<PAGE>
SEPARATE ACCOUNT VA-P
PIONEER VISION 1 AND 2
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SUPPLEMENT DATED JANUARY 28, 1999 TO PROSPECTUS DATED MAY 1, 1998
THIS SUPPLEMENT SUPPLANTS THE SUPPLEMENT DATED DECEMBER 29, 1998
***
On March 15, 1999, an optional Minimum Guaranteed Annuity Payout
Rider will be available under the Contract.* The following information
supplements the corresponding sections of the Prospectus. Please consult the
Prospectus for the full text of each supplemented section.
*Please note, the Minimum Guaranteed Annuity Payout Rider is not available in
all states.
Under "5. Expenses" on page P-2 of the Profile, the following is inserted at the
end of the first paragraph:
In addition, if you elect an optional Minimum Guaranteed Annuity Payout
Rider, we will deduct a charge against the accumulated value of your
contract at an annual rate of 0.25% for a rider with a ten-year waiting
period and at an annual rate of 0.15% for a rider with a fifteen-year
waiting period.
Under "5. Expenses" on page P-2 of the Profile, the following is inserted at the
end of the fourth paragraph:
The following chart does not reflect the optional Minimum Guaranteed
Annuity Payout Rider which, if elected, would increase expenses.
Under "8. Performance" on page P-4 of the Profile, the following is inserted at
the end of the sentence at the top of the page:
The following chart does not reflect the optional Minimum Guaranteed
Annuity Payout Rider which, if elected, would reduce performance.
Under "10. Other Information" on page P-4 of the Profile, the following is
inserted above "Free Look Period:"
OPTIONAL MINIMUM GUARANTEED ANNUITY PAYOUT RIDER: This optional rider
is available for a separate monthly charge. This rider guarantees you a
minimum amount of fixed annuity lifetime income during the annuity
payout phase, subject to certain conditions. On each contract
anniversary a minimum guaranteed annuity payout benefit base is
determined. This minimum guaranteed annuity payout benefit base is the
value that will be annuitized should you exercise the rider.
Annuitization under this rider will occur at the guaranteed annuity
purchase rates listed under the Annuity Option Tables in your Contract.
The minimum guaranteed annuity payout benefit base is equal to the
greatest of:
(a) the accumulated value increased by any positive market value
adjustment, if applicable, (the "accumulated value"); or
(b) accumulated value on the effective date of the rider compounded daily
at an annual rate of 5% plus gross payments made thereafter compounded
daily at an annual rate of 5%, starting on the date each payment is
applied, decreased proportionately to reflect withdrawals; or
(c) the highest accumulated value of all contract anniversaries since the
rider effective date, as determined after the accumulated value of
each contract anniversary is increased for subsequent payments and
decreased proportionately for subsequent withdrawals.
