<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1995
FILE NO. 33-88632
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT
INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
---------------
A. EXACT NAME OF TRUST:
COLONIAL SEPARATE ACCOUNT D
B. NAME OF DEPOSITOR:
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
C. COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES:
ONE GRANITE PLACE
CONCORD, NH 03301
D. NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE:
BRUCE R. STEFANY
PRESIDENT
CHUBB SECURITIES CORPORATION
ONE GRANITE PLACE
CONCORD, NH 03301
COPIES TO:
KURT W. BERNLOHR, JOAN E. BOROS, ESQ.
ESQ. KATTEN MUCHIN & ZAVIS
THE COLONIAL LIFE 1025 THOMAS JEFFERSON STREET,
INSURANCE N.W.
COMPANY OF AMERICA EAST LOBBY, SUITE 700
ONE GRANITE PLACE WASHINGTON, D.C. 20007
CONCORD, NH 03301
---------------
E. TITLE AND AMOUNT OF SECURITIES BEING REGISTERED:
UNITS OF INTEREST IN THE SEPARATE ACCOUNT UNDER GROUP FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE AND GROUP JOINT AND LAST SURVIVOR FLEXIBLE
PREMIUM VARIABLE LIFE INSURANCE POLICIES.
F. PROPOSED MAXIMUM OFFERING PRICE TO THE PUBLIC OF THE SECURITIES BEING
REGISTERED:
REGISTRATION OF INDEFINITE AMOUNT OF SECURITIES UNDER THE SECURITIES ACT
OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
G. AMOUNT OF FILING FEE:
AN INDEFINITE AMOUNT OF THE REGISTRANT'S SECURITIES HAS BEEN REGISTERED
PURSUANT TO A DECLARATION, UNDER RULE 24F-2 UNDER THE INVESTMENT COMPANY
ACT OF 1940, SET OUT IN THE INITIAL FORM S-6 REGISTRATION STATEMENT. IN
CONNECTION THEREWITH, A $500.00 FILING FEE HAS BEEN PAID TO THE
COMMISSION. REGISTRANT EXPECTS TO FILE A RULE 24F-2 NOTICE FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1995 BY FEBRUARY 29, 1996.
H. APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(B) under the
Investment Company Act of 1940, with respect to the policies described in the
Prospectus.
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<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION OF PROSPECTUS
----------- ---------------------
<C> <S>
1................. Cover Page
2................. Cover Page
3................. Not Applicable
4................. Distribution of the Group Policies and Certificates
5................. The Colonial Life Insurance Company of America; Colonial
Separate Account D
6................. Colonial Separate Account D
7................. Not Required
8................. Not Required
9................. Legal Proceedings
10................. Summary, Colonial Separate Account D; The Group Policies
and Certificates; Certificate Benefits and Rights;
Calculation of Accumulation Value; Cash Value Benefits;
Other Matters; Federal Tax Matters
11................. Colonial Separate Account D, Chubb Series Trust
12................. Chubb Series Trust; Distribution of Group Policies and
the Certificates
13................. Chubb Series Trust; General; Charges and Deductions;
Optional Insurance Benefits; Distribution of the Group
Policies and Certificate
14................. The Group Policies and Certificates
15................. The Group Policies and Certificates
16................. Colonial Separate Account D, Chubb Series Trust
17................. Transfers; Telephone Transfers and Reallocations;
Certificate Lapse; Reinstatement; Certificate "Free
Look", Optional Insurance Benefits; Cash Value Benefits
18................. Colonial Separate Account D
19................. Annual Report; Confirmation
20................. Not Applicable
21................. Certificate Loans
22................. Colonial Separate Account D; Telephone Transfers, Loans
and Reallocations
23................. Management of Colonial Life
24................. Not Applicable
25................. The Colonial Life Insurance Company of America
26................. Not Applicable
27................. The Colonial Life Insurance Company of America
28................. The Colonial Life Insurance Company of America;
Management of Colonial Life
29................. The Colonial Life Insurance Company of America
30................. Not Applicable
31................. Not Applicable
32................. Not Applicable
33................. Not Applicable
34................. Not Applicable
35................. The Colonial Life Insurance Company of America
36................. Not Applicable
37................. Not Applicable
38-41.............. Distribution of the Group Policies and Certificates
42................. Not Applicable
43................. Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION OF PROSPECTUS
----------- ---------------------
<C> <S>
44................. Chubb Series Trust; The Group Policies and Certificates;
Charges and Deductions; Calculation of Accumulation
Value; Cash Value Benefits; Distribution of the Group
Policies and Certificates
45................. Not Applicable
46................. Chubb Series Trust; The Group Policies and Certificates;
Charges and Deductions; Calculation of Accumulation
Value; Cash Value Benefits
47................. Not Applicable
48................. Not Applicable
49................. Not Applicable
50................. Colonial Separate Account D
51................. Cover Page; The Group Policies and Certificates; Charges
and Deductions; Certificate Benefits and Rights;
Calculation of Accumulation Value; Cash Value Benefits;
Other Matters
52................. Chubb Series Trust; Other Matters
53................. Federal Tax Matters
54................. Not Applicable
55................. Not Applicable
56................. Not Applicable
57................. Not Applicable
58................. Not Applicable
59................. Financial Statements
</TABLE>
<PAGE>
THE CHUBB HERITAGE SERIES
COLONIAL SEPARATE ACCOUNT D
GROUP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
AND
GROUP JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
ONE GRANITE PLACE, P.O. BOX 2086
CONCORD, NEW HAMPSHIRE 03301
(800) 997-4499
This Prospectus describes two forms of group flexible premium variable life
insurance policies issued by The Colonial Life Insurance Company of America
("Colonial Life"): a group flexible premium variable life insurance policy
form ("Colonial Heritage I") and a group joint and last survivor flexible
premium variable life insurance policy form ("Colonial Heritage II")
(collectively the "Group Policy" or "Group Policies"). The persons and legal
entities covered under the Group Policy (the "Certificate Owners") possess all
rights and interests under the Group Policy. The Certificate Owners are
provided with certificates of insurance ("Certificates") describing each
Certificate Owner's rights, benefits, and options under the Group Policy. The
Certificates are designed to provide a Certificate Owner with both lifetime
insurance protection and maximum flexibility in connection with premium
payments and Death Benefits, together with the opportunity to participate in
the investment experience of Colonial Separate Account D ("Separate Account
D"). Although each Certificate contains a schedule of intended premium
payments ("Planned Periodic Premiums"), and an intended frequency of premium
payments ("Premium Frequency"), a Certificate Owner may, subject to certain
restrictions, vary the frequency and amount of the premium payments and
increase or decrease the level of life insurance benefits payable under the
Certificate. The flexibility allows a Certificate Owner to provide for
changing insurance needs within the framework of a single insurance policy.
Unlike traditional insurance protection providing fixed benefits, the
Certificate Owner participates in the investment experience of Separate
Account D. Accumulation Value under the Certificates will increase with
positive investment experience and decrease with negative investment
experience. Accumulation Value in Separate Account D is not guaranteed and
could decline to zero.
A Certificate issued under Colonial Heritage I provides life insurance
coverage on one Insured, with the Death Benefit payable at the Insured's
death. A Certificate issued under Colonial Heritage II provides life insurance
coverage on two Insureds, with the Death Benefit payable upon the death of the
last surviving Insured. If Net Premiums are allocated to Separate Account D,
the amount of the Death Benefit may reflect the investment experience of the
chosen Divisions, as well as the frequency and amount of premiums, any
withdrawals of Cash Value, and the charges assessed in connection with the
Certificate. As long as the Certificate remains in force, the Death Benefit
will not be less than the current Specified Amount of the Certificate, reduced
by any outstanding indebtedness and any due and unpaid fees and charges. The
minimum initial Specified Amount is $500,000 for Colonial Heritage I and
$2,000,000 for Colonial Heritage II. After a withdrawal, the Specified Amount
may not be reduced to less than $250,000 for Colonial Heritage I and $500,000
for Colonial Heritage II.
The Certificates provide two death benefit options which may be chosen by
the Certificate Owner. Under Option I, the Death Benefit payable under the
Certificate is equal to the greater of (i) the Specified Amount or (ii) the
Certificate's Accumulation Value on the date of death multiplied by the
"corridor percentage". The corridor percentage is a tax law concept which
defines the minimum Death Benefit required in connection with the
Certificate's Accumulation Value in order for the Certificates to qualify as
life insurance. Under Option II, the Death Benefit equals the Specified Amount
plus the Accumulation Value of the Certificate on the date of death, but not
less than the Certificate's Accumulation Value multiplied by the corridor
percentage. The Certificate Owner may, subject to certain restrictions, change
from one death benefit option to the other after the Certificate has been
issued.
There is a minimum initial premium, based on Issue Age, underwriting class
and Specified Amount, that must be paid at issue. If a Certificate Owner
chooses the Guaranteed Death Benefit Rider, the Death Benefit will be
guaranteed to never be less than the Specified Amount, provided that a
cumulative minimum premium requirement is met. No premium payment may be less
than $500.
The Certificate will remain in force so long as Cash Value exceeds
indebtedness and Cash Value less indebtedness is sufficient to pay certain
monthly charges imposed in connection with the Certificate. The Cash Value
equals the Accumulation Value less any Surrender Charge. Accumulation Value in
Separate Account D will reflect the investment experience of the chosen
Divisions, the amount and frequency of premium payments, any withdrawals, and
charges imposed in connection with the Certificate. Adherence to the schedule
of Planned Periodic Premiums will not assure the Certificate will remain in
force. The Certificate Owner bears the entire investment risk for all amounts
allocated to Separate Account D; no minimum Accumulation Value is guaranteed
and the Accumulation Value could decline to zero. So long as Cash Value
exceeds indebtedness and subject to certain conditions described in this
Prospectus, a Certificate Owner may obtain Certificate loans at any time after
the first Certificate anniversary and may make withdrawals at any time. Both
withdrawals and Certificate loans must be made prior to the Certificate's
Maturity Date.
The Certificate Owner may allocate Net Premiums to one or more of the
Divisions or to Colonial Life's General Account on the Allocation Date. Each
Division will invest solely in a corresponding series (a "Portfolio") of Chubb
Series Trust (the "Trust"). Prior to the Allocation Date the Net Premiums paid
will be deposited in Colonial Life's General Account. There is a "free look"
period during which the Certificate Owner may cancel the Certificate. If the
Certificate Owner elects during this "free look" period to cancel the
Certificate, Colonial Life will reimburse, within seven days from the date the
Certificate is surrendered to Colonial Life, the full amount of premium paid.
The accompanying Prospectus for the Trust and the Statement of Additional
Information, available on request, describe the investment objectives and
risks of the five Portfolios of the Trust. The Certificates described in this
Prospectus are available in the State of New York only.
Colonial Life believes the Group Policies and Certificates will in general
receive favorable tax treatment under the Internal Revenue Code of 1986, as
amended ("the Code"). However, because there are issues as to which the law is
developing or changing, there can be no guarantees. Information in this
Prospectus is not intended as tax advice and Colonial Life recommends that
prospective purchasers rely only on the advice of a qualified tax adviser. A
prospective purchaser of a Certificate is advised that replacement of existing
insurance coverage may not be financially advantageous and should consult with
his or her financial advisers with respect to the Certificate. It may also not
be advantageous to purchase a Certificate if the prospective purchaser already
owns a flexible premium variable life insurance policy.
This Prospectus generally describes only the portion of the Certificates
involving Separate Account D. For a brief summary of Colonial Life's General
Account, see "THE GENERAL ACCOUNT."
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED OR
PRECEDED BY A CURRENT PROSPECTUS FOR
CHUBB SERIES TRUST
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES DIVISION, NOR HAS THE COMMISSION OR
ANY STATE SECURITIES DIVISION, PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................................ 3
SUMMARY.................................................................... 5
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA............................. 10
COLONIAL SEPARATE
ACCOUNT D................................................................. 10
Divisions................................................................ 10
CHUBB SERIES TRUST......................................................... 11
THE GROUP POLICIES AND CERTIFICATES........................................ 12
General.................................................................. 12
Payment of Premiums...................................................... 13
Guaranteed Death Benefit
Premiums................................................................ 13
Premium Limitations...................................................... 13
Allocation of Premiums................................................... 13
Transfers................................................................ 14
Telephone Transfers, Loans and Reallocations............................. 16
Certificate Lapse........................................................ 16
Reinstatement............................................................ 16
Conversion............................................................... 16
Certificate "Free Look".................................................. 17
CHARGES AND DEDUCTIONS..................................................... 17
Premium Charges.......................................................... 17
Monthly Deduction........................................................ 18
Risk Charge.............................................................. 19
Surrender Charge......................................................... 19
Administrative Fees...................................................... 19
Other Charges............................................................ 20
CERTIFICATE BENEFITS AND RIGHTS............................................ 20
Death Benefits........................................................... 20
Guaranteed Death Benefit................................................. 21
Combined Requests........................................................ 21
Maturity of the Certificate.............................................. 21
Optional Insurance Benefits.............................................. 22
Settlement Options....................................................... 22
CALCULATION OF ACCUMULATION VALUE.......................................... 23
Unit Values.............................................................. 24
Net Investment Factor.................................................... 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CASH VALUE BENEFITS........................................................ 25
Surrender Privileges..................................................... 25
Certificate Loans........................................................ 26
OTHER MATTERS.............................................................. 27
Voting Rights............................................................ 27
Additions, Deletions or Substitutions of Investments..................... 27
Annual Report............................................................ 28
Confirmation............................................................. 28
Limitation on Right to Contest........................................... 28
Misstatements............................................................ 28
Suicide.................................................................. 28
Beneficiaries............................................................ 29
Postponement of Payments................................................. 29
Assignment............................................................... 29
Illustration of Benefits and Values...................................... 29
Non-Participating Certificate............................................ 29
THE GENERAL ACCOUNT........................................................ 29
General Description...................................................... 29
General Account Accumulation Value....................................... 30
Determination of Charges................................................. 30
Premium Deposit Fund..................................................... 30
DISTRIBUTION OF THE GROUP POLICIES AND CERTIFICATES........................ 30
MANAGEMENT OF COLONIAL LIFE................................................ 32
Executive Officers and Directors of Colonial Life........................ 32
Executive Officers (Other Than Directors)................................ 33
STATE REGULATION OF COLONIAL LIFE.......................................... 34
FEDERAL TAX MATTERS........................................................ 34
Tax Considerations....................................................... 34
Certificate Proceeds..................................................... 34
Charge for Colonial Life Income Taxes.................................... 37
EMPLOYEE BENEFIT PLANS..................................................... 37
LEGAL PROCEEDINGS.......................................................... 37
EXPERTS.................................................................... 37
REGISTRATION STATEMENT..................................................... 38
FINANCIAL STATEMENTS....................................................... 38
ILLUSTRATIONS.............................................................. A-1
</TABLE>
[THIS PROSPECTUS CONSTITUTES AN OFFERING ONLY IN THE STATE OF NEW YORK.
COLONIAL LIFE DOES NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS REGARDING
THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, THE PROSPECTUS OF THE TRUST OR THE STATEMENT OF ADDITIONAL
INFORMATION OF THE TRUST.]
2
<PAGE>
DEFINITIONS
In addition to terms which are defined elsewhere in this Prospectus, the
following words and phrases shall have the indicated meanings:
ACCUMULATION VALUE--The total amount that a Certificate provides for
investment at any time plus the amount held as collateral for Certificate Debt.
AGE--The Insured's age at his or her nearest birthday.
ALLOCATION DATE--The date when the initial premium is placed in the Divisions
and the General Account in accordance with the Certificate Owner's allocation
instructions in the application. The Allocation Date is 20 days from the date
the Certificate is issued.
ATTAINED AGE--The age of the Insured at his or her nearest birthday on the
last Certificate anniversary.
BENEFICIARY--The person, designated by the Certificate Owner in the
application, to receive the Death Benefit proceeds. If later changed, the
Beneficiary is as shown in the latest change filed with Colonial Life. If no
Beneficiary survives the Insured, the Certificate Owner or the Certificate
Owner's estate will be the Beneficiary. The interest of any Beneficiary is
subject to that of any assignee.
CASH VALUE--The Accumulation Value less any applicable Surrender Charge. This
amount less the amount of Certificate Debt is payable to the Certificate Owner
on the earlier of surrender of the Certificate or the Maturity Date.
CERTIFICATE--The form used to describe the Certificate Owners' rights,
benefits, and options under their respective Group Policies. The Certificate
will describe, among other things, (i) the benefits for the named Insured, (ii)
to whom the benefits are payable, and (iii) the limits and other terms of the
Group Policy as they pertain to the Insured.
CERTIFICATE DATE--The date set forth in the Certificate, which is the date
requested by the Certificate Owner. If no date is requested, it is the date the
Certificate is issued. The Certificate Date is the date from which Certificate
years, Certificate months, and Certificate anniversaries will be determined. If
the Certificate Date should fall on the 29th, 30th, or 31st of a month, the
Certificate Date will be the 1st of the following month.
CERTIFICATE DEBT--The sum of all unpaid Certificate loans and accrued
interest thereon.
CERTIFICATE OWNER--The person or legal entity so designated in the
application or as subsequently changed. A Certificate Owner may be someone
other than the Insured. Certificate Owners possess all rights under their
respective Group Policies with respect to their Certificates.
DATE OF RECEIPT--Any business day of Colonial Life, prior to 4:00 P.M.
Eastern time, on which a notice or premium payment is received at Colonial
Life's Service Center.
DEATH BENEFIT--The amount, less the amount of Certificate Debt, which is
payable to the Beneficiary under the Certificate upon the death of the Insured
under Colonial Heritage I and the death of the last surviving Insured under
Colonial Heritage II.
DIVISION--A separate division of Separate Account D which invests exclusively
in the shares of a specified Portfolio of the Trust.
GENERAL ACCOUNT--The assets of Colonial Life other than those allocated to
Separate Account D or any other separate account.
GROUP POLICIES--Refers to the Group Flexible Premium Variable Life Insurance
Policy and the Group Joint and Last Survivor Flexible Premium Variable Life
Insurance Policy described herein.
INSURED(S)--The person(s) upon whose life the Certificate is issued.
ISSUE AGE--The Insured's age at his or her nearest birthday on the
Certificate Date.
JOINT EQUAL AGE--On Colonial Heritage II, this will be calculated pursuant to
a formula which converts the specific age, gender and underwriting
classifications of the two Insureds into one age. The Joint Equal Age is used
in determining issue age limitations, minimum premiums and guaranteed death
benefit premiums.
3
<PAGE>
LOAN VALUE--Generally, 90% of a Certificate's Cash Value on the date of a
loan.
MATURITY DATE--Unless otherwise specified, the Maturity Date will be the
Certificate anniversary nearest to the Insured's 100th birthday for Colonial
Heritage I and the younger Insured's 100th birthday for Colonial Heritage II.
