As filed with the Securities and Exchange Commission on April 27, 2000
Registration No. 33-75280
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
Post-Effective Amendment No. 7
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
The American Separate Account No. 3
(Exact name of Trust)
The American Life Insurance Company of New York
(Name of Depositor)
---------------
320 Park Avenue
New York, New York 10022
(Address of Depositor's Principal Executive Offices)
---------------
Patrick A. Burns, Esq.
Senior Executive Vice President and General Counsel
The American Life Insurance Company of New York
320 Park Avenue, New York, New York 10022
(Name and Address of Agent for Service)
---------------
Copy to:
W. Randolph Thompson, of Counsel
Jones & Blouch L.L.P.
Suite 410 East
1025 Thomas Jefferson St. NW
Washington, D.C. 20007
---------------
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the Registration Statement.
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of
Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of
Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
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<PAGE>
CROSS-REFERENCE SHEET
(File No. 33-75280, VUL Policies)
Registration Statement on Form N-6)
<TABLE>
<CAPTION>
Form N-8B-2
Item No. Caption in Prospectus
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<S> <C>
1 Cover Page
2 Cover Page; About American Life and Our Separate Account No. 3
3 Not Applicable
4 About American Life and Our Separate Account No. 3; Administrative Matters -- Distribution of the Policies
5 About American Life and Our Separate Account No. 3
6 About American Life and Our Separate Account No. 3
7 Not applicable
8 Not applicable
9 Other Matters -- Legal Proceedings
10 Policy Features and Payment of Premiums; Access to Your Account Balance; Federal Tax
Considerations; Your Voting Rights for Meetings of the Underlying Funds; Fund and Other Changes We May
Make
11 Underlying Funds Invested in by Our Separate Account
12 Cover Page; Underlying Funds Invested in by Our Separate Account
13 Charges and Deductions You Will Pay; Policy Features and Payment of Premiums
14 Policy Features and Payment of Premiums -- Policy Issue
15 Policy Features and Payment of Premiums
16 Your Account Balance in the Separate Account Funds
17 Access to Your Account Balance; How to Contact Us and Give Us Instructions
18 Not Applicable
19 Administrative Matters -- Notices, Confirmation Statements and Reports to Policyowners
20 Not Applicable
21 Access to Your Account Balance -- Policy Loans
22 Not Applicable
23 Omitted
24 Administrative Matters; Other Information
25 About American Life and Our Separate Account No. 3
26 Charges and Deductions You Will Pay
27 About American Life and Our Separate Account No. 3
28 Our Executive Officers and Directors
29 About American Life and Our Separate Account No. 3 -- American Life
30 Not Applicable
31 Omitted
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Omitted
36 Not Applicable
37 No Applicable
38 Administrative Matters -- Distribution of the Policies
39 Administrative Matters -- Distribution of the Policies
40 Not Applicable
41 Omitted
42 Not Applicable
43 Not Applicable
44 You Account Balance in the Separate Account Funds
45 Not Applicable
46 Your Account Balance in the Separate Account Funds; Access to Your Account Value; Our General Account
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 About American Life and Our Separate Account No. 3 -- The Separate Account
51 About American Life and Our Separate Account No. 3; Policy Features and Payment of Premiums;
Insurance Benefits Upon Death of the Insured Person
52 Funding and Other Changes We May Make
53 Federal Tax Considerations
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements of the Separate Account and American Life
</TABLE>
<PAGE>
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 - This Prospectus describes our variable universal life
insurance policies (Policies). 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. We no longer offer the Policies for
sale.
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, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Introduction and Summary ........................................... 1
Policy Features and Payment of 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
Assumption of Policies by Mutual of America ........................ 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>
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
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
Notices, Confirmation Statements and Reports to Policyowners .......... 31
Miscellaneous Policy Provisions ....................................... 31
Distribution of the Policies .......................................... 31
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
</TABLE>
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
----------------------------------------------------------------------
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
----------------------------------------------------------------------
**This Supplement is for Massachusetts Policies Only**
----------------------------------------------------------------------
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:
There are 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.
----------------------------------------------------------------------
Supplement, dated May 1, 2000
to Prospectus, dated May 1, 2000
<PAGE>
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
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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 "Policy Features and Payment of 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
----------------------------------------------------------------------------
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 "Policy Features and Payment of Premiums --
Supplemental Insurance Benefits".
-1-
<PAGE>
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.
Underlying Funds Invested in by the Separate Account
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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 0.35% 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.
-2-
<PAGE>
During 1999, 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 -- .49% (.46% management
fee and .03% other expenses); Bond -- .57% (.48% management fee and .09%
other expenses); International -- 1.03% (.85% management fee and .18% other
expenses).
Fidelity Portfolios: VIP Equity-Income -- .57% (.48% management fee and .09%
other expenses); VIP II Contrafund -- .67% (.58% management fee and .09%
other expenses); and VIP II Asset Manager -- .63% (.53% management fee and
.10% other expenses).
Calvert Social Balanced Portfolio -- .89% (.70% management fee and .19% 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
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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 1-800-872-5963 for certain transactions and information.
Refer to "How to Contact Us and Give Us Instructions".
Our Home Office and Processing Center. 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.
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".
-3-
<PAGE>
Accelerated Benefit for Terminal Illness
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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 "Policy Features and Payment of Premiums -- Policy
Issue".
Federal Tax Considerations
----------------------------------------------------------------------------
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.
-4-
<PAGE>
POLICY FEATURES AND PAYMENT OF PREMIUMS
Policy Issue
----------------------------------------------------------------------------
We no longer offer the Policy for sale. This discussion of Policy Issue
describes the procedures we used for Policies previously issued. 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
----------------------------------------------------------------------------
In your application for a Policy, you chose 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.
-5-
<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
----------------------------------------------------------------------------
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
----------------------------------------------------------------------------
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.
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 in companies believed to possess
above-average growth potential and 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.
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 the 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 20% of its assets in intermediate to
longer term debt instruments, depending on market and economic conditions.
Scudder Bond Portfolio
----------------------------------------------------------------------------
The investment objective of the Scudder Bond Portfolio is to provide a
high level of income consistent with a high quality portfolio of debt
securities.
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 to seek
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 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.
Assumption of Policies by Mutual of America
-------------------------------------------
As part of a consolidation of its insurance operations, Mutual of America
Life Insurance Company (MUTUAL OF AMERICA), our parent corporation, has
entered into an assumption reinsurance agreement with us. Under this
agreement, American Life is ceding and Mutual of America is assuming
substantially all of our outstanding individual business, including the
Policies. Mutual of America is combining all insurance operations into one
entity to enhance service to contract and policy owners and obtain
economies of scale.
Mutual of America has declared its intention to sell the outstanding common
stock of American Life to a third party. An additional assumption offer to
remaining American Life Policyowners may occur in connection with the sale
of American Life. In the majority of states, American Life Policyowners
have the right to opt out of the assumption by providing timely notice to
American Life. In the remaining states, American Life Policyowners must
consent to the assumption before it can occur.
When Mutual of America assumes an American Life Policy, it becomes the
issuer in place of American Life and has all of the obligations and holds
all of the assets under the assumed Policy through its General Account and
Separate Account No. 3. The Policy described in this Prospectus is
identical to the Mutual of America Policy, except for the identity of the
issuer and its separate account and the right under the Mutual of America
Policy to participate in divisible surplus. Account balances, unit values
and number of accumulation units in each Separate Account Fund are not
changed by assumption.
-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 at our Home Office 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
0.35%, 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
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. As of December 31,
1999, we had total assets of approximately $1.4 billion. Our home office
is located at 320 Park Avenue, New York, New York 10022.
Currently, Mutual of America Life Insurance Company, a mutual life insurance
company also organized under New York law, is our indirect parent company.
Mutual of America intends to sell American Life during 2000 or in early 2001.
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
-27-
<PAGE>
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 $675,000 in 2000, 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.
-29-
<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.
-30-
<PAGE>
ADMINISTRATIVE MATTERS
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 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.
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. 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.
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<PAGE>
Mutual of America also serves as principal underwriter for the Mutual of
America Investment Corporation, for the variable accumulation annuity
contracts it offers through its Separate Account No. 2 and for the variable
universal life policies it offers through its Separate Account No. 3.
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, 1999 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.
-32-
<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, Mutual of America, since September
Director 1998
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; prior
Director thereto, Consulting Actuary, Milliman &
Robertson
Patrick A. Burns Senior Executive Vice Senior Executive Vice President and General
President and General Counsel, Mutual of America; Director, Mutual
Counsel; Director of America, since September 1998
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, Mutual of America; Director,
Mutual of America, since September 1998
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; prior thereto, partner, Arthur
Andersen LLP
</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
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 and Director, Mutual
and Chief Executive of America
Officer; Director
Robert W. Ruane Senior Vice President; Senior Vice President, Corporate
Director Communications, 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 (0.50%
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
(0.50% 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 1999 expense ratios of the
Underlying Funds. 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 - 1.44%, 4.56% and 10.56%. 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 - 1.69%, 4.31% and 10.31%.
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).