In the Table of Contents on page 3 of the Prospectus, the following is changed:
Under DESCRIPTION OF THE CONTRACT:
"M. Optional Minimum Guaranteed Annuity Payout Rider" is added
"M. NORRIS Decision" is changed to "N. NORRIS Decision"
"N. Computation of Values" is changed to "O. Computation of Values"
<PAGE>
Under CHARGES AND DEDUCTIONS:
"C. Optional Minimum Guaranteed Annuity Payout Rider Charge" is added
"C. Premium Taxes" is changed to "D. Premium Taxes"
"D. Contingent Deferred Sales Charge" is changed to "E. Contingent Deferred
Sales Charge"
"E. Transfer Charge" is changed to "F. Transfer Charge"
In the Summary on page 7 of the Prospectus, the following is added to the end of
the section entitled "What Happens In the Annuity Payout Phase?":
An optional Minimum Guaranteed Annuity Payout Rider is available for a
separate monthly charge. See "M. Optional Minimum Guaranteed Annuity
Payout Rider" under "DESCRIPTION OF THE CONTRACT." If elected, the
rider guarantees the Annuitant a minimum amount of fixed annuity
lifetime income during the annuity payout phase, subject to certain
conditions. On each Contract anniversary a Minimum Guaranteed Annuity
Payout Benefit Base is determined. The Minimum Guaranteed Annuity
Payout Benefit Base is the value that will be annuitized should you
exercise the Rider. Annuitization under this Rider will occur at the
guaranteed annuity purchase rates listed under the Annuity Option Tables
in your Contract. The Minimum Guaranteed Annuity Payout Benefit Base is
equal to the greatest of:
(a) the Accumulated Value increased by any positive Market Value
Adjustment, if applicable, (the "Accumulated Value"); or
(b) Accumulated Value on the effective date of the Rider compounded daily
at an annual rate of 5% plus gross payments made thereafter
compounded daily at an annual rate of 5%, starting on the date each
payment is applied, decreased proportionately to reflect withdrawals;
or
(c) the highest Accumulated Value of all Contract anniversaries since the
Rider effective date, as determined after the Accumulated Value of
each Contract anniversary is increased for subsequent payments and
decreased proportionately for subsequent withdrawals.
For each withdrawal described in (b) and (c) above, the proportionate
reduction is calculated by multiplying the (b) or (c) value determined
immediately prior to the withdrawal by the following fraction:
amount of the withdrawal
------------------------
the Accumulated Value determined immediately prior to the withdrawal.
In the Summary on page 10 of the Prospectus, the following is added to the end
of the section entitled "What Charges Will I Incur Under My Contract?":
Subject to state availability, the Company offers the following Rider that
may be elected by the Owner. A separate monthly charge is made for the
Rider which is deducted from the Accumulated Value at the end of each month
within which the Rider has been in effect. The applicable charge is
assessed by multiplying the Accumulated Value on the last day of each month
and on the date the Rider is terminated by 1/12th of the following annual
percentage rates:
<TABLE>
<S> <C>
Minimum Guaranteed Annuity Payout Rider with a ten-year waiting period.... 0.25%
Minimum Guaranteed Annuity Payout Rider with a fifteen-year waiting
period.................................................................... 0.15%
</TABLE>
For a description of this Rider, see "C. Optional Minimum Guaranteed
Annuity Payout Rider Charge" under "CHARGES AND DEDUCTIONS," and "M.
Optional Minimum Guaranteed Annuity Payout Rider" under "DESCRIPTION OF
THE CONTRACT."
Under "ANNUAL AND TRANSACTION EXPENSES" on page 12 of the Prospectus, after
"Contract Fee," the following is inserted:
<TABLE>
<S> <C>
OPTIONAL RIDER CHARGES:
(on an annual basis as a percentage of Accumulated Value)
Optional Minimum Guaranteed Annuity Payout Rider with a
ten-year waiting period: 0.25%*
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Optional Minimum Guaranteed Annuity Payout Rider with a
fifteen-year waiting period: 0.15%*
</TABLE>
Under "ANNUAL AND TRANSACTION EXPENSES" on page 12 of the Prospectus, below
"Total Asset Charge," the following is inserted:
*if the rider is elected, this annual charge is deducted on a monthly basis
at the end of each month within which the rider was in effect.
