PROSPECTUS
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VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
320 PARK AVENUE, NEW YORK, NEW YORK 10022
THROUGH
THE AMERICAN SEPARATE ACCOUNT NO. 3
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THE POLICIES - We offer variable universal life insurance policies
(POLICIES), without a sales charge. The Policies are designed to provide you
with life insurance protection, while giving you flexibility in the timing
and amount of premiums you pay. You also have some flexibility in the amount
of insurance coverage available to you.
In this Prospectus, a POLICYOWNER or YOU means a person to whom we have
issued a Policy. You should note that the purchase of a Policy as a
replacement for any existing insurance coverage you have may not be
advisable.
INVESTMENT ALTERNATIVES FOR YOUR ACCOUNT BALANCE - You may allocate your
Account Balance to any of the Funds of The American Separate Account No. 3
(the SEPARATE ACCOUNT) or to our General Account. You may transfer all or
any part of your Account Balance among the Funds and the Separate Account at
any time, without charge.
The Separate Account Funds invest in similarly named funds or portfolios of
mutual funds (the UNDERLYING FUNDS), which will have varying investment
returns and performance. The Underlying Funds currently are:
o MUTUAL OF AMERICA INVESTMENT CORPORATION: Equity Index Fund, All America
Fund, Mid-Cap Equity Index Fund, Aggressive Equity Fund, Composite Fund,
Bond Fund, Mid-Term Bond Fund, Short-Term Bond Fund and Money Market
Fund;
o SCUDDER VARIABLE LIFE INVESTMENT FUND: Capital Growth Portfolio, Bond
Portfolio and International Portfolio;
o VARIABLE INSURANCE PRODUCTS FUNDS OF FIDELITY INVESTMENTS(R):
Equity-Income Portfolio of the Variable Insurance Products Fund, and
Contrafund Portfolio and Asset Manager Portfolio of the Variable
Insurance Products Fund II;
o CALVERT SOCIAL BALANCED PORTFOLIO of Calvert Variable Series, Inc.; and
o AMERICAN CENTURY VP CAPITAL APPRECIATION FUND of American Century
Variable Portfolios, Inc.
WE DO NOT GUARANTEE THE INVESTMENT PERFORMANCE OF ANY SEPARATE ACCOUNT FUND.
You bear the entire investment risk, including the risk of a decline in
value, for amounts you allocate to a Separate Account Fund.
We pay a fixed rate of interest on your Account Balance in our General
Account, and we change the rate from time to time. This Prospectus describes
the Separate Account Fund Investment Alternatives, but there is a brief
description of the General Account under the heading "Our General Account".
PROSPECTUSES - You should read this Prospectus carefully before you purchase
a Policy, and you should keep it for future reference. Attached to this
Prospectus are the prospectuses for the Underlying Funds. This Prospectus is
not valid unless the prospectuses of the Underlying Funds are attached to
it.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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DATED: MAY 1, 1999
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TABLE OF CONTENTS
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INTRODUCTION AND SUMMARY ........................................... 1
HOW TO PURCHASE A POLICY AND PAY PREMIUMS .......................... 5
Policy Issue ...................................................... 5
Basic Death Benefit Plan .......................................... 5
Supplemental Insurance Benefits ................................... 6
Scheduled Premiums ................................................ 6
Unscheduled Premiums .............................................. 7
Limitation on Premiums ............................................ 7
Allocation of Premiums ............................................ 7
Dollar Cost Averaging ............................................. 7
Changes in the Face Amount of Your Policy ......................... 8
Policy Lapse and Reinstatement .................................... 8
UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT ............... 9
Investment Advisers for the Underlying Funds ...................... 12
YOUR ACCOUNT BALANCE IN THE SEPARATE ACCOUNT FUNDS ................. 13
OUR GENERAL ACCOUNT ................................................ 14
ACCESS TO YOUR ACCOUNT BALANCE ..................................... 15
Surrender of Policy ............................................... 15
Partial Withdrawals of Account Balance ............................ 15
Your Right to Transfer Among Investment Alternatives .............. 15
How to Tell Us an Amount for Transfers or Partial Withdrawals ..... 15
Policy Loans ...................................................... 16
Accelerated Benefit for Terminal Illness .......................... 17
Maturity Benefit .................................................. 18
When We May Postpone Payments ..................................... 18
INSURANCE BENEFITS UPON DEATH OF INSURED PERSON .................... 19
Death Proceeds .................................................... 19
Basic Death Benefit ............................................... 19
Corridor Percentages .............................................. 19
Payment Options ................................................... 20
CHARGES AND DEDUCTIONS YOU WILL PAY ................................ 21
Cost of Insurance Charges ......................................... 21
Administrative Charges ............................................ 21
Mortality and Expense Risks Charges ............................... 22
Supplemental Insurance Benefits Fee ............................... 22
Accelerated Benefit Fee ........................................... 22
Premium and Other Taxes ........................................... 22
Changes in Policy Cost Factors .................................... 22
Fees and Expenses of Underlying Funds ............................. 23
</TABLE>
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HOW TO CONTACT US AND GIVE US INSTRUCTIONS ............................. 24
Contacting American Life .............................................. 24
Transfers, Allocation Changes, Loans and Withdrawals by Telephone ..... 24
Where You Should Direct Requests ...................................... 24
ABOUT AMERICAN LIFE AND OUR SEPARATE ACCOUNT NO. 3 ..................... 25
FEDERAL TAX CONSIDERATIONS ............................................. 26
Obtaining Tax Advice .................................................. 26
Tax Status of the Policies ............................................ 26
Tax Treatment of Policy Benefits and Access of Account Balance ........ 27
Policy Loan Interest .................................................. 28
Estate Taxes .......................................................... 28
YOUR VOTING RIGHTS FOR MEETINGS OF THE UNDERLYING FUNDS ................ 30
FUNDING AND OTHER CHANGES WE MAY MAKE .................................. 30
ADMINISTRATIVE MATTERS ................................................. 31
Year 2000 Compliance .................................................. 31
Notices, Confirmation Statements and Reports to Policyowners .......... 31
Miscellaneous Policy Provisions ....................................... 31
Distribution of the Policies .......................................... 32
OTHER INFORMATION ...................................................... 32
OUR EXECUTIVE OFFICERS AND DIRECTORS ................................... 33
DEFINITIONS WE USE IN THIS PROSPECTUS .................................. 35
POLICY ILLUSTRATIONS ................................................... 37
Face Amount $100,000................................................... 38
Face Amount $500,000................................................... 46
FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT AND AMERICAN LIFE ......... 50
Separate Account No. 3 ................................................ 51
American Life ......................................................... 64
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
WE MAY NOT LAWFULLY OFFER THE POLICIES FOR SALE. WE HAVE NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE IN THIS PROSPECTUS. IF ANY PERSON GIVES
OR MAKES ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS TO YOU, YOU MUST
NOT RELY ON THEM IN MAKING YOUR DECISION OF WHETHER OR NOT TO PURCHASE A
POLICY.
<PAGE>
SUPPLEMENT TO PROSPECTUS
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VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
320 PARK AVENUE
NEW YORK, NEW YORK 10022
THROUGH
THE AMERICAN SEPARATE ACCOUNT NO. 3
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**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 BALANCE 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
Balance (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 Upon Death of Insured Person" in this Prospectus.
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SUPPLEMENT, DATED MAY 1, 1999
TO PROSPECTUS, DATED MAY 1, 1999
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INTRODUCTION AND SUMMARY
THE DISCUSSION BELOW IS A SUMMARY OF INFORMATION IN THE PROSPECTUS. The
references in the Summary direct you to particular sections in the
Prospectus where you will find more detailed explanations. You will find
definitions at the end of this Prospectus under "Definitions We Use in This
Prospectus".
THE POLICY WE OFFER
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The Policy is a variable universal life insurance policy. It enables you,
within certain limits, to accommodate changes in your insurance needs and
changes in your financial condition.
As a life insurance policy, the Policy provides for:
o a death benefit, based either on the Face Amount of the Policy, or on
the Face Amount of the Policy plus the Account Balance, depending on
the type of Basic Death Benefit you select for your Policy,
o Policy Loans,
o a variety of death proceeds payment options, and
o other features traditionally associated with life insurance, such as
optional supplemental benefits.
As a variable universal life policy, the Policy provides for:
o an Account Balance that varies based on the Investment Alternatives you
select,
o allocation of your premiums and transfer of your Account Balance among
the Investment Alternatives, and
o flexibility in the timing and amount of premium payments and, subject
to certain restrictions, the amount of insurance coverage.
YOUR PREMIUM PAYMENTS
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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 authorized withdrawals from your banking
account or other account or unless premiums are payable under a Payroll
Deduction Program.
You may adjust the timing and amount of your premium payments to suit your
individual circumstances, within certain limits. You may pay unscheduled
premiums, skip scheduled premiums, or increase or decrease 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. REFER TO "HOW TO PURCHASE A POLICY AND PAY PREMIUMS".
CHOICE OF BASIC DEATH BENEFIT
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You may choose as your Basic Death Benefit either a Face Amount Plan, which
generally provides a level death benefit equal to the Face Amount, or a Face
Amount Plus Plan, which provides for a death benefit that varies as your
Account Balance changes. Subject to certain restrictions, you may change
from one Plan to the other while the insured is still living. We pay a death
benefit to the beneficiary upon the death of the insured person under the
Policy. REFER TO "INSURANCE BENEFITS UPON DEATH OF INSURED PERSON".
SUPPLEMENTAL BENEFITS BY RIDER TO POLICY
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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. REFER TO "HOW TO PURCHASE A POLICY AND PAY PREMIUMS
-- SUPPLEMENTAL INSURANCE BENEFITS".
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INVESTMENT ALTERNATIVES FOR YOUR ACCOUNT BALANCE
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You may allocate your premiums among the General Account and one or more of
the Separate Account Funds. You may change your allocation instructions at
any time for future premiums. You may transfer all or part of your Account
Balance among the available Investment Alternatives at any time. REFER TO
"ACCESS TO YOUR ACCOUNT BALANCE"
THE GENERAL ACCOUNT. We pay interest on the portion of your Account Balance
you allocate to our General Account, at an effective annual rate of at least
3%. In our discretion, we change the current rate of interest from time to
time. We have the full investment risk for amounts you allocate to the
General Account. We sometimes refer to the General Account Investment
Alternative as the Interest Accumulation Account.
This Prospectus serves as a disclosure document for the Separate Account
Investment Alternatives under the Policies. REFER TO "OUR GENERAL ACCOUNT"
FOR A BRIEF DESCRIPTION OF THE GENERAL ACCOUNT.
THE SEPARATE ACCOUNT. The Separate Account has Funds, or sub-accounts. The
name of each Fund corresponds to the name of its Underlying Fund. When you
allocate premiums or transfer Account Balance to a Separate Account Fund,
the Fund purchases shares in its Underlying Fund. A Separate Account Fund is
called a "variable option", because you have the investment risk that your
Account Balance in the Fund will increase or decrease based on the
investment performance of the Underlying Fund. The Mid-Cap Equity Index Fund
will be available to you upon its approval by your State's insurance
department.
UNDERLYING FUNDS INVESTED IN BY THE SEPARATE ACCOUNT
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The Separate Account Funds currently invest in seventeen Underlying Funds,
which have different investment objectives, investment policies and risks.
YOU SHOULD REFER TO "UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT"
FOR MORE INFORMATION ABOUT THE UNDERLYING FUNDS' INVESTMENT OBJECTIVES, AND
TO THE PROSPECTUSES OF THE UNDERLYING FUNDS THAT ARE ATTACHED TO THIS
PROSPECTUS.
CHARGES UNDER YOUR POLICY
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We deduct several charges from the net assets of each Separate Account Fund.
REFER TO "CHARGES AND DEDUCTIONS YOU WILL PAY". The charges include:
o an administrative expense charge at an annual rate of 0.40% (except
that currently the annual rate for the American Century VP Capital
Appreciation Fund is 0.20% and the annual rate for the Funds that
invest in the Fidelity Portfolios is 0.30%); and
o a risk charge at an annual rate of 0.70% for assuming certain mortality
risks under the Policies and a charge at an annual rate of 0.15% for
assuming certain expense risks under the Policies.
We deduct certain monthly charges directly from your Account Balance. REFER
TO "CHARGES AND DEDUCTIONS YOU
WILL PAY". The monthly charges include:
o an administrative expense charge of $2.00 if you have an Account
Balance of $2,400 or more during the month, or 1/12 of 1% of the
Account Balance (which will be less than $2.00) if your Account Balance
is less than $2,400 in any month;
o a cost of insurance charge to pay for the life insurance we provide
under the Policy; and
o a deduction to pay the cost of any riders to your Policy.
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 person is
in a standard or substandard premium class. For Policies without a Payroll
Deduction Rider, the gender of the insured person will impact cost of
insurance rates, with different rates for men and women. For Policies with a
Payroll Deduction Rider, cost of insurance rates are unisex.
EXPENSES OF THE UNDERLYING FUNDS. A Separate Account Fund's value is based
on the shares it owns of the Underlying Fund. As a result, the investment
management fees and other expenses the Underlying Funds pay will impact the
value of the Separate Account Funds. You should refer to the attached
prospectuses of the Underlying Funds for a complete description of their
expenses and deductions from net assets.
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During 1998, the Underlying Funds incurred the following total operating
expenses as a percentage of net assets:
Mutual of America Investment Corporation Funds: Money Market -- .25%; Equity
Index -- .125%; each of All America, Bond, Short-Term Bond, Mid-Term Bond
and Composite -- .50%; and Aggressive Equity -- .85%. The expenses shown are
management fees. The Funds' adviser voluntarily pays the Funds' operating
expenses other than transaction costs and extraordinary expenses.
Scudder Variable Life Portfolios: Capital Growth -- .50% (.46% management fee
and .04% other expenses); Bond -- .57% (.48% management fee and .09% other
expenses); International -- 1.04% (.87% management fee and .17% other
expenses).
Fidelity Portfolios: VIP Equity-Income -- .58% (.49% management fee and .09%
other expenses); VIP II Contrafund -- .70% (.59% management fee and .11%
other expenses); and VIP II Asset Manager -- .64% (.54% management fee and
.10% other expenses).
Calvert Social Balanced Portfolio -- .88% (.70% management fee and .18% other
expenses).
American Century VP Capital Appreciation Fund -- 1.00% as a management fee.
The Fund's adviser pays its operating expenses other than transaction costs,
fees of non-interested directors and extraordinary expenses.
PARTIAL WITHDRAWALS AND SURRENDER OF POLICY; TRANSFERS OF ACCOUNT BALANCE
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You may make partial withdrawals of your Account Balance (minus any Policy
Loans) or surrender the Policy and receive the Surrender Proceeds due under
the Policy. You make take any of these actions prior to the Maturity Date of
the Policy when the insured person is still living. We may take up to seven
days following receipt of your withdrawal request to process the request and
mail a check to you. REFER TO "ACCESS TO YOUR ACCOUNT BALANCE".
You may transfer all or a portion of your Account Balance among the
Investment Alternatives. REFER TO "ACCESS TO YOUR ACCOUNT BALANCE -- YOUR
RIGHT TO TRANSFER AMONG INVESTMENT ALTERNATIVES".
We currently do not assess a charge for transfers or withdrawals under the
Policies. We reserve the right, however, to impose a charge for transfers or
withdrawals in the future.
YOUR RIGHT TO BORROW FROM THE POLICY
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You may borrow up to 95% of your Account Balance in 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. We deduct any Policy Loans from the amount otherwise due you upon
the surrender or maturity of the Policy or from the death proceeds due upon
the death of the insured person. REFER TO "ACCESS TO YOUR ACCOUNT BALANCE --
POLICY LOANS".
HOW TO MAKE AN ALLOCATION CHANGE, TRANSFER, WITHDRAWAL, SURRENDER OR POLICY
LOAN REQUEST
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IN WRITING. You may give instructions in writing on our forms for allocation
changes, transfers of Account Balance among Investment Alternatives, partial
withdrawals of Account Balance, surrender of the Policy and Policy Loans.
REFER TO "HOW TO CONTACT US AND GIVE US INSTRUCTIONS".
BY TELEPHONE. Using a Personal Identification Number (PIN) we have assigned,
you may call us at 1-800-468-3785 for certain transactions and information.
REFER TO "HOW TO CONTACT US AND GIVE US INSTRUCTIONS".
OUR HOME OFFICE, PROCESSING CENTER AND REGIONAL OFFICES. Our home office
address is 320 Park Avenue, New York, New York 10022. The address for our
Financial Transactions Processing Center, where you may send requests for
allocation changes or transfers among Investment Alternatives, is 1150
Broken Sound Parkway NW, Boca Raton, FL 33487. You may check the address for
the Regional Office that provides services for your Policy by calling
1-800-872-5963 or by visiting our Website at www.mutualofamerica.com.
CONFIRMATION STATEMENTS. We will send you confirmation statements (which may
be your quarterly statements) for your allocation changes and for your
premiums, transfers and withdrawals of Account Balance and Policy Loans. You
must promptly notify us of any error in a confirmation statement, or you
will give up your right to have us correct the error. REFER TO "NOTICES,
CONFIRMATION STATEMENTS AND REPORTS TO POLICYOWNERS".
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ACCELERATED BENEFIT FOR TERMINAL ILLNESS
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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 person died. The Accelerated Benefit is available only when the
insured person is determined to have less than one year to live. You must
pay an administrative fee of $250 at the time we pay the Accelerated
Benefit. REFER TO "ACCESS TO YOUR ACCOUNT BALANCE -- ACCELERATED BENEFIT FOR
TERMINAL ILLNESS" AND "CHARGES AND DEDUCTIONS YOU WILL PAY -- ACCELERATED
BENEFIT FEE".
YOUR INITIAL RIGHT TO RETURN POLICY
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For a period of 10 days after you receive your Policy (or a longer period if
required by applicable state law when you purchase a Policy by direct mail
or as a replacement policy), you may return it and have your premiums
returned. REFER TO "HOW TO PURCHASE A POLICY AND PAY PREMIUMS -- POLICY
ISSUE".
FEDERAL TAX CONSIDERATIONS
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For purposes of Federal income taxation, you are treated as not receiving
your Account Balance until you take a distribution from the Policy. As a
consequence, you do not pay taxes on the investment income and interest
credited to your Account Balance until you withdraw all or a portion of your
Account Balance. This information about Federal taxation is based on our
belief that a Policy we issue 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.
DISTRIBUTIONS UNDER THE POLICY. Your tax treatment for Policy withdrawals
and loans depends on whether or not your Policy is a "Modified Endowment
Policy".
If your Policy is not a Modified Endowment Contract:
o distributions are treated first as a return of investment (premiums) in
the Policy and then a disbursement of taxable income;
o Policy Loans are not treated as distributions; and
o neither distributions nor Policy Loans are subject to the 10% penalty
tax.
Your Policy may be treated as a special type of life insurance called a
"Modified Endowment Contract", if the cumulative premiums you have paid are
considered, under the Code, to be too large compared to the death benefit
payable. If your Policy is a Modified Endowment Contract:
o all pre-death distributions, including Policy Loans, are treated first
as a distribution of taxable income and then as a return of investment
(premiums) in the Policy; and
o if you have not reached the age of 59 1/2, a distribution usually is
subject to a 10% penalty tax.
If you send us a premium that would cause your Policy to become a Modified
Endowment Contract, we will notify you. Our notice will state that unless
you request a refund of the excess premium, your Policy will become a
Modified Endowment Contract. REFER TO "FEDERAL TAX CONSIDERATIONS".
DEATH BENEFITS. Your beneficiary receives death benefits payable under the
Policy on a tax-free basis, except in limited circumstances. If you are the
Policyowner and also the insured person, the death benefit amount will be
included in your estate in most circumstances.