-37-
<PAGE>
The American Life Insurance Company of New York
Variable Universal Life Insurance Policy
Male Issue Age 35 Face Amount Plan
Standard Non-smoker Face Amount $100,000
Using Our Current Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $ 1,093 $ 1,164 $ 1,236
2 ............... 2,798 100,000 100,000 100,000 2,162 2,373 2,594
3 ............... 4,303 100,000 100,000 100,000 3,204 3,626 4,085
4 ............... 5,883 100,000 100,000 100,000 4,222 4,927 5,724
5 ............... 7,542 100,000 100,000 100,000 5,215 6,279 7,529
6 ............... 9,285 100,000 100,000 100,000 6,186 7,684 9,517
7 ............... 11,114 100,000 100,000 100,000 7,133 9,145 11,708
8 ............... 13,035 100,000 100,000 100,000 8,058 10,665 14,126
9 ............... 15,051 100,000 100,000 100,000 8,961 12,248 16,795
10 .............. 17,169 100,000 100,000 100,000 9,832 13,887 19,733
11 .............. 19,392 100,000 100,000 100,000 10,651 15,563 22,951
12 .............. 21,727 100,000 100,000 100,000 11,439 17,301 26,502
13 .............. 24,178 100,000 100,000 100,000 12,198 19,104 30,424
14 .............. 26,752 100,000 100,000 100,000 12,917 20,968 34,751
15 .............. 29,455 100,000 100,000 100,000 13,609 22,906 39,539
16 .............. 32,292 100,000 100,000 100,000 14,263 24,913 44,834
17 .............. 35,272 100,000 100,000 100,000 14,860 26,977 50,684
18 .............. 38,401 100,000 100,000 100,000 15,422 29,120 57,169
19 .............. 41,686 100,000 100,000 105,563 15,969 31,365 64,368
20 .............. 45,135 100,000 100,000 113,558 16,501 33,718 72,330
30 (age 65) ..... 90,689 100,000 100,000 260,864 18,329 62,816 213,823
35 (age 70) ..... 123,287 100,000 100,000 412,489 15,166 82,822 355,594
40 (age 75) ..... 164,892 100,000 116,570 627,153 6,472 108,944 586,124
</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
Using Our Guaranteed Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $ 1,055 $ 1,125 $ 1,196
2 ............... 2,798 100,000 100,000 100,000 2,073 2,279 2,493
3 ............... 4,303 100,000 100,000 100,000 3,043 3,449 3,889
4 ............... 5,883 100,000 100,000 100,000 3,978 4,649 5,405
5 ............... 7,542 100,000 100,000 100,000 4,869 5,868 7,042
6 ............... 9,285 100,000 100,000 100,000 5,715 7,108 8,811
7 ............... 11,114 100,000 100,000 100,000 6,520 8,370 10,727
8 ............... 13,035 100,000 100,000 100,000 7,272 9,645 12,797
9 ............... 15,051 100,000 100,000 100,000 7,975 10,934 15,056
10 .............. 17,169 100,000 100,000 100,000 8,640 12,250 17,536
11 .............. 19,392 100,000 100,000 100,000 9,258 13,597 20,253
12 .............. 21,727 100,000 100,000 100,000 9,820 14,966 23,224
13 .............. 24,178 100,000 100,000 100,000 10,337 16,371 26,491
14 .............. 26,752 100,000 100,000 100,000 10,802 17,804 30,077
15 .............. 29,455 100,000 100,000 100,000 11,214 19,268 34,024
16 .............. 32,292 100,000 100,000 100,000 11,578 20,765 38,373
17 .............. 35,272 100,000 100,000 100,000 11,884 22,290 43,166
18 .............. 38,401 100,000 100,000 100,000 12,125 23,836 48,453
19 .............. 41,686 100,000 100,000 100,000 12,291 25,397 54,290
20 .............. 45,135 100,000 100,000 100,000 12,382 26,978 60,750
30 (age 65) ..... 90,689 100,000 100,000 212,364 7,454 43,275 174,069
35 (age 70) ..... 123,287 0 100,000 329,698 0 50,917 284,222
40 (age 75) ..... 164,892 0 100,000 492,031 0 56,904 459,842
</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>
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 $ 1,056 $ 1,125 $ 1,194
2 ............... 2,691 100,000 100,000 100,000 2,088 2,292 2,504
3 ............... 4,138 100,000 100,000 100,000 3,105 3,513 3,954
4 ............... 5,657 100,000 100,000 100,000 4,098 4,779 5,549
5 ............... 7,252 100,000 100,000 100,000 5,066 6,095 7,302
6 ............... 8,928 100,000 100,000 100,000 6,011 7,461 9,233
7 ............... 10,686 100,000 100,000 100,000 6,933 8,882 11,361
8 ............... 12,533 100,000 100,000 100,000 7,833 10,359 13,708
9 ............... 14,472 100,000 100,000 100,000 8,712 11,897 16,298
10 .............. 16,508 100,000 100,000 100,000 9,558 13,487 19,147
11 .............. 18,646 100,000 100,000 100,000 10,362 15,122 22,276
12 .............. 20,891 100,000 100,000 100,000 11,135 16,817 25,726
13 .............. 23,248 100,000 100,000 100,000 11,879 18,574 29,535
14 .............. 25,723 100,000 100,000 100,000 12,584 20,389 33,734
15 .............. 28,322 100,000 100,000 100,000 13,271 22,283 38,387
16 .............. 31,050 100,000 100,000 100,000 13,920 24,244 43,529
17 .............. 33,915 100,000 100,000 100,000 14,511 26,258 49,205
18 .............. 36,924 100,000 100,000 100,000 15,077 28,356 55,499
19 .............. 40,082 100,000 100,000 100,000 15,627 30,552 62,487
20 .............. 43,399 100,000 100,000 110,254 16,163 32,852 70,225
30 (age 65) ..... 87,201 100,000 100,000 253,755 18,308 61,297 207,996
35 (age 70) ..... 118,545 100,000 100,000 401,844 15,733 80,760 346,417
40 (age 75) ..... 158,550 100,000 113,650 611,875 8,288 106,215 571,846
</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
Using Our Guaranteed Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $ 1,006 $ 1,073 $ 1,141
2 ............... 2,691 100,000 100,000 100,000 1,976 2,173 2,378
3 ............... 4,138 100,000 100,000 100,000 2,912 3,300 3,721
4 ............... 5,657 100,000 100,000 100,000 3,801 4,443 5,166
5 ............... 7,252 100,000 100,000 100,000 4,647 5,603 6,725
6 ............... 8,928 100,000 100,000 100,000 5,450 6,782 8,410
7 ............... 10,686 100,000 100,000 100,000 6,212 7,980 10,232
8 ............... 12,533 100,000 100,000 100,000 6,934 9,200 12,208
9 ............... 14,472 100,000 100,000 100,000 7,606 10,431 14,358
10 .............. 16,508 100,000 100,000 100,000 8,241 11,686 16,718
11 .............. 18,646 100,000 100,000 100,000 8,830 12,964 19,301
12 .............. 20,891 100,000 100,000 100,000 9,373 14,271 22,134
13 .............. 23,248 100,000 100,000 100,000 9,873 15,611 25,245
14 .............. 25,723 100,000 100,000 100,000 10,319 16,974 28,659
15 .............. 28,322 100,000 100,000 100,000 10,714 18,364 32,410
16 .............. 31,050 100,000 100,000 100,000 11,058 19,783 36,542
17 .............. 33,915 100,000 100,000 100,000 11,344 21,225 41,091
18 .............. 36,924 100,000 100,000 100,000 11,572 22,692 46,111
19 .............. 40,082 100,000 100,000 100,000 11,735 24,178 51,653
20 .............. 43,399 100,000 100,000 100,000 11,823 25,677 57,780
30 (age 65) ..... 87,201 100,000 100,000 202,760 7,597 41,341 166,196
35 (age 70) ..... 118,545 0 100,000 272,081 0 48,741 272,081
40 (age 75) ..... 158,550 0 100,000 441,346 0 54,596 441,346
</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
Using Our Current Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $101,871 $101,990 $ 102,109 $ 1,871 $ 1,990 $ 2,109
2 ........... 4,520 103,712 104,068 104,439 3,712 4,068 4,439
3 ........... 6,951 105,514 106,228 107,001 5,514 6,228 7,001
4 ........... 9,504 107,278 108,474 109,821 7,278 8,474 9,821
5 ........... 12,184 109,005 110,811 112,927 9,005 10,811 12,927
6 ........... 14,998 110,695 113,241 116,347 10,695 13,241 16,347
7 ........... 17,953 112,349 115,770 120,116 12,349 15,770 20,116
8 ........... 21,056 113,967 118,402 124,271 13,967 18,402 24,271
9 ........... 24,314 115,550 121,142 128,851 15,550 21,142 28,851
10 .......... 27,734 117,086 123,982 133,890 17,086 23,982 33,890
11 .......... 31,326 118,553 126,903 139,411 18,553 26,903 39,411
12 .......... 35,097 119,974 129,932 145,488 19,974 29,932 45,488
13 .......... 39,057 121,352 133,075 152,183 21,352 33,075 52,183
14 .......... 43,215 122,674 136,324 159,546 22,674 36,324 59,546
15 .......... 47,581 123,952 139,696 167,662 23,952 39,696 67,662
16 .......... 52,165 125,177 143,186 176,596 25,177 43,186 76,596
17 .......... 56,978 126,325 146,773 186,411 26,325 46,773 86,411
18 .......... 62,032 127,420 150,487 197,223 27,420 50,487 97,223
19 .......... 67,339 128,488 154,358 209,166 28,488 54,358 109,166
20 .......... 72,910 129,528 158,393 222,356 29,528 58,393 122,356
30 (age 65) . 146,498 135,208 205,623 455,305 35,208 105,623 355,305
35 (age 70) . 199,156 133,011 232,755 688,298 33,011 132,755 588,298
40 (age 75) . 266,364 125,119 259,942 1,065,472 25,119 159,942 965,472
</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
Using Our Guaranteed Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $101,831 $101,949 $102,067 $ 1,831 $ 1,949 $ 2,067
2 ............... 4,520 103,603 103,951 104,313 3,603 3,951 4,313
3 ............... 6,951 105,304 105,994 106,741 5,304 5,994 6,741
4 ............... 9,504 106,948 108,092 109,380 6,948 8,092 9,380
5 ............... 12,184 108,524 110,234 112,237 8,524 10,234 12,237
6 ............... 14,998 110,034 112,425 115,360 10,034 12,425 15,360
7 ............... 17,953 111,481 114,684 118,779 11,481 14,684 18,779
8 ............... 21,056 112,864 117,004 122,512 12,864 17,004 22,512
9 ............... 24,314 114,188 119,387 126,593 14,188 19,387 26,593
10 .............. 27,734 115,466 121,848 131,069 15,466 21,848 31,069
11 .............. 31,326 116,687 124,379 135,968 16,687 24,379 35,968
12 .............. 35,097 117,839 126,970 141,322 17,839 26,970 41,322
13 .............. 39,057 118,936 129,635 147,190 18,936 29,635 47,190
14 .............. 43,215 119,967 132,366 153,612 19,967 32,366 53,612
15 .............. 47,581 120,933 135,166 160,646 20,933 35,166 60,646
16 .............. 52,165 121,835 138,037 168,354 21,835 38,037 68,354
17 .............. 56,978 122,663 140,970 176,793 22,663 40,970 76,793
18 .............. 62,032 123,405 143,957 186,027 23,405 43,957 86,027
19 .............. 67,339 124,052 146,986 196,124 24,052 46,986 96,124
20 .............. 72,910 124,604 150,060 207,174 24,604 50,060 107,174
30 (age 65) ..... 146,498 123,265 181,346 394,798 23,265 81,346 294,798
35 (age 70) ..... 199,156 115,435 194,055 574,624 15,435 94,055 474,624
40 (age 75) ..... 266,364 0 199,449 856,519 0 99,449 756,519
</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