Under "ANNUAL AND TRANSACTION EXPENSES" on page 14 of the Prospectus, table (1)
is renamed table (1)(a) and the following table is inserted following table
(1)(a):
(1)(b) If, at the end of the applicable time period, the Contract is
surrendered or annuitized* under a commutable period certain option or a
non-commutable period certain option of less than ten years, you would pay
the following expenses on a $1,000 investment, assuming 5% annual return on
assets and election of a Minimum Guaranteed Annuity Payout Rider(1) with a
ten-year waiting period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets Portfolio $ 94 $147 $202 $363
International Growth Portfolio $ 92 $142 $192 $344
Europe Portfolio $ 92 $142 $192 $344
Capital Growth Portfolio $ 86 $122 $159 $278
Growth Shares Portfolio $ 90 $135 $181 $323
Real Estate Growth Portfolio $ 90 $135 $181 $322
Growth and Income Portfolio $ 90 $135 $181 $323
Equity-Income Portfolio $ 86 $122 $158 $276
Balanced Portfolio $ 87 $127 $167 $294
Swiss Franc Bond Portfolio $ 90 $134 $180 $320
America Income Portfolio $ 90 $135 $180 $321
Money Market Portfolio $ 88 $128 $169 $298
</TABLE>
Under "ANNUAL AND TRANSACTION EXPENSES" on page 14 of the Prospectus, table (2)
is renamed table (2)(a) and the following table is inserted following table
(2)(a):
(2)(b) If, at the end of the applicable time period, the Contract is
annuitized* under a life option or a non-commutable period certain option
of ten years or more, or if the Contract is NOT surrendered or annuitized,
you would pay the following expenses on a $1,000 investment, assuming an
annual 5% return on assets and election of a Minimum Guaranteed Annuity
Payout Rider(1) with a ten-year waiting period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets Portfolio $34 $103 $174 $363
International Growth Portfolio $32 $ 97 $164 $344
Europe Portfolio $32 $ 97 $164 $344
Capital Growth Portfolio $25 $ 76 $130 $278
Growth Shares Portfolio $29 $ 90 $153 $323
Real Estate Growth Portfolio $29 $ 90 $153 $322
Growth and Income Portfolio $29 $ 90 $153 $323
Equity-Income Portfolio $25 $ 76 $129 $276
Balanced Portfolio $26 $ 81 $138 $294
Swiss Franc Bond Portfolio $29 $ 89 $152 $320
America Income Portfolio $29 $ 89 $152 $321
Money Market Portfolio $27 $ 82 $140 $298
</TABLE>
<PAGE>
(1) If the Minimum Guaranteed Annuity Payout Rider is exercised, you may
only annuitize under a fixed annuity payout option involving a life
contingency at the guaranteed annuity purchase rates listed under the
Annuity Option Tables in your Contract.
Under "PERFORMANCE INFORMATION" on page 17 of the Prospectus, between the second
and third sentences of the paragraph which begins on page 16, the following is
inserted:
The calculation is not adjusted to reflect the deduction of a Minimum
Guaranteed Annuity Payout Rider charge.
Under "PERFORMANCE INFORMATION" on page 17 of the Prospectus, at the end of the
fourth full paragraph, the following is inserted:
In addition, relevant broad-based indices and performance from independent
sources may be used to illustrate the performance of certain Contract
features.
Under "J. Electing the Form of Annuity and the Annuity Date" on page 29 of the
Prospectus, the following is inserted above "K. Description of Variable Annuity
Payout Options:"
If the Owner exercises the Minimum Guaranteed Annuity Payout Rider,
annuity benefit payments must be made under a fixed annuity payout
option involving a life contingency and must occur at the guaranteed
annuity purchase rates listed under the Annuity Option Tables in the
Contract.
Under "L. Annuity Benefit Payments" on page 31 of the Prospectus, the following
is inserted above "M. NORRIS Decision:"
If the Owner elects the Minimum Guaranteed Annuity Payout Rider, at
annuitization the income provided under the Contract by applying the
Accumulated Value to the current annuity factors is compared to the
income provided under the Rider by applying the Minimum Guaranteed
Annuity Payout Benefit Base to the guaranteed annuity factors. If
annuity benefit payments under the Rider are higher, the Owner may
exercise the Rider. If annuity benefit payments under the Rider are
lower, the Owner may choose not to exercise the Rider and instead
annuitize under current annuity factors. See "M. Optional Minimum
Guaranteed Annuity Payout Rider" below.