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<PAGE>
HOW TO PURCHASE A POLICY AND PAY PREMIUMS
POLICY ISSUE
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An applicant must submit to us a completed application for a Policy. The
minimum Face Amount for a Policy is $25,000, except that the minimum Face
Amount is $5,000 for any Policy with a Payroll Deduction Rider. We reserve
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 we issue 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.
o If the person to be insured is age 50 or less and the Policy would have
a Face Amount of $100,000 or less, we ordinarily will determine
insurability based on information from the application.
o We usually will require a medical underwriting for a Policy with a Face
Amount above $100,000 or if the person to be insured is age 50 or
older.
We may use outside sources to verify information contained in the
application. A person who does not meet standard underwriting requirements
still may be eligible to purchase a Policy, but we will increase the cost of
insurance charges on the Policy to reflect the additional mortality risks we
assume in insuring a person who is a "substandard risk". A person who is a
"substandard risk" has a greater mortality risk based on unfavorable health
characteristics.
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. Group underwriting
standards provide for guaranteed issue of a Policy in certain circumstances.
We will issue a Policy following 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. The Policy Specification Pages of your Policy will show the
Policy Issue Date.
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 cancellation, we will refund any premiums
that were paid on the Policy. Some states may require us to provide you with
a longer period to examine the Policy. For example, you may have up to 30
days if you purchased the Policy in response to a direct mailing or the
Policy is replacing another life insurance policy.
BASIC DEATH BENEFIT PLAN
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In your application for a Policy, you will choose a Basic Death Benefit. You
have the option of either a Face Amount Plan or a Face Amount Plus Plan. SEE
"Insurance Benefits Upon Death of Insured Person".
Under a Face Amount Plan:
o the death benefit generally will be the Face Amount, and
o premiums you pay and increases in your Account Balance from investment
performance of the Funds will reduce the amount for which we are "at
risk" in providing insurance coverage and on which we impose cost of
insurance charges (SEE "Charges and Deductions You Will Pay").
Under a Face Amount Plus Plan:
o the death benefit generally will be the Face Amount PLUS the Account
Balance, and
o premiums you pay and increases in your Account Balance from investment
performance of the Funds will increase the death benefit while leaving
unchanged the amount on which you must pay cost of insurance charges.
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<PAGE>
CHANGE OF BASIC DEATH BENEFIT PLAN. You may request a change in your Basic
Death Benefit plan. When we make the change, the Basic Death Benefit payable
on the effective date of the change is the same as it would have been
without the requested change, as follows:
o 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 Balance; and
o 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 Balance, except that we may require 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).
SUPPLEMENTAL INSURANCE BENEFITS
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We may 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 person. Currently, supplemental
insurance benefits are available only for Policies with Payroll Deduction
Riders. We will charge you a monthly fee for any supplemental insurance
benefits you select. SEE "Charges and Deductions You Will Pay --
Supplemental Insurance Benefits Fee".
Under an accidental death benefit rider, if the insured person dies as a
result of an accidental bodily injury, we will pay an accidental death
benefit equal to the initial Face Amount of the Policy, up to a maximum of
$200,000.
You may obtain insurance for all your unmarried dependent children between
14 days and 18 years of age under a children's term rider. After we have
issued a rider we automatically insure each additional child 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. For a Policy purchased
when a child reaches age 21, we will charge premiums at our standard rates
then in effect.
SCHEDULED PREMIUMS
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For your convenience, we will specify a "scheduled premium" to be paid at
intervals you select in your application. We will send you notices of when
you should pay scheduled premiums, unless you have authorized withdrawals
from your bank or other account to pay scheduled premiums or your Policy has
a Payroll Deduction Rider. If your Policy does not have a Payroll Deduction
Rider, your scheduled premium must be at least $50.
If your Policy has a Payroll Deduction Rider:
o there is no minimum amount of scheduled premiums;
o on each of your pay dates, scheduled premiums for each Policy you own
and, if applicable, each Policy owned by your spouse and minor
children, will be deducted from your payroll amount; and
o if your employer's participation in a Payroll Deduction Program ends or
you terminate employment with the employer, we will require scheduled
premiums to be paid not more frequently than monthly.
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 timing of your scheduled premiums at
any time. However, you may not decrease scheduled premiums to less than the
applicable minimum. We will require evidence of insurability for an increase
in scheduled premiums when the increase would increase your Policy's Basic
Death Benefit. SEE "Insurance Benefits Upon Death of Insured Person" below.
-6-
<PAGE>
EFFECT OF PAYING SCHEDULED PREMIUMS. Your 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.
o Whether your Policy continues in force or lapses does not depend on
whether scheduled premiums have been made, but rather whether, on each
Monthly Anniversary Day, your Account Balance is sufficient to permit
the deduction of all charges due on that day. SEE "Lapse and
Reinstatement" below.
o We permit you to pay scheduled premiums, even if the payment would
increase the Basic Death Benefit as a result of the Corridor
Percentages described below. SEE "Insurance Benefits Upon Death of
Insured Person."
UNSCHEDULED PREMIUMS
------------------------------------------------------------------------------
You ordinarily may pay unscheduled premiums of at least $50 at any time, but
you may not pay more than $10,000 in unscheduled premiums during any Policy
Year. We will require evidence of insurability if the unscheduled premium
would increase the Policy's Basic Death Benefit. SEE "Insurance Benefits
Upon Death of Insured Person" below.
LIMITATION ON PREMIUMS
------------------------------------------------------------------------------
We will refuse to accept and will return to you 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. SEE
"Federal Tax Considerations".
ALLOCATION OF PREMIUMS
------------------------------------------------------------------------------
You may allocate your premium among the Investment Alternatives. The Mid-Cap
Equity Index Fund may not be available to Policyowners in all states, due to
insurance department regulatory filings.
You may tell us how to allocate your premium by sending us instructions with
the premium. If you do not send instructions, or we receive the premium for
a Policy with a Payroll Deduction Rider, we will allocate the premium on the
basis of your allocation request currently on file at our home office. Your
request for allocation must specify the percentage, in any whole percentage
from 0% to 100%, of each premium to be allocated to each of the Investment
Alternatives.
You may change the allocation instructions for future premiums, at any time.
You should periodically review your allocations in light of market
conditions and your financial needs. A change in allocation will be
effective when we have received it and had the opportunity to act on your
request.
DOLLAR COST AVERAGING
------------------------------------------------------------------------------
We offer a Dollar Cost Averaging program that allows you to authorize
automatic monthly transfers of a specified percentage or dollar amount from
the General Account to any of the Separate Account Funds. Each transfer
under the Dollar Cost Averaging program must be at least $100, and you must
schedule at least 12 transfers. We may discontinue the program at any time.
Your participation in the Dollar Cost Averaging program will automatically
end if your Account Balance in the General Account, minus any outstanding
Policy Loans, is insufficient to support the next scheduled transfer. You
may request termination of participation in the program at any time. We do
not charge you a fee for participating in our Dollar Cost Averaging program.
Dollar cost averaging generally reduces the risk of purchasing at the top of
a market cycle. This effect occurs from investing over a period of time
instead of investing only on one day. Your average cost of purchasing
Accumulation Units in the Separate Account Funds is reduced to less than the
average value of the Units on the same purchase dates, because you are
credited with more Units when the Unit values are lower than when Unit
values are higher. Dollar cost averaging does not assure you of a profit,
nor does it protect against losses in a declining market.
-7-
<PAGE>
CHANGES IN THE FACE AMOUNT OF YOUR POLICY
----------------------------------------------------------------------------
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.
o To change your Face Amount, you must submit to our Processing Office a
Written Request.
o 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.
o We reserve the right to limit the amount of any increase or decrease.
o 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."
Your 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 person'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. A decrease in
Face Amount will first reduce any prior increases in Face Amount, in reverse
of the order in which they occurred (in other words, the most recent Face
Amount increase will be the first reduced), and then will reduce the
original Face Amount.
POLICY LAPSE AND REINSTATEMENT
------------------------------------------------------------------------------
If our deduction of monthly charges when due would result in your Account
Balance, 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. If the insured person 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 we do not receive payment in our
Processing Office prior to the expiration of the grace period, the Policy
will lapse and have no value.
You can reinstate a lapsed Policy during the insured person'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 person 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 we
approve it. The Account Balance on the effective date of reinstatement will
be whatever the premium paid at such time will provide. We base cost of
insurance charges subsequent to a reinstatement upon the insured person's
premium class as of the reinstatement rather than his or her premium class
when we initially issued the Policy.
-8-
<PAGE>
UNDERLYING FUNDS INVESTED IN BY OUR SEPARATE ACCOUNT
Below are summaries of the Underlying Funds' investment objectives and
certain investment policies. The Underlying Funds sell their shares to the
separate accounts of insurance companies and do not offer them for sale to
the general public. You will find more detailed information about the
Underlying Funds in their current prospectuses, which are attached to this
Prospectus. You should read each prospectus for a complete evaluation of the
Underlying Funds, their investment objectives, principal investment
strategies and the risks related to those strategies.
EQUITY INDEX FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
The investment objective of the Equity Index Fund is to provide investment
results that correspond to the performance of the Standard & Poor's
Composite Index of 500 Stocks (the S&P 500 INDEX(R)). The Fund invests
primarily in common stocks that are included in the S&P 500 Index.
ALL AMERICA FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
The investment objective of the All America Fund is to outperform the S&P
500 Index, by investing in a diversified portfolio primarily common stocks.
The Fund invests approximately 60% of its assets (the INDEXED ASSETS) to
provide investment results that correspond to the performance of the S&P 500
Index. The Fund invests the remaining approximately 40% of its assets (the
ACTIVE ASSETS) to seek 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 primarily common stocks with a broad exposure to
the market.
MID-CAP EQUITY INDEX FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
The investment objective of the Mid-Cap Equity Index Fund is to provide
investment results that correspond to the performance of the S&P MidCap 400
Index(R). The Fund invests primarily in common stocks that are included in
the S&P MidCap 400 Index.
AGGRESSIVE EQUITY FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
The investment objective of the Aggressive Equity Fund is capital
appreciation, by investing approximately 50% of its assets in companies
believed to possess above-average growth potential and approximately 50% of
its assets 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. In utilizing the
investment styles of growth and value stock selection, the Adviser
anticipates that the percentage of the Fund's assets in either category will
range between 40% and 60%.
COMPOSITE FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
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, debt securities and money market
instruments. The Fund seeks 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.
--------------
* Standard & Poor's, S&P, S&P 500 and S&P MidCap 400 are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by the
Investment Company. Standard & Poor's does not sponsor, endorse, sell or
promote the Equity Index Fund, All America Fund or Mid-Cap Equity Index
Fund. It has no obligation or liability for the sale or operation of the
Funds and makes no representations as to the advisability of investing in
the Funds.
-9-
<PAGE>
BOND FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
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 Bond Fund seeks to achieve its objective by investing primarily in
investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and
zero coupon securities.
MID-TERM BOND FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
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 average maturity of the Fund's securities holdings will be
between three and seven years.
The Mid-Term Bond Fund seeks to achieve its objective by investing primarily
in investment grade, publicly-traded debt securities, such as bonds, U.S.
Government and agency securities, including mortgage-backed securities, and
zero coupon securities.
SHORT-TERM BOND FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
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 average maturity of the Fund's securities holdings will be
between one and three years.
The Short-Term Bond Fund seeks to achieve its objective by investing
primarily in investment grade, publicly-traded debt securities, such as
bonds, U.S. Government and agency securities, including mortgage-backed
securities, and in money market instruments.
MONEY MARKET FUND OF THE INVESTMENT COMPANY
------------------------------------------------------------------------------
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 Money Market Fund invests only in money market instruments and other
short-term securities. Neither the Federal Deposit Insurance Corporation nor
any other U.S. Government agency insures or guarantees investments by the
Separate Account in shares of the Money Market Fund.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
------------------------------------------------------------------------------
The investment objective of the Equity-Income Portfolio is reasonable income
by investing primarily in income-producing equity securities. In choosing
these securities, the Portfolio also considers the potential for capital
appreciation. The Portfolio's goal is to achieve a yield that exceeds the
composite yield on the securities comprising the S&P 500 Index.
FIDELITY VIP II CONTRAFUND PORTFOLIO
------------------------------------------------------------------------------
The investment objective of the Contrafund Portfolio is capital
appreciation. It seeks to increase the value of an investment in the
Portfolio over the long term by investing in securities of companies whose
value its adviser believes is not fully recognized by the public. These
securities may be issued by domestic or foreign companies and many may not
be well known. The Portfolio normally invests primarily in common stocks.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
------------------------------------------------------------------------------
The investment objective of the Asset Manager Portfolio is high total return
with reduced risk over the long term by allocating its assets among domestic
and foreign stocks, bonds and short-term and money-market instruments.
-10-
<PAGE>
The Portfolio's adviser normally allocates 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
------------------------------------------------------------------------------
The investment objective of Scudder Capital Growth Portfolio is 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. The Portfolio may invest up to 25% of its assets in short-term debt
instruments, depending on market and economic conditions.
SCUDDER BOND PORTFOLIO
------------------------------------------------------------------------------
The investment objective of the Scudder Bond Portfolio is to invest for a
high level of income consistent with a high quality portfolio of debt
securities.
To attempt to achieve its objective, the Portfolio invests principally in
investment grade bonds, including those issued by the U.S. Government and
its agencies and by corporations, and other notes and bonds paying high
current income. The Portfolio may invest up to 20% of its assets in
non-investment grade debt securities.
SCUDDER INTERNATIONAL PORTFOLIO
------------------------------------------------------------------------------
The investment objective of the Scudder International Portfolio is long-term
growth of capital primarily through diversified holdings of marketable
foreign equity investments.
The Portfolio invests primarily in equity securities of established
companies that do business primarily outside the United States and that are
listed on foreign exchanges. 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.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
------------------------------------------------------------------------------
The investment objective of the American Century VP Capital Appreciation
Fund is capital growth by investing primarily in common stocks 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.
CALVERT SOCIAL BALANCED PORTFOLIO
------------------------------------------------------------------------------
The investment objective of Calvert Social Balanced Portfolio is to achieve
a competitive total return through an actively managed non-diversified
portfolio of stocks, bonds and money market instruments that offer income
and capital growth opportunity and satisfy the social concern criteria
established for the Portfolio.
SHARED AND MIXED FUND ARRANGEMENTS. Shares of the Fidelity Portfolios, the
Scudder 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.
Shares of Mutual of America Investment Corporation and shares of certain of
the Shared Funds (together, the MIXED FUNDS) currently are available to
separate accounts for both variable annuity and variable life insurance
products.
The Board of Directors (or Trustees) of each Shared and Mixed Fund is
responsible for monitoring that Fund for the existence of any material
irreconcilable conflict between the interests of participants in all
separate accounts that invest in the Fund. The Board must determine what
action, if any, the Fund should take in response to an irreconcilable
conflict. If we believe that a response does not sufficiently protect our
Policyowners, we will take appropriate action, and we may modify or reduce
the Investment Alternatives available to you.
-11-
<PAGE>
INVESTMENT ADVISERS FOR THE UNDERLYING FUNDS
------------------------------------------------------------------------------
MUTUAL OF AMERICA INVESTMENT CORPORATION: The Investment Company receives
investment advice from Mutual of America Capital Management Corporation (the
ADVISER), an indirect wholly-owned subsidiary of Mutual of America. For the
Active Assets of the All America Fund, the Adviser has entered into
subadvisory agreements with Palley-Needelman Asset Management, Inc., Oak
Associates, Ltd. and Fred Alger Management, Inc. Each of these subadvisers
provides investment advice for approximately 10% of the All America Fund's
assets.
SCUDDER VARIABLE LIFE INVESTMENT FUND: The Scudder Capital Growth, Bond and
International Portfolios receive investment advice from Scudder Kemper
Investments, Inc.
FIDELITY PORTFOLIOS: The Equity-Income Portfolio, Contrafund Portfolio and
Asset Manager Portfolio receive investment advice from Fidelity Management &
Research Company.
CALVERT SOCIAL BALANCED PORTFOLIO: The Portfolio receives investment advice
from Calvert Asset Management Company, Inc., which has entered into a
subadvisory agreement with NCM Capital Management Group, Inc. for the equity
portion of the Portfolio.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND: The Fund receives investment
advice from American Century Investment Management, Inc.
-12-
<PAGE>
YOUR ACCOUNT BALANCE IN THE SEPARATE ACCOUNT FUNDS
ACCUMULATION UNITS IN SEPARATE ACCOUNT FUNDS
------------------------------------------------------------------------------
We use Accumulation Units to represent Account Balances in each Separate
Account Fund. We separately value the Accumulation Unit for each Fund of the
Separate Account.
We determine your Account Balance in the Separate Account as of any
Valuation Day by multiplying the number of Accumulation Units credited to
you in each Fund of the Separate Account by the Accumulation Unit value of
that Fund at the end of the Valuation Day.
Investment experience by the Separate Account Funds does not impact the
number of Accumulation Units credited to your Account Balance. The value of
an Accumulation Unit for a Fund, however, will change as a result of the
Fund's investment experience, in the manner described below.
CALCULATION OF ACCUMULATION UNIT VALUES
------------------------------------------------------------------------------
We determine Accumulation Unit values for the Funds as of the close of
business on each Valuation Day (generally at the close of the New York Stock
Exchange). A Valuation Period is from the close of a Valuation Day until the
close of the next Valuation Day.
The dollar value of an Accumulation Unit for each Fund of the Separate
Account will vary from Valuation Period to Valuation Period. The changes in
Accumulation Unit values for the Separate Account Funds will reflect:
o changes in the net asset values of the Underlying Funds, depending on
the investment experience and expenses of the Underlying Funds, and
o Separate Account charges under the Policies, with the annual rates
calculated as a daily charge. (SEE "Charges and Deductions You Will
Pay".)
ACCUMULATION UNIT VALUES FOR TRANSACTIONS
------------------------------------------------------------------------------
When you allocate premiums to a Separate Account Fund or transfer any
Account Balance to a Fund, we credit Accumulation Units to your Account
Balance. When you withdraw or transfer any Account Balance from a Separate
Account Fund, we cancel Accumulation Units from your Account Balance.
The Accumulation Unit value for a transaction is the Unit value for the
Valuation Period during which we receive the premium or request. As a
result, we will effect the transaction at the Accumulation Unit value we
determine at the NEXT CLOSE of a Valuation Day (generally the close of the
New York Stock Exchange on that business day).
We calculate the number of Accumulation Units for a particular Fund by
dividing the dollar amount you have allocated to, or withdrawn from, the
Fund during the Valuation Period by the applicable Accumulation Unit value
for that Valuation Period. We round the resulting number of Accumulation
Units to two decimal places.
-13-
<PAGE>
OUR GENERAL ACCOUNT
SCOPE OF PROSPECTUS
------------------------------------------------------------------------------
This Prospectus serves as a disclosure document for the variable, or
Separate Account, interests under the Policies. We have not registered the
Policies under the Securities Act of 1933 for allocations to the General
Account, nor is the General Account registered as an investment company
under the 1940 Act. The staff of the Commission has not reviewed the
disclosures in this Prospectus that relate to the General Account.
Disclosures regarding the fixed portion of the Policies and the General
Account, however, generally are subject to certain provisions of the Federal
securities laws relating to the accuracy and completeness of statements made
in prospectuses.
GENERAL DESCRIPTION
------------------------------------------------------------------------------
Amounts that you allocate to the General Account become part of our general
assets. Our General Account supports our insurance and annuity obligations.
The General Account consists of all of our general assets, other than those
in the Separate Account and other segregated asset accounts.