Using Our Current Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $101,786 $101,899 $ 102,013 $ 1,786 $ 1,899 $ 2,013
2 ............... 4,305 103,541 103,881 104,234 3,541 3,881 4,234
3 ............... 6,620 105,271 105,952 106,689 5,271 5,952 6,689
4 ............... 9,051 106,964 108,106 109,391 6,964 8,106 9,391
5 ............... 11,604 108,620 110,345 112,366 8,620 10,345 12,366
6 ............... 14,284 110,241 112,674 115,642 10,241 12,674 15,642
7 ............... 17,098 111,827 115,098 119,252 11,827 15,098 19,252
8 ............... 20,053 113,378 117,619 123,230 13,378 17,619 23,230
9 ............... 23,156 114,894 120,243 127,615 14,894 20,243 27,615
10 .............. 26,414 116,365 122,963 132,438 16,365 22,963 32,438
11 .............. 29,834 117,779 125,769 137,733 17,779 25,769 37,733
12 .............. 33,426 119,149 128,679 143,561 19,149 28,679 43,561
13 .............. 37,197 120,476 131,697 149,979 20,476 31,697 49,979
14 .............. 41,157 121,747 134,815 157,037 21,747 34,815 57,037
15 .............. 45,315 122,988 138,064 164,828 22,988 38,064 64,828
16 .............. 49,681 124,176 141,423 173,404 24,176 41,423 73,404
17 .............. 54,265 125,287 144,875 182,821 25,287 44,875 82,821
18 .............. 59,078 126,359 148,459 193,208 26,359 48,459 93,208
19 .............. 64,132 127,403 152,194 204,679 27,403 52,194 104,679
20 .............. 69,439 128,420 156,088 217,348 28,420 56,088 117,348
30 (age 65) ..... 139,522 134,251 201,934 441,405 34,251 101,934 341,405
35 (age 70) ..... 189,673 132,616 228,694 665,946 32,616 128,694 565,946
40 (age 75) ..... 253,680 125,815 256,071 1,029,907 25,815 156,071 929,907
</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
Using Our Guaranteed Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $101,734 $101,845 $101,957 $ 1,734 $ 1,845 $ 1,957
2 ............... 4,305 103,411 103,741 104,084 3,411 3,741 4,084
3 ............... 6,620 105,031 105,686 106,395 5,031 5,686 6,395
4 ............... 9,051 106,585 107,670 108,893 6,585 7,670 8,893
5 ............... 11,604 108,073 109,695 111,595 8,073 9,695 11,595
6 ............... 14,284 109,498 111,762 114,542 9,498 11,762 14,542
7 ............... 17,098 110,862 113,888 117,766 10,862 13,888 17,766
8 ............... 20,053 112,170 116,082 121,297 12,170 16,082 21,297
9 ............... 23,156 113,419 118,333 125,155 13,419 18,333 25,155
10 .............. 26,414 114,623 120,657 129,385 14,623 20,657 29,385
11 .............. 29,834 115,772 123,044 134,013 15,772 23,044 34,013
12 .............. 33,426 116,865 125,497 139,080 16,865 25,497 39,080
13 .............. 37,197 117,904 128,020 144,632 17,904 28,020 44,632
14 .............. 41,157 118,878 130,601 150,706 18,878 30,601 50,706
15 .............. 45,315 119,788 133,245 157,355 19,788 33,245 57,355
16 .............. 49,681 120,635 135,954 164,639 20,635 35,954 64,639
17 .............. 54,265 121,408 138,718 172,610 21,408 38,718 72,610
18 .............. 59,078 122,109 141,540 181,340 22,109 41,540 81,340
19 .............. 64,132 122,727 144,409 190,895 22,727 44,409 90,895
20 .............. 69,439 123,251 147,317 201,345 23,251 47,317 101,345
30 (age 65) ..... 139,522 122,447 177,467 379,495 22,447 77,467 279,495
35 (age 70) ..... 189,673 115,593 190,287 550,776 15,593 90,287 450,776
40 (age 75) ..... 253,680 101,446 196,948 820,017 1,446 96,948 720,017
</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
Using Our Current Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $ 8,735 $ 9,306 $ 9,878
2 .............. 22,063 500,000 500,000 500,000 17,251 18,943 20,705
3 .............. 33,929 500,000 500,000 500,000 25,613 28,991 32,652
4 .............. 46,388 500,000 500,000 500,000 33,713 39,360 45,728
5 .............. 59,470 500,000 500,000 500,000 41,615 50,128 60,122
6 .............. 73,206 500,000 500,000 500,000 49,325 61,321 75,987
7 .............. 87,628 500,000 500,000 500,000 56,743 72,859 93,388
8 .............. 102,772 500,000 500,000 500,000 63,931 84,822 112,561
9 .............. 118,673 500,000 500,000 500,000 71,049 97,392 133,862
10 ............. 135,370 500,000 500,000 500,000 78,049 110,549 157,480
11 ............. 152,901 500,000 500,000 500,000 84,833 124,234 183,597
12 ............. 171,308 500,000 500,000 500,000 91,311 138,395 212,435
13 ............. 190,636 500,000 500,000 500,000 97,542 153,115 244,369
14 ............. 210,930 500,000 500,000 500,000 103,487 168,398 279,752
15 ............. 232,239 500,000 500,000 500,000 109,107 184,252 318,992
16 ............. 254,614 500,000 500,000 500,000 114,414 200,733 362,592
17 ............. 278,107 500,000 500,000 526,123 119,326 217,827 411,034
18 ............. 302,775 500,000 500,000 585,289 123,899 235,635 464,515
19 ............. 328,676 500,000 500,000 649,107 128,098 254,197 523,473
20 (age 65) .... 355,872 500,000 500,000 717,920 131,845 273,536 588,459
25 (age 70) .... 513,663 500,000 500,000 1,191,399 143,148 385,056 1,027,068
30 (age 75) .... 715,048 500,000 568,318 1,864,143 136,688 531,138 1,742,189
</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
Using Our Guaranteed Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $ 7,709 $ 8,246 $ 8,783
2 ............. 22,063 500,000 500,000 500,000 15,064 16,621 18,246
3 ............. 33,929 500,000 500,000 500,000 22,157 25,224 28,555
4 ............. 46,388 500,000 500,000 500,000 28,945 34,017 39,755
5 ............. 59,470 500,000 500,000 500,000 35,437 43,019 51,955
6 ............. 73,206 500,000 500,000 500,000 41,642 52,250 65,279
7 ............. 87,628 500,000 500,000 500,000 47,516 61,675 79,810
8 ............. 102,772 500,000 500,000 500,000 53,015 71,262 95,648
9 ............. 118,673 500,000 500,000 500,000 58,098 80,984 112,916
10 ............ 135,370 500,000 500,000 500,000 62,777 90,864 131,806
11 ............ 152,901 500,000 500,000 500,000 67,011 100,877 152,490
12 ............ 171,308 500,000 500,000 500,000 70,759 111,003 175,176
13 ............ 190,636 500,000 500,000 500,000 74,083 121,317 200,187
14 ............ 210,930 500,000 500,000 500,000 76,890 131,758 227,777
15 ............ 232,239 500,000 500,000 500,000 79,188 142,361 258,321
16 ............ 254,614 500,000 500,000 500,000 80,884 153,074 292,195
17 ............ 278,107 500,000 500,000 500,000 81,933 163,895 329,884
18 ............ 302,775 500,000 500,000 500,000 82,287 174,823 371,968
19 ............ 328,676 500,000 500,000 500,000 81,796 185,786 419,035
20 (age 65) ... 355,872 500,000 500,000 574,503 80,405 196,794 470,904
25 (age 70) ... 513,663 500,000 500,000 945,419 56,616 252,765 815,016
30 (age 75) ... 715,048 0 500,000 1,458,996 0 309,839 1,363,548
</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
Using Our Current Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $513,982 $ 514,873 $ 515,764 $ 13,982 $ 14,873 $ 15,764
2 ............... 33,579 527,644 530,301 533,067 27,644 30,301 33,067
3 ............... 51,638 541,050 546,371 552,132 41,050 46,371 52,132
4 ............... 70,600 554,084 562,990 573,022 54,084 62,990 73,022
5 ............... 90,510 566,811 580,243 595,990 66,811 80,243 95,990
6 ............... 111,415 579,236 598,161 621,257 79,236 98,161 121,257
7 ............... 133,366 591,244 616,649 648,939 91,244 116,649 148,939
8 ............... 156,414 602,900 635,796 679,354 102,900 135,796 179,354
9 ............... 180,615 614,389 655,816 712,980 114,389 155,816 212,980
10 .............. 206,026 625,653 676,688 750,094 125,653 176,688 250,094
11 .............. 232,707 636,575 698,327 790,938 136,575 198,327 290,938
12 .............. 260,723 647,043 720,645 835,777 147,043 220,645 335,777
13 .............. 290,139 657,122 743,736 885,098 157,122 243,736 385,098
14 .............. 321,026 666,758 767,571 939,310 166,758 267,571 439,310
15 .............. 353,457 675,899 792,125 998,867 175,899 292,125 498,867
16 .............. 387,510 684,550 817,430 1,064,333 184,550 317,430 564,333
17 .............. 423,265 692,601 843,397 1,136,205 192,601 343,397 636,205
18 .............. 460,808 700,119 870,117 1,215,223 200,119 370,117 715,223
19 .............. 500,229 707,052 897,564 1,302,078 207,052 397,564 802,078
20 (age 65) ..... 541,620 713,290 925,649 1,397,472 213,290 425,649 897,472
25 (age 70) ..... 781,770 733,107 1,075,279 2,036,090 233,107 575,279 1,536,090
30 (age 75) ..... 1,088,268 727,339 1,234,477 3,059,122 227,339 734,477 2,559,122
</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
Using Our Guaranteed Cost of Insurance Charges
<TABLE>
<CAPTION>
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 $512,899 $513,755 $ 514,613 $ 12,899 $ 13,755 $ 14,613
2 .............. 33,579 523,342 527,858 530,479 25,342 27,858 30,479
3 .............. 51,638 537,397 542,384 547,792 37,397 42,384 47,792
4 .............. 70,600 549,010 557,291 566,636 49,010 57,291 66,636
5 .............. 90,510 560,189 572,595 587,170 60,189 72,595 87,170
6 .............. 111,415 570,941 588,312 609,567 70,941 88,312 109,567
7 .............. 133,366 581,214 604,400 633,957 81,214 104,400 133,957
8 .............. 156,414 590,957 620,814 660,482 90,957 120,814 160,482
9 .............. 180,615 600,119 637,504 689,299 100,119 137,504 189,299
10 ............. 206,026 608,710 654,485 720,644 108,710 154,485 220,644
11 ............. 232,707 616,681 671,706 754,713 116,681 171,706 254,713
12 ............. 260,723 623,981 689,117 791,726 123,981 189,117 291,726
13 ............. 290,139 630,683 706,787 832,048 130,683 206,787 332,048
14 ............. 321,026 636,677 724,605 875,895 136,677 224,605 375,895
15 ............. 353,457 641,975 742,577 923,629 141,975 242,577 423,629
16 ............. 387,510 646,470 760,587 975,524 146,470 260,587 475,524
17 ............. 423,265 650,116 778,575 1,031,948 150,116 278,575 531,948
18 ............. 460,808 652,869 796,479 1,093,302 152,869 296,479 593,302
19 ............. 500,229 654,564 814,110 1,159,906 154,564 314,110 659,906
20 (age 65) .... 541,620 655,161 831,397 1,232,238 155,161 331,397 732,238
25 (age 70) .... 781,770 639,375 908,915 1,699,258 139,375 408,915 1,199,258
30 (age 75) .... 1,088,268 580,049 953,143 2,402,960 80,049 453,143 1,902,960
</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, 1999.