On page 31 of the Prospectus, "M. NORRIS Decision" is renamed "N. NORRIS
Decision," "N. Computation of Values" is renamed "O. Computation of Values" and
the following is inserted:
M. OPTIONAL MINIMUM GUARANTEED ANNUITY PAYOUT RIDER
An optional Minimum Guaranteed Annuity Payout Rider is available for a
separate monthly charge. The Minimum Guaranteed Annuity Payout Rider
guarantees a minimum amount of fixed annuity lifetime income during the
annuity payout phase, subject to the conditions described below. On
each Contract anniversary a Minimum Guaranteed Annuity Payout Benefit
Base is determined. The Minimum Guaranteed Annuity Payout Benefit Base
is the value that will be annuitized if the Rider is exercised.
Annuitization under this Rider will occur at the guaranteed annuity
purchase rates listed under the Annuity Option Tables in the Contract.
The Minimum Guaranteed Annuity Payout Benefit Base is equal to the
greatest of:
(a) the Accumulated Value increased by any positive Market Value
Adjustment, if applicable, (the "Accumulated Value"); or
(b) Accumulated Value on the effective date of the Rider compounded daily
at an annual rate of 5% plus gross payments made thereafter
compounded daily at an annual rate of 5%, starting on the date each
payment is applied, decreased proportionately to reflect withdrawals;
or
(c) the highest Accumulated Value of all Contract anniversaries since the
Rider effective date, as determined after the Accumulated Value of
each Contract anniversary is increased for subsequent payments and
decreased proportionately for subsequent withdrawals.
<PAGE>
For each withdrawal described in (b) and (c) above, the proportionate
reduction is calculated by multiplying the (b) or (c) value determined
immediately prior to the withdrawal by the following fraction:
amount of the withdrawal
------------------------
the Accumulated Value determined immediately prior to the withdrawal
CONDITIONS OF ELECTION OF THE MINIMUM GUARANTEED ANNUITY PAYOUT RIDER.
- The Owner may elect the Minimum Guaranteed Annuity Payout Rider at
Contract issue or at any time thereafter, however, if the Rider is not
elected within thirty days after Contract issue or within thirty days
after a Contract anniversary date, the effective date of the Rider will
be the following Contract anniversary date.
- The Owner may not elect a Rider with a ten-year waiting period if at the
time of election the Annuitant has reached his or her 78th birthday. The
Owner may not elect a Rider with a fifteen-year waiting period if at the
time of election the Annuitant has reached his or her 73rd birthday.
CONDITIONS OF EXERCISE OF THE MINIMUM GUARANTEED ANNUITY PAYOUT RIDER.
- The Owner may only exercise the Minimum Guaranteed Annuity Payout
Rider within thirty days after any Contract anniversary following the
expiration of a ten or fifteen-year waiting period from the effective
date of the Rider.
- The Owner may only annuitize under a fixed annuity payout option
involving a life contingency as provided under "K. Description of
Variable Annuity Payout Options."
- The Owner may only annuitize at the guaranteed annuity purchase rates
listed under the Annuity Option Tables in the Contract.
TERMINATION OF THE MINIMUM GUARANTEED ANNUITY PAYOUT RIDER.
- The Owner may not terminate the Minimum Guaranteed Annuity Payout
Rider prior to the seventh Contract anniversary after the effective date
of the Rider, unless such termination occurs on or within thirty days
after a Contract anniversary and in conjunction with the purchase of a
Minimum Guaranteed Annuity Payout Rider with a waiting period of equal
or greater length at its then current price, if available.
- After the seventh Contract anniversary from the effective date of the
Rider the Owner may terminate the Rider at any time.
- The Owner may repurchase a Rider with a waiting period equal to or
greater than the Rider then in force at the new Rider's then current
price, if available, however, repurchase may only occur on or within
thirty days of a Contract anniversary.
- Other than in the event of a repurchase, once terminated the Rider may
not be purchased again.