MONTHLY ANNIVERSARY DATE--The same day in each month as the Certificate Date.
NET PREMIUM--The gross premium less a 2.0% state tax charge, a 1.25% federal
deferred acquisition cost tax charge and a 3% sales charge.
POLICYHOLDER--The entity to whom a Group Policy is issued. The Policyholder
possesses no rights under the Group Policy.
PORTFOLIO--A separate investment series of the Trust.
PROOF OF DEATH--One or more of the following:
(a) A copy of a certified death certificate.
(b) A copy of a certified decree of a court of competent jurisdiction as
to the finding of death.
(c) A written statement by a medical doctor who attended the Insured.
(d) Any other proof satisfactory to Colonial Life.
SEPARATE ACCOUNT D--Colonial Separate Account D, a separate investment
account created by Colonial Life to receive and invest Net Premiums paid under
the Certificates and other variable life insurance policies offered by Colonial
Life.
SERVICE CENTER--Colonial Life's administrative service center, located at One
Granite Place, P.O. Box 2086, Concord, New Hampshire 03302, telephone number
(800) 997-4499.
SPECIFIED AMOUNT--The face amount of the Certificate which is the minimum
death benefit payable under the Certificate.
SURRENDER CHARGE--A sales charge assessed only upon surrender or withdrawal.
TRUST--Chubb Series Trust, a series mutual fund.
VALUATION DATE--Each day, as of the close of regular trading on the New York
Stock Exchange, which is currently 4:00 P.M. Eastern time, or any other days as
may be required.
VALUATION PERIOD--The period between two successive Valuation Dates,
commencing at the close of regular trading on the New York Stock Exchange on
each Valuation Date and ending at the close of regular trading on the New York
Stock Exchange on the next succeeding Valuation Date.
4
<PAGE>
SUMMARY
THE DISCUSSION IN THIS PROSPECTUS ASSUMES THAT THERE IS NO CERTIFICATE LOAN
OUTSTANDING. THE TERMS UNDER WHICH THE GROUP POLICIES AND CERTIFICATES ARE
ISSUED MAY ALSO VARY FROM THOSE DESCRIBED IN THIS PROSPECTUS BASED ON
PARTICULAR CIRCUMSTANCES. THE DESCRIPTION OF THE GROUP POLICIES AND
CERTIFICATES IN THIS PROSPECTUS IS SUBJECT TO THE TERMS OF THE GROUP POLICY AND
CERTIFICATE AND ANY SUPPLEMENT OR ENDORSEMENT TO THEM. AN APPLICANT MAY REVIEW
A COPY OF THE GROUP POLICY AND CERTIFICATE AND ANY SUPPLEMENT OR ENDORSEMENT TO
THEM ON REQUEST.
WHAT ARE THE GROUP POLICIES AND CERTIFICATES BEING OFFERED?
This Prospectus describes two forms of group flexible premium variable life
insurance policies issued by The Colonial Life Insurance Company of America
("Colonial Life"). Colonial Heritage I provides life insurance coverage on one
Insured, with the Death Benefit payable upon the death of such Insured.
Colonial Heritage II provides life insurance coverage on two Insureds, with a
Death Benefit payable only when the last surviving Insured dies. The
Certificate Owner may, subject to certain limitations, make premium payments in
any amount at any frequency. The Group Policies and Certificates are life
insurance contracts with death benefits, cash values, and other features
traditionally associated with life insurance. They are called "flexible
premium" because, unlike many insurance contracts, there are no fixed schedules
for premium payments, although each Certificate Owner may establish a schedule
of premium payments ("Planned Periodic Premiums"). This flexibility permits a
Certificate Owner to provide for evolving insurance needs within a single
insurance product. The minimum initial Specified Amount is $500,000 for
Colonial Heritage I and $2,000,000 for Colonial Heritage II. A Certificate
Owner may increase or decrease coverage. Increasing coverage under the
Certificate, rather than purchasing another policy, may save additional
administrative costs. Increasing coverage under the Certificate or purchasing
another policy may require new evidence of insurability. Increasing or
decreasing coverage may have certain tax consequences. See "FEDERAL TAX
MATTERS".
The Certificates generally work as follows: a Certificate Owner periodically
pays a premium to Colonial Life. Colonial Life subtracts an amount for state
taxes, the federal deferred acquisition cost tax charge and the sales charge
from each premium. Colonial Life then places the Net Premium into one or more
of the five Divisions and/or Colonial Life's General Account as directed by the
Certificate Owner. Each Division invests its assets in a corresponding
Portfolio of the Trust. During the year, Colonial Life takes charges from each
Division and credits or charges each Division with its respective investment
experience. The cost of insurance charge, which is deducted from each
Certificate's Accumulation Value, varies monthly based on the sex, Issue Age,
Certificate year, rating class of the Insured(s), Specified Amount of the
Certificate, Death Benefit option and applicable corridor percentage. A
Certificate Owner will incur a Surrender Charge for a surrender or withdrawal
during the first five Certificate years. See "CHARGES AND DEDUCTIONS--Surrender
Charge".
The Death Benefit is payable under two options. Under Option I, the Death
Benefit is equal to the greater of the Specified Amount or the Accumulation
Value of the Certificate on the date of death of the Insured under Colonial
Heritage I and of the last surviving Insured under Colonial Heritage II
multiplied by the corridor percentage. Under Option II, the Death Benefit is
equal to the sum of the Specified Amount plus the Certificate's Accumulation
Value on the date of death of the Insured under Colonial Heritage I and of the
last surviving Insured under Colonial Heritage II, subject to adjustment by the
corridor percentage. The corridor percentage is a tax law concept which defines
the minimum Death Benefit required in connection with the Certificate's
Accumulation Value in order for the Certificate to qualify as life insurance.
Prospective Certificate Owners should be aware that there is no guarantee of
Accumulation Value in Separate Account D. See "CERTIFICATE BENEFITS AND
RIGHTS--Death Benefits".
5
<PAGE>
All persons insured must meet specified age limits and certain health and
other standards called "Underwriting Standards". The smoking status of the
Insureds is generally reflected in the cost of insurance rates. However, for
Colonial Heritage I, distinctions between smokers and nonsmokers are only made
for Insureds age 15 and over. Certificates issued in certain jurisdictions will
not directly reflect the sexes of the Insureds in either the premium rates or
the charges and values under the Certificate.
WHAT IS THE AMOUNT OF THE PREMIUMS?
Premiums are flexible and the Certificate Owner may choose the amount and
frequency of premium payments provided each premium is at least $500. Colonial
Life reserves the right to limit the amount of any increase in premium payment.
The first premium is due on the Certificate Date. The amount of the first
premium is determined by Colonial Life and is based on Issue Age, underwriting
class and Specified Amount for Colonial Heritage I and on Joint Equal Age and
Specified Amount for Colonial Heritage II. Premiums are paid in advance,
generally one year at a time; however, Colonial Life accepts semi-annual,
quarterly and monthly premium payments. Changes in Premium Frequency and
increases or decreases in the amount of Planned Periodic Premiums may be made
by the Certificate Owner. Colonial Life will notify Certificate Owners annually
if any premiums would cause their Certificates to be deemed to be modified
endowment contracts and allow for a refund of the excess premium. See "FEDERAL
TAX MATTERS--Certificate Proceeds".
Failure to pay premiums in accordance with the schedule of Planned Periodic
Premiums will not automatically cause the Certificate to lapse. Unless the
Guaranteed Death Benefit Rider is in force and the conditions under the Rider
satisfied, it will lapse when the Cash Value less outstanding Certificate Debt
is insufficient to pay the monthly deduction for certain charges ("monthly
deduction") and a grace period expires without a sufficient payment by the
Certificate Owner. Conversely, payment of premiums in accordance with the
schedule of Planned Periodic Premiums does not necessarily mean that the
Certificate will remain in force. See "THE GROUP POLICIES AND CERTIFICATES--
Certificate Lapse".
The Guaranteed Death Benefit Rider guarantees that the Death Benefit will
never be less than the Specified Amount provided that a cumulative minimum
premium requirement is met.
WHAT IS COLONIAL SEPARATE ACCOUNT D?
Separate Account D is a separate account established by Colonial Life
pursuant to the insurance laws of the State of New Jersey and organized as a
registered unit investment trust under the Investment Company Act of 1940 (the
"1940 Act"). Such registration does not involve any supervision by the
Securities and Exchange Commission (the "Commission") of the management or
investment practices or policies of Separate Account D. Separate Account D is
presently comprised of five Divisions, each of which buys shares at net asset
value of the corresponding series (a "Portfolio") of Chubb Series Trust (the
"Trust").
WHAT IS CHUBB SERIES TRUST?
The Trust is registered as an open-end diversified management company under
the 1940 Act. Its shares are offered only to the Divisions, whether now in
existence or to be established by Colonial Life, and to divisions of the Chubb
Separate Account C, a separate account established to fund certain variable
life insurance policies by Chubb Life Insurance Company of America, Colonial
Life's parent. The Trust's shares may also be offered to other separate
accounts which may be established by Colonial Life or its affiliated insurance
companies to fund variable life insurance policies and variable annuity
contracts.
The Trust presently has five classes of shares, each representing a Portfolio
having a specific investment objective. The present Portfolios of the Trust are
the Resolute Treasury Money Market Portfolio, the Resolute Bond Portfolio, the
Resolute Equity Portfolio, the Resolute Small Company Portfolio and the
Resolute International Equity Portfolio.
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The investment manager to the Trust is Chubb Investment Advisory Corporation
("Chubb Investment Advisory"), a subsidiary of Chubb Life Insurance Company of
America, Colonial Life's parent. Chubb Investment Advisory receives fees from
the Trust for providing investment management services. The fees range from .40
percent to .80 percent of average daily net assets of the Portfolios. Morgan
Guaranty Trust Company of New York ("Morgan") provides sub-investment advisory
services to the Trust. Morgan receives an annual percentage fee from Chubb
Investment Advisory for its services which in no way increases the costs borne
by the Trust, Separate Account D or the Certificate Owner. See "CHUBB SERIES
TRUST".
WHAT ARE THE CHARGES MADE BY COLONIAL LIFE?
STATE TAX CHARGE AND FEDERAL DAC TAX CHARGE. These charges are deducted from
each premium payment, currently 2.0% for state premium and other local taxes
imposed on premiums and 1.25% as a federal deferred acquisition cost ("DAC")
tax charge.
SALES CHARGE. A 3% sales charge is deducted from each premium payment. Also
see below "Surrender or Withdrawal Charges".
COST OF INSURANCE CHARGE. This charge is calculated on each Monthly
Anniversary Date and deducted from each Certificate's Accumulation Value. The
monthly current cost of insurance rate is based on the sex, Issue Age,
Certificate year, rating class of the Insured(s), Specified Amount, Death
Benefit option and applicable corridor percentage. Monthly cost of insurance
rates will be determined by Colonial Life based upon its expectations as to
future mortality experience. Cost of insurance rates are guaranteed not to
exceed or be increased above the maximum charge based upon the Commissioner's
1980 Standard Ordinary Mortality Table.
CHARGE FOR MORTALITY AND EXPENSE RISKS. This charge is imposed daily at an
annual rate of .65% on the assets of each Division. Colonial Life will realize
net income from this charge to the extent it is not needed to provide benefits
and pay expenses under the Group Policies and Certificates.
SURRENDER OR WITHDRAWAL CHARGES. This sales charge is imposed at the time of
surrender or withdrawal during the first five Certificate years. It declines
annually from 5% to 0% of premiums paid in the first Certificate year.
ADMINISTRATIVE CHARGE FOR WITHDRAWAL OR TRANSFER. Colonial Life charges $100
for each withdrawal and for certain transfers between Divisions or between the
Divisions and the General Account. See "THE GROUP POLICIES AND CERTIFICATES--
Transfers" for a description of situations in which the transfer charge will be
imposed.
GUARANTEED DEATH BENEFIT CHARGE. If the Guaranteed Death Benefit Rider is
added to the Certificate, a monthly charge of $.01 per $1,000 of Specified
Amount will be deducted each month from the Accumulation Value of the
Certificate.
CHARGE FOR OPTIONAL RIDER BENEFITS. An additional charge is required if the
Certificate Owner elects to purchase certain optional insurance benefits by
rider. Charges are deducted monthly from a Certificate's Accumulation Value.
See "CERTIFICATE BENEFITS AND RIGHTS--Optional Insurance Benefits".
See "CHARGES AND EXPENSES" for a fuller description of charges under the
Certificates.
IS THERE A CHARGE AGAINST SEPARATE ACCOUNT D FOR FEDERAL INCOME TAX?
Currently no charge is made against any Division for federal income taxes.
However, if Colonial Life incurs, or expects to incur, income taxes
attributable to any Division of this class of Group Policies and Certificates
in future years, it reserves the right to make a charge. See the discussion of
the federal DAC tax charge under "CHARGES AND DEDUCTIONS--Premium Charges".
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HOW ARE AMOUNTS ALLOCATED TO EACH DIVISION OR THE GENERAL ACCOUNT?
The Certificate Owner indicates in the application the allocation of Net
Premium among the Divisions and the General Account. The initial Net Premium is
allocated on the Allocation Date and Net Premiums received after the Allocation
Date are allocated generally on the Date of Receipt. The minimum percentage of
any Net Premium allocated to any Division or the General Account is 1%. The
Certificate Owner may change his or her allocation of future premium payments
by written notice to Colonial Life or by telephone, if the proper telephone
authorization is on file, without payment of any fee or penalty.
WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
DIVISIONS?
The initial Net Premium is allocated by Colonial Life on the Allocation Date
among the Divisions and the General Account as directed by the Certificate
Owner. Prior to the Allocation Date the initial Net Premium is held in Colonial
Life's General Account. The initial Net Premium is the initial gross premium,
plus any additional premium paid prior to the Allocation Date, less the state
tax charge, the federal DAC tax charge and the sales charge. These charges also
apply to subsequent premium payments.
WHAT COMMISSIONS ARE PAID TO AGENTS?
The Group Policies and Certificates are sold by agents who represent Colonial
Life and are registered representatives of Chubb Securities Corporation or
other registered broker-dealers. Commissions payable to agents are described
under "DISTRIBUTION OF THE GROUP POLICIES AND CERTIFICATES".
WHAT IS THE DEATH BENEFIT?
The Death Benefit under Colonial Heritage I is the amount payable to the
named Beneficiary when the person insured under the Certificate dies. The Death
Benefit under Colonial Heritage II is the amount payable to the named
Beneficiary when the last surviving Insured dies. The Death Benefit proceeds
will equal the Death Benefit of the Certificate, plus any additional rider
benefits included and then due, minus any outstanding Certificate Debt or
unpaid cost of insurance charges or charges for riders.
Under Option I, the Death Benefit will be equal to the greater of the
Specified Amount or the Accumulation Value of the Certificate on the date of
death multiplied by the corridor percentage. Under Option II, the Death Benefit
is equal to the Specified Amount plus the Accumulation Value of the Certificate
on the date of death; provided, however, that under Option II, the Death
Benefit can never be less than the Accumulation Value on the date of death
multiplied by the corridor percentage. See "CERTIFICATE BENEFITS AND RIGHTS--
Death Benefits".
Under the Guaranteed Death Benefit Rider the Death Benefit is guaranteed to
never be less than the Specified Amount provided that a cumulative minimum
premium requirement is met.
HOW DOES THE ACCUMULATION VALUE OF A CERTIFICATE VARY IN RELATION TO THE
DIVISIONS' INVESTMENT EXPERIENCE?
The Certificate provides for Accumulation Value equal to the total of the
Certificate's Accumulation Value in the Divisions and Accumulation Value in the
General Account. The Certificate's Accumulation Value will reflect the amount
and frequency of premium payments, the investment experience of the Divisions,
the value of Net Premiums (Net Premiums plus credited interest), if any,
allocated to the General Account, Certificate loans, any withdrawals, and any
charges imposed in connection with the Certificate. There is no minimum
guaranteed Accumulation Value.
WHAT IS THE LOAN PROVISION AND HOW DOES A LOAN AFFECT THE DEATH BENEFIT,
ACCUMULATION VALUE AND CASH VALUE?
After the first Certificate anniversary, a Certificate Owner may borrow
against the Cash Value of his or her Certificate. Generally, the maximum loan
amount is 90% of the Cash Value of the Certificate on the date
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of the loan. Loan interest is payable at the end of each Certificate year and
all Certificate Debt outstanding will be deducted from proceeds payable at the
Insured's death for Colonial Heritage I and at the death of the last surviving
Insured for Colonial Heritage II, upon maturity, or upon surrender.
When a Certificate loan is made, a portion of the Certificate's Accumulation
Value sufficient to secure the loan will be transferred to the General Account.
A Certificate loan removes the proceeds from the investment experience of
Separate Account D which will have a permanent effect on the Accumulation
Value, the Cash Value and the Death Benefit even if the loan is repaid.
There are two types of loans available. See "CASH VALUE BENEFITS--Certificate
Loans" for a description of the two types of loans and their applicable
interest rates.
IS THERE A SHORT-TERM CANCELLATION RIGHT?
The Certificate Owner has the limited right to return a Certificate for
cancellation and full refund of all premiums paid. Colonial Life will cancel
the Certificate if it is returned by mail or personal delivery to Colonial
Life, or to the agent who sold the Certificate, within 20 days after the
delivery of the Certificate to the Certificate Owner. Colonial Life will return
to the Certificate Owner, within seven days, all payments received on the
Certificate.
WHAT TRANSFERS IS A CERTIFICATE OWNER ALLOWED?
A Certificate Owner may transfer Accumulation Value among the Divisions and
among the Divisions and the General Account. However, transfers out of the
General Account are subject to restrictions. Colonial Life currently permits up
to 24 transfers per Certificate year, twelve of which will not incur a transfer
charge. See "THE GROUP POLICIES AND CERTIFICATES--Transfers" for a more
complete description of the terms and conditions of the transfer privileges
under the Certificates.
ARE THE BENEFITS UNDER THE CERTIFICATES SUBJECT TO FEDERAL INCOME TAX?
Under current interpretations of the tax laws, all Death Benefits paid under
the Certificates will generally be fully excludable from the gross income of
the Beneficiary for federal income tax purposes. Treasury regulations require
that investments underlying the Certificates be adequately diversified.
Colonial Life believes it is presently in compliance with the regulations and
intends to remain in compliance with such regulations and other federal tax law
requirements.
If a Certificate Owner elects to make certain transactions, including a
withdrawal, surrender or exchange of the Certificate, the Certificate Owner may
be taxed on a portion of any amounts paid to the Certificate Owner (which may
include any prior Certificate loans cancelled in the transaction). Also, if
premiums paid by a Certificate Owner exceed certain limits and the Certificate
is deemed a modified endowment contract, then any pre-death distributions,
including loans, surrenders and partial withdrawals, may be treated as income
taxable to the Certificate Owner and may also cause the Certificate Owner to
incur a penalty tax of 10%. Certificate Owners are advised to consult with
their own tax advisers with regard to the tax consequences of the Certificate.