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, 1999
<TABLE>
<CAPTION>
Investment Company
----------------------------------------------------------------------
Money All Equity Mid-Cap
Market America Index Equity Index Bond
Fund Fund Fund Fund Fund
------------ --------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in Mutual of America Investment Corporation
at market value
(Cost:
Money Market Fund -- $10,972
All America Fund -- $1,010,289
Equity Index Fund -- $553,382
Mid-Cap Equity Index Fund -- $9,965
Bond Fund -- $39,473)
(Notes 1 and 2) .......................................... $ 10,711 $ 1,205,450 $ 693,551 $10,545 $ 35,597
Due From (To) General Account ............................. 32 7,327 7,739 (5) 558
-------- ----------- --------- --------- --------
NET ASSETS ................................................ $ 10,743 $ 1,212,777 $ 701,290 $10,540 $ 36,155
======== =========== ========= ======== ========
UNIT VALUE AT DECEMBER 31, 1999 (Note 5) .................. $ 2.11 $ 10.05 $ 3.41 $ 1.11 $ 3.07
======== =========== ========= ======== ========
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31, 1999
(Note 5) ................................................. 5,096 120,656 205,553 9,513 11,766
======== =========== ========= ======== ========
</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 -- $3,544
Mid-Term Bond Fund -- $4,171
Composite Fund -- $437,065
Aggressive Equity Fund -- $365,151)
(Notes 1 and 2) .............................................. $3,364 $3,910 $ 457,025 $ 495,573
Due From (To) General Account ................................. (29) (43) 7,887 1,876
------ ------ --------- ---------
NET ASSETS .................................................... $3,335 $3,867 $ 464,912 $ 497,449
====== ====== ========= =========
UNIT VALUE AT DECEMBER 31, 1999 (Note 5) ...................... $ 1.28 $ 1.32 $ 5.61 $ 2.85
====== ====== ========= =========
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31, 1999 (Note 5) ..... 2,603 2,919 82,918 174,367
====== ====== ========= =========
</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, 1999
<TABLE>
<CAPTION>
American
Scudder Century
------------------------------------------- -------------
Capital VP Capital
Bond Growth International Appreciation
Fund Fund Fund Fund
----------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in Scudder Portfolio and American Century VP Capital
Application Fund at market value
(Cost:
Scudder Bond Fund -- $13,388
Scudder Capital Growth Fund -- $816,318
Scudder International Fund -- $299,065
American Century VP Capital Appreciation Fund -- $109,101)
(Notes 1 and 2) ............................................... $ 7,793 $ 999,330 $ 305,319 $ 157,385
Due From (To) General Account .................................. 143 3,117 176 266
------- ----------- --------- ---------
NET ASSETS ..................................................... $ 7,936 $ 1,002,447 $ 305,495 $ 157,651
======= =========== ========= =========
UNIT VALUE AT DECEMBER 31, 1999 (Note 5) ....................... $ 12.73 $ 48.17 $ 25.83 $ 17.40
======= =========== ========= =========
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31, 1999 (Note 5) ...... 623 20,809 11,828 9,062
======= =========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Calvert Fidelity
---------- --------------------------------------------
Social VIP VIP II VIP II
Balanced Equity-Income Contra Asset Manager
Fund Fund Fund Fund
---------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Calvert Social Balanced Portfolio and Fidelity
Portfolios at market value
(Cost:
Calvert Social Balanced Fund -- $78,246
VIP Equity-Income Fund -- $328,028
VIP II Contra Fund -- $495,731
VIP II Asset Manager Fund -- $224,132)
(Notes 1 and 2) ............................................ $69,605 $ 237,833 $ 583,881 $205,687
Due From (To) General Account ............................... (223) 1,097 3,937 (1,542)
------- --------- --------- --------
NET ASSETS .................................................. $69,382 $ 238,930 $ 587,818 $204,145
======= ========= ========= ========
UNIT VALUE AT DECEMBER 31, 1999 (Note 5) .................... $ 3.37 $ 32.21 $ 32.13 $ 26.40
======= ========= ========= ========
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31, 1999 (Note 5) ... 20,588 7,417 18,296 7,732
======= ========= ========= ========
</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, 1999
<TABLE>
<CAPTION>
Investment Company
---------------------------------------------------------
Mid-Cap
Money Market All America Equity Index Equity Index
Fund Fund Fund Fund*
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME AND EXPENSES:
Income (Notes 1 and 4):
Dividend Income ............................................... $ 495 $ 90,639 $17,838 $84
----- -------- ------- ---
Expenses (Note 3):
Fees and administrative expenses .............................. 332 14,489 8,336 54
----- -------- ------- ---
NET INVESTMENT INCOME (LOSS) ................................... 163 76,150 9,502 30
----- -------- ------- ---
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Note 1):
Net realized gain (loss) on investments ....................... 9 5,982 2,583 (1)
Net unrealized appreciation (depreciation) of investments ..... (90) 142,058 86,992 580
----- -------- ------- -----
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ......... (81) 148,040 89,575 579
----- -------- ------- -----
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS .................................................... $ 82 $224,190 $99,077 $609
===== ======== ======= =====
</TABLE>
<TABLE>
<CAPTION>
Investment Company
------------------------------------------------------------
Aggressive
Bond Short-Term Mid-Term Composite Equity
Fund Bond Fund Bond Fund Fund Fund
----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME AND EXPENSES:
Income (Notes 1 and 4):
Dividend Income ............................................... $ 2,546 $ 274 $ 239 $32,089 $ 27
-------- ------ ------ ------- --------
Expenses (Note 3):
Fees and administrative expenses .............................. 1,179 56 128 7,533 4,651
-------- ------ ------ ------- --------
NET INVESTMENT INCOME (LOSS) ................................... 1,367 218 111 24,556 (4,624)
-------- ------ ------ ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Note 1):
Net realized gain (loss) on investments ....................... (728) 7 (39) 3,345 (1,287)
Net unrealized appreciation (depreciation) of investments ..... (2,629) (119) (155) 28,739 146,822
-------- ------ ------ ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ......... (3,357) (112) (194) 32,084 145,535
-------- ------ ------ ------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS .................................................... $ (1,990) $ 106 $ (83) $56,640 $140,911
======== ====== ====== ======= ========
</TABLE>
- ---------
* Commenced operations May 3, 1999.
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, 1999
<TABLE>
<CAPTION>
American
Scudder Century
--------------------------------------- -------------
Capital VP Capital
Bond Growth International Appreciation
Fund Fund Fund Fund
----------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME AND EXPENSES:
Income (Notes 1 and 4):
Dividend Income .................................................. $ 364 $ 72,252 $16,406 $ --
-------- -------- ------- --------
Expenses (Note 3):
Fees and administrative expenses ................................. 301 9,449 2,459 1,339
-------- -------- ------- --------
NET INVESTMENT INCOME (LOSS) ....................................... 63 62,803 13,947 (1,339)
-------- -------- ------- --------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Net realized gain (loss) on investments .......................... 2,420 29,561 42,870 (538)
Net unrealized appreciation (depreciation) of investments ........ (2,853) 150,030 41,902 61,812
-------- -------- ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ............. (433) 179,591 84,772 61,274
-------- -------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .... $ (370) $242,394 $98,719 $ 59,935
======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Calvert Fidelity
---------- -----------------------------------------
Social VIP VIP II VIP II
Balanced Equity-Income Contra Asset Manager
Fund Fund Fund Fund
---------- --------------- ---------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME AND EXPENSES:
Income (Notes 1 and 4):
Dividend Income ................................................... $ 6,639 $ 10,795 $15,980 $11,496
-------- --------- ------- -------
Expenses (Note 3):
Fees and administrative expenses .................................. 1,126 5,386 6,311 2,871
-------- --------- ------- -------
NET INVESTMENT INCOME (LOSS) ........................................ 5,513 5,409 9,669 8,625
-------- --------- ------- -------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS (Note 1):
Net realized gain (loss) on investments ........................... 2,463 49,375 26,565 7,343
Net unrealized appreciation (depreciation) of investments ......... (2,145) (45,328) 62,794 169
-------- --------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............. 318 4,047 89,359 7,512
-------- --------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 5,831 $ 9,456 $99,028 $16,137
======== ========= ======= =======
</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,
<TABLE>
<CAPTION>
Investment Company
------------------------------------------------------------------------------
Money Market Fund All America Fund Equity Index Fund
------------------------ --------------------------- -------------------------
1999 1998 1999 1998 1999 1998
----------- ------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ................. $ 163 $ 58 $ 76,150 $ 89,933 $ 9,502 $ 26,288
Net realized gain (loss) on investments ...... 9 (6) 5,982 1,744 2,583 2,147
Net unrealized appreciation (depreciation) of
investments ................................ (90) (27) 142,058 32,513 86,992 34,890
------- --------- ---------- --------- --------- --------
Net Increase (Decrease) in net assets resulting
from operations .............................. 82 25 224,190 124,190 99,077 63,325
------- --------- ---------- --------- --------- --------
From Unit Transactions:
Contributions ................................ 5,763 6,108 225,775 241,902 200,423 180,950
Withdrawals .................................. (741) (57) (14,164) (10,084) (10,982) (7,360)
Net Transfers ................................ (687) (3,176) (78,826) (49,261) 10,361 4,004
------- --------- ---------- --------- --------- --------
Net Increase (Decrease) from unit transactions 4,335 2,875 132,785 182,557 199,802 177,594
------- --------- ---------- --------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS ......... 4,417 2,900 356,975 306,747 298,879 240,919
NET ASSETS:
Beginning of Year ............................. 6,326 3,426 855,802 549,055 402,411 161,492
------- --------- ---------- --------- --------- --------
End of Year ................................... $10,743 $ 6,326 $1,212,777 $ 855,802 $ 701,290 $402,411
======= ========= ========== ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Investment Company
----------------------------------------------------------------
Mid-Cap
Equity Index Fund* Bond Fund Short-Term Bond Fund
-------------------- ----------------------- --------------------
1999 1999 1998 1999 1998
-------------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) .......................... $ 30 $ 1,367 $ 1,687 $ 218 $ 103
Net realized gain (loss) on investments ............... (1) (728) 233 7 6
Net unrealized appreciation (depreciation) of
investments ......................................... 580 (2,629) (1,044) (119) (12)
-------- --------- -------- ------ ------
Net Increase (Decrease) in net assets resulting from
operations ............................................ 609 (1,990) 876 106 97
-------- --------- -------- ------ ------
From Unit Transactions:
Contributions ......................................... 1,768 23,334 25,539 1,436 1,370
Withdrawals ........................................... -- (1,742) (2,714) (553) --
Net Transfers ......................................... 8,163 (23,253) (5,483) (668) (277)
-------- --------- -------- ------ ------
Net Increase (Decrease) from unit transactions ......... 9,931 (1,661) 17,342 215 1,093
-------- --------- -------- ------ ------
NET INCREASE (DECREASE) IN NET ASSETS .................. 10,540 (3,651) 18,218 321 1,190
NET ASSETS:
Beginning of Period/Year ............................... -- 39,806 21,588 3,014 1,824
-------- --------- -------- ------ ------
End of Year ............................................ $10,540 $ 36,155 $ 39,806 $3,335 $3,014
======== ========= ======== ====== ======
</TABLE>
- ---------
* Commenced operations May 3, 1999.