We bear the full investment risk for all amounts that Policyowners allocate
to the General Account. We have sole discretion to invest the assets of the
General Account, subject to applicable law. Your allocation of Account
Balance to the General Account does not entitle you to share in the
investment experience of the General Account.
We guarantee that we will credit interest to Policyowners' Account Balances
in the General Account at an effective annual rate of at least 3%. In our
sole discretion, we may credit a higher rate of interest to Account Balances
in the General Account, although WE ARE NOT OBLIGATED TO CREDIT INTEREST IN
EXCESS OF 3% PER YEAR. Your initial Policy Specification Pages will show the
initial current interest rate, and we will send you notice when we change
the current rate. We credit interest daily and compound it annually. The
interest rates may be different for your Account Balance in the General
Account representing borrowed and unborrowed amounts under your Policy. SEE
"Access to Your Account Balance -- Policy Loans".
TRANSFERS AND WITHDRAWALS
------------------------------------------------------------------------------
You may transfer any portion of your Account Balance to or from the General
Account and may withdraw any portion of your Account Balance from the
General Account, except that you may not withdraw from the General Account
the amount of any Policy Loans you have outstanding. SEE "Your Right to
Transfer Among Investment Alternatives" and "Policy Loans" under "Access to
Your Account Balance" below. We have the right to delay transfers and
withdrawals from the General Account for up to six months following the date
that we receive the transaction request.
-14-
<PAGE>
ACCESS TO YOUR ACCOUNT BALANCE
You may obtain all or part of your Account Balance by surrendering your
Policy, by making a partial withdrawal from your Policy or by taking a
Policy Loan. You also may transfer all or any part of your Account Balance
among the available Investment Alternatives. If the insured person has a
terminal illness, you may be eligible to obtain an Accelerated Benefit
payment, as described below. Certain of these transactions may have tax
consequences, and some transactions may cause your Policy to become a
Modified Endowment Contract. SEE "Federal Tax Considerations" below.
SURRENDER OF POLICY
------------------------------------------------------------------------------
You may surrender your Policy and obtain the Surrender Proceeds at any time
prior to the Maturity Date. Surrender Proceeds equal your Account Balance
minus any Policy Loans you have outstanding at the time of surrender. To
surrender your Policy, you must submit the Policy and a Written Request to
our Processing Office, and the insured person must be alive on the surrender
date. We will calculate the Surrender Proceeds as of the Valid Transaction
Date of the surrender, and all insurance benefits under your Policy will
then cease.
PARTIAL WITHDRAWALS OF ACCOUNT BALANCE
------------------------------------------------------------------------------
You may withdraw any portion of your Account Balance (before the death of
the insured person). A partial withdrawal must be in an amount of at least
$500, may not reduce the Account Balance to less than $100, and cannot
exceed the Account Balance minus any Policy Loans. We reserve the right to
limit the number of partial withdrawals in one Policy Year, although we do
not currently impose a limit.
A partial withdrawal will affect both your Account Balance and the amount
of your Basic Death Benefit.
o If you have a Face Amount Plan, we will reduce both your Account
Balance 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. We will not
permit a partial withdrawal that would reduce the Face Amount below the
minimum for the Policy.
o If you have a Face Amount Plus Plan, we will reduce your Account
Balance by the amount of the withdrawal.
YOUR RIGHT TO TRANSFER AMONG INVESTMENT ALTERNATIVES
------------------------------------------------------------------------------
You may transfer all or a portion of your Account Balance among Funds of the
Separate Account, and between the Separate Account and the General Account.
There are no tax consequences to you for transfers among Investment
Alternatives. We currently do not impose a charge for transfers, but we
reserve the right to impose a transfer charge in the future.
HOW TO TELL US AN AMOUNT FOR TRANSFERS OR PARTIAL WITHDRAWALS
------------------------------------------------------------------------------
To tell us the amount of your Account Balance to transfer or withdraw, you
may specify to us:
o the dollar amount to be taken from each Investment Alternative,
o for Separate Account Funds, the number of Accumulation Units to be
transferred or withdrawn, or
o the percentage of your Account Balance in a particular Investment
Alternative to be transferred or withdrawn.
-15-
<PAGE>
For transfers, you also must specify the Investment Alternative(s) to which
you are moving the transferred amount. You should use the form we provide to
give us instructions. Your request for a transfer or withdrawal is not
binding on us until we receive all information necessary to process your
request.
POLICY LOANS
------------------------------------------------------------------------------
You may request a Policy Loan only on your Account Balance in the General
Account. You will pay interest on the Policy Loan, but the amount we hold 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 minus 2%.
We will grant you a Policy Loan if you meet all of the following
conditions.
o We receive at our Processing Office your Written Request for a loan.
o The amount of the requested loan is 95% or less of your Account Balance
in the General Account minus any existing Policy Loans you have.
o The amount of the requested loan is at least $500.
o The sole security for the loan will be the Policy.
o You have assigned the Policy to us in a form acceptable to us.
o Your Policy is in effect.
The interest rate on a Policy Loan will be the maximum interest rate that we
can charge under applicable law,
and the rate will change from time to time. The maximum interest rate is the
greater of:
o our guaranteed rate of interest (3% per annum) plus 1% per year, or
o 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 next
January 1 following a change in
the maximum rate.
o We determine the maximum rate of interest on Policy Loans on each
December 1 after the Policy is issued.
o We may increase the Policy Loan interest rate whenever the maximum
interest rate increases by 0.5% or more a year.
o We will reduce the Policy Loan interest rate whenever the maximum
interest rate decreases by 0.5% or more a year.
We will notify you, and any assignee on our records:
o at the time you take a Policy Loan, of the initial rate of interest on
that loan, and
o at least 28 days before an interest rate increase, of the terms of that
increase.
We will include in each notice the substance of the Policy provisions
permitting an adjustable maximum interest
rate, and we will specify the frequency of interest rate determinations, as
permitted by law.
Interest on Policy Loans accrues daily. Interest is due and payable at the
end of the Policy Month in which the loan is made and at the end of each
following Policy Month. Any interest that you do not pay when due becomes
part of the Policy Loan and increases the loan amount outstanding.
If your Policy Loans exceed your Account Balance on any Monthly Anniversary
Day, the grace period provisions of your Policy will apply. We will notify
you of the minimum payment you will have to make to prevent the Policy from
lapsing at the end of the grace period. SEE "How to Purchase a Policy and
Pay Premiums -- Policy Lapse and Reinstatement". Depending on the percentage
of your Account Balance that you request as a
-16-
<PAGE>
Policy Loan, by taking a Loan you will increase the possibility of lapsing
the Policy and incurring adverse tax consequences. SEE "Federal Tax
Considerations -- Tax Treatment of Policy Benefits and Access of Account
Balance".
We will not terminate your Policy in a Policy Year solely as the result of a
change in the interest rate on a Policy Loan during the Policy Year, or in
other words if the Policy Loans exceed your Account Balance only because we
increased the interest rate due on Policy Loans. We will maintain coverage
during that Policy Year until the time at which the Policy otherwise would
have terminated if there had been no interest rate change during that Policy
Year.
You can repay Policy Loans in part or in full at any time if the insured
person is living and your Policy is in effect. If you do not repay a Policy
Loan, we will deduct the Policy Loan from your Surrender Proceeds or
Maturity Proceeds or from the Death Proceeds we pay to your
beneficiary(ies).
ACCELERATED BENEFIT FOR TERMINAL ILLNESS
------------------------------------------------------------------------------
You may be eligible, under the terms of your Policy or a rider to your
Policy, to receive a lump-sum Accelerated Benefit, when the insured person
is determined to have a terminal illness (a state of health where the
insured person's life expectancy is 12 months or less). We will charge you a
fee when we pay the Accelerated Benefit. SEE "Charges and Deductions You
Will Pay -- Accelerated Benefit Fee".
The amount of the Accelerated Benefit will be the present value (discounted
for a one-year period) of the LESSER OF:
o $200,000, or
o 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 we use in discounting the Accelerated Benefit will not be
more than THE GREATER OF:
o the current yield on 90-day U.S. treasury bills on the Valid
Transaction Date, or
o the then-current maximum rate of interest on Policy Loans.
For the Accelerated Benefit to be payable, the following requirements must
be met.
(a) We must receive at our Processing Office:
o the Policy or, if applicable, the Accelerated Benefit rider;
o your Written Request for payment of the Accelerated Benefit;
o the Written Consent of all irrevocable beneficiaries, if any, under the
Policy; and
o evidence satisfactory to us of the insured person's terminal illness.
(b) 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.
(c) The insured person's terminal illness must not be a consequence of
intentionally self-inflicted injuries.
If the insured person dies before we pay a requested Accelerated Benefit, we
will instead pay the Death Proceeds to the beneficiary in accordance with
the Policy.
The required evidence of terminal illness may include, but is not limited
to:
(a) a certification of state of health by a licensed physician who:
o has examined the insured person,
o is qualified to provide that certification, and
o is neither the Policyowner, the insured person, nor a family member of
either; and
(b) a second opinion or examination by a physician we designate, which
will be at our expense.
-17-
<PAGE>
After we make an Accelerated Benefit payment, your Policy will continue in
force, but amounts otherwise payable under the Policy and any riders to it
will be reduced.
o The amounts will decrease by the percentage of the Death Proceeds
"accelerated" under the Accelerated Benefit. We calculate the
percentage by dividing the Accelerated Benefit by the Death Proceeds at
the Valid Transaction Date. We reduce the Policy's Face Amount, Account
Balance, Policy Loans and any Proceeds payable after the Accelerated
Benefit payment by that percentage.
o We will base subsequent premiums and cost of insurance charges under
the Policy, however, on the Account Balance and Face Amount that were
in effect prior to the payment of the Accelerated Benefit.
MATURITY BENEFIT
------------------------------------------------------------------------------
The Maturity Date for a Policy occurs when the insured person attains the
age of 100. If on the Maturity Date the insured person is living and the
Policy is still in effect, the Maturity Proceeds become payable. The
Maturity Proceeds are equal to your Account Balance, minus any Policy Loans
and unpaid monthly deductions.
We will pay Maturity Proceeds in one lump sum, unless you have selected an
optional payment plan for the Proceeds. A lump sum payment will include
interest from the Maturity Date to the date of payment.
The minimum amount of each payment under any optional payment plan is $100.
Once we have begun making payments under any of these optional payment
plans, the payment plan may not be changed.
The payment plans available for Maturity Proceeds are the same as those
available for Death Proceeds. SEE "Insurance Benefits Upon Death of Insured
Person -- Payment Options".
WHEN WE MAY POSTPONE PAYMENTS
------------------------------------------------------------------------------
We will pay any amounts due from the Separate Account for a partial
withdrawal, death benefit or surrender and will transfer any amount from the
Separate Account to the General Account, within seven days, unless:
o The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on that Exchange is restricted as determined by
the Commission; or
o The Commission by order permits postponement for the protection of
Policyowners; or
o An emergency exists, as determined by the Commission, as a result of
which disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's
net assets.
-18-
<PAGE>
INSURANCE BENEFITS UPON DEATH OF INSURED PERSON
DEATH PROCEEDS
------------------------------------------------------------------------------
When we receive due proof of the death of the insured person (while the
Policy is in effect), the Death Proceeds become payable to the beneficiary.
We calculate the Death Proceeds as of the date of the insured person's
death. The beneficiary(ies) should provide us with written proof of death as
soon as is reasonably possible.
The Death Proceeds under a Policy are equal to:
o the Basic Death Benefit, plus any insurance benefits payable under any
riders to the Policy, MINUS
o the sum of any Policy Loans and unpaid monthly deductions before the
death of the insured person.
BASIC DEATH BENEFIT
------------------------------------------------------------------------------
Your Policy has as its Basic Death Benefit plan either a Face Amount Plan or
a Face Amount Plus Plan. SEE "Basic Death Benefit Plan" under "How to
Purchase a Policy and Pay Premiums".
The Face Amount Plan provides a fixed death benefit, because the Basic Death
Benefit is the Face Amount (unless the Corridor Percentage applies). The
Face Amount Plus Plan provides a variable death benefit, because your
Account Balance, which is a factor in the amount of the death proceeds due,
will vary.
Under the Face Amount Plan, the Basic Death Benefit will be the GREATER of
o the Policy's Face Amount on the date of the insured person's death, or
o the Policy's Account Balance on the date of the insured person's death
multiplied by the appropriate Corridor Percentage from the Corridor
Percentage Chart set forth below.
Under the Face Amount Plus Plan, the Basic Death Benefit will be the
GREATER of
o the Face Amount on the date of the insured person's death plus the
Account Balance on that date, or
o the Account Balance on the date of the insured person's death
multiplied by the appropriate Corridor Percentage from the Corridor
Percentage Chart set forth below.
CORRIDOR PERCENTAGES
------------------------------------------------------------------------------
Corridor Percentages are based upon the age of the insured person at the
date of death. The purpose of the Corridor Percentages is to ensure that a
Policy will qualify as life insurance under the Code, at the time the
insured person dies.
The Corridor Percentages require us to provide a death benefit that is
greater than the Account Balance, or in other words to maintain an amount
for which we are "at risk", until the insured person reaches age 95. The
percentages shown below reflect requirements under the Code, and we reserve
the right to change them if the Code is revised.
-19-
<PAGE>
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>
PAYMENT OPTIONS
------------------------------------------------------------------------------
We will pay Death Proceeds in one lump sum, unless you selected an optional
payment plan for the Proceeds or the beneficiary selects an optional payment
plan. A lump sum payment will include interest from the date of death to the
date of payment, at the rate of interest we are then crediting for amounts
under the Interest Payments plan described below.
You may choose an optional payment plan for all or any part of Death Benefit
Proceeds that will become payable under your Policy, and you may modify your
selection from time to time, when the insured person is living. The minimum
amount of each payment under any optional payment plan is $100.
If you change a beneficiary, your previous selection of an optional payment
plan will no longer be in effect unless you make a Written Request that it
continue. You must send a choice or change of optional payment plan in
writing to our Processing Office.
Once the Proceeds are applied under any of the optional plans, the payments
are not affected by the investment experience of any Separate Account Fund.
In addition, the beneficiary may not change the form of payment plan once we
have begun making payments.
The optional payment plans available under the Policy are:
INTEREST PAYMENTS PLAN. We hold the Proceeds and pay interest to the payee
at an effective rate of at least 3% compounded yearly. We will pay the
principal amount to the payee after the term of years specified when the
Interest Payment plan is elected.
LIFE PAYMENTS PLAN. We make equal monthly payments for a guaranteed minimum
period to a payee, who must be a natural person for whom we have been
provided written proof of the date of birth. 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, we will discount the amount of
remaining guaranteed payments for the minimum period at an effective rate of
3% compounded yearly. We will pay the discounted amount in one lump sum to
the payee's estate, unless otherwise provided.
PAYMENTS FOR A FIXED PERIOD PLAN. We make payments for a period of no more
than 25 years in annual, semi-annual, quarterly or monthly installments. The
payments include interest at an effective rate of at least 3% compounded
yearly. We may credit an effective annual rate of interest of more than 3%,
and to the extent and for the period we do so, the payments will be greater.
PAYMENTS OF A FIXED AMOUNT PLAN. We make equal annual, semi-annual,
quarterly or monthly payments until all of the Proceeds have been paid. We
credit the unpaid balance with interest at an effective rate of at least 3%
compounded yearly. The final payment under this option is any balance equal
to or less than one fixed amount payment.
We also have a Specified Payments Option available, which allows you to
designate a fixed amount (at least $100) to withdraw each month.
-20-
<PAGE>
CHARGES AND DEDUCTIONS YOU WILL PAY
COST OF INSURANCE CHARGES
------------------------------------------------------------------------------
On each Monthly Anniversary Day under a Policy, we deduct charges to
compensate us for the life insurance coverage we will be providing in the
next month. The amount we deduct is equal to:
o the amount for which we are "at risk", which is the Policy's Basic
Death Benefit minus the Account Balance as of the Monthly Anniversary
Day, divided by $1,000, TIMES
o the cost per $1,000 of insurance coverage for the insured person, also
called the "cost of insurance rate". The rate will be no greater than
permitted under the 1980 Commissioners Standard Ordinary mortality
table for the insured person's premium class.
Cost of insurance rates will vary according to the insured person's age and
premium class, and may vary by
gender, meaning whether the insured person is male or female.
o If your Policy does not have a Payroll Deduction Rider, the rates vary
according to the insured person's gender.
o If your Policy has a Payroll Deduction Rider or if applicable state law
requires unisex rates for any Policy, cost of insurance rates are
unisex, meaning that the same rates apply for male and female insured
persons 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.
We separately calculate cost of insurance for a Policy's initial Face Amount
and for each increase in the Face Amount. For the initial Face Amount, we
use the premium class on the Issue Date. For any increase in Face Amount, we
use the premium class in effect at the time of that increase.
We determine cost of insurance rates based on our estimates of future cost
factors such as mortality, investment income, expenses, and the length of
time Policies stay in force. We have the right to adjust our cost of
insurance rates from time to time. Any adjustments we make will be on a
uniform basis. If the insured person's premium class is standard, the rates
we use will never be greater than the guaranteed cost of insurance rates
shown in your Policy Specification Pages.
We deduct cost of insurance charges from your Account Balance, if any, in
our General Account. If you do not have sufficient Account Balance allocated
to the General Account, we will deduct the charges from your Account Balance
allocated to one or more of the Separate Account Funds. We look to the Funds
in the following order:
(a) Investment Company Money Market Fund, (b) Investment Company
Short-Term Bond Fund, (c) Investment Company Mid-Term Bond Fund,
(d) Investment Company Bond Fund, (e) Scudder Bond Fund, (f) Investment
Company Composite Fund, (g) Fidelity VIP II Asset Manager Fund,
(h) Calvert Social Balanced Fund, (i) Fidelity VIP Equity-Income Fund,
(j) Investment Company All America Fund, (k) Investment Company Equity
Index Fund, (l) Investment Company Mid-Cap Equity Index Fund, (m) Fidelity
VIP II Contra Fund, (n) Investment Company Aggressive Equity Fund,
(o) Scudder Capital Growth Fund, (p) Scudder International Fund, and
(q) American Century VP Capital Appreciation Fund.
ADMINISTRATIVE CHARGES
------------------------------------------------------------------------------
We deduct, on each Valuation Day, from the value of the net assets in each
Fund of the Separate Account a charge for administrative expenses at an
annual rate of 0.40%, except that we reduce the administrative charge to the
extent we receive a reimbursement for administrative expenses.
-21-
<PAGE>
o For the Separate Account Fund that invests in the American Century VP
Capital Appreciation Fund, the annual rate currently is 0.20%, because
the adviser for the American Century VP Capital Appreciation Fund
reimburses us at an annual rate of up to 0.20% for administrative
expenses.
o For the Funds that invest in the Fidelity Portfolios, the annual rate
currently is 0.30%, because the transfer agent and distributor for the
Fidelity Portfolios reimburse us at an aggregate annual rate of 0.10%
for administrative expenses.
o We make an additional deduction for administrative expenses, on each
Monthly Anniversary Day, from your Account Balance. The charge is $2.00
per month, except that we will reduce the charge to 1/12 of 1.00% if
your Account Balance for the month is less than $2,400. We deduct the
administrative expense charge from your Account Balance in the same
manner as described above for cost of insurance charges.
o We reserve the right to increase our administrative charges if the
revenues from these charges are insufficient to cover our costs of
administering the Policies. In no event will we increase the .40%
charge to more than an annual rate of .65% or the $2.00 per month
charge to more than $10 per month.