- The Rider will terminate upon surrender of the Contract or the date that
a death benefit is payable if the Contract is not continued under "H. The
Spouse of the Owner as Beneficiary" (see "DESCRIPTION OF THE CONTRACT").
From time to time the Company may illustrate minimum guaranteed income
amounts under the Minimum Guaranteed Annuity Payout Rider for
individuals based on a variety of assumptions, including varying rates
of return on the value of the Contract during the accumulation phase,
annuity payout periods, annuity payout options and Minimum Guaranteed
Annuity Payout Rider waiting periods. Any assumed rates of return are
for purposes of illustration only and are not intended as a
representation of past or future investment rates of return.
<PAGE>
For example, the illustration below assumes an initial payment of
$100,000 for an Annuitant age 60 (at issue) and exercise of a Minimum
Guaranteed Annuity Payout Rider with a ten-year waiting period. The
illustration assumes that no subsequent payments or withdrawals are made
and that the annuity payout option is a Life Annuity With Payments
Guaranteed For 10 Years. The values below have been computed based on a
5% net rate of return and are the guaranteed minimums that would be
received under the Minimum Guaranteed Annuity Payout Rider. The minimum
guaranteed benefit base amounts are the values that will be annuitized.
Minimum guaranteed annual income values are based on a fixed
annuity payout.
<TABLE>
<CAPTION>
Minimum
Contract Minimum Guaranteed
Anniversary Guaranteed Annual
at Exercise Benefit Base Income (1)
----------- ------------ ----------
<S> <C> <C>
10 $162,889 $12,153
15 $207,892 $17,695
</TABLE>
(1) Other fixed annuity options involving a life contingency other than
Life Annuity With Payments Guaranteed for 10 Years are available. See
"K. Description of Variable Annuity Payout Options."
The Minimum Guaranteed Annuity Payout Rider does not create Accumulated
Value or guarantee performance of any investment option. Because this
Rider is based on conservative actuarial factors, the level of lifetime
income that it guarantees may often be less than the level that would be
provided by application of Accumulated Value at current annuity factors.
Therefore, the Rider should be regarded as a safety net. As described
above, withdrawals will reduce the Benefit Base.
Under "CHARGES AND DEDUCTIONS" on pages 33 and 34 of the Prospectus, "C. Premium
Taxes" is renamed "D. Premium Taxes," "D. Contingent Deferred Sales Charge" is
renamed "E. Contingent Deferred Sales Charge" and the following is inserted:
C. OPTIONAL MINIMUM GUARANTEED ANNUITY PAYOUT CHARGE
Subject to state availability, the Company offers an optional Minimum
Guaranteed Annuity Payout Rider that may be elected by the Owner. A
separate monthly charge is made for the Rider. On the last day of each
month and on the date the Rider is terminated, a charge equal to 1/12th
of an annual rate (see table below) is made against the Accumulated
Value of the Contract at that time. The charge is made through a
pro-rata reduction of the Accumulated Value of the Sub-Accounts, the
Fixed Account and the Guarantee Period Accounts (based on the relative
value that the Accumulation Units of the Sub-Accounts, the dollar
amounts in the Fixed Account and the dollar amounts in the Guarantee
Period Accounts bear to the total Accumulated Value).
The applicable charge is assessed on the Accumulated Value on the last day
of each month and on the date the Rider is terminated, multiplied by 1/12th
of the following annual percentage rates:
<TABLE>
<S> <C>
Minimum Guaranteed Annuity Payout Rider with ten-year waiting period........ 0.25%
Minimum Guaranteed Annuity Payout Rider with fifteen-year waiting period.... 0.15%
</TABLE>
<PAGE>
For a description of the Rider, see "M. Optional Minimum Guaranteed
Annuity Payout Rider" under "DESCRIPTION OF THE CONTRACT," above.
After the section entitled "LEGAL MATTERS" on page 45 of the Prospectus, the
following is inserted:
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business
activities.