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,
<TABLE>
<CAPTION>
Investment Company
-----------------------------------------------------------------------------
Mid-Term Aggressive
Bond Fund Composite Fund Equity Fund
------------------------ -------------------------- -------------------------
1999 1998 1999 1998 1999 1998
----------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ...................... $ 111 $ 49 $ 24,556 $ 14,028 $ (4,624) $ (1,051)
Net realized gain (loss) on investments ........... (39) (1) 3,345 (2,308) (1,287) (5,609)
Net unrealized appreciation (depreciation) of
investments ..................................... (155) (30) 28,739 40,252 146,822 (9,779)
--------- ---------- ----------- --------- --------- ---------
Net Increase (Decrease) in net assets resulting from
operations ........................................ (83) 18 56,640 51,972 140,911 (16,439)
--------- ---------- ----------- --------- --------- ---------
From Unit Transactions:
Contributions ..................................... 3,734 4,187 143,578 160,764 122,221 164,628
Withdrawals ....................................... (33) (157) (7,275) (13,170) (11,223) (15,635)
Net Transfers ..................................... (2,933) (2,597) (230,186) (43,657) (51,648) (57,515)
--------- ---------- ----------- --------- --------- ---------
Net Increase (Decrease) from unit transactions ..... 768 1,433 (93,883) 103,937 59,350 91,478
--------- ---------- ----------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS .............. 685 1,451 (37,243) 155,909 200,261 75,039
NET ASSETS:
Beginning of Year .................................. 3,182 1,731 502,155 346,246 297,188 222,149
--------- ---------- ----------- --------- --------- ---------
End of Year ........................................ $ 3,867 $ 3,182 $ 464,912 $ 502,155 $ 497,449 $ 297,188
========= ========== =========== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Scudder
-----------------------------------------------------------------------------
Bond Fund Capital Growth Fund International Fund
----------------------- --------------------------- -------------------------
1999 1998 1999 1998 1999 1998
----------- ----------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ................. $ 63 $ 140 $ 62,803 $ 21,930 $ 13,947 $ 13,208
Net realized gain (loss) on investments ...... 2,420 435 29,561 59,922 42,870 8,854
Net unrealized appreciation (depreciation) of
investments ................................ (2,853) (417) 150,030 20,657 41,902 (3,025)
-------- -------- ---------- --------- -------- --------
Net Increase (Decrease) in net assets resulting
from operations .............................. (370) 158 242,394 102,509 98,719 19,037
-------- -------- ---------- --------- -------- --------
From Unit Transactions:
Contributions ................................ 6,655 7,436 179,349 171,043 48,408 41,383
Withdrawals .................................. (7,951) (747) (19,485) (17,243) (4,488) (3,269)
Net Transfers ................................ 2,657 (4,105) (32,768) (37,452) 5,086 (6,087)
-------- -------- ---------- --------- -------- --------
Net Increase (Decrease) from unit transactions 1,361 2,584 127,096 116,348 49,006 32,027
-------- -------- ---------- --------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS ......... 991 2,742 369,490 218,857 147,725 51,064
NET ASSETS:
Beginning of Year ............................. 6,945 4,203 632,957 414,100 157,770 106,706
-------- -------- ---------- --------- -------- --------
End of Year ................................... $ 7,936 $ 6,945 $1,002,447 $ 632,957 $305,495 $157,770
======== ======== ========== ========= ======== ========
</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,
<TABLE>
<CAPTION>
American Century Calvert
------------------------ -----------------------
VP Capital Appreciation
Fund Social Balanced Fund
------------------------ -----------------------
1999 1998 1999 1998
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ...................................... $ (1,339) $ 3,232 $ 5,513 $ 2,632
Net realized gain (loss) on investments ........................... (538) (2,064) 2,463 3,550
Net unrealized appreciation (depreciation) of investments ......... 61,812 (3,934) (2,145) (1,400)
--------- -------- --------- ---------
Net Increase (Decrease) in net assets resulting from operations ..... 59,935 (2,766) 5,831 4,782
--------- -------- --------- ---------
From Unit Transactions:
Contributions ..................................................... 19,332 28,381 29,109 30,086
Withdrawals ....................................................... (3,725) (1,400) (1,433) (2,076)
Net Transfers ..................................................... (12,717) (9,765) (10,503) (12,258)
--------- -------- --------- ---------
Net Increase (Decrease) from unit transactions ...................... 2,890 17,216 17,173 15,752
--------- -------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ............................... 62,825 14,450 23,004 20,534
NET ASSETS:
Beginning of Year ................................................... 94,826 80,376 46,378 25,844
--------- -------- --------- ---------
End of Year ......................................................... $ 157,651 $ 94,826 $ 69,382 $ 46,378
========= ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Fidelity
----------------------------------------------------------------------------
VIP Equity-Income Fund VIP II Contra Fund VIP II Asset Manager Fund
------------------------- ------------------------- -------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From Operations:
Net investment income (loss) ................... $ 5,409 $ 6,552 $ 9,669 $ 10,289 $ 8,625 $ 11,124
Net realized gain (loss) on investments ........ 49,375 41,256 26,565 43,590 7,343 17,688
Net unrealized appreciation (depreciation) of
investments .................................. (45,238) (31,062) 62,794 22,246 169 (13,211)
--------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in net assets resulting
from operations ................................ 9,456 16,746 99,028 76,125 16,137 15,601
--------- --------- --------- --------- --------- ---------
From Unit Transactions:
Contributions .................................. 102,202 132,435 128,973 124,636 63,355 69,680
Withdrawals .................................... (20,796) (22,291) (14,050) (15,833) (3,675) (2,791)
Net Transfers .................................. (73,688) (58,797) (3,218) (43,163) (23,061) (31,342)
--------- --------- --------- --------- --------- ---------
Net Increase (Decrease) from unit transactions .. 7,718 51,347 111,705 65,640 36,619 35,547
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ........... 17,174 68,093 210,733 141,765 52,756 51,148
NET ASSETS:
Beginning of Year ............................... 221,756 153,663 377,085 235,320 151,389 100,241
--------- --------- --------- --------- --------- ---------
End of Year ..................................... $ 238,930 $ 221,756 $ 587,818 $ 377,085 $ 204,145 $ 151,389
========= ========= ========= ========= ========= =========
</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 of New York
("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. 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. ("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 ("Fidelity VIP") and the
Contrafund and Asset Manager Funds invest in corresponding portfolios of
Fidelity Variable Insurance Products Fund II ("Fidelity VIP II") (collectively,
"Fidelity").
On May 3, 1999 the Mid-Cap Equity Index Fund of the Investment Company
became the 17th investment alternative available to Separate Account No. 3.
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, 1999
are as follows:
<TABLE>
<CAPTION>
Number of Net Asset
Shares Value
----------- ----------
<S> <C> <C>
Investment Company Funds:
Money Market Fund ............................... 9,026 $ 1.19
All America Fund ................................ 357,922 3.37
Equity Index Fund ............................... 240,742 2.88
Mid-Cap Equity Index Fund ....................... 9,514 1.11
Bond Fund ....................................... 27,442 1.30
Short-Term Bond Fund ............................ 3,389 0.99
Mid-Term Bond Fund .............................. 4,513 0.87
Composite Fund .................................. 239,869 1.91
Aggressive Equity Fund .......................... 229,289 2.16
Scudder Portfolios:
Bond Portfolio .................................. 1,201 6.49
Capital Growth Portfolio -- Class "A" ........... 34,306 29.13
International Portfolio -- Class "A" ............ 15,011 20.34
American Century VP Capital Appreciation Fund ..... 10,605 14.84
Calvert Social Balanced Portfolio ................. 32,090 2.17
Fidelity Portfolios:
Equity-Income -- "Initial" Class ................ 9,251 25.71
Contrafund -- "Initial" Class ................... 20,030 29.15
Asset Manager -- "Initial" Class ................ 11,017 18.67
</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, 1999, a
dividend distribution was made by the Investment Company to shareholders of
record as of December 30, 1999. Prior thereto, the Investment Company declared
and paid a dividend distribution on September 15, 1999. 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 ................. $ 495
All America Fund .................. 90,639
Equity Index Fund ................. 17,838
Mid-Cap Equity Index Fund ......... 84
Bond Fund ......................... 2,546
Short-Term Bond Fund .............. 274
Mid-Term Bond Fund ................ 239
Composite Fund .................... 32,089
Aggressive Equity Fund ............ 27
</TABLE>
On January 27, 1999 and April 28, 1999, dividends were paid by the Scudder
Bond Portfolio. The combined amount of the dividends was $364.
On January 27, 1999 and April 28, 1999 dividends were paid by the Scudder
Capital Growth Portfolio. The combined amount of the dividends was $72,252.
On April 28, 1999, a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $16,406.
On December 30, 1999, a dividend was paid by the Calvert Social Balanced
Portfolio. The amount of the dividend was $6,639.
On February 5, 1999, a dividend was paid by the Fidelity Equity-Income
Portfolio. The amount of the dividend was $10,795.
On February 5, 1999, a dividend was paid by the Fidelity Contrafund
Portfolio. The amount of the dividend was $15,980.
On February 5, 1999, a dividend was paid by the Fidelity Asset Manager
Portfolio. The amount of the dividend was $11,496.
No dividend was paid by the American Century VP Capital Appreciation Fund
during 1999.
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding for the year
ended December 31, 1999 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
------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of
year ................... $ 2.03 $ 1.95 $ 1.87 $ 1.80 $ 1.77
======= ======= ======= ====== ======
Unit value, end of year . $ 2.11 $ 2.03 $ 1.95 $ 1.87 $ 1.80
======= ======= ======= ====== ======
Units outstanding, end of
year ................... 5,096 3,113 1,755 442 25
======= ======= ======= ====== ======
<CAPTION>
Investment Company
--------------------------------------------------------
All America Fund
--------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of
year ................... $ 8.09 $ 6.76 $ 5.39 $ 4.52 $ 3.36
========= ========= ======== ======== =======
Unit value, end of year . $ 10.05 $ 8.09 $ 6.76 $ 5.39 $ 4.52
========= ========= ======== ======== =======
Units outstanding, end of
year ................... 120,656 105,770 81,264 39,912 9,813
========= ========= ======== ======== =======
</TABLE>
-60-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS -- (Continued)
5. FINANCIAL HIGHLIGHTS -- (Continued)
<TABLE>
<CAPTION>
Investment Company
--------------------------------------------------------
Equity Index Fund
--------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value,
beginning of
period/year ......... $ 2.86 $ 2.26 $ 1.72 $ 1.42 $ 1.25
========= ========= ======== ======== =======
Unit value, end
of year ............. $ 3.41 $ 2.86 $ 2.26 $ 1.72 $ 1.42
========= ========= ======== ======== =======
Units outstanding,
end of year ......... 205,553 140,499 71,579 26,794 4,449
========= ========= ======== ======== =======
<CAPTION>
Investment Company
-------------------------------------------------------------------
Mid-Cap
Equity
Index Fund Bond Fund
------------ ------------------------------------------------------
1999* 1999 1998 1997 1996 1995
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unit value,
beginning of
period/year ......... $ 1.00 $ 3.17 $ 3.00 $ 2.75 $ 2.69 $ 2.36
======= ======== ======== ======= ======= ======
Unit value, end
of year ............. $ 1.11 $ 3.07 $ 3.17 $ 3.00 $ 2.75 $ 2.69
======= ======== ======== ======= ======= ======
Units outstanding,
end of year ......... 9,513 11,766 12,551 7,204 3,239 507
======= ======== ======== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
Investment Company
------------------------------------------------------
Short-Term Bond Fund
------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ... $ 1.24 $ 1.19 $ 1.14 $ 1.10 $ 1.08
======= ======= ======= ======= ======
Unit value, end of year ......... $ 1.28 $ 1.24 $ 1.19 $ 1.14 $ 1.10
======= ======= ======= ======= ======
Units outstanding, end of year .. 2,603 2,422 1,530 908 302
======= ======= ======= ======= ======
<CAPTION>
Investment Company
------------------------------------------------------
Mid-Term Bond Fund
------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ... $ 1.32 $ 1.26 $ 1.19 $ 1.16 $ 1.11
======= ======= ======= ====== ======
Unit value, end of year ......... $ 1.32 $ 1.32 $ 1.26 $ 1.19 $ 1.16
======= ======= ======= ====== ======
Units outstanding, end of year .. 2,919 2,404 1,374 460 28
======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Investment Company
-------------------------------------------------------
Composite Fund
-------------------------------------------------------
1999 1998 1997 1996 1995
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning
of year ............. $ 4.93 $ 4.36 $ 3.75 $ 3.39 $ 3.14
======== ========= ======== ======== =======
Unit value, end of
year ................ $ 5.61 $ 4.93 $ 4.36 $ 3.75 $ 3.39
======== ========= ======== ======== =======
Units outstanding, end
of year ............. 82,918 101,886 79,417 27,055 2,688
======== ========= ======== ======== =======
<CAPTION>
Investment Company
---------------------------------------------------------
Aggressive Equity Fund
---------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning
of year ............. $ 2.02 $ 2.15 $ 1.80 $ 1.43 $ 1.05
========= ========= ========= ======== ========
Unit value, end of
year ................ $ 2.85 $ 2.02 $ 2.15 $ 1.80 $ 1.43
========= ========= ========= ======== ========
Units outstanding, end
of year ............. 174,367 147,405 103,218 46,985 12,411
========= ========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Scudder
-----------------------------------------------------------
Bond Fund
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of
year .................. $ 13.02 $ 12.37 $ 11.48 $ 11.30 $ 10.68
======= ======= ======= ======= =======
Unit value, end of year . $ 12.73 $ 13.02 $ 12.37 $ 11.48 $ 11.30
======= ======= ======= ======= =======
Units outstanding, end of
year .................. 623 534 340 120 35
======= ======= ======= ======= =======
<CAPTION>
Scudder
-----------------------------------------------------------
Capital Growth Fund
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of
year .................. $ 36.07 $ 29.64 $ 22.11 $ 18.64 $ 14.67
======== ======== ======= ======= =======
Unit value, end of year . $ 48.17 $ 36.07 $ 29.64 $ 22.11 $ 18.64
======== ======== ======= ======= =======
Units outstanding, end of
year .................. 20,809 17,547 970 5,067 2,011
======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Scudder
-----------------------------------------------------------
International Fund
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year .......... $ 16.93 $ 14.46 $ 13.43 $ 11.85 $ 10.80
======== ======= ======= ======= =======
Unit value, end of year ................ $ 25.83 $ 16.93 $ 14.46 $ 13.43 $ 11.85
======== ======= ======= ======= =======
Units outstanding, end of year ......... 11,828 9,321 7,377 5,193 715
========= ======= ======= ======= =======
</TABLE>
- ---------
* Commenced operations May 3, 1999.