MORTALITY AND EXPENSE RISKS CHARGES
------------------------------------------------------------------------------
We deduct, on each Valuation Day, from the value of the net assets in each
Fund of the Separate Account a charge for mortality and expense risks we
assume under the Policies. The mortality risk charge, at an annual rate of
0.70%, compensates us for assuming the risk that insured persons may live
for a shorter period of time than we estimated. The expense risk charge, at
an annual rate of 0.15%, compensates us for the risk that our expenses in
administering the Policies will be greater than we estimated. We will
realize a gain from these charges to the extent that they are not needed to
provide benefits and pay expenses under the Policies.
SUPPLEMENTAL INSURANCE BENEFITS FEE
------------------------------------------------------------------------------
We deduct the cost of any supplemental benefits you may have from your
Account Balance on each Monthly Anniversary Day. The current monthly cost
per thousand of coverage for the accidental death benefit rider is $.10. The
total monthly cost per $1,000 of coverage for all covered children under a
children's term rider currently is $.60. The maximum insurance coverage per
child currently is $5,000. SEE "How to Purchase a Policy and Pay Premiums --
Supplemental Insurance Benefits".
ACCELERATED BENEFIT FEE
------------------------------------------------------------------------------
We deduct a one-time administrative fee from the Accelerated Benefit when we
pay the Accelerated Benefit. The amount of the Accelerated Benefit fee is
$250. SEE " -- Access to Your Account Balance -- Accelerated Benefit for
Terminal Illness".
PREMIUM AND OTHER TAXES
------------------------------------------------------------------------------
We currently do not deduct state premium taxes from your premium payments.
We reserve 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 Separate
Account Funds. Currently, most state premium taxes range from 2% to 4%. SEE
"Federal Tax Considerations".
CHANGES IN POLICY COST FACTORS
------------------------------------------------------------------------------
From time to time we may make adjustments in policy cost factors, which
include interest credited on amounts in our General Account, cost of
insurance deductions and administrative charges. We base adjustments upon
changes in our expectations for our investment earnings, mortality of
insured persons, persistency (how long Policies stay in effect), expenses,
and taxes. We make any adjustments "by class", meaning that all Policies
within the same class will have the same adjustment.
-22-
<PAGE>
We determine changes in policy cost factors for a Policy in accordance with
procedures and standards on file with the insurance regulator of the
jurisdiction in which we delivered the Policy. We review policy cost factors
for in-force Policies once every five Policy Years, or whenever we change
the premiums or factors for comparable new Policies. We will never make a
change in the guaranteed cost of insurance rates and the Guaranteed Rate of
Interest shown on the Specification Pages of your Policy that would be
unfavorable to you.
FEES AND EXPENSES OF UNDERLYING FUNDS
------------------------------------------------------------------------------
Each Separate Account Fund purchases shares of an Underlying Fund at net
asset value. That net asset value reflects investment management and other
fees and expenses incurred by that Underlying Fund. Detailed information
concerning those fees and expenses is set forth in the prospectuses for the
Underlying Funds that are attached to this Prospectus.
-23-
<PAGE>
HOW TO CONTACT US AND GIVE US INSTRUCTIONS
CONTACTING AMERICAN LIFE
------------------------------------------------------------------------------
You should send in writing all notices, requests and elections required or
permitted under the Policies, except that you may give certain instructions
by telephone, as described below. Our home office address is:
The American Life Insurance Company of New York
320 Park Avenue
New York, New York 10022
You can check the address for your Regional Office by calling 1-800-872-5963
or by visiting our Website at www.mutualofamerica.com.
TRANSFERS, ALLOCATION CHANGES, LOANS AND WITHDRAWALS BY TELEPHONE
------------------------------------------------------------------------------
You may make requests by telephone for transfers or withdrawals of Account
Balance or to change the Investment Alternatives to which we will allocate
your future Premiums.
You must use a Personal Identification Number (PIN) to make telephone
requests. We automatically send a PIN to you, and your use of the PIN
constitutes your agreement to use the PIN in accordance with our rules and
requirements. You may call us to change or cancel the PIN that we have
assigned. Our toll-free telephone number for requests is 1-800-872-5963.
On any Valuation Day, we will consider requests by telephone that we receive
by 4 p.m. Eastern Time (or the close of the New York Stock Exchange, if
earlier) as received that day. We will consider requests that we receive
after 4 p.m. (or the Exchange close) as received the next Valuation Day. We
reserve the right to suspend or terminate at any time the right of
Policyowners to request transfers or reallocations by telephone.
Although our failure to follow reasonable procedures may result in our
liability for any losses due to unauthorized or fraudulent telephone
transfers, we will not be liable for following instructions communicated by
telephone that we reasonably believe to be genuine. We will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. Those procedures are to confirm your Social Security number,
check the Personal Identification Number, tape record all telephone
transactions and provide written confirmation of telephone transactions.
WHERE YOU SHOULD DIRECT REQUESTS
------------------------------------------------------------------------------
You may make requests for allocation changes or transfers of Account Balance
by calling 1-800-872-5963 or by writing to our Processing Center.
For withdrawals and Policy Loans, you must make your request according to
our procedures, which we may change from time to time. Under our current
procedures, you should make a withdrawal or loan request to our 800 number
or in writing to our Processing Center.
The address for our Processing Center is:
The American Life Insurance Company of New York
Financial Transaction Processing Center
1150 Broken Sound Parkway NW
Boca Raton, FL 33487
You should use our forms to submit written requests to us.
-24-
<PAGE>
ABOUT AMERICAN LIFE AND OUR SEPARATE ACCOUNT NO. 3
AMERICAN LIFE
------------------------------------------------------------------------------
We are a life insurance company organized in 1955 under the laws of the
State of New York. We are authorized to transact business in 50 states, the
District of Columbia and the United States Virgin Islands. Our home office
is located at 320 Park Avenue, New York, New York 10022. Mutual of America
Life Insurance Company (MUTUAL OF AMERICA), a mutual life insurance company
also organized under New York law, is our indirect parent company. It was
incorporated in 1945 as a nonprofit retirement association to provide
retirement and other benefits for non-profit organizations and their
employees in the health and welfare field. On December 31, 1978, Mutual of
America reorganized as a mutual life insurance company.
We sell individual and group life insurance, group disability, annuities and
pension plans, including variable accumulation annuity contracts and
variable universal life insurance policies. As of December 31, 1998, we had
total assets of approximately $1.4 billion.
Our operations as a life insurance company are reviewed periodically by
various independent rating agencies. These agencies, such as A.M. Best &
Company, Standard & Poor's Insurance Rating Service and Duff & Phelps Credit
Rating Company, publish their ratings. From time to time we reprint and
distribute the rating reports in whole or in part, or summaries of them, to
the public. The ratings concern our operation as a life insurance company
and do not imply any guarantees of performance of the Separate Account.
THE SEPARATE ACCOUNT
------------------------------------------------------------------------------
We established the Separate Account under a resolution of our Board of
Directors adopted on February 23, 1993. The Separate Account is registered
with the Securities and Exchange Commission (COMMISSION) as a unit
investment trust under the Investment Company Act of 1940 (1940 ACT). The
Commission does not supervise the management or investment practices or
policies of the Separate Account or American Life. The 1940 Act, however,
does regulate certain actions by the Separate Account.
We divide the Separate Account into distinct Funds. Each Fund invests its
assets in an Underlying Fund, and the name of each Separate Account Fund
reflects the name of the corresponding Underlying Fund.
The assets of the Separate Account are our property. The Separate Account
assets attributable to Policyowners' Account Balances and any other policies
funded through the Separate Account cannot be charged with liabilities from
other businesses that we conduct. The income, capital gains and capital
losses of each Fund of the Separate Account are credited to, or charged
against, the net assets held in that Fund. We separately determine each
Fund's net assets, without regard to the income, capital gains and capital
losses from any of the other Funds of the Separate Account or from any other
business that we conduct.
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 we are
licensed to do business.
-25-
<PAGE>
FEDERAL TAX CONSIDERATIONS
For Federal income tax purposes, the Separate Account is not separate from
us, and its operations are considered part of our operations. Under existing
Federal income tax law, we do not pay taxes on the net investment income and
realized capital gains earned by the Separate Account. We reserve the right,
however, to make a deduction for taxes if in the future we must pay tax on
the Separate Account's operations.
OBTAINING TAX ADVICE
------------------------------------------------------------------------------
THE DESCRIPTION BELOW OF THE CURRENT FEDERAL TAX STATUS AND CONSEQUENCES FOR
POLICYOWNERS DOES NOT COVER EVERY POSSIBLE SITUATION AND IS FOR INFORMATION
PURPOSES ONLY. TAX PROVISIONS AND REGULATIONS MAY CHANGE AT ANY TIME. The
discussion below of Federal tax considerations is based upon our
understanding of current Federal income tax laws as they are currently
interpreted and is not intended as tax advice. We do not make any guarantee
regarding the tax status of any Policy or any transaction involving a
Policy.
Tax results may vary depending upon your individual situation, and special
rules may apply to you in certain cases. You also may be subject to State
and local taxes, which may not correspond to the Federal tax provisions. For
these reasons, you should consult a qualified tax adviser for detailed
information and advice regarding the tax consequences to you of purchasing a
Policy or of effecting any transaction under a Policy.
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
formulate regulations that implement Section 7702. The Treasury has proposed
regulations and issued other interim guidance, but it has not adopted final
regulations. Accordingly, 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.
We believe that a Policy issued on the basis of a standard premium class
should meet the Section 7702 definition of a life insurance contract. Our
interpretation is based primarily on IRS Notice 88-128 and the proposed
mortality charge regulations under Section 7702 issued on July 5, 1991.
For a Policy issued on a substandard basis (in other words, the insured
person's premium class indicates a higher than standard mortality risk),
there is less guidance as to whether the Policy would meet the Section 7702
definition of life insurance contract. Particularly if the Policyowner pays
the full amount of premiums permitted under the Policy, there may be a
question as to whether the Policy is a life insurance policy.
If it is subsequently determined that a Policy we have issued does not
satisfy Section 7702, we may take whatever steps are appropriate and
reasonable to attempt to cause that Policy to comply with Section 7702. For
this purpose, we reserve 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 Separate Account's investments
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 Funds, intends to
comply with the diversification requirements prescribed in Treasury
Regulation Section 1.817-5. We believe that the Separate Account meets the
diversification requirement, and we 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. If the Treasury provides additional
guidance on this issue, the Policy may need to be modified to comply with
that guidance. Accordingly, we reserve 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.
-26-
<PAGE>
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS AND ACCESS OF ACCOUNT BALANCE
------------------------------------------------------------------------------
IN GENERAL. Proceeds and Account Balance increases should be treated in a
manner consistent with a fixed-benefit life insurance policy for Federal
income tax purposes. You will not be considered to have received the Account
Balance, including investment earnings and interest earned, until there is a
distribution of Account Balance.
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. 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 person, 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.
When you receive a distribution under the Policy, an important factor in
determining whether all or any portion of the distribution is taxable to you
is your INVESTMENT IN THE POLICY. Your investment in the Policy generally is
the amount of premiums or other consideration you have paid for the Policy
which you have not previously withdrawn.
DEATH BENEFITS. The death benefit under the Policy should be excludable from
the gross income of the beneficiary under Section 101(a)(1) of the Code.
SURRENDER OR LAPSE OF POLICY; MATURITY PROCEEDS. Upon a complete surrender
or lapse of a Policy or when benefits are paid at the Maturity Date, if the
amount you receive plus the amount of your outstanding Policy Loans exceeds
your total investment in the Policy, the excess will be treated as ordinary
income subject to tax, regardless of whether the Policy is considered to be
a Modified Endowment Contract.
DISTRIBUTIONS FROM A POLICY THAT IS NOT A MODIFIED ENDOWMENT CONTRACT. The
general rule is that a distribution from a Policy that is not a Modified
Endowment Contract is tax-free to you up to the amount of your investment in
the Policy. Any distribution or portion of a distribution that exceeds the
investment in the Policy is taxable income to you. In effect, all
distributions are treated as first a return to you of your investment in the
Policy, prior to the return to you of interest and earnings on your Account
Balance.
An exception to this general rule applies if:
o the Policy's death benefit decreases, or any other change occurs that
reduces benefits under the Policy, during the first 15 years after the
Policy was issued, and
o the decrease or change results in a cash distribution to the
Policyowner in order for the Policy to continue to comply with the
limits defined in Section 7702.
In such a case, the 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.
CHARACTERIZATION AS A MODIFIED ENDOWMENT CONTRACT. Section 7702A of the Code
establishes a class of life insurance contracts designated as Modified
Endowment Contracts. A Policy is considered to be a Modified Endowment
Contract if it fails 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) is greater than a certain amount in relation to the
then current death benefit under the Policy.
The seven pay test provides that a Policy will be a Modified Endowment
Contract if the accumulated premiums paid at any time during the first seven
Policy years are greater than the sum of the net level premiums that 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
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 Balance at the time of that change and the additional
premiums paid in the seven years following the material change. If the
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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 to your Policy that would cause the 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. Our notification will provide you with instructions and
the 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 A POLICY THAT IS A MODIFIED ENDOWMENT CONTRACT. A Policy
classified as Modified Endowment Contract is subject to the tax rules below.
In effect, all distributions are treated as first a return to you of
interest and earnings on your Account Balance, prior to the return to you of
your investment in the Policy.
1) All distributions you receive under the Policy, including Surrender
Proceeds, partial withdrawals and distributions within two years before
the Policy became a Modified Endowment Contract, are treated as taxable
ordinary income to you, in an amount up to:
o your Account Balance immediately before the distribution, minus
o your investment in the Policy at that time.
2) Second, any loans you take from or secure by the Policy are treated as
distributions and are taxed as described in 1) above, and past due loan
interest that is added to the loan amount is treated as a loan.
3) A 10 percent additional income tax is imposed on the portion of any
distribution that is included in your taxable income in accordance with 1)
above, unless the distribution or loan
o is made when you are age 59 1/2 or older,
o is attributable to you becoming disabled, or
o is part of a series of substantially equal periodic payments for your
life (or life expectancy) or the joint lives (or joint life
expectancies) of the you and your beneficiary.
All Modified Endowment Contracts that we (or any affiliates of ours) issue
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
------------------------------------------------------------------------------
If you are an individual, you may not deduct personal interest paid on any
loan under a Policy, in most circumstances. 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 Policies 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.
ESTATE TAXES
------------------------------------------------------------------------------
The Death Proceeds payable under the Policy are includable in the insured
person's gross estate for federal estate tax purposes if the Death Proceeds
are paid:
o to the insured person's estate, or
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<PAGE>
o to a beneficiary other than the estate and the insured person 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.
Death Proceeds paid to a surviving spouse as beneficiary are not includable
in your Federal gross estate because of a 100% estate tax marital deduction.
In addition, Death Proceeds paid to a tax-exempt charity may not be taxable
in your estate because of the allowance of an estate tax charitable
deduction. When Death Proceeds are paid to other beneficiaries, whether or
not any Federal estate tax is payable on that amount depends on a variety of
factors, including the size of the gross estate. There is an estate tax
credit that is equivalent to an exemption of $650,000 in 1999, which will
increase in increments until 2006, when it will reach the equivalent of an
exemption of $1 million.
If you are not the insured person, and your death occurs before the death of
the insured person, the value of the Policy, as determined under Internal
Revenue Service regulations, is includable in your gross estate for Federal
estate tax purposes.
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<PAGE>
YOUR VOTING RIGHTS FOR MEETINGS OF THE UNDERLYING FUNDS
We will vote the shares of the Underlying Funds owned by the Separate
Account at regular and special meetings of the shareholders of the
Underlying Funds. We will cast our votes according to instructions we
receive from Policyowners. The number of Underlying Fund shares that we may
vote at a meeting of shareholders will be determined as of a record date set
by the Board of Directors or Trustees of the Underlying Fund.
We will vote 100% of the shares that a Separate Account Fund owns. If you do
not send us voting instructions, we will vote the shares attributable to
your Account Balance in the same proportion as we vote shares for which we
have received voting instructions from Policyowners. We will determine the
number of Accumulation Units attributable to each Policyowner for purposes
of giving voting instructions as of the same record date used by the
Underlying Fund.
Each Policyowner who has the right to give us voting instructions for a
shareholders' meeting of an Underlying Fund will receive information about
the matters to be voted on, including the Underlying Fund's proxy statement
and a voting instructions form to return to us.
We may elect to vote the shares of the Underlying Funds held by our Separate
Account in our own discretion if the Investment Company Act of 1940 is
amended, or if the present interpretation of the Act changes with respect to
our voting of these shares.
FUNDING AND OTHER CHANGES WE MAY MAKE
We reserve the right to make certain changes to the Separate Account Funds
and to the Separate Account's operations. In making changes, we will comply
with applicable law and will obtain the approval of Policyowners, if
required. We may:
o create new investment funds of the Separate Account at any time;
o to the extent permitted by state and federal law, modify, combine or
remove investment funds in the Separate Account;
o transfer assets we have determined to be associated with the class of
contracts to which the Policies belong from one investment fund of the
Separate Account to another investment fund;
o create additional separate accounts or combine any two or more accounts
including the Separate Account;
o transfer assets we have determined to be associated with the class of
contracts to which the Policies belong from the Separate Account to
another separate account of ours by withdrawing the same percentage of
each investment in the Separate Account, with appropriate adjustments
to avoid odd lots and fractions;
o operate the Separate Account as a diversified, open-end management
investment company under the 1940 Act, or in any other form permitted
by law, and designate an investment advisor for its management, which
may be us, an affiliate of ours or another person;
o deregister the Separate Account under the 1940 Act; and
o operate the Separate Account under the general supervision of a
committee, any or all the members of which may be interested persons
(as defined in the 1940 Act) of ours or our affiliates, or discharge
the committee for the Separate Account.
If our exercise of any of these rights results in a material change to the
Investment Alternatives of the Separate Account, we will advise you of the
change.
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<PAGE>
ADMINISTRATIVE MATTERS
YEAR 2000 COMPLIANCE
------------------------------------------------------------------------------
Many of the services that we provide to you depend on the proper functioning
of our computer and computer-based systems, as well as those of our 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 your premium, transfer and withdrawal transactions, the
crediting of Accumulation Units, accounting and other recordkeeping
services.
We have performed a comprehensive review of our computer systems, made the
necessary modifications or replacements and successfully completed system
testing of our in-house software, the largest and most critical project
under our Year 2000 program. For the balance of 1999, we will continue to
monitor and verify Year 2000 compliance. We also have contacted our vendors
and service providers as to the status of their Year 2000 compliance.
Vendors and service providers whose systems are material to our operations
have indicated they are, or expect to be, Year 2000 compliant. Although we
anticipate that our computer systems and those of our providers will be
adapted in time for the year 2000, it is possible Year 2000 problems still
may occur. We are developing written contingency plans to ensure our
business continuity through the year 2000.
NOTICES, CONFIRMATION STATEMENTS AND REPORTS TO POLICYOWNERS
------------------------------------------------------------------------------
Approximately 20 days before a scheduled premium, we will send you a notice
of the amount and due date of that scheduled premium, except that we will
not send notices for scheduled premiums payable under a Payroll Deduction
Program or if you have authorized withdrawals from your bank or other
account to pay scheduled premiums.
Within 30 days after each calendar quarter, we will send you a statement
showing your Account Balance, premiums received, charges incurred and
information concerning any Policy Loans as of the end of the quarter. We
will send you a confirmation statement within five business days after any
transaction involving purchase, sale or transfer of Accumulation Units and
for any change in allocation instructions, except that if your Policy has a
Payroll Deduction Rider, your quarterly statement will serve as the
confirmation statement for your purchase, sale and transfer transactions.
You must notify us of any error in a statement within 30 days after the date
we processed the allocation change or transaction, or within 30 days after
the end of the period covered by the quarterly statement that serves as the
confirmation statement, or you will give up your right to have us correct
the error.