See "FEDERAL TAX MATTERS".
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THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
Colonial Life is a stock life insurance company chartered in 1897 in New
Jersey and has been continuously engaged in the insurance business since that
time. It is licensed to do life insurance business in fifty states of the
United States, Puerto Rico, the U.S. Virgin Islands, and in the District of
Columbia. Colonial Life is a wholly-owned subsidiary of Chubb Life Insurance
Company of America, ("Chubb Life") a New Hampshire life insurance company which
in turn is a wholly owned subsidiary of The Chubb Corporation, a New Jersey
Corporation. The principal offices of The Chubb Corporation are located at 15
Mountain View Road, Warren, New Jersey. Its telephone number is (908) 580-2000.
Chubb Life's home office and Colonial Life's service center are located at One
Granite Place, P.O. Box 2086, Concord, New Hampshire 03302, telephone number
(800) 997-4499. Colonial Life's home office is located at Eight Sylvan Way,
Parsippany, New Jersey 17054, telephone number (201) 455-1400. Colonial Life's
total assets at December 31, 1994, were $651,933,000.
Colonial Life writes life and health insurance and annuities. It is subject
to New Jersey law governing insurance, and is regulated and supervised by the
New Jersey Insurance Commissioner. Colonial Life is currently rated AAA
(Superior) by Standard and Poor's Corporation and A (Excellent) by A.M. Best
and Company. These ratings do not apply to Separate Account D but merely
reflect the opinion of the rating company as to the relative financial strength
of Colonial Life and Colonial Life's ability to meet its contractual
obligations to its policy and certificate owners. Even though assets in
Separate Account D are held separately from Colonial Life's other assets,
ratings of Colonial Life may still be relevant to Certificate Owners since not
all of Colonial Life's contractual obligations relate to payments based on
those segregated assets.
COLONIAL SEPARATE ACCOUNT D
Separate Account D is a separate account of Colonial Life established on June
13, 1994 and governed by the insurance laws of the State of New Jersey.
Separate Account D is organized as a unit investment trust registered with the
Commission under the 1940 Act and is subject to that Act's requirements. Such
registration does not involve supervision of the management or investment
policies of Separate Account D or Colonial Life by the Commission. Colonial
Life is the depositor of Separate Account D. Under New Jersey law, the assets
of Separate Account D are held exclusively for the benefit of Policyholders,
Certificate Owners and persons entitled to payments under these Group Policies
and Certificates, and other variable life insurance policies funded by Separate
Account D. The income, realized or unrealized capital gains, or capital losses
of Separate Account D are credited to or charged against the assets held in
Separate Account D in accordance with the terms of the Group Policies and
Certificates, without regard to other income or capital gains or losses of any
other account arising out of any other business Colonial Life conducts.
Separate Account D is administered and accounted for as part of the general
business of Colonial Life, but the assets of Separate Account D are not
chargeable with liabilities arising out of any other business which Colonial
Life may conduct.
Colonial Life holds the assets of Separate Account D. These assets are kept
physically segregated and held separate and apart from the General Account.
Colonial Life maintains records of all purchases and redemptions of Trust
shares by each of the Divisions.
DIVISIONS. Separate Account D presently has five Divisions but may, in the
future, add or delete investment Divisions. Each Division will invest
exclusively in shares representing an interest in a Portfolio of the Trust.
Investment income and other distributions to each Division of Separate
Account D arising from the applicable underlying Portfolio of the Trust
increases the assets of the corresponding Division of Separate Account D. The
income and both realized and unrealized gains or losses on the assets of each
Division of Separate Account D are credited to or charged against that Division
without regard to income, gains or losses from any other Division.
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CHUBB SERIES TRUST
Separate Account D invests in shares of the Trust which is organized as a
Delaware business trust and is registered as an open-end diversified management
company under the 1940 Act. The Trust currently has five Portfolios each of
which has different objectives. The shares of each Portfolio are offered only
to the Divisions and to divisions of the Chubb Separate Account C, a separate
account of Chubb Life Insurance Company of America, Colonial Life's parent. The
Trust's shares may also be offered to other separate accounts that may be
established by Colonial Life or any of its affiliated insurance companies to
fund variable life insurance policies and variable annuity contracts. The
assets of each Portfolio are maintained separately from the assets of the other
Portfolios and each Portfolio has investment objectives and policies which are
different from those of the other Portfolios. Thus, each Portfolio operates as
a separate investment fund, and the income, gains or losses of one Portfolio
has no effect on the investment performance of any other Portfolio.
The investment manager to the Trust is Chubb Investment Advisory Corporation
("Chubb Investment Advisory"), which is an affiliate of Colonial Life. Chubb
Investment Advisory has in turn retained Morgan Guaranty Trust Company of New
York ("Morgan") to provide sub-investment advisory services to each Portfolio.
An investment management fee is charged monthly against each Portfolio by
Chubb Investment Advisory at the annual rate of .40 percent of the average
daily net asset value of the Resolute Treasury Money Market Portfolio, .50
percent of the average daily net asset value of the Resolute Bond Portfolio,
.60 percent of the average daily net asset value of the Resolute Equity
Portfolio, and .80 percent of the average daily net asset value of the Resolute
Small Company Portfolio and the Resolute International Equity Portfolio. The
compensation of Morgan is set at the annual rate of .20 percent of the average
daily net asset value of the Resolute Treasury Money Market Portfolio, .30
percent of the average daily net asset value of the Resolute Bond Portfolio,
.40 percent of the average daily net asset value of the Resolute Equity
Portfolio, and .60 percent of the average daily net asset value of the Resolute
Small Company Portfolio and the Resolute International Equity Portfolio. Chubb
Investment Advisory is solely responsible for paying such sub-investment
advisory fees out of its investment management fee described above.
The investment objectives of each Portfolio are set forth below. There can be
no assurance that any of the Portfolios will achieve its stated objectives. The
specialized nature of each Portfolio gives rise to significant differences in
the relative investment potential and market and financial risks of each
Portfolio. Certificate Owners should consider the unique features of each
Portfolio before investing in any corresponding Division. For more detailed
information concerning each Portfolio, including a description of the
investment risks, reference is made to the Prospectus for the Trust which
accompanies this Prospectus, or the Statement of Additional Information for the
Trust, available upon request.
The RESOLUTE TREASURY MONEY MARKET PORTFOLIO seeks to provide current income,
maintain a high level of liquidity and preserve capital.
The RESOLUTE BOND PORTFOLIO seeks to provide a high total return consistent
with moderate risk of capital and maintenance of liquidity.
The RESOLUTE EQUITY PORTFOLIO seeks to provide a high total return from a
portfolio comprised of selected equity securities.
The RESOLUTE SMALL COMPANY PORTFOLIO seeks to provide a high total return
from a portfolio of equity securities of small companies.
The RESOLUTE INTERNATIONAL EQUITY PORTFOLIO seeks to provide a high total
return from a portfolio of equity securities of foreign corporations.
The Trust may find it necessary to take action to assure that the Group
Policies and Certificates qualify as life insurance under federal tax laws. The
Trust, for example, may alter the investment objectives of any Portfolio or
take other appropriate actions. See "OTHER MATTERS--Additions, Deletions or
Substitutions of Investments" and "FEDERAL TAX MATTERS".
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Separate Account D will purchase shares of the Trust at net asset value in
connection with Net Premiums, transfers and loan repayments allocated to the
Divisions in accordance with the Certificate Owner's directions and will redeem
shares of the Trust to process transfers, Certificate loans, surrenders or
withdrawals and generally to meet contract obligations or make adjustments in
reserves. The Trust will sell and redeem its shares at net asset value as of
the Date of Receipt by Separate Account D of premium payments or notifications
by a Certificate Owner.
THE GROUP POLICIES AND CERTIFICATES
GENERAL. The Group Policies are issued to the banking corporation set forth
in the Group Policies and Certificates (the "Policyholder"). The Policyholder
possesses no rights under the Group Policies but holds the Group Policies as
trustee under a trust known as the Colonial Heritage Group Insurance Trust.
Colonial Life established the Colonial Heritage Group Insurance Trust for the
purpose of enabling participating financial institutions in the State of New
York which have applied for and been accepted as participants in the Group
Insurance Trust and have accepted its terms and conditions (the "Members") to
join together in the purchase and maintenance of the Group Policies.
Certificates of insurance may be issued to certain eligible persons (natural or
legal entity) who maintain at the time of application an account with, or whose
account is serviced by, a financial institution participating as a Member and
who have applied for insurance under this Group Policy. The Certificates
describe each Certificate Owner's rights, benefits and options under the Group
Policy. The Certificate is designed to provide the Certificate Owner with
lifetime insurance protection and flexibility in connection with the amount and
frequency of premium payments and the level of life insurance proceeds payable
under the Certificate. Colonial Life reserves the right to no longer accept any
new Insureds under a Group Policy as of a specified date.
Colonial Heritage I is a group flexible premium variable life insurance
policy which provides life insurance coverage on one Insured, with the Death
Benefit payable upon the death of such Insured. Colonial Heritage II is a group
flexible premium joint and last survivor variable life insurance policy which
provides life insurance coverage on two Insureds, with a Death Benefit payable
only when the last surviving Insured dies. The Certificate Owner is not
required to pay scheduled premiums to keep a Certificate in force but may,
subject to certain limitations, vary the frequency and amount of premium
payments. Moreover, subject to certain limitations, a Certificate Owner may
adjust the level of life insurance payable under the Certificate without having
to purchase a new policy by increasing or decreasing the Specified Amount.
Thus, as insurance needs or financial conditions change, the Certificate Owner
has the flexibility to adjust coverage and vary the premium payments. Death
Benefits are payable under two options as described in "CERTIFICATE BENEFITS
AND RIGHTS--Death Benefits".
To purchase a Certificate, a completed application must be submitted to
Colonial Life through the agent selling the Certificate. Applicants for
insurance must furnish satisfactory evidence of insurability. An Insured under
Colonial Heritage I must generally be between the ages of 0 and 80 and the
Insureds under Colonial Heritage II must generally be between 20 and 85 with
only one Insured over the age of 80. The Joint Equal Age of the Insureds under
Colonial Heritage II cannot be over age 80. The smoking status of each Insured
is reflected in the cost of insurance rates; provided, however, that under
Colonial Heritage I distinctions between smokers and nonsmokers are only made
for Insureds age 15 and over.
The minimum Specified Amount at issue is $500,000 for Colonial Heritage I and
$2,000,000 for Colonial Heritage II. Colonial Life reserves the right to revise
its rules from time to time to specify different minimum Specified Amounts at
issue. If the Specified Amount applied for plus all other insurance in force
which is underwritten by Colonial Life or its affiliates exceeds an amount
which varies between $300,000 and $2,000,000 based on various factors, Colonial
Life will reinsure all or a portion of the Certificate. Acceptance
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of an application or revocation of a Certificate during the contestable period
is subject to Colonial Life's insurance underwriting rules and Colonial Life
may, in its sole discretion, reject any application or related premium for any
good reason or contest a Certificate.
PAYMENT OF PREMIUMS. Premiums must be paid to Colonial Life at its Service
Center or through an authorized agent of Colonial Life for forwarding to
Colonial Life's Service Center. The initial premium may be wired to Colonial
Life's bank upon notification that the application has been approved by
Colonial Life. Subsequent premium payments may also be wired to Colonial Life's
bank. The financial institution transmitting the wired funds may impose a
charge for this service. In addition, Colonial Life has administrative
procedures whereby premium payments in response to billing notices are sent
directly to Colonial Life's bank. Unlike traditional insurance contracts, there
is no fixed schedule of premium payments on a Certificate either as to the
amount or the timing of the payment. A Certificate Owner may determine, within
specified limits, his or her own premium payment schedule. These limits will be
set forth by Colonial Life and will include a minimum initial premium payment
and may also include limits on the total amount and frequency of payments in
each Certificate year. No premium payment may be less than $500. In order to
help the Certificate Owner obtain the insurance benefits desired, a Planned
Periodic Premium and Premium Frequency will be stated in each Certificate. This
premium will usually be based upon the Certificate Owner's insurance needs and
financial abilities, the current financial climate, the Specified Amount of the
Certificate, and the Insured's age, sex and risk class, as discussed with the
agent. The Certificate Owner is not required to pay such premiums and failure
to make any premium payment will not necessarily result in lapse of the
Certificate, provided the Certificate's Cash Value, less Certificate Debt, if
any, is sufficient to pay monthly deductions. Conversely, adherence to the
schedule of Planned Periodic Premiums will not assure that the Certificate will
remain in force. See "THE GROUP POLICIES AND CERTIFICATES--Certificate Lapse".
GUARANTEED DEATH BENEFIT PREMIUMS. If the Guaranteed Death Benefit Rider is
added to the Certificate, the Death Benefit is guaranteed to never be less than
the Specified Amount, provided the Certificate Owner pays a cumulative minimum
premium. This cumulative minimum premium is based on Issue Age, sex, smoking
status and underwriting class of the Insured(s) as well as the Specified Amount
and Death Benefit option. The premium is increased for increases in the
Specified Amount. See "CERTIFICATE BENEFITS AND RIGHTS--Optional Insurance
Benefits".
PREMIUM LIMITATIONS. If, at any time during the year, a premium has been paid
which would result in a Certificate being deemed a modified endowment contract,
Colonial Life will so notify the Certificate Owner on the Certificate's
anniversary date and allow the Certificate Owner to request a refund of the
excess premium, or other action, in order to avoid having the Certificate be
deemed to be a modified endowment contract. A Certificate Owner, however, may
choose to have the Certificate be deemed a modified endowment contract, and, in
that case, Colonial Life will not refund the premiums. See "FEDERAL TAX
MATTERS--Certificate Proceeds". Premium payments less than the minimum amount
of $500 will be returned to the Certificate Owner.
ALLOCATION OF PREMIUMS. Premium payments, net of the state premium tax
charge, the federal DAC tax charge and the sales charge plus interest earned
prior to the Allocation Date, will be allocated on the Allocation Date among
the Divisions and the General Account in accordance with the directions of the
Certificate Owner, as contained in the application. Prior to the Allocation
Date the initial Net Premium will be held in Colonial Life's General Account.
Any other premiums received prior to the Allocation Date will also be held in
the General Account. If the Certificate issued as applied for is not accepted
or the "free look" is exercised, no interest will be credited and Colonial Life
will retain any interest earned on the initial Net Premium. The minimum
percentage of any Net Premium payment allocated to any Division or the General
Account is 1%. The Certificate Owner may change his or her allocation of future
premium payments among the Divisions and the General Account by written notice
to Colonial Life or by telephone without payment of any fee or penalty.
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The allocation of each Net Premium to a Division will be determined first by
multiplying the Net Premium by the percentage to be allocated to each Division
as the Certificate Owner directs to determine the portion to be invested in the
Division. Each portion to be invested in each Division is then divided by the
unit value of that particular Division to determine the number of units to be
credited to a Certificate Owner. The unit value of each Division will vary to
reflect the investment experience of the corresponding underlying Portfolio
shares. For a description of the method of determining unit values see
"CALCULATION OF ACCUMULATION VALUE--Unit Values". Applicants should refer to
the Prospectus for the Trust which accompanies this Prospectus for a
description of how the assets of each Portfolio are valued.
All valuations in connection with the Certificate, e.g., with respect to
determining Cash Value in connection with Certificate loans or withdrawals,
with respect to determining Accumulation Value in connection with transfers or
payment of Death Benefits, and with respect to determining a Division's unit
value at the time of each Net Premium payment, will be made on the Date of
Receipt of the premium or the request for payment, loan, withdrawal or transfer
if such date is a Valuation Date; otherwise, such determination will be made on
the next succeeding day which is a Valuation Date. The Date of Receipt of a
premium payment sent directly to Colonial Life's bank pursuant to a billing
notice will be the date the payment is received at the bank and the value of
any Division to which the payment is allocated will be determined as of such
date provided such date is a Valuation Date; otherwise, such determination will
be made on the next succeeding day which is a Valuation Date.
TRANSFERS. Accumulation Value may be transferred among the Divisions and
between the Divisions and the General Account. In addition to individual
transfer requests, Certificate Owners may elect either a Dollar Cost Averaging
feature or an Automatic Portfolio Re-Balancing feature which provides for
systematic transfers as described below. Transfer requests may be made in
writing or by telephone. The total amount transferred each time must be at
least $1,000 unless a lesser amount constitutes the entire Accumulation Value
in a Division or in the General Account. Accumulation Value transferred from
one Division or from the General Account into more than one Division, and/or
into the General Account, counts as one transfer. Similarly, transferring
Accumulation Value from more than one Division, and/or the General Account,
into one other Division or the General Account, counts as one transfer.
Colonial Life currently permits 12 transfers per Certificate year without
imposing a transfer charge. For transfers in excess of 12 in any Certificate
year, a transfer charge of $100 to cover administrative costs will be imposed
each time amounts are transferred and will be deducted on a pro-rata basis from
the Division or Divisions or the General Account into which the amount is
transferred. However, no transfer charge will be imposed on the transfer of the
initial Net Premium payments, plus interest earned, from the General Account to
the Divisions on the Allocation Date or on loan repayments. No transfer charge
will be imposed for transfers pursuant to the Dollar Cost Averaging or
Automatic Portfolio Re-Balancing features. Currently, a Certificate Owner may
make up to 24 transfers per Certificate year. Colonial Life reserves the right
to revoke or modify transfer privileges and charges.
At any time, the Certificate Owner may transfer 100% of the Certificate's
Accumulation Value to the General Account and elect to have all future premium
payments allocated to the General Account. While 100% of the Certificate's
Accumulation Value and all future premium payments are allocated to the General
Account, the minimum period the Certificate will be in force will be fixed and
guaranteed. The minimum period will depend on the amount of Accumulation Value,
the Specified Amount, the sex, the Attained Age, and rating class of the
Insured at the time of transfer. The minimum period will decrease if the
Certificate Owner subsequently elects to increase the Specified Amount, elects
to surrender the Certificate, or elects to make a withdrawal. The minimum
period will increase if the Certificate Owner elects to decrease the Specified
Amount, additional premium payments are received, or Colonial Life credits a
higher interest rate or charges a lower cost of insurance rate than those
guaranteed for the General Account.
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Except for transfers in connection with Dollar Cost Averaging, Automatic
Portfolio Re-Balancing and loan repayments, transfers out of the General
Account to the Divisions are permitted only once every 180 days and are limited
in amount to the lesser of (a) 25% of the Accumulation Value in the General
Account not being held as loan collateral or (b) $100,000. In addition, any
other transfer rules, including minimum transfer amounts, also apply. Colonial
Life reserves the right to modify these restrictions.