-61-
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS -- (Continued)
5. FINANCIAL HIGHLIGHTS -- (Continued)
<TABLE>
<CAPTION>
American Century
-----------------------------------------------------------
VP Capital
Appreciation Fund
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ..... $ 10.69 $ 11.04 $ 11.53 $ 12.18 $ 11.14
======= ======= ======= ======= =======
Unit value, end of year ........... $ 17.40 $ 10.69 $ 11.04 $ 11.53 $ 12.18
======= ======= ======= ======= =======
Units outstanding, end of year .... 9,062 8,874 7,282 5,921 4,409
======= ======= ======= ======= =======
<CAPTION>
Calvert
----------------------------------------------------------
Social Balanced
Fund
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year ..... $ 3.04 $ 2.65 $ 2.23 $ 2.01 $ 1.89
======== ======== ======= ======= =======
Unit value, end of year ........... $ 3.37 $ 3.04 $ 2.65 $ 2.23 $ 2.01
======== ======== ======= ======= =======
Units outstanding, end of year .... 20,588 15,253 9,760 2,364 115
======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fidelity
-----------------------------------------------------------
VIP
Equity-Income
Fund
-----------------------------------------------------------
1999 1998 1997 1996 1995*
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period ....................... $ 30.65 $ 27.77 $ 21.93 $ 19.43 $ 17.68
======= ======= ======= ======= =======
Unit value, end of year ............ $ 32.21 $ 30.65 $ 27.77 $ 21.93 $ 19.43
======= ======= ======= ======= =======
Units outstanding, end of year ..... 7,417 7,236 5,533 2,393 449
======= ======= ======= ======= =======
<CAPTION>
Fidelity
-----------------------------------------------------------
VIP II
Contra
Fund
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period ....................... $ 26.16 $ 20.36 $ 16.59 $ 13.85 $ 12.41
======== ======== ======== ======= =======
Unit value, end of year ............ $ 32.13 $ 26.16 $ 20.36 $ 16.59 $ 13.85
======== ======== ======== ======= =======
Units outstanding, end of year ..... 18,296 14,417 11,560 6,672 756
======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fidelity
-----------------------------------------------------------
VIP II
Asset Manager
Fund
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year/period ......... $ 24.04 $ 21.14 $ 17.72 $ 15.66 $ 14.87
======= ======= ======= ======= =======
Unit value, end of year ...................... $ 26.40 $ 24.04 $ 21.14 $ 17.72 $ 15.66
======= ======= ======= ======= =======
Units outstanding, end of year ............... 7,732 6,297 4,742 2,639 1,178
======= ======= ======= ======= =======
</TABLE>
- ---------
* Commenced operations May 1, 1995.
6. SUBSEQUENT EVENT
In September 1999, Mutual of America Life Insurance Company ("Mutual of
America"), submitted to the New York Insurance Department a Plan of
Reorganization whereby Mutual of America would prepare for the sale of its
wholly-owned subsidiary, The American Life Insurance Company of New York ("the
Company"). In preparation for such sale, Mutual of America would assume,
subject to approval from the Company's policyowners, the Company's in force
business. Upon obtaining approval from the policyowners, Mutual of America will
assume the Company's outstanding Variable Universal Life policies ("Policies")
pursuant to the assumption reinsurance agreement. Upon transfer of these
Policies, Mutual of America will replace the Company as the issuer of the
Policies. Commensurate with the transfer, all of the assets and obligations of
the variable portion of these Policies will be transferred to Mutual of
America's Separate Account No. 3.
-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, 1999, 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 and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. 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, 1999, 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 Andersen LLP
New York, New York
February 21, 2000
-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, 1999 and 1998,
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 with auditing standards generally accepted in the
United States. 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 accounting principles generally
accepted in the United States.
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, 1999 and 1998, 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 ANDERSEN LLP
New York, New York
February 21, 2000
-64-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
ASSETS
General Account
Bonds and notes .................................................................... $ 1,086,821,705 $ 1,148,665,458
Common stocks ...................................................................... 52,570,134 18,019,909
Preferred stocks ................................................................... 6,078,462 8,952,635
Cash and short-term investments .................................................... 42,386,082 43,071,763
Policy loans ....................................................................... 7,809,464 8,303,917
Other invested assets .............................................................. -- 98,611
Investment income accrued .......................................................... 15,369,034 15,948,956
Receivables and other assets ....................................................... 1,506,634 2,142,179
--------------- ---------------
Total General Account ............................................................ 1,212,541,515 1,245,203,428
Separate account assets ............................................................. 213,251,218 140,113,056
--------------- ---------------
TOTAL ASSETS ........................................................................ $ 1,425,792,733 $ 1,385,316,484
=============== ===============
LIABILITIES AND SURPLUS
General Account Liabilities
Insurance and annuity reserves ..................................................... $ 1,060,317,222 $ 1,107,344,991
Other contract liabilities and reserves ............................................ 9,411,230 9,293,567
Dividends payable to contract and policyholders .................................... 83,895 93,791
Interest maintenance reserve ....................................................... 15,675,742 17,506,597
Due to affiliates .................................................................. 4,443,985 5,482,793
Federal income taxes payable ....................................................... 3,338,590 3,941,090
Other liabilities .................................................................. 16,305,680 1,710,489
--------------- ---------------
Total General Account ............................................................ 1,109,576,344 1,145,373,318
Separate account reserves and liabilities ........................................... 213,251,218 140,113,056
--------------- ---------------
TOTAL LIABILITIES ................................................................... 1,322,827,562 1,285,486,374
--------------- ---------------
Asset Valuation Reserve ............................................................. 11,553,626 9,960,197
--------------- ---------------
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 ................................................................... 55,143,445 43,548,059
Unassigned surplus ................................................................. 33,765,600 43,819,354
--------------- ---------------
Total Surplus .................................................................... 91,411,545 89,869,913
--------------- ---------------
TOTAL LIABILITIES AND SURPLUS ....................................................... $ 1,425,792,733 $ 1,385,316,484
=============== ===============
</TABLE>
See accompanying notes to financial statements.
-65-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF OPERATIONS AND SURPLUS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
<S>
<C> <C>
INCOME
Annuity considerations and deposits (Note 1) ............ $ 77,375,129 $ 119,057,354
Life and disability insurance premiums .................. 27,259,600 27,318,300
------------- -------------
Total considerations and premiums ..................... 104,634,729 146,375,654
Reserve adjustment on reinsurance ceded ................. (4,091,395) (2,998,456)
Net investment income ................................... 86,622,674 91,825,033
Separate account investment and administrative fees ..... 2,271,456 1,619,170
Other, net .............................................. 1,121,445 725,189
------------- -------------
Total income .......................................... 190,558,909 237,546,590
------------- -------------
DEDUCTIONS
Change in insurance and annuity reserves ................ (47,025,689) 16,654,360
Annuity and surrender benefits .......................... 155,491,847 144,281,578
Net transfers to separate accounts ...................... 29,298,085 23,657,434
Death and disability benefits ........................... 18,974,393 20,153,378
Operating expenses and other ............................ 28,525,080 26,851,380
------------- -------------
Total deductions ...................................... 185,263,716 231,598,130
------------- -------------
Net gain before dividends ............................. 5,295,193 5,948,460
Dividends to contractholders and policyholders ........... 97,865 117,184
------------- -------------
Net gain from operations .............................. 5,197,328 5,831,276
Federal income tax (provision) benefit ................... (72,500) 518,812
Net realized capital gains ............................... 362,318 363,187
------------- -------------
Net income ............................................ 5,487,146 6,713,275
SURPLUS TRANSACTIONS
Change in:
Asset valuation reserve ............................... (1,593,429) (3,820,933)
Unrealized capital gains .............................. (2,343,338) 3,857,310
Non-admitted assets and other, net .................... (8,747) 635,695
------------- -------------
Net change in surplus ................................ 1,541,632 7,385,347
SURPLUS
Beginning of year ....................................... 89,869,913 82,484,566
------------- -------------
End of year ............................................. $ 91,411,545 $ 89,869,913
============= =============
</TABLE>
See accompanying notes to financial statements.
-66-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
CASH PROVIDED
Premium and annuity funds received .............................. $ 104,663,447 $ 146,653,511
Investment income received ...................................... 79,694,002 79,116,499
Reserve adjustment on reinsurance ceded ......................... (3,994,659) (2,875,451)
Separate account investment and administrative fees ............. 2,271,456 1,619,170
Other, net ...................................................... 1,031,749 591,081
------------- -------------
Total receipts ................................................ 183,665,995 225,104,810
------------- -------------
Benefits paid ................................................... 173,735,182 164,174,894
Dividends paid to contract and policyholders .................... 107,761 129,722
Insurance and operating expenses paid ........................... 28,239,503 26,890,569
Net transfers to separate accounts .............................. 30,615,404 23,488,256
------------- -------------
Total payments ................................................ 232,697,850 214,683,441
------------- -------------
Net cash (used in) provided by operations ..................... (49,031,855) 10,421,369
Proceeds from long-term investments sold, matured or repaid ..... 183,933,270 334,971,358
Other, net ...................................................... 15,206,883 269,274
------------- -------------
Total cash provided ........................................... 150,108,298 345,662,001
------------- -------------
CASH APPLIED
Cost of long-term investments acquired .......................... 149,970,238 303,943,877
Other, net ...................................................... 823,741 24,492,360
------------- -------------
Total cash applied ............................................ 150,793,979 328,436,237
------------- -------------
Net change in cash and short-term investments ................. (685,681) 17,225,764
CASH AND SHORT-TERM INVESTMENTS
Beginning of year ............................................... 43,071,763 25,845,999
------------- -------------
End of year ..................................................... $ 42,386,082 $ 43,071,763
============= =============
</TABLE>
See accompanying notes to financial statements.
-67-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
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"). 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.