We also will send to you annual and semi-annual reports for the Separate
Account and each Underlying Fund, which will include financial statements.
MISCELLANEOUS POLICY PROVISIONS
------------------------------------------------------------------------------
LIMIT ON RIGHT TO CONTEST. We will not contest the insurance coverage under
a Policy after it has been in force (a) for two years from the Issue Date
with respect to the initial amount of insurance coverage; (b) for two years
from the effective date of an increase in the amount of insurance requiring
evidence of insurability; and (c) for two years from the effective date of
the reinstatement with respect to any amount of insurance that was
reinstated. If we contest a Face Amount increase or a reinstatement, the
contest will be based only on the application for that increase or
reinstatement.
SUICIDE EXCLUSION. If the insured person commits suicide within two years
from the Issue Date, we will not pay the Death Proceeds that would otherwise
be payable under a Policy. We will pay no more than (a) the sum of the
Account Balance and any insurance charges; minus (b) the sum of any Policy
Loans. If there was 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 person 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.
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<PAGE>
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
person is misstated on your Policy Specifications Pages, then the Proceeds
payable upon proof of the death of the insured person 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 on us until we receive and record it 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. The Policies are non-participating policies, which means
that they will not share in our profits or surplus earnings through payment
of dividends or otherwise.
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. We offer the Policies continuously without
a sales charge through our employees and certain employees of Mutual of
America. These employees receive a salary from us or Mutual of America and
do not receive commissions for sales of the Policies. All persons engaged in
selling the Policies are our licensed agents and are duly qualified
registered representatives of Mutual of America. Under our Distribution and
Administration Agreement with Mutual of America, we pay Mutual of America
for the cost of providing services to us. Because the Policies have no sales
load, the costs of distribution will necessarily be paid out of our profits,
including any profits from the Policies' mortality and expense risks
charges.
Mutual of America also serves as principal underwriter for the Mutual of
America Investment Corporation and for the variable accumulation annuity
contracts it offers through its Separate Account No. 2.
OTHER INFORMATION
LEGAL PROCEEDINGS
------------------------------------------------------------------------------
From time to time we may engage in litigation. In our judgment, our current
litigation is not of material importance in relation to our total assets.
The Separate Account is not a party to any pending legal proceedings.
LEGAL MATTERS
------------------------------------------------------------------------------
Patrick A. Burns, Senior Executive Vice President and General Counsel of
American Life, has passed upon all matters of applicable state law relating
to the Policies, including our right to issue the Policies. Jones & Blouch
L.L.P., Washington, D.C., has passed upon certain legal matters relating to
Federal securities laws that are applicable to our offering of the Policies.
EXPERTS
------------------------------------------------------------------------------
Arthur Andersen LLP, independent public accountants, has audited the
December 31, 1998 financial statements included in this prospectus, as
indicated in their reports on the financial statements. We have included the
reports of Arthur Andersen in reliance upon their authority as experts in
giving reports on financial statements.
ADDITIONAL INFORMATION AVAILABLE
------------------------------------------------------------------------------
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 relating to the offering of
Policies described in this Prospectus. This Prospectus does not include all
the information contained in that registration statement. You may obtain the
omitted information at the principal office of the Securities and Exchange
Commission in Washington, D.C. upon payment of their prescribed fee.
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<PAGE>
OUR EXECUTIVE OFFICERS AND DIRECTORS
The name and position of each of our executive officers and directors, 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 PRINCIPAL OCCUPATION
NAME WITH AMERICAN LIFE 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
Diane M. Aramony Senior Vice President and Senior Vice President, Corporate Secretary
Corporate Secretary; and Assistant to the Chairman, Mutual of
Director America, since September 1998, prior thereto,
Senior Vice President
William Breneisen Executive Vice President Executive Vice President, Office of
Technology, Mutual of America; prior thereto,
Senior Vice President
Jeremy J. Brown Executive Vice President Executive Vice President and Chief Actuary,
and Chief Actuary; Mutual of America, since March 1997;
Director 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
Counsel; Director
Richard J. Ciecka Director President and Chief Executive Officer, Mutual
of America Capital Management Corporation,
since September 1998; prior thereto, Director
and Vice Chairman of the Board, Mutual of
America
William S. Conway Executive Vice President; Executive Vice President, Marketing and
Director Corporate Communications, Mutual of
America
Salvatore R. Curiale Senior Executive Vice Senior Executive Vice President, Technical
President; Director Operations, since March 1995 and Director
since October 1998, Mutual of America; prior
thereto, Superintendent of Insurance, State of
New York
William A. DeMilt Executive Vice President; Executive Vice President, Mutual of America
Director
Thomas E. Gilliam Executive Vice President; Executive Vice President and Assistant to the
Director President and Chief Executive Officer, Mutual
of America
John R. Greed Executive Vice President Executive Vice President since May 1997 and
and Treasurer; Director Treasurer since May 1997, Mutual of
America; Senior Vice President July 1996 to
May 1997; partner, Arthur Andersen LLP,
from September 1995 to June 1996; prior
thereto, Senior Manager
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION
NAME WITH AMERICAN LIFE DURING PAST FIVE YEARS
- ----------------------- --------------------------- -----------------------------------------------
<S> <C> <C>
Theodore L. Herman Vice Chairman of the Vice Chairman, American Life
Board; Director
Gregory A. Kleva Executive Vice President Executive Vice President & Deputy General
& Deputy General Counsel, Mutual of America, since February
Counsel 1995; prior thereto, Senior Vice President &
Deputy General Counsel
Amir Lear Senior Vice President; Executive Vice President, Mutual of America
Director Capital Management Corporation since
September 1998; prior thereto, Senior Vice
President, Mutual of America
Howard Lichtenstein President and Chief President and Chief Operating Officer,
Operating Officer; American Life
Director
George L. Medlin Executive Vice President, Executive Vice President, Internal Audit,
Internal Audit Mutual of America since March 1998; prior
thereto, Senior Vice President, Internal Audit
Thomas J. Moran Chairman of the Board Chief Executive Officer since October 1994
and Chief Executive and Director, Mutual of America; prior
Officer; Director thereto, President and Director, Mutual of
America
Robert W. Ruane Senior Vice President; Senior Vice President, Corporate Communi-
Director cations and Direct Response, Mutual of
America
</TABLE>
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<PAGE>
DEFINITIONS WE USE IN THIS PROSPECTUS
ACCELERATED BENEFIT -- The portion of the Death Proceeds payable before the
death of the insured person when
the insured person is determined to have a terminal illness and is expected
to live for one year or less.
ACCOUNT BALANCE -- The value of a Policyowner's Accumulation Units in the
Separate Account Funds plus the value of amounts held in the General Account
for the Policyowner. As used in this Prospectus, the term "Account Balance"
may mean all or any part of your total Account Balance.
ACCUMULATION UNIT -- A measure we use to calculate the value of a
Policyowner's interest in each of the Funds of the Separate Account. Each
Fund has its own Accumulation Unit value.
BASIC DEATH BENEFIT -- The primary component of the Death Proceeds payable
upon the death of the insured person when the Policy is in effect. The Basic
Death Benefit is the greater of:
o the Face Amount under a Face Amount Policy, or the Face Amount plus the
Account Balance under a Face Amount Plus Policy (you select the type of
Policy upon purchase), and
o the Account Balance times the applicable Corridor Percentage.
BENEFICIARY -- The person(s) you designate in your application or in a
change of beneficiary form filed with us to receive the Death Proceeds payable
upon the death of the insured person.
BUSINESS DAY -- Any day 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. Depending on the context,
the term Code includes the regulations adopted by the Internal Revenue
Service for the Code section being discussed.
CORRIDOR PERCENTAGE -- A percentage established under the Code, based on the
insured person's age. The Corridor Percentage is multiplied by your Account
Balance to establish the minimum 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 the Variable Insurance
Products Fund (VIP) and the Contrafund and Asset Manager Portfolios of the
Variable Insurance Products Fund II (FIDELITY VIP II).
FUND OF THE SEPARATE ACCOUNT (OR FUND) -- One of the subaccounts of the
Separate Account. Each Fund's name corresponds to the name of the Underlying
Fund in which it invests.
GENERAL ACCOUNT -- Assets we own that are not in a separate account, but
rather are held as part of our general assets. We sometimes refer to the
General Account as the INTEREST ACCUMULATION ACCOUNT, because amounts you
allocate to the General Account earn interest at a fixed rate that we change
from time to time.
INSURED PERSON -- The person on whose life a Policy is issued, or in other
words the person whose death will trigger payment of a death benefit under
your Policy.
INSURED PERSON'S AGE -- The insured person's age as of his or her last
birthday preceding the Policy Date. The insured person'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 ALTERNATIVES -- Our General Account and the Funds of the Separate
Account. You may allocate your premiums and transfer your Account Balance
among the Investment Alternatives.
INVESTMENT COMPANY -- Mutual of America Investment Corporation.
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<PAGE>
ISSUE DATE -- The date as of which we issued a Policy to you, as shown on
the Policy Specification Pages of your Policy.
MATURITY DATE -- The Policy Anniversary on which the insured person's attained
age equals 100.
MONTHLY ANNIVERSARY DAY -- The same day each month as the day on which the
Policy Date occurred.
PAYROLL DEDUCTION PROGRAM -- A program established by an employer under
which it agrees with its participating employees to deduct on each pay date
from the 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 designated on the Policy Specification Pages of your
Policy as the owner.
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 person that we used
in setting rates for cost of insurance charges.
PROCEEDS -- The amount we will pay upon (a) surrender of the Policy, (b) the
death of the insured person or (c) the Maturity Date, 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 any other location 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 in the amount and at the intervals specified in
your Policy.
SCUDDER PORTFOLIOS -- The following three portfolios of the Scudder Variable
Life Investment Fund: Capital Growth Portfolio, Bond Portfolio and
International Portfolio.
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. The assets of the Separate Account are set aside and kept separate
from our other assets.
UNDERLYING FUNDS -- The funds or portfolios that are invested in by the
Separate Account Funds.
UNSCHEDULED PREMIUMS -- Premiums other than scheduled premiums that you are
permitted to pay 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 requested transaction. If 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 -- Each day that the New York Stock Exchange is open for
business until the close of the New York Stock Exchange that day.
VALUATION PERIOD -- A period beginning on the close of business of a
Valuation Day and ending on the close of the next Valuation Day.
WE, US, OUR, AMERICAN LIFE -- Refer to The American Life Insurance Company of
New York.
WRITTEN REQUEST -- A written request on an administrative form provided by
us or in a form otherwise acceptable to us.
YOU, YOUR -- Refer to a Policyowner.
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<PAGE>
POLICY ILLUSTRATIONS
We have prepared the following tables to help show you how Account Balance and
Death Proceeds under a Policy change with investment performance. The
illustrations cover:
o both a Face Amount Plan and a Face Amount Plus Plan, for Face Amounts
of $100,000 and $500,000,
o 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 for Face Amounts of $100,000, and
o both our current cost of insurance rates and our guaranteed cost of
insurance rates.
The tables illustrate how Account Balance, which reflects all applicable
charges and deductions, and Death Proceeds of a Policy issued on an insured
person of a specified age would vary over time if the investment return on
the assets of each Underlying Fund was a uniform, after-tax, annual rate of
0%, 6% or 12%. The annual rate is assumed to be gross, or in other words is
before fees or expenses incurred by each Underlying Fund, other than
transaction expenses such as brokerage commissions. The Account Balance 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 current reimbursement arrangements).
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, based on current reimbursement arrangements).
A simple average of the investment management fees and other expenses of the
available Underlying Funds is reflected in all the tables. That average
total expense figure is 0.57%, based upon the 1998 expense ratios of the
Underlying Funds and the estimated expenses of the Investment Company
Mid-Cap Equity Index Fund. The expenses of the Underlying Funds may
fluctuate from year to year, but we have assumed they remain constant for
purposes of these tables. The Adviser for the Investment Company voluntarily
pays the expenses of each Fund of the Investment Company other than its
investment advisory fee and portfolio transaction expenses. If the
Investment Company Funds paid all of their expenses, the average total
expense figure would be higher and the death benefit and account balance
numbers in the illustrations would be lower.
After subtracting the average total expenses for the Underlying Funds and
the current expenses of the Separate Account Funds, the gross annual
investment returns shown in the illustrations of 0%, 6% and 12% are reduced
to - 1.79%, 4.21% and 10.21%. After subtracting the average total expenses
for the Underlying Funds and maximum expenses for the Separate Account
Funds, the gross annual investment returns shown in the illustrations of 0%,
6% and 12% are reduced to - 2.04%, 3.96% and 9.96%.
The tables assume that the insured person is a standard risk (non-smoker),
that scheduled premiums of the amounts specified in notes following the
tables are paid on each Policy Anniversary and that no transfers, partial
withdrawals, Policy Loans, changes in Basic Death Benefit plan or changes in
Face Amount are 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 Balances 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).
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<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
<TABLE>
<CAPTION>
USING OUR CURRENT COST OF INSURANCE CHARGES
-------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
----------------------------------- ------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ------------------- --------------- ----------- ----------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 1,365 $100,000 $100,000 $100,000 $ 1,089 $ 1,160 $ 1,232
2 ............... 2,798 100,000 100,000 100,000 2,150 2,361 2,581
3 ............... 4,303 100,000 100,000 100,000 3,181 3,601 4,057
4 ............... 5,883 100,000 100,000 100,000 4,183 4,884 5,675
5 ............... 7,542 100,000 100,000 100,000 5,159 6,212 7,450
6 ............... 9,285 100,000 100,000 100,000 6,107 7,588 9,400
7 ............... 11,114 100,000 100,000 100,000 7,030 9,014 11,541
8 ............... 13,035 100,000 100,000 100,000 7,928 10,492 13,896
9 ............... 15,051 100,000 100,000 100,000 8,801 12,026 16,488
10 .............. 17,169 100,000 100,000 100,000 9,639 13,607 19,331
11 .............. 19,392 100,000 100,000 100,000 10,422 15,218 22,433
12 .............. 21,727 100,000 100,000 100,000 11,172 16,881 25,844
13 .............. 24,178 100,000 100,000 100,000 11,890 18,601 29,599
14 .............. 26,752 100,000 100,000 100,000 12,568 20,371 33,727
15 .............. 29,455 100,000 100,000 100,000 13,215 22,203 38,280
16 .............. 32,292 100,000 100,000 100,000 13,823 24,093 43,298
17 .............. 35,272 100,000 100,000 100,000 14,372 26,027 48,820
18 .............. 38,401 100,000 100,000 100,000 14,884 28,025 54,921
19 .............. 41,686 100,000 100,000 101,153 15,379 30,112 61,679
20 .............. 45,135 100,000 100,000 108,558 15,859 32,290 69,145
30 (age 65) ..... 90,689 100,000 100,000 243,092 17,093 58,366 199,256
35 (age 70) ..... 123,287 100,000 100,000 379,068 13,601 75,350 326,782
40 (age 75) ..... 164,892 100,000 104,218 568,062 4,570 97,400 530,899
</TABLE>
(1) Assumes that a premium of $1,300 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The death benefits and Account Balances 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 those averages in individual policy
years.