No transfer charge will be imposed for a transfer of all Accumulation Value
in Separate Account D to the General Account. However, any transfer from the
General Account to the Division(s) will be subject to the transfer charge,
unless it is one of the first 12 transfers in a Certificate year and except for
the transfer of the initial Net Premium payments, plus interest earned, from
the General Account, loan repayments, and transfers pursuant to the Dollar Cost
Averaging or Automatic Portfolio Re-Balancing features.
A feature called Dollar Cost Averaging is available to Certificate Owners
under which a Certificate Owner deposits or designates an amount, subject to a
minimum of $6,000, in the Resolute Treasury Money Market Division or the
General Account and elects to have a specified dollar amount (the "Periodic
Transfer Amount") automatically transferred to one or more of the Divisions on
a monthly, quarterly, or semi- annual basis. This feature allows Certificate
Owners to systematically invest in the Divisions at various prices which may be
higher or lower than the price a Certificate Owner would pay when investing the
entire amount at one time and at one price. Each Periodic Transfer Amount is
subject to a minimum amount of $500. A minimum of 1% of the Periodic Transfer
Amount must be transferred to any specified Division. These amounts are subject
to change at Colonial Life's discretion. If a transfer would reduce
Accumulation Value in the Resolute Treasury Money Market Division or the
General Account to less than the Periodic Transfer Amount, Colonial Life
reserves the right to include such remaining Accumulation Value in the amount
transferred. Automatic transfers will continue until the amount designated for
Dollar Cost Averaging has been transferred, or until the Certificate Owner
gives notification of a change in allocation or cancellation of the feature.
Dollar Cost Averaging is currently available at no charge to Certificate
Owners. Although Colonial Life reserves the right to assess a charge, no
greater than cost and with 30 days advance notice to Certificate Owners, it has
no present intention to do so.
An Automatic Portfolio Re-Balancing feature is also available to Certificate
Owners. This feature provides a method for re-establishing fixed proportions
between various types of investments on a systematic basis. Under this feature,
the allocation between Divisions and the General Account will be automatically
re-adjusted to the desired allocation, subject to a minimum of 1% per Division
or General Account, on a quarterly, semi-annual or annual basis.
A Certificate Owner may choose one of the two features. Transfers and
adjustments pursuant to these features will occur on a Certificate's Monthly
Anniversary Date in the month in which the transaction is to take place or the
next succeeding business day if the Monthly Anniversary Date falls on a holiday
or a weekend. The applicable authorization form must be on file at Colonial
Life before either feature may begin. Neither feature guarantees profits nor
protects against losses. Transfers under these features do not count toward the
12 free transfers or the 24 transfers currently allowed per year. Colonial Life
reserves the right to modify the terms and conditions of these features upon 30
days advance notice to Certificate Owners.
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<PAGE>
TELEPHONE TRANSFERS, LOANS AND REALLOCATIONS. Certificate Owners may request
by telephone transfers of Accumulation Value or reallocation of premiums
(including allocation changes pursuant to existing Dollar Cost Averaging and
Automatic Portfolio Re-Balancing programs), provided that the appropriate
authorization form is on file with Colonial Life. Colonial Life may also, in
its discretion, permit loans to be made by telephone, provided that the proper
authorization form is on file with Colonial Life. During periods of heavy
telephone transfers, implementing a telephone transfer may be difficult. If a
Certificate Owner is unable to reach Colonial Life via telephone, the
Certificate Owner should send a written request to Colonial Life via an express
mailing service or via the Colonial Life telecopier machine at (603) 226-5155.
(Any transfer requests received via telecopier are considered telephone
transfers and are bound by the conditions outlined in the signed authorization
form.) Colonial Life reserves the right to discontinue telephone transfers at
any time without notice to the Certificate Owners. Procedures have been
established that are reasonably designed to reduce the risk of unauthorized
telephone transfers, loan requests or allocation changes. These procedures
include requiring personal identification information (such as social security
number and date of birth), tape recording calls and providing written
confirmations to Certificate Owners.
CERTIFICATE LAPSE. Failure to make a premium payment on a Certificate will
not necessarily cause the Certificate to lapse. The duration of a Certificate
depends upon its Cash Value. The Certificate will remain in force so long as
the Cash Value, less any outstanding Certificate Debt, is sufficient to cover
cost of insurance and any rider charges. In the event the Cash Value, less any
outstanding Certificate Debt, is insufficient to pay these monthly cost of
insurance and rider charges ("monthly deduction") the Certificate Owner will be
given a sixty-one day period ("grace period") within which to make a premium
payment to avoid lapse. The premium required to avoid lapse must be sufficient
in amount, after the deduction of the state premium tax charge, the federal DAC
tax charge and the sales charge, to cover the monthly deduction for at least
three Certificate months. This required premium will be set forth in a written
notice which Colonial Life will send to the Certificate Owner thirty-one days
prior to the end of the grace period. The Certificate will continue in force
through the grace period, but if no payment is forthcoming, the Certificate
will terminate without value at the end of the grace period. If the Insured
under Colonial Heritage I or the last surviving Insured under Colonial Heritage
II dies during the grace period, the Death Benefit payable under the
Certificate will be reduced by the amount of the monthly deduction due and
unpaid and the amount of any outstanding Certificate Debt. In addition, if the
Cash Value of the Certificate at any time should decrease so the aggregate
amount of outstanding Certificate Debt secured by the Certificate exceeds the
Cash Value shown in the Certificate and an additional payment is not made
within sixty-one days the Certificate will lapse.
REINSTATEMENT. If the Certificate lapses, the Certificate Owner may reinstate
the Certificate. The terms of the original Certificate will apply upon
reinstatement. The Accumulation Value, before payment of the required
reinstatement premium, will equal the Accumulation Value on the date of
termination. The Certificate year on reinstatement will be measured from the
Certificate Date. An application for reinstatement may be made any time within
five years of lapse and before the Maturity Date, but satisfactory proof of
insurability of the Insured under Colonial Heritage I or the Insureds or
surviving Insured under Colonial Heritage II and payment of a reinstatement
premium is required. The reinstatement premium, after deduction of the state
premium tax charge, the federal DAC tax charge and the sales charge, must be
sufficient to cover the monthly deduction for three Certificate months
following the effective date of reinstatement. If a loan was outstanding at the
time of lapse, Colonial Life will require, at the election of the Certificate
Owner, repayment or reinstatement of the loan before permitting reinstatement
of the Certificate. The effective date will be the date of approval of the
reinstatement application, which will be as of a Monthly Anniversary Date.
CONVERSION. If the Insured's coverage under the Group Policy ends for any
reason other than the non-payment of premiums, the Certificate Owner may
convert the insurance under the Group Policy to a comparable, individual policy
without evidence of insurability. The Certificate Owner must apply for the
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<PAGE>
individual policy and pay the first premium within 31 days after coverage under
the Group Policy ends. The new policy will be non-participating and issued
subject to the following:
(i) The policy will be on one of the forms Colonial Life customarily
issues at the time of conversion, other than term;
(ii) The policy will be issued at the amount and age applied for;
(iii) The amount of the policy may not exceed the Specified Amount of the
Certificate which ends; and
(iv) The premium for the policy will be at Colonial Life's usual rate,
and it will be based on the amount of insurance, risk class, type of policy
and age at the policy issued date.
If the Insured dies during the time in which the Certificate is entitled to
be converted, Colonial Life will pay the Death Benefit which was in effect
under the Certificate just prior to its termination. Colonial Life will deduct
any overdue monthly deduction, which is applicable to the conversion period,
from the proceeds of the Insured's coverage. This will be done whether or not
the Certificate Owner actually applied for the individual policy. Any policy
issued pursuant to this provision will take effect at the end of the 31-day
period in which application must be made.
CERTIFICATE "FREE LOOK". The Certificate Owner has a limited right to return
a Certificate for cancellation and a full refund of all premiums paid. Colonial
Life will cancel the Certificate if it is returned by mail or personal delivery
to Colonial Life, or to the agent who sold the Certificate, within 20 days
after the delivery of the Certificate to the Certificate Owner. Colonial Life
will return to the Certificate Owner within seven days all payments received on
the Certificate. Prior to the Allocation Date the initial Net Premium will be
held in Colonial Life's General Account; Colonial Life will retain any interest
earned if the "free look" right is exercised.
CHARGES AND DEDUCTIONS
PREMIUM CHARGES. Upon receipt of each premium payment and before allocation
of payment among the Divisions and the General Account, Colonial Life will
deduct a state premium tax charge of 2.0%. This charge is designed to
compensate Colonial Life for state premium taxes, franchise taxes and other
local taxes imposed on premiums by the State of New York and local
jurisdictions. The actual taxes imposed on Colonial Life may fall between 1.7%
and 2.5% of premiums received. As a result, the 2.0% charge may at times be
higher or lower than the actual taxes incurred by Colonial Life. Colonial Life
reserves the right to increase this charge to Certificate Owners up to a
maximum of 2.5%. Colonial Life does not expect to realize a profit from this
charge.
Colonial Life will also deduct from each premium a charge currently equal to
1.25% to cover the estimated cost to Colonial Life of the federal income tax
treatment of the Group Policies' and Certificates' deferred acquisition costs
(the "federal DAC tax charge"). Colonial Life has determined that this charge
is reasonable in relation to Colonial Life's increased federal income tax
burden under the Code resulting from the receipt of premiums. Colonial Life
will not increase this charge under outstanding Group Policies and
Certificates, but reserves the right, subject to any required regulatory
approval, to change this charge for Group Policies and Certificates thereunder
not yet issued in order to correspond with changes in the DAC tax.
Colonial Life will deduct a sales charge of 3% from each premium payment to
compensate Colonial Life for the cost of selling the Certificates. The cost of
selling the Certificates includes, among other things, agents' commissions,
commission overrides, advertising and the printing of prospectuses and sales
literature. Under normal circumstances, the amount of this charge, plus the
Surrender Charge discussed below, are expected to compensate Colonial Life for
total sales expenses for that year. To the extent sales expenses in
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<PAGE>
any one Certificate year are not recovered by this 3% sales charge and the
sales charge imposed upon surrenders or withdrawals during the first five
Certificate years, the sales expenses may be recovered from other sources,
including surplus, which may include profits, if any, from the mortality and
expense Risk Charge.
MONTHLY DEDUCTION. On each Monthly Anniversary Date and on the Certificate
Date, Colonial Life will deduct from the Accumulation Value of a Certificate an
amount to cover certain charges and expenses incurred in connection with the
Certificate. The amount of the monthly deduction is equal to the cost of
insurance for the Certificate as described below, and the cost of any optional
benefits added by rider. The amount deducted will be deducted pro rata from
each of the Divisions and the General Account, excluding the amount held in the
General Account as loan collateral, in which the Certificate Owner is invested.
The cost of insurance is determined on a monthly basis, and is determined
separately for the initial Specified Amount and each subsequent increase in the
Specified Amount. The monthly current cost of insurance rate is based on the
sex, Issue Age, Certificate year, smoking status and rating class of the
Insured(s), Specified Amount, Death Benefit option and applicable corridor
percentage.
The cost of insurance is calculated as (i) multiplied by the result of (ii)
minus (iii) where:
(i) is the cost of insurance rate as described in the Cost of Insurance
Rates provision contained in the Certificate.
(ii) is the Death Benefit at the beginning of the Certificate month
divided by 1.00327374, to arrive at the proper values for the beginning of
the month assuming the guaranteed interest rate of 4% that is applicable to
the General Account portion of the Certificate; and
(iii) is the Accumulation Value at the beginning of the Certificate
month.
If the corridor percentage is applicable, the Death Benefit used in the
foregoing calculation will reflect the corridor percentage. The cost of
insurance charge is not affected by the death of the first Insured to die under
Colonial Heritage II.
The monthly cost of insurance rate will be determined by Colonial Life based
upon expectations as to future mortality experience, but can never exceed the
rates shown in the table of Monthly Guaranteed Cost of Insurance Rates set
forth in the Certificate. Such guaranteed maximum rates are based on the
Commissioner's 1980 Standard Ordinary Mortality Table.
A guaranteed cost of insurance discount will be calculated at the beginning
of each Certificate year and subtracted from the cost of insurance for each
month of that Certificate year during which the discount is in effect. The
discount will be allocated between the Divisions and the General Account in the
same proportion as premium payments. The discount is calculated as (i)
multiplied by the result of (ii) minus (iii) minus (iv), but not less than
zero, where:
(i) is a factor that varies by Specified Amount as follows:
<TABLE>
<S> <C>
Under $5,000,000................................................ .0001250
$5,000,000 to $9,999,999........................................ .0002500
$10,000,000 to $14,999,999...................................... .0003750
$15,000,000 and Above........................................... .0004583
</TABLE>
(ii) is the Accumulation Value at the beginning of the Certificate year;
(iii) is the Guideline Single Premium at issue under Section 7702 of the
Code, increased on a pro-rata basis for any increase in Specified Amount;
and
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<PAGE>
(iv) is the outstanding Type A loan balance at the beginning of the
Certificate year. See "CASH VALUE BENEFITS--Certificate Loans" for a
description of Type A loans.
The cost of insurance discount is the mechanism whereby Colonial Life
annually evaluates its mortality risk exposure on individual Certificates based
on, among other factors, the proceeds from all mortality charges, including the
cost of insurance charge and the mortality risk portion of the Risk Charge. The
insurance charges are set at rates designed to cover total anticipated
mortality experience, i.e., Death Benefit payments, taking into consideration
the risk that actual experience may exceed Colonial Life's expectation. Of
course, as the amount at risk under any one Certificate decreases, i.e.,
Accumulation Value increases, Colonial Life's exposure on such Certificate will
be reduced. Moreover, Colonial Life 's risk decreases as the Specified Amount
increases. The cost of insurance discount formula factors in Accumulation Value
and Specified Amount. Thus, the cost of insurance discount may be translated
into a net reduction of the Risk Charge which is applied to the Accumulation
Value. As shown in the following table, the cost of insurance discount may be
expressed as a reduction in the mortality portion of the Risk Charge, discussed
below.
<TABLE>
<CAPTION>
MORTALITY MORTALITY
RISK RISK
SPECIFIED EFFECTIVE MORTALITY CHARGE CHARGE
AMOUNT MORTALITY RISK COI BELOW ABOVE
CHARGE* CHARGE DISCOUNT GSP* GSP* RISK
------------------- --------- -------- --------- --------- ----
<S> <C> <C> <C> <C> <C>
$500,000--$4,999,999 .55% .15% .55% .40% .475%
$5,000,000--$9,999,999 .55% .30% .55% .25% .40%
$10,000,000--$14,999,999 .55% .45% .55% .10% .325%
$15,000,000 and Above .55% .55% .55% .0% .275%
</TABLE>
- --------
* Assumes that Accumulation Value, less any Type A loans, at the beginning of
the Certificate year is twice the Guideline Single Premium ("GSP").
RISK CHARGE. Colonial Life will also assess a charge on a daily basis against
each Division at an annual rate of .65% of the value of the Division to
compensate Colonial Life for its assumption of certain mortality and expense
risks in connection with the Certificate. Specifically, Colonial Life bears the
risk that the total amount of Death Benefit payable under the Certificate will
be greater than anticipated and Colonial Life also assumes the risk that the
actual cost incurred by it to administer the Certificate will not be covered by
charges assessed under the Certificate.
SURRENDER CHARGE. Upon surrender during the first five Certificate years,
Colonial Life will assess a contingent deferred sales charge. This contingent
deferred sales charge will be 5% of first year premiums for surrender during
the first Certificate year, 4% of first year premiums for surrender during the
second Certificate year, 3% of first year premiums for surrender during the
third Certificate year, 2% of first year premiums for surrender during the
fourth Certificate year and 1% of first year premiums for surrender during the
fifth Certificate year. There is no Surrender Charge assessed for surrender
after the fifth Certificate year. A pro rata portion of any Surrender Charge
will be assessed upon a withdrawal. The Certificate's Accumulation Value will
be reduced by the amount of any withdrawal plus any applicable pro-rata
Surrender Charge.
The Surrender Charge helps to compensate Colonial Life for the cost of
selling the Certificates, including the cost of advertising and the printing of
the Prospectus and sales literature.
ADMINISTRATIVE FEES. An administrative fee equal to $100 is imposed for each
transfer among the Divisions or the General Account, after the first 12
transfers in a Certificate year and except for the transfer of the initial Net
Premium payments, plus interest, from the General Account on the Allocation
Date, loan repayments and transfers pursuant to the Dollar Cost Averaging and
Automatic Portfolio Re-Balancing features. For withdrawals, an administrative
fee equal to $100 will be charged. All administrative fees are no greater than
the anticipated expenses of providing such services.
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<PAGE>
OTHER CHARGES. Colonial Life also reserves the right to charge the assets of
each Division to provide for any income taxes or other taxes payable by
Colonial Life on the assets attributable to that Division. An investment
advisory fee for services provided by the Trust's investment manager and sub-
investment adviser and certain other operating expenses are deducted from the
assets of each Portfolio of the Trust. See "CHUBB SERIES TRUST".
CERTIFICATE BENEFITS AND RIGHTS
DEATH BENEFITS. So long as it remains in force, Colonial Heritage I provides
for the payment of life insurance proceeds upon the death of the Insured and
Colonial Heritage II provides for a Death Benefit payable upon the death of the
last surviving Insured. Proceeds will be paid to a named Beneficiary or
contingent Beneficiary. One or more Beneficiaries or contingent Beneficiaries
may be named. Life insurance proceeds may be paid in a lump sum or under an
optional payment plan. (See "SETTLEMENT OPTIONS" below.) Proceeds of the
Certificate will be reduced by any outstanding Certificate Debt and any due and
unpaid charges and increased by any benefits added by rider. Proceeds that are
payable in a lump sum will be increased to include interest as required by
applicable state law. Proceeds will ordinarily be paid within seven days after
Colonial Life receives due Proof of Death. Under Colonial Heritage II, due
Proof of Death must also be submitted at the time of the first death.
Certificate Owners designate in the initial application one of two Death
Benefit options offered under the Certificates. The amount of life insurance
proceeds payable under a Certificate will depend upon the option in effect, as
follows:
Option I: The Death Benefit equals the greater of the current Specified
Amount or the Accumulation Value of the Certificate at the date of death
multiplied by the corridor percentage, as described below.
Option II: The Death Benefit equals the current Specified Amount plus the
Accumulation Value of the Certificate on the date of death. The Death Benefit
will not be less than the Accumulation Value on the date of death multiplied by
the corridor percentage.