Reorganization -- In September 1999, Mutual of America submitted a Plan of
Reorganization (the "Plan") to the State of New York Insurance Department ("New
York Insurance Department") whereby Mutual of America would prepare for the
sale of the Company. In preparation for such a sale, the Plan indicates that
during the period from January 1, 2000 through June 30, 2000, Mutual of America
would assume (via an assumption reinsurance agreement) virtually all of the
Company's in force business. Mutual of America would then sell the stock of the
Company to a third party. Effective October 1, 1999, virtually all new business
has been written by Mutual of America. On January 1, 2000, approximately 95% of
the Company's in force group business totaling approximately $190.0 million of
insurance and annuity reserves was assumed by Mutual of America.
Basis of Presentation
The financial statements are presented in conformity with statutory
accounting practices prescribed or permitted by the 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.
In 1999, the National Association of Insurance Commissioners ("NAIC")
adopted codified statutory accounting principles (Codification). Codification
will change, to some extent, current prescribed statutory accounting practices
and may result in changes to the accounting practices that the Company uses to
prepare its statutory financial statements going forward. Before Codification
becomes effective for the Company, the New York Insurance Department must adopt
Codification as the prescribed basis of accounting for its domestic insurers.
The New York Insurance Department has not yet reached a decision as to whether
it will adopt Codification. Adoption by the New York Insurance Department would
not have a material adverse effect on the Company's operating results and
financial position.
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 1998 amounts included in the accompanying financial statements
have been reclassified to conform to the 1999 presentation.
Asset Valuations
Bonds and Notes -- Investment valuations are prescribed by the NAIC. Bonds
qualifying for amortization are stated at amortized cost. Short-term
investments in good standing are stated at cost. All other bonds and short-term
notes are stated at market value. Unrealized gains and losses on valuation of
bonds and short-term investments are recorded directly to unassigned surplus.
Common and Preferred Stocks -- Common stocks in good standing are stated
at market value. Market value is determined by reference to valuations quoted
by the NAIC. Unrealized gains and losses are recorded directly to unassigned
surplus.
Policy Loans -- Policy loans are stated at the unpaid principal balance of
the loan.
Other Assets -- Certain other assets, such as furniture and fixtures and
prepaid expenses, are considered "non-admitted assets" and excluded from the
statements of financial condition.
-68-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
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 1999 and 1998, averaged
4.75% and 5.50%, 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.
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. Separate accounts offered include a multifund
account managed by Mutual of America Capital Management Corporation, or certain
other funds managed by outside investment advisors. All fund investment
experience, including net realized and unrealized capital gains in the separate
accounts (net of investment advisory fees and administration fees assessed),
accrues directly to participants and are not reflected in the Company's
statements of operations. 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 both 1999 and 1998 such fees were
equal to approximately 1.30% of the total average assets under management.
Investment advisory and administrative fees are included in the statement of
operations.
Investments held in the separate accounts are stated at market value.
Participants' corresponding equity in the separate accounts is 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.
Premiums and Annuity Considerations
Insurance premiums and annuity considerations are recognized as income
when due. Considerations for deposit type contracts are recognized as income
when received. Group life and disability insurance premiums are recognized as
income over the contract period.
Investment Income and Expenses
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.
-69-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (Continued)
2. INVESTMENTS
Valuation
The statement values and NAIC market values of investments in fixed
maturity securities (bonds and notes) and equity securities at December 31,
1999 and 1998 are shown below. Excluding U.S. government and government agency
investments, the Company is not exposed to any significant concentration of
credit risk.
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------------
Gross Unrealized
Statement --------------------- NAIC Market
Value Gains Losses Value
----------- ---------- ---------- ------------
(in millions)
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies ................................ $ 407.4 $ 3.7 $ 5.7 $ 405.4
Obligations of states and political subdivisions .......... 43.3 -- .5 42.8
Debt securities issued by foreign governments ............. 28.5 .1 1.4 27.2
Corporate securities ...................................... 652.0 1.4 28.4 625.0
--------- ------- ------- ----------
Total .................................................. $ 1,131.2 $ 5.2 $ 36.0 $ 1,100.4
========= ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------
Gross Unrealized
Statement ------------------- NAIC Market
Value Gains Losses Value
----------- ---------- -------- ------------
(in millions)
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S. Government
corporations and agencies ................................ $ 431.8 $ 9.7 $ .2 $ 441.3
Obligations of states and political subdivisions .......... 8.3 1.8 -- 10.1
Debt securities issued by foreign governments ............. 31.6 2.2 -- 33.8
Corporate securities ...................................... 720.1 16.2 7.8 728.5
--------- ------- ------ ----------
Total .................................................. $ 1,191.8 $ 29.9 $ 8.0 $ 1,213.7
========= ======= ====== ==========
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC
market value of $44.3 million and $43.1 million at December 31, 1999 and 1998,
respectively, are included in the above tables. As of December 31, 1999 and
1998, the Company had $3.4 million (with a par value $3.1 million) of its
long-term fixed maturity securities on deposit with various state regulatory
agencies.
At December 31, 1999 and 1998 net unrealized appreciation of common equity
securities was $8.0 million and $3.9 million, respectively.
Maturities
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, 1999 are
shown below. Expected maturities may differ from contractual maturities because
borrowers may have the right to prepay obligations with or without prepayment
penalties.
-70-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (Continued)
2. INVESTMENTS -- (Continued)
<TABLE>
<CAPTION>
December 31, 1999
------------------------
Statement NAIC Market
Value Value
----------- ------------
(in millions)
<S> <C> <C>
Due in one year or less ................. $ 81.5 $ 79.3
Due after one year through five years ... 456.9 444.5
Due after five years through ten years .. 253.3 246.5
Due after ten years ..................... 339.5 330.1
--------- ----------
Total .......................................... $ 1,131.2 $ 1,100.4
========= ==========
</TABLE>
Realized Investment Gains
Sales of fixed maturity securities were as follows:
<TABLE>
<CAPTION>
December 31
-------------------------
1999 1998
------------ ------------
(in millions)
<S> <C> <C>
Fixed maturity securities
Proceeds ...................... $ 170.0 $ 304.6
Gross realized gains .......... 1.1 2.7
Gross realized losses ......... .6 1.2
</TABLE>
Sales of investments in fixed maturity securities resulted in $.5 million
and $1.5 million of gains being accumulated in IMR in 1999 and 1998,
respectively. Such amounts will be amortized into net investment income over
the estimated remaining life of the investment sold. During 1999 and 1998, $2.3
million and $6.1 million of the IMR was amortized and included in net
investment income. Included in IMR amortization income for 1998 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 Accounts) that
occurred in 1997.
Net realized capital gains reflected in the statements of operations for
the years ended December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
December 31
-------------------
1999 1998
--------- ---------
(in millions)
<S> <C> <C>
Equity securities (common stock) ..... $ .4 $ .4
</TABLE>
3. 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 $13.9 million and $31.0 million
in 1999 and 1998, respectively. Total reserve liabilities reinsured under this
agreement were as follows:
<TABLE>
<CAPTION>
December 31
-------------------------
1999 1998
------------ ------------
(in millions)
<S> <C> <C>
Life and annuity ......... $ 659.3 $ 687.3
Other reserves ........... $ 2.6 $ 3.1
</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 ceased ceding and the Company ceased
assuming new business on and after January 1, 1999.
-71-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (Continued)
4. 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, 1999, 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 1999
and 1998 was $534 thousand and $724 thousand, respectively.
Mutual of America also administers two defined benefit postretirement
plans covering substantially all 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 contain other cost-sharing
features, such as deductibles and coinsurance. Post retirement benefit expense
allocated to the Company for the years ended 1999 and 1998 was $269 thousand
and $188 thousand, respectively.
Savings and Other Incentive Plans
All employees may participate in a Company sponsored savings plan under
which the Company matches a portion of the employee's contributions up to 6% of
salary. The Company contributed $1.8 million and $1.7 million in 1999 and 1998,
respectively. Mutual of America also sponsors a long-term performance based
incentive compensation plan for certain employees. Shares are granted each year
and generally vest over a three-year period. The value of such shares is based
upon increases in Mutual of America's statutory surplus and the maintenance of
certain financial ratios. Compensation expense recognized in 1999 and 1998
related to this plan was $5.0 million and $3.2 million, respectively.
5. 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.
6. 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 actual tax
provision (benefit) reflected in the accompanying statements of operations and
the expected amounts computed by applying the statutory rate of 35% to operating
income arises principally from the recognition of revenues and expenses in
different periods for statutory and tax accounting purposes. These differences
are primarily related to policyholder insurance reserves, deferred acquisition
costs and realized capital gains and losses.
7. 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 1999 and 1998, operating and investment-related expenses of $20.3
million and $1.4 million and $17.9 million and $1.4 million, respectively, were
charged to the Company and are reflected in the accompanying statements of
operations and surplus.
-72-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- (Continued)
8. FAIR MARKET VALUE
The estimated fair values of financial instruments have been determined by
using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein
may not necessarily be indicative of amounts that could be realized in a
current market exchange. The use of different assumptions or valuation
methodologies may have a material effect on the estimated fair value amounts.
Amounts related to the Company's financial instruments were are follows:
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------
Statement Estimated
Value Fair Value
-------------- --------------
(in millions)
<S> <C> <C>
ASSETS
Bonds and notes ...................... $ 1,086.8 $ 1,056.1
Common stock ......................... 52.6 52.6
Preferred stock ...................... 6.1 6.1
Cash and short term investments ...... 42.4 42.4
Policy loans ......................... 7.8 7.8
LIABILITIES
Insurance and annuity reserves ....... $ 1,060.3 $ 954.0
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-----------------------------
Statement Estimated
Value Fair Value
-------------- --------------
(in millions)
<S> <C> <C>
ASSETS
Bonds and notes ...................... $ 1,148.7 $ 1,170.6
Common stock ......................... 18.0 18.0
Preferred stock ...................... 9.0 9.0
Cash and short term investments ...... 43.1 43.1
Policy loans ......................... 8.3 8.3
LIABILITIES
Insurance and annuity reserves ....... $ 1,107.3 $ 1,094.4
</TABLE>
Fixed Maturities and Equity Securities -- Fair value for fixed maturities
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. Market value for equity securities is determined by
reference to valuations quoted by the NAIC.
Cash and Short Term Investments -- The carrying value for cash and
short-term investments approximates fair values due to the short-term
maturities of these instruments.
Mortgage Loans -- Fair value for mortgage loans 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.
Policy Loans -- The majority of policy loans are issued with variable
interest rates which are periodically adjusted based on changes in rates
credited to the underlying policies and therefore are considered to be stated
at fair value.
Insurance and Annuity Reserves -- Contractual funds not yet used to
purchase retirement annuities and other deposit liabilities are stated at their
cash surrender value. General account policies are issued with variable
interest rates that are periodically adjusted based on changes in underlying
economic conditions.
The fair value of annuity contracts (approximately $.5 billion and $.6
billion at December 31, 1999 and 1998, 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 7.83% and 5.38% were used at December 31, 1999 and
1998, respectively.
-73-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
ANNUAL STATEMENT AS OF DECEMBER 31, 1999
Schedule 1 -- Selected Financial Data
The following is a summary of certain financial data included in other
exhibits and schedules subjected to audit procedures by independent auditors
and utilized by actuaries in the determination of reserves.