o The death benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-38-
<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
<TABLE>
<CAPTION>
USING OUR GUARANTEED COST OF INSURANCE CHARGES
----------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
-------------------------------------- --------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ------------------- --------------- ------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 1,365 $ 100,000 $ 100,000 $ 100,000 $ 1,051 $ 1,121 $ 1,192
2 ............... 2,798 100,000 100,000 100,000 2,061 2,266 2,480
3 ............... 4,303 100,000 100,000 100,000 3,020 3,424 3,862
4 ............... 5,883 100,000 100,000 100,000 3,942 4,607 5,358
5 ............... 7,542 100,000 100,000 100,000 4,815 5,805 6,968
6 ............... 9,285 100,000 100,000 100,000 5,642 7,019 8,702
7 ............... 11,114 100,000 100,000 100,000 6,425 8,250 10,574
8 ............... 13,035 100,000 100,000 100,000 7,154 9,487 12,587
9 ............... 15,051 100,000 100,000 100,000 7,830 10,733 14,775
10 .............. 17,169 100,000 100,000 100,000 8,468 12,000 17,169
11 .............. 19,392 100,000 100,000 100,000 9,056 13,288 19,782
12 .............. 21,727 100,000 100,000 100,000 9,587 14,593 22,630
13 .............. 24,178 100,000 100,000 100,000 10,073 15,924 25,748
14 .............. 26,752 100,000 100,000 100,000 10,504 17,276 29,160
15 .............. 29,455 100,000 100,000 100,000 10,883 18,649 32,899
16 .............. 32,292 100,000 100,000 100,000 11,211 20,047 37,004
17 .............. 35,272 100,000 100,000 100,000 11,480 21,461 41,512
18 .............. 38,401 100,000 100,000 100,000 11,682 22,886 46,463
19 .............. 41,686 100,000 100,000 100,000 11,807 24,314 51,908
20 .............. 45,135 100,000 100,000 100,000 11,858 25,748 57,911
30 (age 65) ..... 90,689 100,000 100,000 197,339 6,588 39,543 161,753
35 (age 70) ..... 123,287 0 100,000 302,230 0 44,638 260,543
40 (age 75) ..... 164,892 0 100,000 444,669 0 45,916 415,578
</TABLE>
(1) Assumes that a premium of $1,300 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-39-
<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
<TABLE>
<CAPTION>
USING OUR CURRENT COST OF INSURANCE CHARGES
-------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
-------------------------------------- --------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ------------------- --------------- ------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 1,313 $ 100,000 $ 100,000 $ 100,000 $ 1,052 $ 1,121 $ 1,190
2 ............... 2,691 100,000 100,000 100,000 2,077 2,280 2,492
3 ............... 4,138 100,000 100,000 100,000 3,083 3,488 3,928
4 ............... 5,657 100,000 100,000 100,000 4,060 4,737 5,501
5 ............... 7,252 100,000 100,000 100,000 5,011 6,030 7,226
6 ............... 8,928 100,000 100,000 100,000 5,935 7,368 9,120
7 ............... 10,686 100,000 100,000 100,000 6,834 8,755 11,200
8 ............... 12,533 100,000 100,000 100,000 7,707 10,191 13,486
9 ............... 14,472 100,000 100,000 100,000 8,556 11,681 16,001
10 .............. 16,508 100,000 100,000 100,000 9,370 13,216 18,758
11 .............. 18,646 100,000 100,000 100,000 10,139 14,788 21,774
12 .............. 20,891 100,000 100,000 100,000 10,876 16,410 25,089
13 .............. 23,248 100,000 100,000 100,000 11,581 18,087 28,736
14 .............. 25,723 100,000 100,000 100,000 12,245 19,810 32,744
15 .............. 28,322 100,000 100,000 100,000 12,889 21,602 37,169
16 .............. 31,050 100,000 100,000 100,000 13,493 23,450 42,042
17 .............. 33,915 100,000 100,000 100,000 14,037 25,337 47,401
18 .............. 36,924 100,000 100,000 100,000 14,555 27,295 53,325
19 .............. 40,082 100,000 100,000 100,000 15,055 29,338 59,881
20 .............. 43,399 100,000 100,000 105,399 15,539 31,469 67,133
30 (age 65) ..... 87,201 100,000 100,000 236,450 17,106 57,007 193,812
35 (age 70) ..... 118,545 100,000 100,000 369,250 14,213 73,607 318,319
40 (age 75) ..... 158,550 100,000 101,593 554,162 6,443 94,946 517,909
</TABLE>
(1) Assumes that a premium of $1,250 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-40-
<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
<TABLE>
<CAPTION>
USING OUR GUARANTEED COST OF INSURANCE CHARGES
----------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
-------------------------------------- --------------------------------
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(1) 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 1,965 2,162 2,366
3 ............... 4,138 100,000 100,000 100,000 2,890 3,276 3,695
4 ............... 5,657 100,000 100,000 100,000 3,766 4,403 5,122
5 ............... 7,252 100,000 100,000 100,000 4,596 5,543 6,655
6 ............... 8,928 100,000 100,000 100,000 5,380 6,696 8,306
7 ............... 10,686 100,000 100,000 100,000 6,121 7,865 10,086
8 ............... 12,533 100,000 100,000 100,000 6,820 9,049 12,008
9 ............... 14,472 100,000 100,000 100,000 7,468 10,240 14,091
10 .............. 16,508 100,000 100,000 100,000 8,077 11,448 16,370
11 .............. 18,646 100,000 100,000 100,000 8,638 12,672 18,854
12 .............. 20,891 100,000 100,000 100,000 9,152 13,917 21,569
13 .............. 23,248 100,000 100,000 100,000 9,621 15,187 24,540
14 .............. 25,723 100,000 100,000 100,000 10,036 16,473 27,786
15 .............. 28,322 100,000 100,000 100,000 10,398 17,777 31,341
16 .............. 31,050 100,000 100,000 100,000 10,709 19,101 35,241
17 .............. 33,915 100,000 100,000 100,000 10,961 20,438 39,518
18 .............. 36,924 100,000 100,000 100,000 11,154 21,790 44,220
19 .............. 40,082 100,000 100,000 100,000 11,281 23,150 49,390
20 .............. 43,399 100,000 100,000 100,000 11,332 24,510 55,083
30 (age 65) ..... 87,201 100,000 100,000 188,343 6,792 37,831 154,380
35 (age 70) ..... 118,545 0 100,000 289,215 0 42,900 249,324
40 (age 75) ..... 158,550 0 100,000 426,632 0 44,581 398,722
</TABLE>
(1) Assumes that a premium of $1,250 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-41-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
<TABLE>
<CAPTION>
USING OUR CURRENT COST OF INSURANCE CHARGES
-------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
----------------------------------- -------------------------------
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(1) 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 ........... 4,520 103,692 104,047 104,417 3,692 4,047 4,417
3 ........... 6,951 105,474 106,185 106,954 5,474 6,185 6,954
4 ........... 9,504 107,213 108,401 109,738 7,213 8,401 9,738
5 ........... 12,184 108,909 110,697 112,794 8,909 10,697 12,794
6 ........... 14,998 110,562 113,078 116,149 10,562 13,078 16,149
7 ........... 17,953 112,174 115,547 119,834 12,174 15,547 19,834
8 ........... 21,056 113,745 118,108 123,882 13,745 18,108 23,882
9 ........... 24,314 115,276 120,764 128,331 15,276 20,764 28,331
10 .......... 27,734 116,756 123,508 133,209 16,756 23,508 33,209
11 .......... 31,326 118,162 126,318 138,535 18,162 26,318 38,535
12 .......... 35,097 119,519 129,221 144,378 19,519 29,221 44,378
13 .......... 39,057 120,828 132,223 150,794 20,828 32,223 50,794
14 .......... 43,215 122,078 135,314 157,826 22,078 35,314 57,826
15 .......... 47,581 123,282 138,510 165,551 23,282 38,510 65,551
16 .......... 52,165 124,428 141,804 174,027 24,428 41,804 74,027
17 .......... 56,978 125,495 145,176 183,304 25,495 45,176 83,304
18 .......... 62,032 126,507 148,653 193,491 26,507 48,653 93,491
19 .......... 67,339 127,489 152,264 204,706 27,489 52,264 104,706
20 .......... 72,910 128,441 156,014 217,053 28,441 56,014 117,053
30 (age 65) . 146,498 133,184 198,691 430,379 33,184 98,691 330,379
35 (age 70) . 199,156 130,560 222,010 638,498 30,560 122,010 538,498
40 (age 75) . 266,364 122,360 244,001 969,236 22,360 144,001 869,236
</TABLE>
(1) Assumes that a premium of $2,100 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-42-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
<TABLE>
<CAPTION>
USING OUR GUARANTEED COST OF INSURANCE CHARGES
------------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
-------------------------------------- --------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ------------------- --------------- ------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 2,205 $ 101,824 $ 101,942 $ 102,060 $ 1,824 $ 1,942 $ 2,060
2 ............... 4,520 103,583 103,930 104,291 3,583 3,930 4,291
3 ............... 6,951 105,265 105,952 106,696 5,265 5,952 6,696
4 ............... 9,504 106,885 108,021 109,301 6,885 8,021 9,301
5 ............... 12,184 108,432 110,126 112,112 8,432 10,126 12,112
6 ............... 14,998 109,909 112,271 115,172 9,909 12,271 15,172
7 ............... 17,953 111,318 114,474 118,512 11,318 14,474 18,512
8 ............... 21,056 112,658 116,728 122,147 12,658 16,728 22,147
9 ............... 24,314 113,935 119,034 126,106 13,935 19,034 26,106
10 .............. 27,734 115,162 121,407 130,434 15,162 21,407 30,434
11 .............. 31,326 116,329 123,838 135,155 16,329 23,838 35,155
12 .............. 35,097 117,424 126,315 140,296 17,424 26,315 40,296
13 .............. 39,057 118,461 128,854 145,910 18,461 28,854 45,910
14 .............. 43,215 119,429 131,445 152,034 19,429 31,445 52,034
15 .............. 47,581 120,331 134,089 158,717 20,331 34,089 58,717
16 .............. 52,165 121,166 136,788 166,015 21,166 36,788 66,015
17 .............. 56,978 121,925 139,534 173,977 21,925 39,534 73,977
18 .............. 62,032 122,598 142,314 182,655 22,598 42,314 82,655
19 .............. 67,339 123,173 145,119 192,110 23,173 45,119 92,110
20 .............. 72,910 123,654 147,949 202,418 23,654 47,949 102,418
30 (age 65) ..... 146,498 121,652 175,533 373,290 21,652 75,533 273,290
35 (age 70) ..... 199,156 113,630 185,349 532,485 13,630 85,349 432,485
40 (age 75) ..... 266,364 0 187,053 776,680 0 87,053 676,680
</TABLE>
(1) Assumes that a premium of $2,100 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-43-
<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 PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
<TABLE>
<CAPTION>
USING OUR CURRENT COST OF INSURANCE CHARGES
-------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
------------------------- ---------------------
ASSUMING HYPOTHETICAL
ASSUMING HYPOTHETICAL GROSS ANNUAL
PREMIUMS GROSS ANNUAL INVESTMENT INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ------------------------- ---------------------
YEAR PER YEAR(1) 0% 6% 12% 0% 6% 12%
- --------------- --------------- ------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ........... $ 2,100 $ 101,779 $ 101,892 $ 102,006 $ 1,779 $ 1,892 $ 2,006
2 ........... 4,305 103,522 103,860 104,213 3,522 3,860 4,213
3 ........... 6,620 105,233 105,911 106,645 5,233 5,911 6,645
4 ........... 9,051 106,901 108,035 109,312 6,901 8,035 9,312
5 ........... 11,604 108,528 110,237 112,239 8,528 10,237 12,239
6 ........... 14,284 110,114 112,519 115,453 10,114 12,519 15,453
7 ........... 17,098 111,659 114,885 118,982 11,659 14,885 18,982
8 ........... 20,053 113,165 117,338 122,858 13,165 17,338 22,858
9 ........... 23,156 114,632 119,882 127,118 14,632 19,882 27,118
10 .......... 26,414 116,049 122,509 131,787 16,049 22,509 31,787
11 .......... 29,834 117,406 125,209 136,895 17,406 25,209 36,895
12 .......... 33,426 118,714 127,999 142,499 18,714 27,999 42,499
13 .......... 37,197 119,974 130,881 148,650 19,974 30,881 48,650
14 .......... 41,157 121,177 133,848 155,392 21,177 33,848 55,392
15 .......... 45,315 122,346 136,928 162,808 22,346 36,928 62,808
16 .......... 49,681 123,459 140,100 170,945 23,459 40,100 70,945
17 .......... 54,265 124,492 143,345 179,848 24,492 43,345 79,848
18 .......... 59,078 125,483 146,702 189,635 25,483 46,702 89,635
19 .......... 64,132 126,445 150,188 200,409 26,445 50,188 100,409
20 .......... 69,439 127,377 153,808 212,270 27,377 53,808 112,270
30 (age 65) . 139,522 132,301 195,278 417,512 32,301 95,278 317,512
35 (age 70) . 189,673 130,245 218,361 618,183 30,245 118,361 518,183
40 (age 75) . 253,680 123,129 240,712 937,556 23,129 140,712 837,556
</TABLE>
(1) Assumes that a premium of $2,000 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-44-
<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 PLAN
STANDARD NON-SMOKER FACE AMOUNT $100,000
<TABLE>
<CAPTION>
USING OUR GUARANTEED COST OF INSURANCE CHARGES
----------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
----------------------------------- ------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ------------------- --------------- ----------- ----------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............... $ 2,100 $101,727 $101,839 $101,951 $ 1,727 $ 1,839 $ 1,951
2 ............... 4,305 103,392 103,721 104,064 3,392 3,721 4,064
3 ............... 6,620 104,995 105,646 106,352 4,995 5,646 6,352
4 ............... 9,051 106,525 107,603 108,817 6,525 7,603 8,817
5 ............... 11,604 107,987 109,593 111,476 7,987 9,593 11,476
6 ............... 14,284 109,380 111,617 114,364 9,380 11,617 14,364
7 ............... 17,098 110,708 113,691 117,514 10,708 13,691 17,514
8 ............... 20,053 111,975 115,822 120,952 11,975 15,822 20,952
9 ............... 23,156 113,179 118,000 124,694 13,179 18,000 24,694
10 .............. 26,414 114,336 120,241 128,784 14,336 20,241 28,784
11 .............. 29,834 115,433 122,533 133,244 15,433 22,533 33,244
12 .............. 33,426 116,472 124,880 138,109 16,472 24,880 38,109
13 .............. 37,197 117,454 127,282 143,422 17,454 27,282 43,422
14 .............. 41,157 118,369 129,731 149,213 18,369 29,731 49,213
15 .............. 45,315 119,218 132,228 155,530 19,218 32,228 55,530
16 .............. 49,681 120,002 134,774 162,426 20,002 34,774 62,426
17 .............. 54,265 120,771 137,360 169,945 20,711 37,360 69,945
18 .............. 59,078 121,345 139,988 178,151 21,345 39,988 78,151
19 .............. 64,132 121,896 142,645 187,097 21,896 42,645 87,097
20 .............. 69,439 122,352 145,323 196,847 22,352 45,323 96,847
30 (age 65) ..... 139,522 120,916 171,965 359,141 20,916 71,965 259,141
35 (age 70) ..... 189,673 113,869 182,033 510,881 13,869 82,033 410,881
40 (age 75) ..... 253,680 0 185,161 744,380 0 85,161 644,380
</TABLE>
(1) Assumes that a premium of $2,000 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-45-
<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
<TABLE>
<CAPTION>
USING OUR CURRENT COST OF INSURANCE CHARGES
-------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
------------------------------------ ----------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ------------------ --------------- ----------- ----------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 .............. $ 10,763 $500,000 $500,000 $ 500,000 $ 8,702 $ 9,273 $ 9,845
2 .............. 22,063 500,000 500,000 500,000 17,154 18,842 20,601
3 .............. 33,929 500,000 500,000 500,000 25,424 28,786 32,431
4 .............. 46,388 500,000 500,000 500,000 33,405 39,011 45,335
5 .............. 59,470 500,000 500,000 500,000 41,161 49,593 59,495
6 .............. 73,206 500,000 500,000 500,000 48,699 60,552 75,049
7 .............. 87,628 500,000 500,000 500,000 55,920 71,807 92,051
8 .............. 102,772 500,000 500,000 500,000 62,887 83,433 110,721
9 .............. 118,673 500,000 500,000 500,000 69,763 95,607 131,396
10 ............. 135,370 500,000 500,000 500,000 76,498 108,307 154,247
11 ............. 152,901 500,000 500,000 500,000 82,996 121,465 179,430
12 ............. 171,308 500,000 500,000 500,000 89,168 135,024 207,138
13 ............. 190,636 500,000 500,000 500,000 95,072 149,062 237,716
14 ............. 210,930 500,000 500,000 500,000 100,671 163,576 271,477
15 ............. 232,239 500,000 500,000 500,000 105,927 178,566 308,787
16 ............. 254,614 500,000 500,000 500,000 110,851 194,078 350,095
17 ............. 278,107 500,000 500,000 506,720 115,362 210,090 395,875
18 ............. 302,775 500,000 500,000 562,440 119,518 226,693 446,381
19 ............. 328,676 500,000 500,000 622,336 123,283 243,915 501,884
20 (age 65) .... 355,872 500,000 500,000 686,698 126,580 261,762 562,867
25 (age 70) .... 513,663 500,000 500,000 1,125,549 135,376 362,925 970,301
30 (age 75) .... 715,048 500,000 527,972 1,737,859 125,906 493,432 1,624,167
</TABLE>
(1) Assumes that a premium of $10,250 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-46-
<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
<TABLE>
<CAPTION>
USING OUR GUARANTEED COST OF INSURANCE CHARGES
----------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
-------------------------------------- ---------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ----------------- --------------- ------------ ------------ ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 ............. $ 10,763 $ 500,000 $ 500,000 $ 500,000 $ 7,678 $ 8,214 $ 8,752
2 ............. 22,063 500,000 500,000 500,000 14,975 16,528 18,149
3 ............. 33,929 500,000 500,000 500,000 21,986 25,038 28,353
4 ............. 46,388 500,000 500,000 500,000 28,668 33,703 39,401
5 ............. 59,470 500,000 500,000 500,000 35,032 42,542 51,394
6 ............. 73,206 500,000 500,000 500,000 41,089 51,569 64,444
7 ............. 87,628 500,000 500,000 500,000 46,794 60,748 78,626
8 ............. 102,772 500,000 500,000 500,000 52,107 70,046 94,026
9 ............. 118,673 500,000 500,000 500,000 56,986 79,429 110,750
10 ............ 135,370 500,000 500,000 500,000 61,445 88,917 128,974
11 ............ 152,901 500,000 500,000 500,000 65,444 98,484 148,850
12 ............ 171,308 500,000 500,000 500,000 68,943 108,103 170,560
13 ............ 190,636 500,000 500,000 500,000 72,007 117,845 194,401
14 ............ 210,930 500,000 500,000 500,000 74,541 127,645 220,589
15 ............ 232,239 500,000 500,000 500,000 76,557 137,528 249,463
16 ............ 254,614 500,000 500,000 500,000 77,961 147,438 281,350
17 ............ 278,107 500,000 500,000 500,000 78,710 157,362 316,678
18 ............ 302,775 500,000 500,000 500,000 78,756 167,291 355,956
19 ............ 328,676 500,000 500,000 500,000 77,951 177,140 399,760
20 (age 65) ... 355,872 500,000 500,000 546,926 76,239 186,906 448,300
25 (age 70) ... 513,663 500,000 500,000 889,990 50,811 234,063 767,233
30 (age 75) ... 715,048 0 500,000 1,356,392 0 274,516 1,267,656
</TABLE>
(1) Assumes that a premium of $10,250 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-47-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $500,000
<TABLE>
<CAPTION>
USING OUR CURRENT COST OF INSURANCE CHARGES
-------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
------------------------------------- ----------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ------------------ --------------- ----------- ------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 .............. $ 16,380 $513,930 $ 514,821 $ 515,712 $ 13,930 $ 14,821 $ 15,712
2 .............. 33,579 527,493 530,143 532,902 27,493 30,143 32,902
3 .............. 51,638 540,753 546,049 551,784 40,753 46,049 51,784
4 .............. 70,600 553,597 562,440 572,404 53,597 62,440 72,404
5 .............. 90,510 566,093 579,399 595,002 66,093 79,399 95,002
6 .............. 111,415 578,246 596,949 619,782 78,246 96,949 119,782
7 .............. 133,366 589,944 614,993 646,838 89,944 114,993 146,838
8 .............. 156,414 601,254 633,612 676,467 101,254 133,612 176,467
9 .............. 180,615 612,362 653,015 709,121 112,362 153,015 209,121
10 ............. 206,026 623,212 673,173 745,045 123,212 173,173 245,045
11 ............. 232,707 633,689 693,996 784,448 133,689 193,996 284,448
12 ............. 260,723 643,682 715,389 827,557 143,682 215,389 327,557
13 ............. 290,139 653,258 737,437 874,815 153,258 237,437 374,815
14 ............. 321,026 662,365 760,106 926,582 162,365 260,106 426,582
15 ............. 353,457 670,953 783,362 983,254 170,953 283,362 483,254
16 ............. 387,510 679,031 807,229 1,045,333 179,031 307,229 545,333
17 ............. 423,265 686,489 831,609 1,113,244 186,489 331,609 613,244
18 ............. 460,808 693,397 856,587 1,187,646 193,397 356,587 687,646
19 ............. 500,229 699,707 882,125 1,269,138 199,707 382,125 769,138
20 (age 65) .... 541,620 705,309 908,124 1,358,317 205,309 408,124 858,317
25 (age 70) .... 781,770 721,862 1,044,355 1,948,464 221,862 544,355 1,448,464
30 (age 75) .... 1,088,268 712,985 1,184,199 2,876,346 212,985 684,199 2,376,346
</TABLE>
(1) Assumes that a premium of $15,600 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-48-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLUS PLAN
STANDARD NON-SMOKER FACE AMOUNT $500,000
<TABLE>
<CAPTION>
USING OUR GUARANTEED COST OF INSURANCE CHARGES
----------------------------------------------
DEATH BENEFIT ACCOUNT BALANCE
------------------------------------ ----------------------------------
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(1) 0% 6% 12% 0% 6% 12%
- ------------------ --------------- ----------- ----------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 .............. $ 16,380 $512,849 $513,705 $ 514,563 $ 12,849 $ 13,705 $ 14,563
2 .............. 33,579 525,199 527,708 530,324 25,199 27,708 30,324
3 .............. 51,638 537,118 542,082 547,465 37,118 42,082 47,465
4 .............. 70,600 548,557 556,779 566,060 48,557 56,779 66,060
5 .............. 90,510 559,526 571,814 586,255 59,526 71,814 86,255
6 .............. 111,415 570,033 587,199 608,208 70,033 87,199 108,208
7 .............. 133,366 580,029 602,887 632,032 80,029 102,887 132,032
8 .............. 156,414 589,466 618,828 657,849 89,466 118,828 157,849
9 .............. 180,615 598,294 634,971 685,796 98,294 134,971 185,796
10 ............. 206,026 606,527 651,325 716,084 106,527 151,325 216,084
11 ............. 232,707 614,118 667,837 748,883 114,118 167,837 248,883
12 ............. 260,723 621,019 684,450 784,380 121,019 184,450 284,380
13 ............. 290,139 627,306 701,231 822,907 127,306 201,231 322,907
14 ............. 321,026 632,870 718,064 864,640 132,870 218,064 364,640
15 ............. 353,457 637,728 734,951 909,897 137,728 234,951 409,897
16 ............. 387,510 641,774 751,771 958,904 141,774 251,771 458,904
17 ............. 423,265 644,967 768,461 1,011,970 144,967 268,461 511,970
18 ............. 460,808 647,264 784,954 1,069,436 147,264 284,954 569,436
19 ............. 500,229 648,505 801,057 1,131,553 148,505 301,057 631,553
20 (age 65) .... 541,620 648,653 816,696 1,198,718 148,653 316,696 698,718
25 (age 70) .... 781,770 630,846 884,060 1,626,285 130,846 384,060 1,126,285
30 (age 75) .... 1,088,268 570,315 914,777 2,255,008 70,315 414,777 1,755,008
</TABLE>
(1) Assumes that a premium of $15,600 is paid at the beginning of each
Policy Year.