Option I emphasizes the impact of investment experience on Accumulation Value
rather than insurance coverage because the Specified Amount and the Death
Benefit, generally, remain stable. Under Option I, as Accumulation Value
increases and the Death Benefit does not increase, the amount at risk
decreases. Thus, the cost of insurance charges are imposed on a decreasing
amount. Option II emphasizes insurance coverage because favorable investment
experience adds to the Accumulation Value that provides an addition to the
total Death Benefit. Under Option II, favorable investment experience does not
reduce the amount at risk upon which cost of insurance charges are based.
The corridor percentage is a minimum ratio of Death Benefit to Accumulation
Value required pursuant to the cash value corridor test under Section 7702 of
the Code. The Certificate Owner has the option to select this minimum corridor
percentage under the Code or an alternative corridor percentage that produces a
higher corridor percentage beginning in Certificate year 25 which grades back
to the minimum corridor percentage at the Maturity Date. Use of the alternative
corridor percentage results in a higher ratio of Death Benefit to Accumulation
Value than that resulting from the use of the minimum corridor percentage
beginning in Certificate year 25. This higher ratio then gradually reduces
until, by the Maturity Date, it is equal to the ratio produced by use of the
minimum corridor percentage. Although use of the alternative corridor
percentage results in a higher Death Benefit than the minimum corridor
percentage beginning in Certificate year 25, this higher Death Benefit results
in higher cost of insurance charges which has the effect of reducing
Accumulation Value and consequently future Death Benefits.
The Death Benefit option in effect may be changed by sending Colonial Life a
written request for change. The effective date of the change will be the first
Monthly Anniversary Date that coincides with or next follows
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<PAGE>
the Date of Receipt of such request. If the Death Benefit option is changed
from Option II to Option I, the Specified Amount will be increased by the
Certificate's Accumulation Value on the effective date of the change.
Conversely, if the Death Benefit option is changed from Option I to Option II,
the Specified Amount will be decreased by the Certificate's Accumulation Value
on the effective date of the change. Evidence of insurability satisfactory to
Colonial Life will be required on a change from Option I to Option II. A change
in the Death Benefit option may not be made if it would result in a Specified
Amount which is less than a minimum Specified Amount of $250,000 on Colonial
Heritage I and $1,000,000 on Colonial Heritage II. A change in Death Benefit
options will affect the cost of insurance.
After a Certificate has been in force for one year, the Certificate Owner may
adjust the existing insurance coverage by increasing or decreasing the
Specified Amount. The increase or decrease must be at least $250,000 on
Colonial Heritage I and $500,000 on Colonial Heritage II. To make a change, the
Certificate Owner must send a written request and the Certificate to Colonial
Life's Service Center. Any change in the Specified Amount will affect a
Certificate Owner's cost of insurance charge. An increase in the Specified
Amount will affect the determination of the amount available for a Type A loan,
as explained below, and will affect the cost of insurance discount, if any.
Decreases in the Specified Amount may affect the cost of insurance discount but
will have no affect on the determination of the amount available for a Type A
loan. Any decrease in the Specified Amount will become effective on the Monthly
Anniversary Date after the Date of Receipt of the request. Any decrease in
Specified Amount will first apply to coverage provided by the most recent
Specified Amount increase, then to the next most recent increases successively
and finally to the coverage under the original application. By applying
decreases in this manner, savings, generally, may be realized by a Certificate
Owner since additional costs and limitations associated with increases in
Specified Amounts would be eliminated first.
To apply for an increase in the Specified Amount, a supplemental application
must be completed and evidence satisfactory to Colonial Life that each Insured
is insurable must be submitted. Any approved increase in the Specified Amount
will become effective on the date shown in the Supplemental Certificate
Specifications Page. Such increase will not become effective, however, if the
Certificate's Cash Value is insufficient to cover the deduction for the cost of
the increased insurance for the Certificate month following the increase. Such
an increase may require a payment or future increased Planned Periodic
Premiums.
GUARANTEED DEATH BENEFIT. The Certificate Owner may add a Guaranteed Death
Benefit Rider to the Certificate under which the Death Benefit is guaranteed to
never be less than the Specified Amount provided that a cumulative minimum
premium requirement is met. The premium requirement is based on Issue Age, sex,
smoking status, underwriting class, Specified Amount and Death Benefit Option.
If the Specified Amount is increased, an additional premium, based on Attained
Age, will be required for such increase. There is a monthly charge for this
Death Benefit Rider. See "Optional Insurance Benefits".
COMBINED REQUESTS. Certificate Owners may combine requests for changes in the
Specified Amount and the Death Benefit option and requests for withdrawals. The
requirements and limitations that apply to each change will apply to the
combined transactions, including any required evidence of insurability,
Specified Amount and premium limitations, effectiveness on the Monthly
Anniversary Date following the Date of Receipt of the request, and the
sufficiency of Cash Value to keep the Certificate in force for the month
following the transaction.
The effect of a combined transaction on the cost of insurance, the amount of
the Death Benefit proceeds and the premium limitations will be the net result
of such effects for each such transaction considered separately. Certificate
Owners should consider the net result of a combined transaction in light of
insurance needs, financial circumstances and tax consequences.
MATURITY OF THE CERTIFICATE. As long as the Certificate remains in force,
Colonial Life will pay the Certificate's Cash Value, less outstanding
Certificate Debt, if any, on the Maturity Date. Benefits at maturity may be
paid in a lump sum or under an optional payment plan. The Maturity Date is the
date shown in the Certificate. To change the Maturity Date, a written request
and the Certificate must be sent to Colonial Life's
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<PAGE>
Service Center. The Date of Receipt for any request must be before the Maturity
Date then in effect. The requested Maturity Date must be (i) on a Certificate
anniversary, (ii) at least one year from the Date of Receipt of the request,
(iii) after the tenth Certificate year and (iv) on or before the Certificate
anniversary nearest to the Insured's 100th birthday for Colonial Heritage I and
the younger Insured's 100th birthday for Colonial Heritage II.
OPTIONAL INSURANCE BENEFITS. Subject to certain requirements, one or more of
the following optional insurance benefits may be added to a Certificate by
rider. More detailed information concerning such riders may be obtained from
the agent selling the Certificate. Additional riders, developed after the
effective date of this Prospectus, may also be available as optional insurance
benefits to the Certificate. The agent selling the Certificate should be
consulted regarding the availability of any such additional riders. The cost of
any optional insurance benefits will be deducted as part of the monthly
deduction. See "CHARGES AND DEDUCTIONS."
(a) GUARANTEED DEATH BENEFIT RIDER. This rider guarantees that the
Certificate will stay in force with a Death Benefit equal to the Specified
Amount, even if the Cash Value less Certificate Debt is not sufficient to pay
the monthly deduction, provided that cumulative premiums paid, less loans and
withdrawals, are greater than or equal to the guaranteed death benefit premium
multiplied by the number of months the Certificate has been in force. This
cumulative premium requirement must be met at all times for the rider to stay
in force. A monthly charge of $.01 per $1,000 of Specified Amount will be
deducted from the Certificate's Accumulation Value.
(b) AUTOMATIC INCREASE RIDER. This rider allows for scheduled annual
increases in Specified Amount of from 1% to 7%, subject to certain limitations
set forth in the rider. There is a monthly charge per unit of Specified Amount
which varies by Issue Age on Colonial Heritage I and by Joint Equal Age at
issue on Colonial Heritage II.
(c) CERTIFICATE EXCHANGE OPTION RIDER. This rider is available on Colonial
Heritage II provided both Insureds are insurable. It allows Colonial Heritage
II to be exchanged for two individual Colonial Heritage I Certificates, without
evidence of insurability, each with a face amount equal to one half of the
Death Benefit under Colonial Heritage II at the time of exchange, upon the
Insureds' divorce or the occurrence of certain federal tax law changes as
specified in the rider. There is no charge for this rider.
(d) EXTENSION OF MATURITY DATE RIDER. This rider allows the Certificate Owner
to extend the original Maturity Date of the Certificate under the terms set
forth in the rider.
SETTLEMENT OPTIONS. In addition to a lump sum payment of benefits under the
Certificate, any proceeds to be paid under the Certificate may be paid in any
of four methods. A settlement option may be designated by notifying Colonial
Life in writing. A lump sum payment of proceeds under the Certificate will be
made if a settlement option is not designated. Any amount left with Colonial
Life for payment under an optional payment plan will be transferred to the
account of the Beneficiary in the General Account on the date Colonial Life
receives written instructions. During the life of the Insured, the Certificate
Owner may select a plan. If a payment plan has not been chosen at the time the
Death Benefit becomes payable, a Beneficiary can choose a plan. If a
Beneficiary is changed, the payment plan selection will no longer be in effect
unless the Certificate Owner requests that it continue. An option may be
elected only if the amount of the proceeds is $2,000 or more. Colonial Life
reserves the right to change the interval of payments to 3, 6 or 12 months, if
necessary, to increase the guaranteed payments to at least $20 each.
OPTION A.
INSTALLMENTS OF A SPECIFIED AMOUNT. Payments of an agreed amount to be made
each month until the proceeds and interest are exhausted.
OPTION B.
INSTALLMENTS FOR A SPECIFIED PERIOD. Payments to be made each month for an
agreed number of years.
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<PAGE>
OPTION C.
LIFE INCOME. Payments to be made each month for the lifetime of the payee. It
is guaranteed that payments will be made for a minimum of 10, 15, or 20 years,
as agreed upon.
OPTION D.
INTEREST. Payment of interest on the proceeds held by Colonial Life
calculated at the compound rate of 3% per year. Interest payments will be made
at 12, 6, 3 or 1 month intervals, as agreed upon.
The interest rate for Options A, B, and D will not be less than 3% per year.
The interest rate for Option C will not be less than 2 1/2% per year. Interest
in addition to that stated may be paid or credited from time to time under any
option, but only in the sole discretion of Colonial Life.
Unless otherwise stated in the election of an option, the payee of
Certificate benefits shall have the right to receive the withdrawal value under
that option. For Options A and D, the withdrawal value shall be any unpaid
balance of proceeds plus accrued interest. For Option B, the withdrawal value
shall be the commuted value of the remaining payments. Such value will be
calculated on the same basis as the original payments. For Option C, the
withdrawal value will be the commuted value of the remaining payments. Such
value will be calculated on the same basis as the original payments. To receive
this value under Option C, the payee must submit evidence of insurability
acceptable to Colonial Life. Otherwise, the withdrawal value shall be the
commuted value of any remaining guaranteed payments. If the payee should be
alive at the end of the guaranteed period, the payment will be resumed on that
date. The payment will then continue for the lifetime of the payee.
If a payee of Certificate benefits dies before the proceeds are exhausted or
the prescribed payments made, a final payment will be made in one sum to the
estate of the last surviving payee. The amount to be paid will be calculated as
described for the applicable option in the Withdrawal Value provision of the
Certificate.
CALCULATION OF ACCUMULATION VALUE
The Certificate provides for an Accumulation Value, which will be determined
on a daily basis. Accumulation Value is the sum of the values in the Divisions
plus the value in the General Account. The Certificate's Accumulation Value in
the Divisions is calculated by units and unit values under the Certificates, as
described below. The Certificate's Accumulation Value will reflect a number of
factors, including the investment experience of the Divisions that are invested
in the Portfolios, any additional net premiums paid, any withdrawals, any
Certificate loans, and any charges assessed in connection with the Certificate.
Accumulation Values in Separate Account D are not guaranteed as to dollar
amount.
On the Allocation Date, the Accumulation Value in Separate Account D is the
initial premium payments, reduced by the state tax charge, the federal DAC tax
charge and the sales charge, plus interest earned prior to the Allocation Date,
and less the monthly deduction for the first Certificate month. On the
Allocation Date, the initial number of units credited to Separate Account D for
the Certificate will be established. At the end of each Valuation Period
thereafter, the Accumulation Value in a Division is (i) plus (ii) plus (iii)
minus (iv) minus (v) where:
(i) is the Accumulation Value in the Division on the preceding Valuation
Date multiplied by the net investment factor, as described below, for the
current Valuation Period,
(ii) is any Net Premium received during the current Valuation Period
which is allocated to the Division,
(iii) is all Accumulation Values transferred to the Division from another
Division or the General Account during the current Valuation Period,
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<PAGE>
(iv) is the Accumulation Values transferred from the Division to another
Division or the General Account and Accumulation Values transferred to
secure a Certificate loan during the current Valuation Period, and
(v) is all withdrawals from the Division during the current Valuation
Period.
In addition, whenever a Valuation Period includes the Monthly Anniversary
Date, the Accumulation Value at the end of such period is reduced by the
portion of the monthly deduction allocated to the Division.
The Certificate's total Accumulation Value in Separate Account D equals the
sum of the Certificate's Accumulation Value in each Division thereof.
UNIT VALUES. Units are credited to a Certificate Owner upon allocation of Net
Premiums to a Division. Each Net Premium payment allocated to a Division will
increase the number of units in that Division. Both full and fractional units
are credited. The number of units and fractional units is determined by
dividing the Net Premium payment by the unit value of the Division to which the
payment has been allocated. The unit value of each Division is determined on
each Valuation Date. The number of units credited will not change because of
subsequent changes in unit value. The dollar value of each Division's units
will vary depending upon the investment performance of the corresponding
Portfolio of the Trust.
Certain transactions affect the number of units in a Division under a
Certificate. Loans, surrenders and withdrawals, withdrawal and transfer fees
and charges, the Surrender Charge, and monthly deductions involve the
redemption of units and will decrease the number of units. Transfers of
Accumulation Value among Divisions will reduce or increase the number of units
in a Division, as appropriate.
The unit value of each Division's units initially under the Certificates was
$10.00. Thereafter, the unit value of a Division on any Valuation Date is
calculated by multiplying (1) by (2) where:
(1) is the Division's unit value on the previous Valuation Date; and
(2) is the net investment factor for the Valuation Period then ended.
The unit value of each Division's units on any day other than a Valuation
Date is the unit value as of the next Valuation Date and is used for the
purpose of processing transactions.
NET INVESTMENT FACTOR. The net investment factor measures the investment
experience of each Division and is used to determine changes in unit value from
one Valuation Period to the next Valuation Period. The net investment factor
for a Valuation Period is (i) divided by (ii) minus (iii) where:
(i) is (a) the value of the assets of the Division at the end of the
preceding Valuation Period, plus (b) the investment income and capital
gains, realized or unrealized, credited to the assets of the Division
during the Valuation Period for which the net investment factor is being
determined, minus (c) capital losses, realized or unrealized, charged
against those assets during the Valuation Period, minus (d) any amount
charged against the Division for taxes or any amount set aside during the
Valuation Period by Colonial Life to provide for taxes attributable to the
operation or maintenance of that Division, and
(ii) is the value of the assets of the Division at the end of the
preceding Valuation Period, and
(iii) is a charge no greater than .0017808% on a daily basis. This
corresponds to .65% on an annual basis for mortality and expense risks.
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<PAGE>
CASH VALUE BENEFITS
So long as it remains in force, the Certificate provides for certain benefits
prior to the Maturity Date. Subject to certain limitations, the Certificate
Owner may at any time obtain Cash Value by surrendering the Certificate or
making withdrawals from the Certificate. The Cash Value equals the Accumulation
Value less any Surrender Charge. In addition, the Certificate Owner has certain
Certificate loan privileges under the Certificate.
SURRENDER PRIVILEGES. As long as the Certificate is in force, a Certificate
Owner may surrender the Certificate or make a withdrawal from the Certificate
at any time by sending a written request along with the Certificate to Colonial
Life. See "FEDERAL TAX MATTERS--Certificate Proceeds."
The surrender value of the Certificate equals the Cash Value less any
outstanding Certificate Debt. The amount payable upon surrender of the
Certificate is the surrender value at the end of the Valuation Period during
which the request is received. The surrender value may be paid in a lump sum or
under one of the optional payment plans specified in the Certificate. Proceeds
will generally be paid within seven days of the Date of Receipt of a request
for surrender or withdrawal. See "CERTIFICATE BENEFITS AND RIGHTS--Settlement
Options."
A Certificate Owner can obtain a portion of the Certificate's Cash Value by
withdrawal of Cash Value from the Certificate. A withdrawal from a Certificate
is subject to the following conditions:
A. The amount withdrawn may not exceed the Cash Value less any
outstanding Certificate Debt.
B. The minimum amount that may be withdrawn is $5,000.
C. A charge of $100 will be deducted from the amount of each withdrawal.
Withdrawals generally will affect the Certificate's Accumulation Value, Cash
Value and the life insurance proceeds payable under the Certificate. The
Certificate's Cash Value will be reduced by the amount of the withdrawal. The
Certificate's Accumulation Value will be reduced by the amount of the
withdrawal plus any applicable pro-rata Surrender Charge. Life insurance
proceeds payable under the Certificate will generally be reduced by the amount
of the withdrawal plus any applicable pro-rata Surrender Charge, unless the
withdrawal is combined with a request to maintain or increase the Specified
Amount. See "CERTIFICATE BENEFITS AND RIGHTS--Combined Requests".
Under Option I, which provides for life insurance proceeds equal to the
greater of the Specified Amount or the Accumulation Value of the Certificate at
the date of death multiplied by the corridor percentage, the Specified Amount
will be reduced by the amount of the withdrawal plus any applicable pro-rata
Surrender Charge. The Specified Amount remaining after a withdrawal may not be
less than $250,000 for Colonial Heritage I and $500,000 for Colonial Heritage
II. As a result, Colonial Life will not effectuate any withdrawal that would
reduce the Specified Amount below these minimums. If increases in Specified
Amount previously have occurred, a withdrawal will first reduce the Specified
Amount of the most recent increase, then the most recent increases
successively, then the coverage under the original application. If the life
insurance proceeds payable under either Death Benefit option, both before and
after the withdrawal, is the Accumulation Value multiplied by the corridor
percentage, a withdrawal generally will result in a reduction in life insurance
proceeds equal to the amount paid upon withdrawal, multiplied by the corridor
percentage then in effect.
Under Option II, which provides for life insurance proceeds equal to the
Specified Amount plus Accumulation Value, a reduction in Accumulation Value as
a result of a withdrawal will typically result in a dollar per dollar reduction
in the life insurance proceeds payable under the Certificate.
A Certificate Owner may allocate a withdrawal among the Divisions and the
General Account. If no such allocation is made, a withdrawal will be allocated
among the Divisions and the General Account in the same proportion that the
Accumulation Value in each Division and the Accumulation Value in the General
Account, less any Certificate Debt bears to the total Accumulation Value of the
Certificate, less any Certificate Debt, on the date of withdrawal. See "FEDERAL
TAX MATTERS--Certificate Proceeds".
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<PAGE>
CERTIFICATE LOANS. So long as the Certificate remains in force, a Certificate
Owner may borrow money from Colonial Life at any time after the first
Certificate anniversary using the Certificate as the only security for the
loan. Loans have priority over the claims of any assignee or any other person.