<TABLE>
<S> <C>
Gross Investment Income Earned:
(excluding amortization of the IMR)
Government bonds .................................................... $ 4,895,896
Other bonds (unaffiliated) .......................................... 77,434,865
Preferred stocks (unaffiliated) ..................................... 514,705
Common stocks (unaffiliated) ........................................ 261,231
Mortgage loans ...................................................... (4,648)
Premium notes, policy loans and liens ............................... 450,279
Short-term investments .............................................. 2,222,686
Aggregate write-ins for investment income ........................... (2,498)
------------
Gross investment income ............................................ $ 85,772,516
============
Real Estate Owned -- Book Value less Encumbrances ..................... --
============
Mortgage Loans -- Book Value:
Residential ......................................................... --
Commercial .......................................................... --
------------
Total .............................................................. $ --
============
Mortgage Loans by Standing -- Book Value:
Good standing ....................................................... --
Good standing with restructured terms ............................... --
Interest overdue more than three months, not in foreclosure ......... --
Foreclosure in process .............................................. --
------------
$ --
============
Other Long-Term Assets -- Statement Value ............................. $ --
============
Bonds and Stocks of Parents, Subsidiaries and Affiliates -- Book Value:
Bonds ............................................................... None
Common Stocks ....................................................... None
Preferred Stocks .................................................... None
</TABLE>
-74-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
ANNUAL STATEMENT AS OF DECEMBER 31, 1999
Schedule 1 -- Selected Financial Data
<TABLE>
<S> <C>
Bonds and Short-Term Investments by Class and Maturity:
Bonds by Maturity -- Statement Value
Due within one year or less ..................................................... $ 81,314,148
Over 1 year through 5 years ..................................................... 456,924,998
Over 5 years through 10 years ................................................... 253,338,918
Over 10 years through 20 years .................................................. 188,687,639
Over 20 years ................................................................... 150,840,676
---------------
Total by Maturity .............................................................. $ 1,131,106,379
===============
Bonds by Class -- Statement Value
Class 1 ......................................................................... 797,744,858
Class 2 ......................................................................... 260,472,063
Class 3 ......................................................................... 45,552,632
Class 4 ......................................................................... 21,406,826
Class 5 ......................................................................... 5,600,000
Class 6 ......................................................................... 330,000
---------------
Total by Class ................................................................. $ 1,131,106,379
===============
Total Bonds Publicly Traded .................................................... $ 1,104,739,124
Total Bonds Privately Placed ................................................... 26,367,255
---------------
$ 1,131,106,379
===============
Preferred Stocks -- Statement Value ................................................ $ 6,078,462
===============
Common Stocks -- Market Value ...................................................... $ 52,570,134
===============
Short-Term Investments -- Book Value ............................................... $ 44,284,675
===============
Financial Options Owned -- Statement Value ......................................... $ --
===============
Financial Options Written and In Force -- Statement Value .......................... $ --
===============
Financial Futures Contracts Open -- Current Price .................................. $ --
===============
Cash on Deposit .................................................................... $ (1,898,593)
===============
Life Insurance in Force (in thousands):
Industrial ....................................................................... --
Ordinary ......................................................................... $ 559,039
Credit Life ...................................................................... --
Group Life ....................................................................... 2,196,070
---------------
$ 2,755,109
Amount of Additional Accidental Death Insurance in Force Under Ordinary Policies
(in thousands): .................................................................. $ 89,576
===============
Life Insurance Policies with Disability Provisions in Force (in thousands):
Industrial ....................................................................... --
Ordinary ......................................................................... 105,336
Credit Life ...................................................................... --
Group Life ....................................................................... --
</TABLE>
-75-
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
ANNUAL STATEMENT AS OF DECEMBER 31, 1999
Schedule 1 -- Selected Financial Data
<TABLE>
<S> <C>
Supplementary Contracts in Force (in thousands):
Ordinary -- Not Involving Life Contingencies -- Amount of Income Payable .. $ 1,512,995
=============
Ordinary -- Involving Life Contingencies -- Amount of Income Payable ...... $ 804,394
=============
Group -- Not Involving Life Contingencies -- Amount on Deposit ............ $ --
=============
Group -- Involving Life Contingencies -- Amount on Deposit ................ $ --
=============
Annuities:
Ordinary --
Immediate -- Amount of Income Payable .................................... $ 67,764,650
Deferred -- Fully Paid Account Balance ................................... 18,855,446
Deferred -- Not Fully Paid -- Account Balance ............................ 175,409,911
-------------
$ 262,030,007
=============
Accident and Health Insurance -- Premiums in Force:
Ordinary .................................................................. $ 37,929
Group ..................................................................... 8,111,138
Credit .................................................................... --
-------------
$ 8,149,067
Deposit Funds and Dividend Accumulations:
Deposit Funds -- Account Balance .......................................... $ 215,472,101
Dividend Accumulations -- Account Balance ................................. 164,974
-------------
$ 215,637,075
=============
Claim Payments 1999:
Group Accident and Health
1999 ..................................................................... 132,752
1998 ..................................................................... 132,636
1997 ..................................................................... 138,019
Other Accident & Health
1999 ..................................................................... 27,960
1998 ..................................................................... 22,467
1997 ..................................................................... 31,543
Other Coverages that use developmental methods to calculate claims reserves
1999 ..................................................................... --
1998 ..................................................................... --
1997 ..................................................................... --
</TABLE>
-76-
<PAGE>
PART II. OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The prospectus, consisting of 76 pages;
The undertaking required by Section 15(d) of the Securities Exchange Act
of 1934 -- included in Registration Statement and Pre-Effective Amendment No.
1.;
The undertaking pursuant to Rule 484 -- included in Registration Statement
and Pre-Effective Amendment No. 1.
The representations pursuant to Rule 6e-3(T) -- included in Registration
Statement and Pre-Effective Amendment No. 1.
The representation as to reasonableness of fees and charges deducted under
the Policies was included in Post-Effective Amendment No. 3 and is restated
herein as follows: The Insurance Company represents and undertakes that the
fees and charges deducted under the Policies, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by the Insurance Company.
The signatures;
Written consents of the following persons:
Arthur Andersen LLP
Jones & Blouch L.L.P.
The following exhibits are filed as part of this Registration statement:
<TABLE>
<S> <C>
6 Opinion and consent of Actuary of American Life
10 Consent of Arthur Andersen LLP
11 Consent of Jones & Blouch L.L.P.
</TABLE>
- ---------
Powers of Attorney of Messrs. Altstadt, Burns, Ciecka, Conway, DeMilt,
Gilliam, Herman and Lichtenstein are set forth on the signature pages of the
Registration Statement filed on February 14, 1994.
Power of Attorney of Mr. Moran is set forth on the signature pages of the
Pre-Effective Amendment No. 1 to Registration Statement filed on April 29,
1994.
Power of Attorney of Mr. Curiale was filed with Post-Effective Amendment No. 4
on April 24, 1998.
Powers of Attorney of Jeremy J. Brown, John R. Greed, Diane M. Aramony, Amir
Lear and Robert W. Ruane were filed with Post-Effective Amendment No. 5 on
March 2, 1999.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the
requirements of the Securities Act Rule 485(b) for the effectiveness of this
amendment to Registration Statement and has duly caused this amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of New York, the State of New York, the 27th day of
April, 2000.
THE AMERICAN LIFE SEPARATE ACCOUNT NO. 3
(Registrant)
THE AMERICAN LIFE INSURANCE COMPANY OF
NEW YORK
(Depositor)
By: /s/ MANFRED ALTSTADT
-------------------------------------
Manfred Altstadt
Senior Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to Registration Statement has been signed below by the following persons in the
capacities indicated on April 27, 2000.
<TABLE>
<CAPTION>
Signature Title
- --------------------------------------- ---------------------------------------------
<S> <C>
* Chairman and Chief Executive Officer;
- -------------------------------------- Director
Thomas J. Moran
/s/ MANFRED ALTSTADT Senior Executive Vice President &
- -------------------------------------- Chief Financial Officer; Director
Manfred Altstadt
* Senior Vice President & Corporate Secretary;
- -------------------------------------- Director
Diane M. Aramony
* Executive Vice President and Chief Actuary;
- -------------------------------------- Director
Jeremy J. Brown
* Senior Executive Vice President &
- -------------------------------------- General Counsel; Director
Patrick A. Burns
* Director
- --------------------------------------
Richard J. Ciecka
* Executive Vice President;
- -------------------------------------- Director
William S. Conway
* Senior Executive Vice President;
- -------------------------------------- Director
Salvatore R. Curiale
* Executive Vice President;
- -------------------------------------- Director
William A. DeMilt
* Executive Vice President;
- -------------------------------------- Director
Thomas E. Gilliam
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Signature Title
- --------------------------------------- --------------------------------------
<S> <C>
* Executive Vice President & Treasurer;
- -------------------------------------- Director
John R. Greed
* Vice Chairman of the Board;
- -------------------------------------- Director
Theodore L. Herman
* Senior Vice President; Director
- --------------------------------------
Amir Lear
* President & Chief Operating Officer;
- -------------------------------------- Director
Howard Lichtenstein
* Senior Vice President; Director
- --------------------------------------
Robert W. Ruane
*By /s/ MANFRED ALTSTADT
----------------------------------
Manfred Altstadt
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Page
- ----------- -----
<S> <C> <C>
99.6 Opinion and Consent of Actuary of American Life ..........
99.10 Consent of Arthur Andersen LLP ...........................
99.11 Consent of Jones & Blouch L.L.P. .........................
</TABLE>
Exhibit 99.6
[AMERICAN LIFE LETTERHEAD]
------------------------
April 27, 2000
The American Life Insurance Company of New York
320 Park Avenue
New York, New York 10022
This opinion is furnished in connection with the Registration Statement
on Form S-6, as amended ("Registration Statement") of the American Separate
Account No. 3 (the "Separate Account") of The American Life Insurance Company of
New York ("American Life") and American Life covering an indefinite number of
units of interest in the Separate Account under individual flexible premium
variable life insurance policies ("Policies"). Net premium received under the
Policies may be allocated to the Separate Account as described in the Prospectus
included in the Registration Statement.
I participated in the preparation of the Policies, and I am familiar
with their provisions. I am also familiar with the description contained in the
Prospectus. In my opinion:
The illustrations of death benefits, account values and accumulated
premiums for the Policies in the Prospectus, based on the assumptions stated in
the illustrations, are consistent with the provisions of the Policies. The
assumptions upon which the illustrations are based, including the current cost
of insurance and expense charges, are reasonable. The rate structure of the
Policies has not been designed so as to make the relationship between premiums
and benefits, as shown in the illustrations, appear disproportionately more
favorable to a prospective purchaser of Policies for non-smoker standard risk
males age 35 or 45 than to prospective purchasers of Policies for a male at
other ages or in other underwriting classes or for a female. The particular
illustrations shown were not selected for the purpose of making this
relationship appear more favorable.
I consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Joseph A. Gross
--------------------------
Joseph A. Gross
Vice President and Actuary
Exhibit 99.10
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of registration
statement no. 33-75280.
ARTHUR ANDERSEN LLP
New York, New York
April 27, 2000
[Jones & Blouch Letterhead]
Exhibit 99.11
April 27, 2000
Board of Directors
The American Life Insurance Company
of New York
320 Park Avenue
New York, New York 10022
Gentlemen:
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the prospectus contained in post-effective amendment No. 7 to the
registration statement on Form S-6 of The American Separate Account No. 3 and
The American Life Insurance Company of New York, File No. 33-75280, to be filed
with the Securities and Exchange Commission.
Very truly yours,
Jones & Blouch L.L.P.