In evaluating the above illustration, you should consider that:
o The hypothetical investment rates of return shown above are for
illustration purposes only, and you should not view them as indicative of
past or future investment rates of return. We do not make any
representation that these hypothetical rates of return can be achieved for
any one year or sustained over any period of time. Actual rates of return
may be more or less than those shown.
o The Death Benefits and Account Balances 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 those averages in individual policy
years.
o The Death Benefits and Account Balances also would be different from the
amounts shown, depending on the allocation of Account Balance to the
Separate Account Funds, if the rates of return over all Funds averaged 0%,
6% or 12% but varied above or below those averages for individual Separate
Account Funds, or if any policy loan were made during the period.
-49-
<PAGE>
FINANCIAL STATEMENTS
Below are financial statements for the Separate Account and for American
Life for the year ended
December 31, 1998.
The Separate Account commenced operations on December 21, 1994, which was
the date premiums under the Policies were first allocated to any Separate
Account Fund.
You should consider the financial statements of American Life as bearing
upon the ability of American Life to meet its obligations under the
Policies. You should not consider them as bearing upon the investment
experience of the Separate Account Funds.
<TABLE>
<S> <C>
THE AMERICAN SEPARATE ACCOUNT NO. 3
PAGE
----
Statement of Assets and Liabilities .............. 51
Statement of Operations .......................... 53
Statements of Changes in Net Assets .............. 55
Notes to Financial Statements .................... 58
Report of Independent Public Accountants ......... 63
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
PAGE
----
Report of Independent Public Accountants ......... 64
Statements of Financial Condition ................ 65
Statements of Operations and Surplus ............. 66
Statements of Cash Flows ......................... 67
Notes to Financial Statements .................... 68
</TABLE>
-50-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<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 -- $6,469
All America Fund -- $801,911
Equity Index Fund -- $348,233
Bond Fund -- $40,959)
(Notes 1 and 2) ......................................... $ 6,298 $ 855,016 $ 401,410 $ 39,711
Due From (To) General Account ............................. 28 786 1,001 95
------- --------- --------- --------
NET ASSETS ................................................ $ 6,326 $ 855,802 $ 402,411 $ 39,806
======= ========= ========= ========
UNIT VALUE AT DECEMBER 31, 1998 (Note 5) .................. $ 2.03 $ 8.09 $ 2.86 $ 3.17
======= ========= ========= ========
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31, 1998 (Note 5) . 3,113 105,770 140,499 12,551
======= ========= ========= ========
</TABLE>
<TABLE>
<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 -- $3,075
Mid-Term Bond Fund -- $3,288
Composite Fund -- $510,769
Aggressive Equity Fund -- $313,326)
(Notes 1 and 2) .................................................... $ 3,014 $ 3,182 $ 501,990 $ 296,926
Due From (To) General Account ....................................... -- -- 165 262
------- ------- --------- ---------
NET ASSETS .......................................................... $ 3,014 $ 3,182 $ 502,155 $ 297,188
======= ======= ========= =========
UNIT VALUE AT DECEMBER 31, 1998 (Note 5) ............................ $ 1.24 $ 1.32 $ 4.93 $ 2.02
======= ======= ========= =========
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31, 1998 (Note 5) ........... 2,422 2,404 101,886 147,405
======= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-51-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
AMERICAN
SCUDDER CENTURY CALVERT
----------------------------------------- -------------- ------------
CAPITAL VP CAPITAL SOCIAL
BOND GROWTH INTERNATIONAL APPRECIATION BALANCED
FUND FUND FUND FUND FUND
----------- ------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Scudder Portfolios, American Century VP
Capital Appreciation Fund and Calvert Social Balanced
Portfolio at market value
(Cost:
Scudder Bond Fund -- $9,646
Scudder Capital Growth Fund -- $599,193
Scudder International Fund -- $193,178
American Century VP Capital Appreciation
Fund -- $108,277
Calvert Social Balanced Fund -- $52,757)
(Notes 1 and 2) ......................................... $ 6,904 $ 632,172 $ 157,529 $ 94,748 $ 46,260
Due From (To) General Account ............................. 41 785 241 78 118
------- --------- --------- -------- --------
NET ASSETS ................................................ $ 6,945 $ 632,957 $ 157,770 $ 94,826 $ 46,378
======= ========= ========= ======== ========
UNIT VALUE AT DECEMBER 31, 1998 (Note 5) .................. $ 13.02 $ 36.07 $ 16.93 $ 10.69 $ 3.04
======= ========= ========= ======== ========
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31, 1998
(Note 5) ................................................ 534 17,547 9,321 8,874 15,253
======= ========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
------------------------------------------
VIP
EQUITY- VIP II VIP II
INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- ------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in Fidelity Portfolios at market value
(Cost:
VIP Equity-Income Fund -- $266,412
VIP II Contra Fund -- $348,521
VIP II Asset Manage Fund -- $171,547)
(Notes 1 and 2) ............................................ $ 221,545 $ 373,877 $152,933
Due From (To) General Account ................................ 211 3,208 (1,544)
--------- --------- --------
NET ASSETS ................................................... $ 221,756 $ 377,085 $151,389
========= ========= ========
UNIT VALUE AT DECEMBER 31, 1998 (Note 5) ..................... $ 30.65 $ 26.16 $ 24.04
========= ========= ========
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31, 1998 (Note 5) .... 7,236 14,417 6,297
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-52-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<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 ..................................................... $283 $100,623 $30,279 $ 2,665
---- -------- ------- --------
Total income .................................................. 283 100,623 30,279 2,665
---- -------- ------- --------
Expenses (Note 3):
Fees .......................................................... 60 8,858 3,342 359
Administrative Expenses ....................................... 165 1,832 649 619
---- -------- ------- --------
Total Expenses ................................................. 225 10,690 3,991 978
---- -------- ------- --------
NET INVESTMENT INCOME (LOSS) ................................... 58 89,933 26,288 1,687
---- -------- ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 1):
Net realized gain (loss) on investments ....................... (6) 1,744 2,147 233
Net unrealized appreciation (depreciation) of investments ..... (27) 32,513 34,890 (1,044)
------ -------- ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ......... (33) 34,257 37,037 (811)
------ -------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 25 $124,190 $63,325 $ 876
====== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------------
SHORT-TERM MID-TERM COMPOSITE AGGRESSIVE
BOND FUND BOND FUND FUND EQUITY FUND
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME AND EXPENSES:
Income (Notes 1 and 4):
Dividends ..................................................... $139 $170 $ 21,019 $ 2,509
---- ---- -------- ---------
Total income .................................................. 139 170 21,019 2,509
---- ---- -------- ---------
Expenses (Note 3):
Fees .......................................................... 30 29 5,536 3,148
Administrative Expenses ....................................... 6 92 1,455 412
---- ---- -------- ---------
Total Expenses ................................................. 36 121 6,991 3,560
---- ---- -------- ---------
NET INVESTMENT INCOME (LOSS) ................................... 103 49 14,028 (1,051)
---- ---- -------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 1):
Net realized gain (loss) on investments ....................... 6 (1) (2,308) (5,609)
Net unrealized appreciation (depreciation) of investments ..... (12) (30) 40,252 (9,779)
---- ------ -------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ......... (6) (31) 37,944 (15,388)
------- ------ -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 97 $ 18 $ 51,972 $ (16,439)
====== ====== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-53-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AMERICAN
SCUDDER CENTURY CALVERT
------------------------------------- -------------- -----------
CAPITAL VP CAPITAL SOCIAL
BOND GROWTH INTERNATIONAL APPRECIATION BALANCED
FUND FUND FUND FUND FUND
--------- ----------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME AND EXPENSES:
Income (Notes 1 and 4):
Dividends ................................................... $ 343 $ 28,936 $ 14,958 $ 4,170 $ 3,335
------ -------- -------- -------- --------
Total income ................................................ 343 28,936 14,958 4,170 3,335
------ -------- -------- -------- --------
Expenses (Note 3):
Fees ........................................................ 72 6,741 1,657 890 435
Administrative Expenses ..................................... 131 265 93 48 268
------ -------- -------- -------- --------
Total Expenses ................................................ 203 7,006 1,750 938 703
------ -------- -------- -------- --------
NET INVESTMENT INCOME (LOSS) .................................. 140 21,930 13,208 3,232 2,632
------ -------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Note 1):
Net realized gain (loss) on investments ..................... 435 59,922 8,854 (2,064) 3,550
Net unrealized appreciation (depreciation) of investments ... (417) 20,657 (3,025) (3,934) (1,400)
------ -------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ........ 18 80,579 5,829 (5,998) 2,150
------ -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS .................................................. $ 158 $102,509 $ 19,037 $ (2,766) $ 4,782
====== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
--------------------------------------
VIP II
EQUITY- VIP II VIP II
INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------ ---------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME AND EXPENSES:
Income (Notes 1 and 4):
Dividends ........................................................ $ 10,380 $14,074 $ 12,953
--------- ------- ---------
Total income ..................................................... 10,380 14,074 12,953
--------- ------- ---------
Expenses (Note 3):
Fees ............................................................. 2,215 3,374 1,396
Administrative Expenses .......................................... 1,613 411 433
--------- ------- ---------
Total Expenses .................................................... 3,828 3,785 1,829
--------- ------- ---------
NET INVESTMENT INCOME (LOSS) ...................................... 6,552 10,289 11,124
--------- ------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 1):
Net realized gain (loss) on investments .......................... 41,256 43,590 17,688
Net unrealized appreciation (depreciation) of investments ........ (31,062) 22,246 (13,211)
--------- ------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ............ 10,194 65,836 4,477
--------- ------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... $ 16,746 $76,125 $ 15,601
========= ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-54-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
----------------------------------------------------------------------------
MONEY MARKET FUND ALL AMERICA FUND EQUITY INDEX FUND
------------------------- ------------------------- ------------------------
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ..................... $ 58 $ 187 $ 89,933 $ 62,482 $ 26,288 $ 1,984
Net realized gain (loss) on investments .......... (6) (1) 1,744 8,270 2,147 3,540
Net unrealized appreciation (depreciation) of
investments ..................................... (27) (101) 32,513 10,051 34,890 22,798
--------- --------- --------- --------- -------- ---------
Net Increase (Decrease) in net assets resulting from
operations ....................................... 25 85 124,190 80,803 63,325 28,322
--------- --------- --------- --------- -------- ---------
From Unit Transactions:
Contributions .................................... 6,108 5,245 241,902 192,506 180,950 113,705
Withdrawals ...................................... (57) (116) (10,084) (16,643) (7,360) (8,950)
Net Transfers .................................... (3,176) (2,616) (49,261) 77,078 4,004 (17,582)
--------- --------- --------- --------- -------- ---------
Net Increase (Decrease) from unit transactions ..... 2,875 2,513 182,557 252,941 177,594 87,173
--------- --------- --------- --------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS .............. 2,900 2,598 306,747 333,744 240,919 115,495
NET ASSETS:
Beginning of Year .................................. 3,426 828 549,055 215,311 161,492 45,997
--------- --------- --------- --------- -------- ---------
End of Year ........................................ $ 6,326 $ 3,426 $ 855,802 $ 549,055 $402,411 $ 161,492
========= ========= ========= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------------------------------
SHORT-TERM MID-TERM
BOND FUND BOND FUND BOND FUND
----------------------- ----------------------- ------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ......................... $ 1,687 $ 1,163 $ 103 $ 93 $ 49 $ 92
Net realized gain (loss) on investments .............. 233 53 6 15 (1) (65)
Net unrealized appreciation (depreciation) of
investments ......................................... (1,044) 527 (12) (12) (30) 59
-------- --------- ------- ------- --------- --------
Net Increase (Decrease) in net assets resulting from
operations ........................................... 876 1,743 97 96 18 86
-------- --------- ------- ------- --------- --------
From Unit Transactions:
Contributions ........................................ 25,539 25,566 1,370 1,200 4,187 3,609
Withdrawals .......................................... (2,714) (1,237) -- (234) (157) --
Net Transfers ........................................ (5,483) (13,385) (277) (272) (2,597) (2,510)
-------- --------- ------- ------- --------- --------
Net Increase (Decrease) from unit transactions ......... 17,342 10,944 1,093 694 1,433 1,099
-------- --------- ------- ------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS .................. 18,218 12,687 1,190 790 1,451 1,185
NET ASSETS:
Beginning of Year ...................................... 21,588 8,901 1,824 1,034 1,731 546
-------- --------- ------- ------- --------- --------
End of Year ............................................ $ 39,806 $ 21,588 $ 3,014 $ 1,824 $ 3,182 $ 1,731
======== ========= ======= ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-55-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------
AGGRESSIVE
COMPOSITE FUND EQUITY FUND
------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ...................................... $ 14,028 $ 74,191 $ (1,051) $ 20,074
Net realized gain (loss) on investments ........................... (2,308) 2,976 (5,609) 968
Net unrealized appreciation (depreciation) of investments ......... 40,252 (38,603) (9,779) 1,024
--------- --------- --------- ---------
Net Increase (Decrease) in net assets resulting from operations ..... 51,972 38,564 (16,439) 22,066
--------- --------- --------- ---------
From Unit Transactions:
Contributions ..................................................... 160,764 111,675 164,628 145,655
Withdrawals ....................................................... (13,170) (4,754) (15,635) (5,821)
Net Transfers ..................................................... (43,657) 99,278 (57,515) (24,231)
--------- --------- --------- ---------
Net Increase (Decrease) from unit transactions ...................... 103,937 206,199 91,478 115,603
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ............................... 155,909 244,763 75,039 137,669
NET ASSETS:
Beginning of Year ................................................... 346,246 101,483 222,149 84,480
--------- --------- --------- ---------
End of Year ......................................................... $ 502,155 $ 346,246 $ 297,188 $ 222,149
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
---------------------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND INTERNATIONAL FUND
----------------------- ------------------------- -------------------------
1998 1997 1998 1997 1998 1997
----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ..................... $ 140 $ 190 $ 21,930 $ 9,395 $ 13,208 $ 433
Net realized gain (loss) on investments .......... 435 1,921 59,922 23,338 $ 8,854 18,444
Net unrealized appreciation (depreciation) of
investments ..................................... (417) (1,821) 20,657 27,860 (3,025) (14,970)
-------- -------- --------- --------- -------- ---------
Net Increase (Decrease) in net assets resulting from
operations ....................................... 158 290 102,509 60,593 19,037 3,907
-------- -------- --------- --------- -------- ---------
From Unit Transactions:
Contributions .................................... 7,436 7,137 171,043 118,952 41,383 35,724
Withdrawals ...................................... (747) (80) (17,243) (13,128) (3,269) (7,350)
Net Transfers .................................... (4,105) (4,523) (37,452) 135,647 (6,087) 4,683
-------- -------- --------- --------- -------- ---------
Net Increase (Decrease) from unit transactions ..... 2,584 2,534 116,348 241,471 32,027 33,057
-------- -------- --------- --------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS .............. 2,742 2,824 218,857 302,064 51,064 36,964
NET ASSETS:
Beginning of Year .................................. 4,203 1,379 414,100 112,036 106,706 69,742
-------- -------- --------- --------- -------- ---------
End of Year ........................................ $ 6,945 $ 4,203 $ 632,957 $ 414,100 $157,770 $ 106,706
======== ======== ========= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-56-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
AMERICAN CENTURY CALVERT
----------------------- -----------------------
VP CAPITAL SOCIAL
APPRECIATION FUND BALANCED FUND
----------------------- -----------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ...................................... $ 3,232 $ 690 $ 2,632 $ 1,591
Net realized gain (loss) on investments ........................... (2,064) (1,449) 3,550 3,885
Net unrealized appreciation (depreciation) of investments ......... (3,934) (2,436) (1,400) (2,620)
-------- --------- --------- --------
Net Increase (Decrease) in net assets resulting from operations ..... (2,766) (3,195) 4,782 2,856
-------- --------- --------- --------
From Unit Transactions:
Contributions ..................................................... 28,381 28,353 30,086 27,549
Withdrawals ....................................................... (1,400) (1,802) (2,076) (1,511)
Net Transfers ..................................................... (9,765) (11,249) (12,258) (8,329)
-------- --------- --------- --------
Net Increase (Decrease) from unit transactions ...................... 17,216 15,302 15,752 17,709
-------- --------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS ............................... 14,450 12,107 20,534 20,565
NET ASSETS:
Beginning of Year ................................................... 80,376 68,269 25,844 5,279
-------- --------- --------- --------
End of Year ......................................................... $ 94,826 $ 80,376 $ 46,378 $ 25,844
======== ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
--------------------------------------------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------------------ ------------------------ ------------------------
1998 1997 1998 1997 1998 1997
------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ................ $ 6,552 $ 5,445 $ 10,289 $ 1,652 $ 11,124 $ 5,367
Net realized gain (loss) on investments ..... 41,256 12,348 43,590 5,525 17,688 6,538
Net unrealized appreciation (depreciation) of
investments ................................ (31,062) 5,615 22,246 27,301 (13,211) (176)
--------- --------- --------- -------- --------- ---------
Net Increase (Decrease) in net assets resulting
from operations ............................. 16,746 23,408 76,125 34,478 15,601 11,729
--------- --------- --------- -------- --------- ---------
From Unit Transactions:
Contributions ............................... 132,435 115,463 124,636 90,026 69,680 54,797
Withdrawals ................................. (22,291) (6,744) (15,833) (4,539) (2,791) (1,606)
Net Transfers ............................... (58,797) (30,953) (43,163) 4,679 (31,342) (11,456)
--------- --------- --------- -------- --------- ---------
Net Increase (Decrease) from unit transactions 51,347 77,766 65,640 90,166 35,547 41,735
--------- --------- --------- -------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ......... 68,093 101,174 141,765 124,644 51,148 53,464
NET ASSETS:
Beginning of Year ............................. 153,663 52,489 235,320 110,676 100,241 46,777
--------- --------- --------- -------- --------- ---------
End of Year ................................... $ 221,756 $ 153,663 $ 377,085 $235,320 $ 151,389 $ 100,241
========= ========= ========= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-57-
<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 and Calvert
Social Balanced Fund (formerly the 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 Social Balanced
Portfolio of Calvert Variable Series, Inc. (formerly 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.
-58-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. INVESTMENTS
The number of shares owned by Separate Account No. 3 and the respective
net asset values (rounded to the nearest cent) per share at December 31, 1998
are as follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
----------- ----------
<S> <C> <C>
Investment Company Funds:
Money Market Fund ............................... 5,317 $ 1.18
All America Fund ................................ 295,242 2.90
Equity Index Fund ............................... 163,743 2.45
Bond Fund ....................................... 27,875 1.42
Short-Term Bond Fund ............................ 2,928 1.03
Mid-Term Bond Fund .............................. 3,496 0.91
Composite Fund .................................. 282,197 1.78
Aggressive Equity Fund .......................... 196,833 1.51
Scudder Portfolios:
Bond Portfolio .................................. 1,003 6.88
Capital Growth Portfolio -- Class "A" ........... 26,396 23.95
International Portfolio -- Class "A" ............ 10,819 14.56
American Century VP Capital Appreciation Fund ..... 10,504 9.02
Calvert Social Balanced Portfolio ................. 21,647 2.14
Fidelity Portfolios:
Equity-Income -- "Initial" Class ................ 8,715 25.42
Contrafund -- "Initial" Class ................... 15,298 24.44
Asset Manager -- "Initial" Class ................ 8,421 18.16
</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 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, 1998, a
dividend distribution was made by the Investment Company to shareholders of
record as of December 30, 1998. Prior thereto, the Investment Company declared
and paid a dividend distribution on September 15, 1998. The combined amount of
these dividends was as follows:
-59-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. DIVIDENDS -- (Continued)
<TABLE>
<S> <C>
Money Market Fund .............. $ 283
All America Fund ............... 100,623
Equity Index Fund .............. 30,279
Bond Fund ...................... 2,665
Short-Term Bond Fund ........... 139
Mid-Term Bond Fund ............. 170
Composite Fund ................. 21,019
Aggressive Equity Fund ......... 2,509
</TABLE>
On January 28, 1998, February 25, 1998, April 28, 1998, July 29, 1998 and
October 18, 1998, dividends were paid by the Scudder Bond Portfolio. The
combined amount of the dividends was $343.