Generally, the maximum loan amount is 90% of the Cash Value at the end of the
Valuation Period during which the loan request is received. The maximum amount
which may be borrowed at any given time is the maximum loan amount reduced by
any outstanding Certificate Debt.
Proceeds of Certificate loans ordinarily will be disbursed within seven days
from the Date of Receipt of a request for a loan by Colonial Life, although
payments may be postponed under certain circumstances. See "OTHER MATTERS--
Postponement of Payments". Colonial Life may, in its discretion, permit loans
to be made by telephone if the proper authorization form is on file with
Colonial Life. So long as the Certificate remains in force, the loan may be
repaid in whole or in part without penalty at any time while an Insured is
living.
When a Certificate loan is made, a portion of the Certificate's Accumulation
Value sufficient to secure the loan will be transferred to the General Account.
A Certificate loan removes the proceeds from the investment experience of
Separate Account D which will have a permanent effect on the Accumulation Value
and Death Benefit even if the loan is repaid. Any loan interest that is due and
unpaid will also be so transferred. Accumulation Value equal to Certificate
Debt in the General Account will accrue interest daily at an annual rate of 6%.
The Certificate Owner may allocate a Certificate loan among the Divisions and
the General Account. If no such allocation is made the loan will be allocated
among the Divisions and the General Account in the same proportion that the
Accumulation Value in each Division and the Accumulation Value in the General
Account less Certificate Debt bears to the total Accumulation Value of the
Certificate, less Certificate Debt, on the date of the loan.
Colonial Life will charge interest on any outstanding Certificate loan with
such interest compounded annually. There are two types of loans available. A
Type A loan is charged the same interest rate as the interest credited to the
amount of Accumulation Value held in the General Account to secure loans. The
amount available at any time for a Type A loan equals the maximum loan amount
less the Guideline Single Premium at issue, as set forth in the Code, less any
outstanding Type A loans. Any other loans are Type B loans. A Type B loan is
charged an interest rate of 6.85%. It is possible for one loan request to
result in both a Type A and a Type B loan. A request for a loan will be granted
first as a Type A loan, to the extent available, and then as a Type B loan.
Once a Certificate loan is granted, it remains a Type A or Type B until it is
repaid. Increases in the Specified Amount will affect the determination of the
amount available for a Type A loan; however, decreases in the Specified Amount
will not have any such effect. Interest is due and payable at the end of each
Certificate year, and any interest not paid when due becomes loan principal.
Where applicable, loans are subject to conditions and requirements of the
Employee Retirement Income Security Act of 1974 ("ERISA"), as well as the terms
of any retirement plan in connection with which the Certificate has been
purchased. The ERISA rules relating to loans are complex and vary depending on
the individual circumstances of each Certificate. Employers and Certificate
Owners should consult with qualified advisers before exercising the loan
privileges.
Certificate Debt equals the total of all outstanding Certificate loans and
accrued interest on Certificate loans. If Certificate Debt exceeds Cash Value,
Colonial Life will notify the Certificate Owner and any assignee of record. A
payment at least equal to the amount of excess Certificate Debt above the Cash
Value must be made to Colonial Life within 61 days from the date Certificate
Debt exceeds Cash Value, otherwise, the Certificate will lapse and terminate
without value. In such event, the Certificate Owner may be taxed on the total
appreciation under the Certificate. The Certificate may, however, later be
reinstated, subject to satisfactory proof of insurability and the payment of a
reinstatement premium. See "THE CERTIFICATES--Reinstatement".
So long as the Certificate remains in force, Certificate Debt may be repaid
in whole or in part at any time during an Insured's life. If there is any
existing Certificate Debt, premium payments in the amount of the Planned
Periodic Premium, received at the Premium Frequency, will be applied as
premium. Premium
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payments in excess of the Planned Periodic Premium or premium payments received
other than at the Premium Frequency, will first be applied as Certificate loan
repayments, then as premium when the Certificate Debt is repaid. For
Certificate Owners with both Type A and Type B loans, repayments of the loan
will be applied first to Type B loans and then to Type A loans. Upon repayment,
the Certificate's Accumulation Value securing the repaid portion of the debt in
the General Account will be transferred to the Divisions and the General
Account using the same percentages used to allocate Net Premiums. Any
outstanding Certificate Debt is subtracted from life insurance proceeds payable
at the Insured's or last surviving Insured's death, from Accumulation Value
upon surrender, and from Cash Value payable on the Maturity Date.
OTHER MATTERS
VOTING RIGHTS. To the extent required by law, Colonial Life will vote the
Trust shares held in the various Divisions at regular and special shareholder
meetings of the Trust in accordance with instructions received from persons
having voting interests in Separate Account D. If, however, the 1940 Act or any
regulation thereunder should be amended or if the present interpretation
thereof should change and, as a result, Colonial Life determines that it is
permissible to vote the Trust shares in its own right, it may elect to do so.
The number of votes on which each Certificate Owner has the right to instruct
will be determined by dividing the Certificate's Accumulation Value in a
Division by the net asset value per share of the corresponding Portfolio in
which the Division invests, or as otherwise required by law. Fractional shares
will be counted. The number of votes on which the Certificate Owner has the
right to instruct will be determined as of the date coincident with the date
established by the Trust for determining shareholders eligible to vote at the
meeting of the Trust. Voting instructions will be solicited by written
communications prior to such meeting in accordance with procedures established
by the Trust. Colonial Life will vote Trust shares as to which no instructions
are received in proportion to the voting instructions which are received with
respect to all Certificates participating in the Trust in accordance with
applicable law. Each person having a voting interest will receive proxy
material, reports and other materials relating to the Trust. The shares held by
Colonial Life, including shares for which no voting instructions have been
received, shares held in Separate Account D representing charges imposed by
Colonial Life against Separate Account D under the Certificates and shares held
by Colonial Life that are not otherwise attributable to Certificates, will also
be voted by Colonial Life in proportion to instructions received from the
owners of variable life insurance Certificates funded through Separate Account
D. Colonial Life reserves the right to vote any or all such shares at its
discretion to the extent consistent with then current interpretations of the
1940 Act and rules thereunder.
Colonial Life may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that shares be voted
so as to cause a change in subclassification or investment objective of the
Trust or disapprove an investment advisory contract of the Trust. In addition,
Colonial Life may disregard voting instructions in favor of changes initiated
by a Certificate Owner in the investment policies or the investment adviser of
the Trust if Colonial Life reasonably disapproves of such changes. A change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities or Colonial Life determined that the
change would be inconsistent with the investment objectives of Separate Account
D or would result in the purchase of securities for Separate Account D which
vary from the general quality and nature of investments and investment
techniques utilized by other separate accounts created by Colonial Life or any
affiliate of Colonial Life which have similar investment objectives. In the
event that Colonial Life does disregard voting instructions, a summary of that
action and the reason for such actions will be included in the next semi-annual
report to the Certificate Owner.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS. Colonial Life reserves
the right, subject to compliance with applicable law, to make additions to,
deletions from, or substitutions for the shares held by any Division or which
any Division may purchase. If shares of the Trust should no longer be available
for investment or if, in the judgment of Colonial Life's management, further
investment in shares of the Trust should become inappropriate in view of the
purposes of the Certificate, Colonial Life may substitute shares of any other
investment company for shares already purchased, or to be purchased in the
future under the
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Certificates. No substitution of securities will take place without notice to
and consent of Certificate Owners and without prior approval of the Commission,
all to the extent required by the 1940 Act. Any surrender of a Certificate due
to a change in a Portfolio's investment policy will incur any applicable
Surrender Charges.
Each class of Trust shares is subject to certain investment restrictions
which may not be changed without the approval of the majority of the holders of
such class. See the accompanying Prospectus for the Trust.
ANNUAL REPORT. Each year a report will be sent to the Certificate Owner which
shows the current Accumulation Value, Cash Value, premiums paid and all charges
since the last annual report as well as the balance of outstanding Certificate
loans. Colonial Life will also send to the Certificate Owner the reports
required by the 1940 Act.
CONFIRMATION. Confirmation notices (or other appropriate notification) will
be mailed promptly at the time of the following transactions:
(1) Certificate issue;
(2) receipt of premium payments;
(3) initial allocation among Divisions on the Allocation Date;
(4) transfers among Divisions;
(5) change of premium allocation;
(6) change between Option I and Option II;
(7) increases or decreases in Specified Amount;
(8) withdrawals, surrenders or loans;
(9) receipt of loan repayments; and
(10) reinstatements; and
(11) redemptions due to insufficient funds.
LIMITATION ON RIGHT TO CONTEST. Colonial Life will not contest or revoke the
insurance coverage provided under the Certificate, except for any subsequent
increase in Specified Amount, after the Certificate has been in force during
the lifetime of each Insured for a period of two years from the date it is
issued. Any increase in the Specified Amount will not be contested after such
increase has been in force during the lifetime of each Insured for two years
following the effective date of the increase. Any increase will be contestable
within the two year period only with regard to statements concerning this
increase.
MISSTATEMENTS. If the age or sex of an Insured has been misstated in an
application, including a reinstatement application, Colonial Life will adjust
the benefits payable to reflect the correct age or sex.
SUICIDE. The Certificate does not cover the risk of suicide within two years
from the date the Certificate is issued or two years from the date of any
increase in Specified Amount with respect to such increase, whether the Insured
is sane or insane, unless otherwise specified by state law. In the event of
suicide of any Insured within two years of the date the Certificate is issued,
the only liability of Colonial Life will be a refund of premiums paid, without
interest, less any Certificate Debt and less any withdrawal. In the event of
suicide by any Insured within two years of an increase in Specified Amount, the
only liability of Colonial Life with respect to the increase will be a refund
of the cost of insurance for such increase.
Under Colonial Heritage II, if the first death is by suicide and the
surviving Insured is classified by Colonial Life as insurable on the
Certificate Date, Colonial Life will issue, upon request of the Certificate
Owner and without evidence of insurability, an individual Certificate providing
coverage on the life of the surviving Insured equal to the coverage on the
Insureds for which premiums or cost of insurance was refunded.
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BENEFICIARIES. The original Beneficiaries and contingent Beneficiaries are
designated by the Certificate Owner on the application. If changed, the primary
Beneficiary or contingent Beneficiary is as shown in the latest change filed
with Colonial Life. One or more primary or contingent Beneficiaries may be
named in the application. In such case, the proceeds of the Certificate will be
paid in equal shares to the survivors in the appropriate beneficiary class
unless requested otherwise by the Certificate Owner.
POSTPONEMENT OF PAYMENTS. Payment of any amount upon surrender, withdrawal,
Certificate loan, or benefits payable at death or maturity may be postponed
whenever: (i) the New York Stock Exchange is closed other than customary week-
end and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the Commission; (ii) the Commission by order
permits postponement for the protection of Certificate Owners; or (iii) an
emergency exists, as determined by the Commission, as a result of which
disposal of securities is not reasonably practical or it is not reasonably
practicable to determine the value of net assets in Separate Account D.
ASSIGNMENT. Ownership of the Certificate can be assigned or the Certificate
can be assigned as collateral security. Colonial Life must be notified in
writing if the Certificate has been assigned. Each assignment will be subject
to any payments made or action taken by Colonial Life prior to its notification
of such assignment. Colonial Life is not responsible for the validity of an
assignment. A Certificate Owner's rights and the rights of the Beneficiary may
be affected by an assignment.
ILLUSTRATION OF BENEFITS AND VALUES. The Certificate Owner may request
illustrations of Death Benefits, Accumulation Values and Cash Values at any
time after the Certificate Date. Illustrations will be based on the existing
Accumulation Value and Cash Value at the time of the request and both the
maximum and the then current costs of insurance rates. Although Colonial Life
does not currently charge a fee for such illustrations, it reserves the right
to charge an administrative fee, not to exceed $25, to cover the cost of
preparing the illustrations.
NON-PARTICIPATING CERTIFICATE. The Certificate does not share in any surplus
distributions of Colonial Life. No dividends are payable with respect to the
Certificate.
THE GENERAL ACCOUNT
CERTIFICATE OWNERS MAY ALLOCATE NET PREMIUMS AND TRANSFER ACCUMULATION VALUE TO
THE GENERAL ACCOUNT. BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE GENERAL ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND THE GENERAL ACCOUNT HAS NOT BEEN REGISTERED AS AN INVESTMENT
COMPANY UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE GENERAL ACCOUNT NOR ANY
INTERESTS THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE ACTS, AND COLONIAL
LIFE HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS RELATING TO THE GENERAL
ACCOUNT. DISCLOSURES REGARDING THE GENERAL ACCOUNT MAY, HOWEVER, BE SUBJECT TO
CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING
TO THE ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
GENERAL DESCRIPTION. The General Account consists of all assets owned by
Colonial Life other than those in Separate Account D and other separate
accounts which have been or may be established by Colonial Life. Subject to
applicable law, Colonial Life has sole discretion over the investment of the
assets of the General Account.
A Certificate Owner may elect to allocate Net Premiums to the General Account
or to transfer Accumulation Value to or from the Divisions and the General
Account. The allocation or transfer of funds to the General Account does not
entitle a Certificate Owner to share in the investment experience of the
General Account. Instead, Colonial Life guarantees that Accumulation Value in
the General Account will accrue interest daily at an effective annual rate of
at least 4%, independent of the actual investment experience of the General
Account. Colonial Life is not obligated to credit interest at any higher rate,
although Colonial Life may, in its sole discretion, do so.
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If the Certificate issued as applied for is not accepted or the "free look"
is exercised, no interest will be credited and Colonial Life will retain any
interest earned on the initial Net Premium.
GENERAL ACCOUNT ACCUMULATION VALUE. The Accumulation Value in the General
Account on the Allocation Date is equal to the portion of the Net Premium
payments, plus interest earned, which have been paid and allocated to the
General Account, less the portion of the first monthly deduction allocated to
the General Account.
Colonial Life guarantees that interest credited to each Certificate Owner's
Accumulation Value in the General Account will not be less than an effective
annual rate of at least 4%. Colonial Life may, IN ITS SOLE DISCRETION, credit a
higher rate of interest, although it is not obligated to credit interest in
excess of 4% per year, and might not do so. ANY INTEREST CREDITED ON THE
CERTIFICATE'S ACCUMULATION VALUE IN THE GENERAL ACCOUNT IN EXCESS OF THE
GUARANTEED RATE OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF
COLONIAL LIFE. THE CERTIFICATE OWNER ASSUMES THE RISK THAT INTEREST CREDITED
MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4% PER YEAR. Accumulation Value
in the General Account that equals Certificate Debt will be credited interest
daily at an effective annual rate of 6%. The Accumulation Value in the General
Account will be calculated on each Monthly Anniversary Date of the Certificate,
or on any other date with consistent adjustments.
Colonial Life guarantees that, at any time prior to the Maturity Date, the
Accumulation Value in the General Account will not be less than the amount of
the Net Premiums allocated or Accumulation Value transferred to the General
Account, plus interest at the rate of 4% per year, plus any excess interest
which Colonial Life credits and any amounts transferred into the General
Account, less the sum of all charges allocable to the General Account and any
amounts deducted from the General Account in connection with withdrawals or
transfers to Separate Account D.
DETERMINATION OF CHARGES. The portion of the monthly deduction attributable
to the General Account will be determined as of the actual Monthly Anniversary
Date, even if the Monthly Anniversary Date does not fall on a Valuation Date.
PREMIUM DEPOSIT FUND. As a convenience to Certificate Owners, Colonial Life
permits Certificate Owners to deposit funds in a premium deposit fund ("PDF"),
subject to the terms and conditions of the appropriate agreement. Funds
deposited in the PDF earn interest at a minimum annual rate of 4%, with
interest credited on each monthly anniversary date. Interest on these funds is
not tax deferred and will be annually reported on Form 1099 to the Certificate
Owner. An amount equal to the Planned Periodic Premium will be transferred on
the Certificate date to pay premiums on the Certificate. Certificate Owners may
withdraw all or part of the funds from the PDF at any time. No commissions are
earned or paid until premium payments are made pursuant to transfers from the
PDF.
DISTRIBUTION OF THE GROUP POLICIES AND CERTIFICATES
The Group Policies and Certificates will be sold by individuals who, in
addition to being licensed as life insurance agents for Colonial Life, are also
registered representatives of Chubb Securities Corporation, the principal
underwriter of the Certificates, or of broker-dealers who have entered into
written sales agreements with the principal underwriter. Chubb Securities
Corporation is a New Hampshire corporation organized in 1969. Chubb Securities
Corporation is registered with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. Each broker-dealer with whom
Chubb Securities Corporation has executed a selling agreement will receive as a
commission the full charge of 3% imposed on premiums. Any such broker-dealers
will be registered under the Securities Exchange Act of 1934 and their
representatives selling the Group Policies and Certificates will be authorized
under applicable insurance laws and regulations to sell insurance products of
this type. It is not expected that the compensation paid by Colonial Life in
connection with such sales will exceed that described above for sales by Chubb
Securities Corporation's registered representatives.
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Colonial Life and Separate Account D have entered into a Distribution
Agreement with Chubb Securities Corporation which continues until terminated by
any party on 60 days notice. Chubb Securities Corporation is not obligated to
sell any specified amount of Certificates and may not assign its
responsibilities under the Distribution Agreement. Colonial Life reimburses
Chubb Securities Corporation for its expenses under the Distribution Agreement.
Chubb Securities Corporation is engaged in the sale and distribution of
various other securities, including other flexible premium variable life
policies. It acts as principal underwriter for other flexible premium variable
life policies and variable annuity contracts issued by Colonial Life and Chubb
Life Insurance Company of America, Colonial Life's parent, and for the Chubb
America Fund, Inc. and Chubb Investment Funds, Inc. mutual funds. It sells a
number of mutual fund shares as well as shares of other securities and limited
partnership interests in both public and private limited partnerships. Mutual
fund shares available for sale by Chubb Securities Corporation are sold
pursuant to non-exclusive selling agreements with the distributors of the
mutual funds.