Based on a third party assessment, the Company determined that significant
portions of its software required modification or replacement to enable its
computer systems to properly process dates beyond December 31, 1999. The
Company is presently completing the process of modifying or replacing
existing software and believes that this action will resolve the Year 2000
issue. However, if such modifications and conversions are not made, or are
not completed timely, or should there be serious unanticipated
interruptions from unknown sources, the Year 2000 issue could have a
material adverse impact on the operations of the Company. Specifically, the
Company could experience, among other things, an interruption in its
ability to collect and process premiums, process claim payments, safeguard
and manage its invested assets, accurately maintain policyholder
information, accurately maintain accounting records, and perform customer
service. Any of these specific events, depending on duration, could have a
material adverse impact on the results of operations and the financial
position of the Company.
The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company
is vulnerable to those third parties' failure to remediate their own Year
2000 issue. The Company's total Year 2000 project cost and estimates to
complete the project include the estimated costs and time associated with
the impact of a third party's Year 2000 issue, and are based on presently
available information. However, there can be no guarantee that the systems
of other companies on which the Company's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion
that is incompatible with the Company's systems, would not have material
adverse effect on the Company. The Company does not believe that it has
material exposure to contingencies related to the Year 2000 Issue for the
products it has sold. Although the Company does not believe that there is
a material contingency associated with the Year 2000 project, there can be
no assurance that exposure for material contingencies will not arise.
The Company will utilize both internal and external resources to reprogram
or replace, and test both information technology and embedded technology
systems for Year 2000 modifications. The Company plans to complete the
mission critical elements of the Year 2000 by December 31, 1998. The cost
of the Year 2000 project will be expensed as incurred over the next two
years and is being funded primarily through a reallocation of resources
from discretionary projects. Therefore, the Year 2000 project is not
expected to result in any significant incremental technology cost and is
not expected to have a material effect on the results of operations.
Through September 30, 1998, the Company and its subsidiaries and affiliates
have incurred and expensed approximately $47 million related to the
assessment of, and preliminary efforts in connection with, the project and
the development of a remediation plan. The total remaining cost of the
project is estimated at between $30-40 million.
The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources, third
party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could
differ materially from those plans. Specific factors that might cause such
material differences include, but are not limited to, the availability and
cost of personnel trained in this area, the ability to locate and correct
all relevant computer codes, and similar uncertainties.
<PAGE>
Under Appendix D on page D-2 of the Prospectus, in all instances "(1)" in number
8 is changed to "(1)(a)," and the following is added after example (1)(a) on
page D-3:
(1)(b) If the Contract is surrendered or annuitized* under a commutable
period certain option or a non-commutable period certain option of less
than ten years at the end of the applicable period, you would pay the
following expenses on a $1,000 investment, assuming 5% annual return on
assets and election of a Minimum Guaranteed Annuity Payout Rider (1) with a
ten-year waiting period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------
<S> <C> <C> <C> <C>
Emerging Markets Portfolio $98 $169 $223 $363
International Growth Portfolio $96 $163 $214 $344
Europe Portfolio $96 $163 $214 $344
Capital Growth Portfolio $89 $144 $180 $278
Growth Shares Portfolio $94 $157 $203 $323
Real Estate Growth Portfolio $94 $157 $203 $322
Growth and Income Portfolio $94 $157 $203 $323
Equity-Income Portfolio $89 $144 $179 $276
Balanced Portfolio $91 $149 $188 $294
Swiss Franc Bond Portfolio $93 $156 $202 $320
America Income Portfolio $94 $156 $202 $321
Money Market Portfolio $91 $150 $190 $298
</TABLE>
(1) If the Minimum Guaranteed Annuity Payout Rider is exercised, you may
only annuitize under a fixed annuity payout option involving a life
contingency at the guaranteed annuity purchase rates listed under the
Annuity Option Tables in your policy.
Supplement dated January 28, 1999.