On January 28, 1998, February 25, 1998, April 28, 1998, July 29, 1998 and
October 18, 1998, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $28,936.
On February 25, 1998, a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $14,958.
On March 13, 1998, a dividend was paid by the American Century VP Capital
Appreciation Fund. The amount of the dividend was $4,170.
On December 30, 1998, a dividend was paid by the Calvert Social Balanced
Portfolio. The amount of the dividend was $3,335.
On February 6, 1998, a dividend was paid by the Fidelity Equity-Income
Portfolio. The amount of the dividend was $10,380.
On February 6, 1998, a dividend was paid by the Fidelity Contrafund
Portfolio. The amount of the dividend was $14,074.
On February 6, 1998, a dividend was paid by the Fidelity Asset Manager
Portfolio. The amount of the dividend was $12,953.
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding for the year
ended December 31, 1998 and for each of the previous years or, if not in
existence a full year, the initial period ended December 31:
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------
MONEY MARKET FUND
-------------------------------------------
1998 1997 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Unit value, beginning of year ... $ 1.95 $ 1.87 $ 1.80 $ 1.77
======= ======= ====== ======
Unit value, end of year ......... $ 2.03 $ 1.95 $ 1.87 $ 1.80
======= ======= ====== ======
Units outstanding, end of year .. 3,113 1,755 442 25
======= ======= ====== ======
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------------------
ALL AMERICA FUND
-------------------------------------------------------
1998 1997 1996 1995 1994
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ... $ 6.76 $ 5.39 $ 4.52 $ 3.36 $ 3.32
========= ======== ======== ======= ======
Unit value, end of year ......... $ 8.09 $ 6.76 $ 5.39 $ 4.52 $ 3.36
========= ======== ======== ======= ======
Units outstanding, end of year .. 105,770 81,264 39,912 9,813 107
========= ======== ======== ======= ======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------------------------------------------
EQUITY INDEX FUND BOND FUND
------------------------------------------- -------------------------------------------
1998 1997 1996 1995 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year ... $ 2.26 $ 1.72 $ 1.42 $ 1.25 $ 3.00 $ 2.75 $ 2.69 $ 2.36
======== ======= ======= ======= ======= ======= ======= ======
Unit value, end of year ......... $ 2.86 $ 2.26 $ 1.72 $ 1.42 $ 3.17 $ 3.00 $ 2.75 $ 2.69
======== ======= ======= ======= ======= ======= ======= ======
Units outstanding, end of year .. 140,499 71,579 26,794 4,449 12,551 7,204 3,239 507
======== ======= ======= ======= ======= ======= ======= ======
</TABLE>
-60-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. FINANCIAL HIGHLIGHTS -- (Continued)
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------------------------------------------
SHORT-TERM BOND FUND MID-TERM BOND FUND
------------------------------------------- -------------------------------------------
1998 1997 1996 1995 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year ...... $ 1.19 $ 1.14 $ 1.10 $ 1.08 $ 1.26 $ 1.19 $ 1.16 $ 1.11
======= ======= ======= ====== ======= ======= ====== ======
Unit value, end of year ............ $ 1.24 $ 1.19 $ 1.14 $ 1.10 $ 1.32 $ 1.26 $ 1.19 $ 1.16
======= ======= ======= ====== ======= ======= ====== ======
Units outstanding, end of year ..... 2,422 1,530 908 302 2,404 1,374 460 28
======= ======= ======= ====== ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------------------------------------------------
COMPOSITE FUND AGGRESSIVE EQUITY FUND
------------------------------------------- ------------------------------------------------------
1998 1997 1996 1995 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning
of year .................. $ 4.36 $ 3.75 $ 3.39 $ 3.14 $ 2.15 $ 1.80 $ 1.43 $ 1.05 $ 1.03
======== ======= ======= ======= ======== ======== ======= ======= ======
Unit value, end of year $ 4.93 $ 4.36 $ 3.75 $ 3.39 $ 2.02 $ 2.15 $ 1.80 $ 1.43 $ 1.05
======== ======= ======= ======= ======== ======== ======= ======= ======
Units outstanding, end
of year .................. 101,886 79,417 27,055 2,688 147,405 103,218 46,985 12,411 174
======== ======= ======= ======= ======== ======== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
-----------------------------------------------
BOND FUND
-----------------------------------------------
1998 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Unit value, beginning of year ... $ 12.37 $ 11.48 $ 11.30 $ 10.68
======= ======= ======= =======
Unit value, end of year ......... $ 13.02 $ 12.37 $ 11.48 $ 11.30
======= ======= ======= =======
Units outstanding, end of year .. 534 340 120 35
======= ======= ======= =======
<CAPTION>
SCUDDER
-----------------------------------------------------------
CAPITAL GROWTH FUND
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ... $ 29.64 $ 22.11 $ 18.64 $ 14.67 $ 14.50
======== ======= ======= ======= =======
Unit value, end of year ......... $ 36.07 $ 29.64 $ 22.11 $ 18.64 $ 14.67
======== ======= ======= ======= =======
Units outstanding, end of year .. 17,547 970 5,067 2,011 737
======== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
-----------------------------------------------------------
INTERNATIONAL FUND
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year .......... $ 14.46 $ 13.43 $ 11.85 $ 10.80 $ 10.66
======= ======= ======= ======= =======
Unit value, end of year ................ $ 16.93 $ 14.46 $ 13.43 $ 11.85 $ 10.80
======= ======= ======= ======= =======
Units outstanding, end of year ......... 9,321 7,377 5,193 715 17
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY CALVERT
----------------------------------------------- -----------------------------------------------
VP CAPITAL SOCIAL BALANCED
APPRECIATION FUND FUND
----------------------------------------------- -----------------------------------------------
1998 1997 1996 1995 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of year ... $ 11.04 $ 11.53 $ 12.18 $ 11.14 $ 2.65 $ 2.23 $ 2.01 $ 1.89
======= ======= ======= ======= ======== ======= ======= =======
Unit value, end of year ......... $ 10.69 $ 11.04 $ 11.53 $ 12.18 $ 3.04 $ 2.65 $ 2.23 $ 2.01
======= ======= ======= ======= ======== ======= ======= =======
Units outstanding, end of year .. 8,874 7,282 5,921 4,409 15,253 9,760 2,364 115
======= ======= ======= ======= ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
-----------------------------------------------
VIP
EQUITY-INCOME
FUND
-----------------------------------------------
1998 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Unit value, beginning of year ...... $ 27.77 $ 21.93 $ 19.43 $ 17.68
======= ======= ======= =======
Unit value, end of year ............ $ 30.65 $ 27.77 $ 21.93 $ 19.43
======= ======= ======= =======
Units outstanding, end of year ..... 7,236 5,533 2,393 449
======= ======= ======= =======
<CAPTION>
FIDELITY
-----------------------------------------------
VIP II
CONTRA
FUND
-----------------------------------------------
1998 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Unit value, beginning of year ...... $ 20.36 $ 16.59 $ 13.85 $ 12.41
======== ======== ======= =======
Unit value, end of year ............ $ 26.16 $ 20.36 $ 16.59 $ 13.85
======== ======== ======= =======
Units outstanding, end of year ..... 14,417 11,560 6,672 756
======== ======== ======= =======
</TABLE>
-61-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. FINANCIAL HIGHLIGHTS -- (Continued)
<TABLE>
<CAPTION>
FIDELITY
-----------------------------------------------
VIP II
ASSET MANAGER
FUND
-----------------------------------------------
1998 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Unit value, beginning of year .......... $ 21.14 $ 17.72 $ 15.66 $ 14.87
======= ======= ======= =======
Unit value, end of year ................ $ 24.04 $ 21.14 $ 17.72 $ 15.66
======= ======= ======= =======
Units outstanding, end of year ......... 6,297 4,742 2,639 1,178
======= ======= ======= =======
</TABLE>
-62-
<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, 1998, 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 five 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, 1998, 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 five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ARTHUR ANDERSON LLP
New York, New York
February 19, 1999
-63-
<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, 1998 and 1997,
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 1, 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 is a
comprehensive basis of accounting other than generally accepted accounting
principles.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The American Life Insurance
Company of New York as of December 31, 1998 and 1997, 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.
This report is intended solely for the information and use of the Board of
Directors and management of The American Life Insurance Company of New York and
for filing with state insurance departments and other regulatory authorities to
whose jurisdiction the Company is subject and should not be used for any other
purpose.
/s/ ARTHUR ANDERSON LLP
New York, New York
February 19, 1999
-64-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
ASSETS
GENERAL ACCOUNT
Bonds and notes .............................................. $1,148,665,458 $1,164,994,627
Common stocks ................................................ 18,019,909 15,407,140
Preferred stocks ............................................. 8,952,635 9,527,901
Cash and short-term investments .............................. 43,071,763 25,845,999
Mortgage loans ............................................... -- 6,350,956
Policy loans ................................................. 8,303,917 8,881,485
Other assets ................................................. 98,611 87,418
Investment income accrued .................................... 15,948,956 14,043,501
Receivables and other assets ................................. 2,142,179 2,180,703
-------------- --------------
Total General Account ...................................... 1,245,203,428 1,247,319,730
SEPARATE ACCOUNT ASSETS ....................................... 140,113,056 94,399,213
-------------- --------------
TOTAL ASSETS .................................................. $1,385,316,484 $1,341,718,943
============== ==============
LIABILITIES AND SURPLUS
GENERAL ACCOUNT LIABILITIES
Insurance and annuity reserves ............................... $1,107,344,991 $1,090,571,807
Other contract liabilities and reserves ...................... 9,293,567 9,367,352
Dividends payable to contract and policyholders .............. 93,791 106,329
Interest maintenance reserve ................................. 17,506,597 21,999,839
Due to affiliates ............................................ 5,482,793 21,073,324
Federal income taxes payable ................................. 3,941,090 5,327,311
Other liabilities ............................................ 1,710,489 10,249,938
-------------- --------------
Total General Account ...................................... 1,145,373,318 1,158,695,900
SEPARATE ACCOUNT RESERVES AND LIABILITIES ..................... 140,113,056 94,399,213
-------------- --------------
TOTAL LIABILITIES ............................................. 1,285,486,374 1,253,095,113
-------------- --------------
ASSET VALUATION RESERVE (NOTE 2) .............................. 9,960,197 6,139,264
-------------- --------------
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 ........................................... 43,819,354 36,434,007
-------------- --------------
Total Surplus .............................................. 89,869,913 82,484,566
-------------- --------------
TOTAL LIABILITIES AND SURPLUS ................................. $1,385,316,484 $1,341,718,943
============== ==============
</TABLE>
See accompanying notes to financial statements.
-65-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ----------------
<S> <C> <C>
INCOME
Annuity considerations and deposits (Note 4) ............ $112,271,585 $ 82,181,885
Life and disability insurance premiums (Note 4) ......... 34,104,069 28,214,541
------------ -------------
Total considerations and premiums ..................... 146,375,654 110,396,426
Reserve adjustment on reinsurance ceded (Note 4) ........ (2,998,456) (2,598,704)
Net investment income ................................... 91,825,033 95,846,920
Separate account investment and administrative fees ..... 1,619,170 1,088,253
Other, net .............................................. 725,189 309,103
------------ -------------
Total income .......................................... 237,546,590 205,041,998
------------ -------------
DEDUCTIONS
Change in insurance and annuity reserves ................ 40,311,794 (42,363,729)
Annuity and surrender benefits .......................... 144,107,623 192,238,148
Death and disability benefits ........................... 20,153,378 20,086,539
Operating expenses (Note 8) ............................. 27,025,335 27,401,222
------------ -------------
Total deductions ...................................... 231,598,130 197,362,180
------------ -------------
Net gain before dividends ............................. 5,948,460 7,679,818
DIVIDENDS TO CONTRACT AND POLICYHOLDERS .................. 117,184 147,104
------------ -------------
Net gain from operations .............................. 5,831,276 7,532,714
FEDERAL INCOME TAX BENEFIT ............................... 518,812 343,145
NET REALIZED CAPITAL GAINS (LOSSES) (NOTE 3) ............. 363,187 (2,636,718)
------------ -------------
Net income ............................................ 6,713,275 5,239,141
SURPLUS TRANSACTIONS
Change in asset valuation reserve ....................... (3,820,933) 4,544,799
Change in unrealized capital gains ...................... 3,857,310 18,521
Change in non-admitted assets ........................... 264,239 229,472
Other, net .............................................. 371,456 57,440
------------ -------------
Net change in surplus ................................. 7,385,347 10,089,373
SURPLUS, AT BEGINNING OF YEAR ............................ 82,484,566 72,395,193
------------ -------------
SURPLUS, AT END OF YEAR .................................. $ 89,869,913 $ 82,484,566
============ =============
</TABLE>
See accompanying notes to financial statements.
-66-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
CASH PROVIDED
Premium and annuity funds received .............................. $146,653,511 $ 110,396,425
Investment income received ...................................... 79,116,499 95,229,999
Reserve adjustment on reinsurance ceded ......................... (2,875,451) (2,506,267)
Separate account investment and administrative fees ............. 1,619,170 1,088,253
Other, net ...................................................... 591,081 262,932
------------ -------------
Total receipts ................................................ 225,104,810 204,471,342
------------ -------------
Benefits paid ................................................... 164,174,894 211,664,088
Dividends paid to contract and policyholders .................... 129,722 147,127
Insurance and operating expenses paid ........................... 26,831,765 29,095,047
Net transfers to separate accounts .............................. 23,547,060 38,860,509
------------ -------------
Total payments ................................................ 214,683,441 279,766,771
------------ -------------
Net cash provided by (used in) operations ..................... 10,421,369 (75,295,429)
Proceeds from long-term investments sold, matured or repaid ..... 334,971,358 899,695,610
Other, net ...................................................... 269,274 31,768,841
------------ -------------
Total cash provided ........................................... 345,662,001 856,169,022
------------ -------------
CASH APPLIED
Cost of long-term investments acquired .......................... 303,943,877 857,753,087
Other, net ...................................................... 24,492,360 355,785
------------ -------------
Total cash applied ............................................ 328,436,237 858,108,872
------------ -------------
Net change in cash and short-term investments ................. 17,225,764 (1,939,850)
CASH AND SHORT-TERM INVESTMENTS
Beginning of year ............................................... 25,845,999 27,785,849
------------ -------------
End of year ..................................................... $ 43,071,763 $ 25,845,999
============ =============
</TABLE>
See accompanying notes to financial statements.
-67-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
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. 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 1997 amounts included in the accompanying financial statements
have been reclassified to conform with the 1998 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 1998 and 1997) 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 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) 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 1998 and
1997.
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").
-68-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (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 annuity considerations may be
invested at the participant's 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. Charges
for investment advisory fees and administration fees are assessed as a
percentage of the assets under management and vary based upon the investment
objectives of the fund and level of administrative services provided. During
1998 and 1997 such fees were equal to approximately 1.3% of the total average
assets under management.
Investments held in the separate accounts are stated at market value,
which approximates 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 1998 and 1997, averaged 5.00% and 5.25%, respectively, and are
deemed sufficient to provide for contractual surrender values of these funds.
Reserves for life and disability insurance are based on mortality, morbidity
and interest rate assumptions which meet statutory requirements.
Contractual funds not yet used to purchase retirement annuities and other
deposit liabilities are stated at their cash surrender value, which
approximates fair value ($574.0 million and $507.1 million at December 31, 1998
and 1997, respectively). The fair value of annuity contracts (approximately
$660.5 million and $636.4 million at December 31, 1998 and 1997, 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 5.38% and 6.12% were used at
December 31, 1998 and 1997, 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.
3. FIXED MATURITY SECURITIES
The statement values and NAIC market values of investments in fixed
maturity securities (bonds and notes) at December 31, 1998 are shown below.
Excluding U.S. Government and government agency investments, the Company is not
exposed to any significant concentration of credit risk.
-69-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. FIXED MATURITY SECURITIES -- (Continued)
<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 ................................ $ 431,832 $ 9,743 $ 257 $ 441,318
Obligations of states and political subdivisions .......... 8,327 1,774 -- 10,101
Debt securities issued by foreign governments ............. 31,565 2,249 -- 33,814
Corporate securities ...................................... 720,055 16,211 7,784 728,482
---------- ------- ------ ----------
Total .................................................... $1,191,779 $29,977 $8,041 $1,213,715
========== ======= ====== ==========
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC
market value of $43.1 million at December 31, 1998 are included in the above
table. As of December 31, 1998, 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, 1998 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 ............... $ 74,441 $ 75,810
Due after one year through five years . 494,570 503,667
Due after five years through ten years 303,857 309,448
Due after ten years ................... 318,911 324,790
---------- -----------
Total ............................... $1,191,779 $ 1,213,715
========== ===========
</TABLE>
Proceeds from the sale of investments in fixed maturity securities during
1998 were $304.6 million. Gross gains of $2.7 million and gross losses of $1.2
million were realized on these sales, of which $1.5 million of gains were
accumulated in the IMR. Such amounts will be amortized into net investment
income over the estimated remaining lives of the investments sold.
During 1998, $6.1 million of the IMR was amortized and included in net
investment income. Included in IMR amortization income for the year is a $4.1
million net adjustment related to realized capital gains that should have been
exempted from IMR since they were associated with higher than normal general
account withdrawal activity (including transfers to the separate account) that
occurred last year.
The statement values and NAIC market values of investments in fixed
maturity securities at December 31, 1997 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 ... $ 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>
-70-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. FIXED MATURITY SECURITIES -- (Continued)
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.
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 taxes of $2.7 million) in the IMR. Such amounts
will be amortized into net investment income over the estimated remaining lives
of the investments sold. During 1997, $3.0 million of the IMR was amortized and
included in net investment income.
Net realized capital gains (losses) on mortgage loans and other invested
assets reflected in the statements of operations were $.4 million and ($2.6
million) for the years ended December 31, 1998 and 1997, respectively. At
December 31, 1998 and 1997, net unrealized appreciation of equity securities
was $3.9 million and $19 thousand respectively.
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 $31.0 million and $18.7 million
in 1998 and 1997, respectively. Total reserve liabilities reinsured under this
agreement were as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(IN MILLIONS)
<S> <C> <C>
Life and annuity ......... $ 687.3 $ 692.1
Other reserves ........... $ 3.1 $ 3.3
</TABLE>
Effective January 1, 1999 the existing reinsurance agreement in effect
between the Company and Mutual of America was amended. Under the terms of the
amended agreement, Mutual of America will cease ceding and the Company will
cease assuming new business on and after January 1, 1999.
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, 1998, 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 1998
and 1997 was $724 thousand and $388 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 $79 thousand and $75 thousand in 1998 and 1997,
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
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 1998 and 1997 was $188 thousand and $81 thousand,
respectively.
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THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. PENSION PLAN AND POSTRETIREMENT BENEFITS -- (Continued)
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 1998 and 1997, operating and investment-related expenses of $17.9
million and $1.4 million and $18.6 million and $1.6 million, respectively, were
charged to the Company and are reflected in the accompanying statements of
operations and surplus.
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