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MANAGEMENT OF COLONIAL LIFE
Executive Officers and Directors of Colonial Life
DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS ADDRESS
- ---- ------------------------
<S> <C>
*Percy Chubb, III..... Vice Chairman
The Chubb Corporation
(also serves as Vice Chairman of The Colonial Life
Insurance Company of America)
15 Mountain View Road
P.O. Box 1615
Warren, New Jersey 07061-1615
*Frederick H. Condon.. Senior Vice President, General Counsel and Secretary
Chubb Life Insurance Company of America
(also serves as Senior Vice President, General Counsel
and Secretary of The Colonial Life Insurance Company
of America)
One Granite Place
Concord, NH 03301
*Randall G. Craig..... Executive Vice President and Chief Operating Officer
Chubb Life Insurance Company of America
(also serves as Executive Vice President and Chief
Operating Officer of The Colonial Life Insurance Company
of America)
One Granite Place
Concord, NH 03301
*David S. Fowler...... Senior Vice President
The Chubb Corporation
(also serves as Vice Chairman of The Colonial Life
Insurance Company of America)
15 Mountain View Road
P.O. Box 1615
Warren, New Jersey 07061-1615
*Dean R. O'Hare....... Chairman and Chief Executive Officer
The Chubb Corporation
(also serves as Chairman of The Colonial Life Insurance
Company of America)
15 Mountain View Road
P.O. Box 1615
Warren, NJ 07061-1615
*Theresa M. Stone..... President and Chief Executive Officer
Chubb Life Insurance Company of America
(also serves as President and Chief Executive Officer of
The Colonial Life Insurance Company of America)
One Granite Place
Concord, NH 03301
*Richard V. Werner.... Executive Vice President and Chief Financial Officer
Chubb Life Insurance Company of America
(also serves as Executive Vice President and Chief
Financial Officer of The Colonial Life Insurance Company
of America)
One Granite Place
Concord, NH 03301
</TABLE>
- --------
* Executive Officer of Colonial Life
32
<PAGE>
EXECUTIVE OFFICERS (OTHER THAN DIRECTORS)
<TABLE>
<CAPTION>
NAME
- ----
<S> <C>
Ronald R. Angarella..................... Senior Vice President
Charles C. Cornelio..................... Senior Vice President and
Chief Administrative Officer
Ronald H. Emery......................... Senior Vice President and Controller
Gregory W. Johnson...................... Senior Vice President
Vincent G. Mace, Jr. ................... Senior Vice President and Group Actuary
Warren L. Reynolds...................... Senior Vice President
Bruce R. Stefany........................ Senior Vice President
James R. Wagner, Jr. ................... Senior Vice President and
Chief Marketing Officer
Arthur V. Anderson...................... Vice President
Douglas H. Blampied..................... Vice President
Thomas M. Bodrogi....................... Vice President
Edwin E. Creter......................... Vice President
Richard A. Croak........................ Vice President and Assistant Secretary
Ned I. Gerstman......................... Vice President
J. Michael Gannon....................... Vice President and Counsel
Glenn Hilsinger......................... Vice President
Donald M. Kane.......................... Vice President
Patrick A. Lang......................... Vice President
Deborah A. Leitch....................... Vice President
Bonnie L. Lyons......................... Vice President
Edward C. Mackenzie..................... Vice President
Justin J. Manjorin...................... Vice President
Donna L. Metcalf........................ Vice President
Christopher J. Moakley.................. Vice President
Thomas E. Murphy, Jr. MD................ Vice President
Herbert B. Olson........................ Vice President and Group Actuary
Patrick Ramotar......................... Vice President
Richard D. Reed......................... Vice President
Kenneth L. Robinson, Jr. ............... Vice President
Robert R. Rodgers....................... Vice President
Russell C. Simpson...................... Vice President and Treasurer
James S. Smith.......................... Vice President
William A. Spencer...................... Vice President
John A. Thomas.......................... Vice President
Ernest J. Tsouros....................... Vice President
David G. Underwood, II,MD............... Vice President
John W. Wells........................... Vice President
</TABLE>
The officers and employees of Colonial Life who have access to the assets of
Separate Account D are covered by a fidelity bond issued by Aetna Casualty and
Surety Company in the amount of $35,000,000.
33
<PAGE>
STATE REGULATION OF COLONIAL LIFE
Colonial Life is governed under the laws of the state of New Jersey and is
subject to regulation by the Insurance Commissioner of New Jersey. An annual
statement is filed with the New Jersey Insurance Commissioner on or before
March 1 of each year covering the operations and reporting on the financial
condition of Colonial Life as of December 31 of the preceding year.
Periodically, the Commissioner examines the assets and liabilities of Colonial
Life and Separate Account D and verifies their adequacy and a full examination
of Colonial Life's operations is conducted by the Commissioner at least every
five years.
In addition, Colonial Life is subject to the insurance laws and regulations
of other states within which it is licensed to operate. Generally, the
insurance department of any other state applies the laws of the state of
domicile in determining permissible investments.
FEDERAL TAX MATTERS
TAX CONSIDERATIONS. The following description is a brief summary of some of
the tax rules, primarily related to federal income taxes under the Code, which,
in the opinion of Colonial Life, are currently in effect and is not intended as
tax advice. Colonial Life believes that, as discussed below, the Group Policies
and Certificates will in general receive favorable tax treatment under the
Code. Because there are issues as to which the law is still developing or may
change, however, and because this information is not intended as tax advice,
Colonial Life recommends that the Certificate Owner or prospective Certificate
Owner rely only on the advice of a qualified tax adviser.
CERTIFICATE PROCEEDS. The Certificate contains provisions not found in
traditional life insurance policies providing only for fixed benefits. However,
under the Code, the Certificate should qualify as a life insurance contract for
federal income tax purposes, with the result that all Death Benefits paid under
the Certificate will generally be fully excludable from the gross income of the
Certificate's Beneficiary for federal income tax purposes and, as long as the
Group Policy and Certificate remain in force, income earned on the Certificate
will not be subject to federal income tax unless and until there is a
distribution from the Certificate. Certificate Owners should consult with their
own tax advisers in this regard.
The federal income tax treatment of a distribution from the Certificate will
depend on whether a Certificate is a life insurance policy and also if it is
determined to be a "modified endowment contract," as defined by the Code.
Colonial Life will notify a Certificate Owner if the amount of premiums paid in
would cause a Certificate to be a modified endowment contract and will allow a
refund of the excess premium. Thus, the Certificate Owner may choose to have
the Certificate treated as a modified endowment contract.
A modified endowment contract is a life insurance policy under which premiums
are paid that exceed the sum of net level premiums that would be paid under a
policy that provides for paid-up insurance after the payment of seven level
annual premiums (the "seven-pay test"). A Certificate will be treated as a
modified endowment contract unless the cumulative premiums actually paid under
a Certificate, at all times during the first seven Certificate years, are less
than or equal to the cumulative seven-pay premiums which would have been paid
under the hypothetical Certificate on or before such times.
If a Certificate Owner reduces the Death Benefit during the first seven
Certificate years by requesting a decrease in the Specified Amount or a partial
withdrawal, the seven-pay test will be redetermined based on the new Death
Benefit and applied retrospectively for purposes of the seven-pay test. If the
premiums previously paid are greater than the seven-pay premium test limits,
the Certificate will become a modified endowment contract. Generally, a life
insurance policy which is received in exchange for a modified endowment
contract will also be considered a modified endowment contract.
34
<PAGE>
If a Certificate is deemed to be a modified endowment contract, any
distribution from the Certificate will be taxed in a manner comparable to
distributions from annuities (i.e., on an "income-first" basis); distributions
for this purpose include a loan or partial withdrawal. Any such distributions
will be considered taxable income to the extent accumulation value under the
Certificate exceeds investment in the Certificate.
A 10% penalty tax will apply to the taxable portion of such a distribution.
No penalty will apply to distributions (i) to taxpayers 59 1/2 years of age or
older, (ii) in the case of a disability which can be expected to result in
death or to be of indefinite duration or (iii) received as part of a series of
substantially equal periodic annuity payments for the life (or life expectancy)
of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer
and his beneficiary.
To the extent a Certificate becomes a modified endowment contract, any
distribution, including any loan, which occurs in the Certificate year it
becomes a modified endowment contract and in any year thereafter, will be
taxable income to the Certificate Owner. Also, any distributions within two
years before a Certificate becomes a modified endowment contract will also be
income taxable to the Certificate Owner. The Secretary of the Treasury has been
authorized to prescribe rules which would similarly treat other distributions
made in anticipation of a policy becoming a modified endowment contract. For
purposes of determining the amount of any distribution includable in income,
all modified endowment contract policies that fail the above-described tests
which are issued by the same insurer, or its affiliates, to the same
Certificate Owner during any calendar year are treated as one contract. The
Secretary of the Treasury is also authorized to issue regulations in this
connection.
In addition to the distribution rules for modified endowment contracts, the
Code and proposed regulations thereunder require that reasonable mortality and
other charges be used in satisfying the definition of life insurance. The death
benefit under a Certificate which meets this definition will continue to be
excluded from the beneficiary's gross income. Colonial Life believes that the
Certificates meet this definition. However, there is uncertainty as to the
meaning of "reasonable mortality charges" and resultant uncertainties as to
Colonial Heritage II's qualification if a different definition is adopted by
the Treasury Department. As long as a Certificate does not violate the tests
described above, it will not fail to meet the tests of the Code and the general
tax provisions described herein still apply.
The foregoing summary does not purport to be complete or to cover all
situations, and, as always, there is some degree of uncertainty with respect to
the application of the current tax laws. In particular, prior to the issuance
of final regulations or other clarifications under certain sections of the
Code, there may be some uncertainties about the tax treatment of the
Certificate with respect to the mortality charges, substandard risks and any
extension of the Maturity Date. In addition to the provisions discussed above,
the United States Congress may consider other legislation which, if enacted,
could adversely affect the tax treatment of life insurance policies. Also, the
Treasury Department may amend current regulations or adopt new regulations with
respect to this and other Code provisions. Therefore, Certificate Owners are
advised to consult a tax adviser or attorney for more complete tax information,
specifically regarding the applicability of the Code provisions to an
individual Certificate Owner's situation.
Under normal circumstances, the Certificate is not a modified endowment
contract and loans received under the Certificate will be construed as
indebtedness of the Certificate Owner in the same manner as loans under a fixed
benefit life insurance policy and no part of any loan under the Certificate is
expected to constitute income to the Certificate Owner. Certificate Owners are
advised to consult a tax adviser or attorney regarding the deduction of
interest paid on loans.
Even if the Certificate is not a modified endowment contract, a partial
withdrawal together with a reduction in death benefits during the first 15
Certificate years may create taxable income for the Certificate Owner. The
amount of that taxable income is determined under a complex formula and it may
be equal to part or all of, but not greater than, the income on the contract. A
partial withdrawal made after the first 15 Certificate years will be taxed on a
recovery of premium-first basis, and will only be subject to federal income tax
to the extent such proceeds exceed the total amount of premiums the Certificate
Owner has paid that have not been previously withdrawn.
35
<PAGE>
If a Certificate Owner makes a partial withdrawal, surrender, loan or
exchange of the Certificate, Colonial Life may be required to withhold federal
income tax from the portion of the money received by the Certificate Owner that
is includable in the Certificate Owner 's federal gross income. A Certificate
Owner who is not a corporation may elect not to have such tax withheld;
however, such election must be made before Colonial Life makes the payment. In
addition, if a Certificate Owner fails to provide Colonial Life with a correct
taxpayer identification number (usually a social security number) or if the
Treasury notifies Colonial Life that the taxpayer identification number which
has been provided is not correct, the election not to have such taxes withheld
will not be effective. In any case, a Certificate Owner is liable for payment
of the federal income tax on the taxable portion of money received, whether or
not an election to have federal income tax withheld is made. If a Certificate
Owner elects not to have federal income tax withheld, or if the amount withheld
is insufficient, then the Certificate Owner may be responsible for payment of
estimated tax. A Certificate Owner may also incur penalties under the estimated
tax rules if the withholding and estimated tax payments are insufficient.
Colonial Life suggests that Certificate Owners consult with a tax adviser or
attorney as to the tax implications of these matters.
In the event that a Certificate is owned by a trustee under a pension or
profit sharing plan, or similar deferred compensation arrangement, the tax
consequences of ownership or receipt of proceeds under the Certificate could
differ from those stated herein. However, if ownership of such a Certificate is
transferred from the plan to a plan participant (upon termination of
employment, for example), the Certificate will be subject to all of the federal
tax rules described above. A Certificate owned by a trustee under such a plan
may be subject to restrictions under ERISA and a tax adviser should be
consulted regarding any applicable ERISA requirements.
The Certificate may also be used in various arrangements, including
nonqualified deferred compensation or salary continuation plans, split dollar
insurance plans, executive bonus plans and others, where the tax consequences
may vary depending on the particular facts and circumstances of each individual
arrangement. A tax adviser should be consulted regarding the tax attributes of
any particular arrangement where the value of it depends in part on its tax
consequences.
Federal estate and local estate, inheritance and other tax consequences of
ownership or receipt of Certificate proceeds depend upon the circumstances of
each Certificate Owner and Beneficiary.
Current Treasury regulations set standards for diversification of the
investments underlying variable life insurance policies in order for such
policies to be treated as life insurance. Colonial Life believes it presently
is in compliance with the diversification requirements as set forth in the
regulations and intends to remain in compliance with such diversification
requirements. If the diversification requirements are not satisfied, the
Certificate would not be treated as a life insurance contract. As a consequence
to the Certificate Owner, income earned on a Certificate would be taxable to
the Certificate Owner in the calendar quarter in which the diversification
requirements were not satisfied, and for all subsequent calendar quarters.
The Secretary of the Treasury may issue a regulation or a ruling which will
prescribe the circumstances in which a Certificate Owner's control of the
investments of a segregated asset account may cause the Certificate Owner,
rather than the insurance company, to be treated as the owner of the assets of
the account. The regulation or ruling could impose requirements that are not
reflected in the Certificate, relating, for example, to such elements of
Certificate Owner control as premium allocation, investment selection, transfer
privileges and investments in a division focusing on a particular investment
sector. It has also been suggested that, in certain circumstances, control over
the investment adviser might constitute prohibited Certificate Owner control.
Colonial Life believes that Certificate Owner control will not exist under the
Certificate. Because failure to comply with any such regulation or ruling
presumably would cause earnings on a Certificate Owner's interest in Separate
Account D to be includable in the Certificate Owner's gross income in the year
earned, Colonial Life has reserved certain rights to alter the Certificate and
investment alternatives so as to comply with such regulation or ruling.
Colonial Life believes that any such regulation or ruling would
36
<PAGE>
apply prospectively. Since the regulation or ruling has not been issued, there
can be no assurance as to the content of such regulation or ruling or even
whether application of the regulation or ruling will be prospective. For these
reasons, Certificate Owners are urged to consult with their own tax advisers.
A Certificate Owner may elect to exchange Colonial Heritage II for two
individual Colonial Heritage I Certificates provided the conditions under the
Certificate Exchange Option Rider are met. This could have adverse tax
consequences including, but not limited to, the recognition of taxable income
in an amount up to any taxable gain in the Certificate at the time of the
exchange.
CHARGE FOR COLONIAL LIFE INCOME TAXES. Colonial Life is presently taxed as a
life insurance company under the provisions of the Code. The Code specifically
provides for adjustments in reserves for variable policies, and Colonial Life
will include flexible premium life insurance operations in its tax return in
accordance with these rules.
Currently no charge is made against Separate Account D for Colonial Life's
federal income taxes, or provisions for such taxes, that may be attributable to
Separate Account D. Colonial Life may charge each Division for its portion of
any income tax charged to Colonial Life on the Division or its assets. See
"CHARGES AND DEDUCTIONS--Premium Charges" for a description of the federal DAC
tax charge deducted from premium payments. Under present laws, Colonial Life
may incur state and local taxes (in addition to premium taxes) in several
states. At present, these taxes are not significant. If they increase, however,
Colonial Life may decide to make charges for such taxes or provisions for such
taxes against Separate Account D. Colonial Life would retain any investment
earnings on any tax charges accumulated in a Division. Any such charges against
Separate Account D or its Divisions could have an adverse effect on the
investment experience of such Division.
EMPLOYMENT BENEFIT PLANS
Employers and employee organizations should consider, in consultation with
counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
purchase of a Certificate in connection with an employment-related insurance or
benefit plan. The United States Supreme Court held, in a 1983 decision, that,
under Title VII, optional annuity benefits under a deferred compensation plan
could not vary on the basis of sex.
LEGAL PROCEEDINGS
There are no legal proceedings to which Separate Account D is a party or to
which the assets of any of the Divisions are subject. Colonial Life is not
involved in any litigation that is of material importance in relation to its
total assets or that relate to Separate Account D.
EXPERTS
The financial statements of Colonial Life as of December 31, 1994 and for the
year then ended, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
No financial statements of Separate Account D are included in this Prospectus
because, at the date hereof, Separate Account D had no assets or liabilities
and had not yet commenced operations.
Actuarial matters included in this Prospectus have been examined by Michael
J. LeBoeuf, FSA, MAAA as stated in the opinion filed as an exhibit to the
Registration Statement.
37
<PAGE>
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Group Policies and Certificates offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
amendments and exhibits to the Registration Statement to all of which reference
is made for further information concerning Separate Account D, Colonial Life
and the Group Policies and Certificates offered hereby. Statements contained in
this Prospectus as to the contents of the Group Policies and Certificates and
other legal instruments are summaries. For a complete statement of the terms
thereof reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The most current financial statements of Colonial Life are those as of the
end of the most recent fiscal year. Colonial Life does not prepare financial
statements more often than annually and believes that any incremental benefit
to prospective Certificate Owners that may result from preparing and delivering
more current financial statements, though unaudited, does not justify the
additional cost that would be incurred. In addition, Colonial Life represents
that there have been no adverse changes in the financial condition or
operations of Colonial Life between the end of the most current fiscal year and
the date of this Prospectus.
The financial statements of Colonial Life which are included in the
Prospectus should be considered only as bearing on the ability of Colonial Life
to meet its obligations under the Certificate. They should not be considered as
bearing on the investment experience of the assets held in Separate Account D.
38
<PAGE>
APPENDIX A
ILLUSTRATIONS OF ACCUMULATION VALUES CASH VALUES AND DEATH BENEFITS
Following are a series of tables that illustrate how the Accumulation Values,
Cash Values and Death Benefits of a Certificate change with the investment
performance of the Trust. The tables show how the Accumulation Values, Cash
Values and Death Benefits of a Certificate issued to an Insured(s) of a given
age(s) and given premium would vary over time if the return on the assets held
in each Portfolio of the Trust were a constant gross annual rate of 0%, 6%, and
12%. The tables on pages A-3 through A-8 illustrate a Colonial Heritage I
Certificate issued to a male, age 35, under a standard rate non-smoker
underwriting risk classification. The tables on pages A-9 through A-14
illustrate a Colonial Heritage II Certificate issued to a male, age 40, under a
standard rate non-smoker underwriting risk classification and a female, age 35,
under a standard rate non-smoker underwriting risk classification. The
Accumulation Values, Cash Values and Death Benefits would be different from
those shown if the returns averaged 0%, 6%, and 12% over a period of years, but
fluctuated above and below those averages for individual Certificate years.
The amount of the Accumulation Value exceeds the Cash Value during the first
five Certificate years due to the Surrender Charge. For Certificate years six
and after, the Accumulation Value and Cash Value are equal, since the Surrender
Charge has been reduced to zero.
The second column shows the Accumulation Value of the premiums paid at the
stated interest rate. The third and sixth columns illustrate the Accumulation
Values and the fourth and seventh columns illustrate the Cash Values of the
Certificate over the designated period. The Accumulation Values shown in the
third column and the Cash Values shown in the fourth column assume the monthly
charge for cost of insurance is based upon the current cost of insurance rates
and assume a cost of insurance discount which varies based on the Specified
Amount of the Certificate. The current cost of insurance rates, which may be
modified at any time, are based on the sex, Issue Age, Certificate year, and
rating class of the Insured(s). The cost of insurance discount may be modified
or terminated at any time. The Accumulation Values shown in the sixth column
and the cash values shown in the seventh column assume the monthly charge for
cost of insurance is based upon the maximum cost of insurance rates allowable,
which are based on the Commissioner's 1980 Standard Ordinary Mortality Table.
The fifth and eighth columns illustrate the Death Benefit of a Certificate over
the designated period. The illustrations of Death Benefits reflect the same
assumptions as the Accumulation Values and Cash Values. The Death Benefit
values also vary between tables, depending upon whether Option I or Option II
Death Benefits are illustrated.
The amounts shown for the Death Benefit, Accumulation Values, and Cash Values
reflect the fact that the net investment return of the Divisions of Separate
Account D is lower than the gross rates of return on the assets in the Trust,
as a result of expenses paid by the Trust and charges levied against the
Divisions of Separate Account D.
The certificate values shown take into account a daily investment advisory
fee equivalent to the maximum annual rate of .62% of the aggregate average
daily net assets of the Portfolios of the Trust plus an assumed charge of .30%
of the aggregate average daily net assets to cover expenses incurred by the
Trust. The .62% investment advisory fee is an average of the individual
investment advisory fees of the five Portfolios. See the attached Prospectus
for the Trust for a description of the assumption of expenses of the Trust in
excess of specified annual rates averaging .92%. The Certificate values also
take into account a daily charge to each Division of Separate Account D for
assuming mortality and expense risks which is equivalent to a charge at an
annual rate of .65% of the average net assets of the Divisions of Separate
Account D. After deduction of these amounts, the illustrated gross investment
rates of 0%, 6% and 12% correspond to approximate net annual rates of -1.57%,
4.43% and 10.43%, respectively.
The hypothetical values shown in the tables do not reflect any charges for
federal income taxes or other taxes other than the DAC tax. However, if, in the
future, any additional charges are made, the gross annual investment rate of
return would have to exceed the stated investment rates by a sufficient amount
to cover the tax charges in order to produce the Accumulation Values, Cash
Values and Death Benefits illustrated.
The tables illustrate the Certificate values that would result based on
hypothetical investment rates of return if premiums are paid in full at the
beginning of each year, if all Net Premiums are allocated to Separate Account
D, and if
A-1
<PAGE>
no Certificate loans have been made. The values would vary from those shown if
the assumed annual premium payments were paid in installments during a year.
The values would also vary if the Certificate Owner varied the amount or
frequency of premium payments. The tables also assume that the Certificate
Owner has not requested an increase or decrease in Specified Amount, that no
withdrawals have been made and no Surrender Charges imposed, and that no
transfers have been made and no transfer charges imposed.
Upon request, Colonial Life will provide, without charge, a comparable
illustration based upon the proposed Insured's age, sex and rating class the
Specified Amount requested, the proposed frequency and amount of premium
payments and any available riders requested. Existing Certificate Owners may
request illustrations based on existing cash value at the time of request.
Colonial Life has reserved the right to charge an administrative fee of up to
$25 for such illustrations.
A-2
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 0% (-1.57% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 10,966 10,348 1,000,000 9,753 9,135 1,000,000
2 26,605 21,687 21,193 1,000,000 19,293 18,798 1,000,000
3 40,913 32,112 31,741 1,000,000 28,593 28,222 1,000,000
4 55,937 42,285 42,038 1,000,000 37,650 37,403 1,000,000
5 71,712 52,232 52,108 1,000,000 46,452 46,328 1,000,000
6 88,275 61,956 61,956 1,000,000 54,994 54,994 1,000,000
7 105,667 71,454 71,454 1,000,000 63,254 63,254 1,000,000
8 123,928 80,722 80,722 1,000,000 71,240 71,240 1,000,000
9 143,103 89,765 89,765 1,000,000 78,931 78,931 1,000,000
10 163,236 98,570 98,570 1,000,000 86,333 86,333 1,000,000
11 184,376 107,152 107,152 1,000,000 93,418 93,418 1,000,000
12 206,572 115,471 115,471 1,000,000 100,174 100,174 1,000,000
13 229,879 123,526 123,526 1,000,000 106,594 106,594 1,000,000
14 254,351 131,297 131,297 1,000,000 112,665 112,665 1,000,000
15 280,047 138,775 138,775 1,000,000 118,363 118,363 1,000,000
16 307,027 145,972 145,972 1,000,000 123,676 123,676 1,000,000
17 335,356 152,849 152,849 1,000,000 128,554 128,554 1,000,000
18 365,102 159,374 159,374 1,000,000 132,945 132,945 1,000,000
19 396,335 165,546 165,546 1,000,000 136,808 136,808 1,000,000
20 429,130 171,325 171,325 1,000,000 140,075 140,075 1,000,000
25 619,402 193,155 193,155 1,000,000 145,696 145,696 1,000,000
30 862,243 197,603 197,603 1,000,000 125,647 125,647 1,000,000
35 1,172,177 173,363 173,363 1,000,000 58,878 58,878 1,000,000
40 1,567,739 98,100 98,100 1,000,000 0 0 0
45 0 0 0 0 0 0 0
50 0 0 0 0 0 0 0
55 0 0 0 0 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $12,360 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-3
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 6% (4.43% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ---------------------------------- ---------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ --------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 11,647 11,029 1,000,000 10,395 9,777 1,000,000
2 26,605 23,736 23,241 1,000,000 21,190 20,695 1,000,000
3 40,913 36,229 35,858 1,000,000 32,373 32,002 1,000,000
4 55,937 49,187 48,940 1,000,000 43,957 43,710 1,000,000
5 71,712 62,653 62,529 1,000,000 55,944 55,820 1,000,000
6 88,275 76,652 76,652 1,000,000 68,345 68,345 1,000,000
7 105,667 91,201 91,201 1,000,000 81,157 81,157 1,000,000
8 123,928 106,319 106,319 1,000,000 94,402 94,402 1,000,000
9 143,103 122,034 122,034 1,000,000 108,079 108,079 1,000,000
10 163,236 138,360 138,360 1,000,000 122,215 122,215 1,000,000
11 184,376 155,342 155,342 1,000,000 136,801 136,801 1,000,000
12 206,572 172,992 172,992 1,000,000 151,850 151,850 1,000,000
13 229,879 191,340 191,340 1,000,000 167,374 167,374 1,000,000
14 254,351 210,401 210,401 1,000,000 183,390 183,390 1,000,000
15 280,047 230,202 230,202 1,000,000 199,899 199,899 1,000,000
16 307,027 250,786 250,786 1,000,000 216,920 216,920 1,000,000
17 335,356 272,157 272,157 1,000,000 234,437 234,437 1,000,000
18 365,102 294,328 294,328 1,000,000 252,437 252,437 1,000,000
19 396,335 317,346 317,346 1,000,000 270,917 270,917 1,000,000
20 429,130 341,229 341,229 1,000,000 289,859 289,859 1,000,000
25 619,402 474,872 474,872 1,000,000 391,652 391,652 1,000,000
30 862,243 633,449 633,449 1,127,539(3) 505,667 505,667 1,000,000
35 1,172,177 814,178 814,178 1,286,402(3) 633,367 633,367 1,000,720
40 1,567,739 1,015,082 1,015,082 1,441,417(3) 772,622 772,622 1,097,123(3)
45 2,072,589 1,232,813 1,232,813 1,614,985(3) 909,180 909,180 1,191,026(3)
50 2,716,918 1,464,312 1,464,312 1,786,461(3) 1,041,805 1,041,805 1,271,002(3)
60 4,588,809 1,972,541 1,972,541 2,189,520(3) 1,295,567 1,295,567 1,438,079(3)
65 5,928,325 2,347,159 2,347,159 2,441,045(3) 1,430,138 1,430,138 1,487,344(3)
</TABLE>
- -------
(1) Assumes a $12,360 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-4
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 12% (10.43% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ----------------------------------- ----------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 12,328 11,710 1,000,000 11,038 10,420 1,000,000
2 26,605 25,866 25,372 1,000,000 23,166 22,671 1,000,000
3 40,913 40,683 40,312 1,000,000 36,470 36,100 1,000,000
4 55,937 56,956 56,709 1,000,000 51,070 50,823 1,000,000
5 71,712 74,862 74,739 1,000,000 67,087 66,964 1,000,000
6 88,275 94,576 94,576 1,000,000 84,668 84,668 1,000,000
7 105,667 116,283 116,283 1,000,000 103,955 103,955 1,000,000
8 123,928 140,186 140,186 1,000,000 125,141 125,141 1,000,000
9 143,103 166,532 166,532 1,000,000 148,408 148,408 1,000,000
10 163,236 195,600 195,600 1,000,000 173,992 173,992 1,000,000
11 184,376 227,699 227,699 1,000,000 202,118 202,118 1,000,000
12 206,572 263,121 263,121 1,000,000 233,060 233,060 1,000,000
13 229,879 302,229 302,229 1,000,000 267,124 267,124 1,000,000
14 254,351 345,414 345,414 1,000,000 304,656 304,656 1,000,000
15 280,047 393,049 393,049 1,084,816(3) 346,029 346,029 1,000,000
16 307,027 445,455 445,455 1,189,365(3) 391,635 391,635 1,045,666(3)
17 335,356 503,052 503,052 1,302,904(3) 441,526 441,526 1,143,552(3)
18 365,102 566,317 566,317 1,421,455(3) 495,987 495,987 1,244,928(3)
19 396,335 635,809 635,809 1,545,017(3) 555,411 555,411 1,349,649(3)
20 429,130 712,075 712,075 1,680,497(3) 620,160 620,160 1,463,577(3)
25 619,402 1,218,688 1,218,688 2,486,124(3) 1,040,257 1,040,257 2,122,124(3)
30 862,243 2,009,998 2,009,998 3,577,797(3) 1,672,197 1,672,197 2,976,511(3)
35 1,172,177 3,226,138 3,226,138 5,097,297(3) 2,600,688 2,600,688 4,109,086(3)
40 1,567,739 5,064,488 5,064,488 7,191,573(3) 3,932,104 3,932,104 5,583,588(3)
45 2,072,589 7,796,641 7,796,641 10,213,600(3) 5,779,060 5,779,060 7,570,569(3)
50 2,716,918 11,802,156 11,802,156 14,398,630(3) 8,318,795 8,318,795 10,148,930(3)
55 3,539,264 17,627,383 17,627,383 20,447,765(3) 11,757,373 11,757,373 13,638,553(3)
60 4,588,809 26,146,044 26,146,044 29,022,109(3) 16,532,436 16,532,436 18,351,004(3)
65 5,928,325 40,108,769 40,108,769 41,713,119(3) 23,192,407 23,192,407 24,120,103(3)
</TABLE>
- -------
(1) Assumes a $12,360 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-5
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 0% (-1.57% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 10,961 10,343 1,010,961 9,736 9,118 1,009,736
2 26,605 21,671 21,176 1,021,671 19,239 18,745 1,019,239
3 40,913 32,074 31,703 1,032,074 28,485 28,114 1,028,485
4 55,937 42,215 41,968 1,042,215 37,467 37,220 1,037,467
5 71,712 52,118 51,994 1,052,118 46,170 46,046 1,046,170
6 88,275 61,787 61,787 1,061,787 54,588 54,588 1,054,588
7 105,667 71,214 71,214 1,071,214 62,696 62,696 1,062,696
8 123,928 80,395 80,395 1,080,395 70,499 70,499 1,070,499
9 143,103 89,333 89,333 1,089,333 77,972 77,972 1,077,972
10 163,236 98,013 98,013 1,098,013 85,121 85,121 1,085,121
11 184,376 106,447 106,447 1,106,447 91,910 91,910 1,091,910
12 206,572 114,591 114,591 1,114,591 98,326 98,326 1,098,326
13 229,879 122,439 122,439 1,122,439 104,355 104,355 1,104,355
14 254,351 129,966 129,966 1,129,966 109,983 109,983 1,109,983
15 280,047 137,158 137,158 1,137,158 115,177 115,177 1,115,177
16 307,027 144,023 144,023 1,144,023 119,924 119,924 1,119,924
17 335,356 150,514 150,514 1,150,514 124,162 124,162 1,124,162
18 365,102 156,587 156,587 1,156,587 127,829 127,829 1,127,829
19 396,335 162,237 162,237 1,162,237 130,877 130,877 1,130,877
20 429,130 167,413 167,413 1,167,413 133,224 133,224 1,133,224
25 619,402 184,617 184,617 1,184,617 132,431 132,431 1,132,431
30 862,243 180,273 180,273 1,180,273 102,587 102,587 1,102,587
35 1,172,177 141,583 141,583 1,141,583 24,930 24,930 1,024,930
40 1,567,739 48,758 48,758 1,048,758 0 0 0
45 0 0 0 0 0 0 0
50 0 0 0 0 0 0 0
55 0 0 0 0 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $12,360 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-6
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 6% (4.43% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 11,642 11,024 1,011,642 10,376 9,758 1,010,376
2 26,605 23,717 23,223 1,023,717 21,131 20,636 1,021,131
3 40,913 36,185 35,814 1,036,185 32,249 31,878 1,032,249
4 55,937 49,103 48,856 1,049,103 43,738 43,491 1,043,738
5 71,712 62,512 62,389 1,062,512 55,593 55,469 1,055,593
6 88,275 76,434 76,434 1,076,434 67,820 67,820 1,067,820
7 105,667 90,880 90,880 1,090,880 80,405 80,405 1,080,405
8 123,928 105,864 105,864 1,105,864 93,365 93,365 1,093,365
9 143,103 121,410 121,410 1,121,410 106,684 106,684 1,106,684
10 163,236 137,522 137,522 1,137,522 120,379 120,379 1,120,379
11 184,376 154,240 154,240 1,154,240 134,426 134,426 1,134,426
12 206,572 171,561 171,561 1,171,561 148,820 148,820 1,148,820
13 229,879 189,503 189,503 1,189,503 163,557 163,557 1,163,557
14 254,351 208,063 208,063 1,208,063 178,630 178,630 1,178,630
15 280,047 227,250 227,250 1,227,250 194,014 194,014 1,194,014
16 307,027 247,092 247,092 1,247,092 209,702 209,702 1,209,702
17 335,356 267,558 267,558 1,267,558 225,637 225,637 1,225,637
18 365,102 288,626 288,626 1,288,626 241,758 241,758 1,241,758
19 396,335 310,313 310,313 1,310,313 258,013 258,013 1,258,013
20 429,130 332,587 332,587 1,332,587 274,314 274,314 1,274,314
25 619,402 451,810 451,810 1,451,810 353,973 353,973 1,353,973
30 862,243 577,634 577,634 1,577,634 419,512 419,512 1,419,512
35 1,172,177 695,295 695,295 1,695,295 443,338 443,338 1,443,338
40 1,567,739 777,046 777,046 1,777,046 377,894 377,894 1,377,894
45 2,072,589 775,555 775,555 1,775,555 138,079 138,079 1,138,079
50 2,716,918 610,250 610,250 1,610,250 0 0 0
55 3,539,264 160,496 160,496 1,160,496 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $12,360 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-7
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 12% (10.43% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ----------------------------------- ----------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 12,323 11,705 1,012,323 11,018 10,400 1,011,018
2 26,605 25,846 25,352 1,025,846 23,101 22,607 1,023,101
3 40,913 40,633 40,262 1,040,633 36,329 35,958 1,036,329
4 55,937 56,857 56,610 1,056,857 50,810 50,562 1,050,810
5 71,712 74,689 74,566 1,074,689 66,654 66,530 1,066,654
6 88,275 94,297 94,297 1,094,297 83,993 83,993 1,083,993
7 105,667 115,856 115,856 1,115,856 102,952 102,952 1,102,952
8 123,928 139,558 139,558 1,139,558 123,698 123,698 1,123,698
9 143,103 165,634 165,634 1,165,634 146,388 146,388 1,146,388
10 163,236 194,345 194,345 1,194,345 171,224 171,224 1,171,224
11 184,376 225,980 225,980 1,225,980 198,388 198,388 1,198,388
12 206,572 260,797 260,797 1,260,797 228,101 228,101 1,228,101
13 229,879 299,123 299,123 1,299,123 260,609 260,609 1,260,609
14 254,351 341,296 341,296 1,341,296 296,182 296,182 1,296,182
15 280,047 387,704 387,704 1,387,704 335,098 335,098 1,335,098
16 307,027 438,795 438,795 1,438,795 377,684 377,684 1,377,684
17 335,356 495,001 495,001 1,495,001 424,251 424,251 1,424,251
18 365,102 556,813 556,813 1,556,813 475,140 475,140 1,475,140
19 396,335 624,814 624,814 1,624,814 530,739 530,739 1,530,739
20 429,130 699,595 699,595 1,699,595 591,445 591,445 1,591,445
25 619,402 1,198,346 1,198,346 2,444,625(3) 989,381 989,381 2,018,337(3)
30 862,243 1,977,709 1,977,709 3,520,323(3) 1,594,044 1,594,044 2,837,399(3)
35 1,172,177 3,175,518 3,175,518 5,017,318(3) 2,482,628 2,482,628 3,922,552(3)
40 1,567,739 4,986,191 4,986,191 7,080,391(3) 3,756,952 3,756,952 5,334,871(3)
45 2,072,589 7,677,244 7,677,244 10,057,190(3) 5,524,877 5,524,877 7,237,588(3)
50 2,716,918 11,622,538 11,622,538 14,179,496(3) 7,956,071 7,956,071 9,706,406(3)
55 3,539,264 17,360,215 17,360,215 20,137,850(3) 11,247,826 11,247,826 13,047,478(3)
60 4,588,809 25,750,861 25,750,861 28,583,456(3) 15,819,033 15,819,033 17,559,126(3)
65 5,928,325 39,503,671 39,503,671 41,083,818(3) 22,039,751 22,039,751 23,039,751(3)
</TABLE>
- -------
(1) Assumes a $12,360 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
(3) Death Benefits are greater than Specified Amount plus Accumulation Value
due to adjustment by the corridor percentage.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-8
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 0% (-1.57% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $19,620
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 18,102 17,121 2,000,000 18,098 17,117 2,000,000
2 42,232 35,914 35,129 2,000,000 35,898 35,113 2,000,000
3 64,945 53,438 52,850 2,000,000 53,400 52,812 2,000,000
4 88,793 70,679 70,287 2,000,000 70,606 70,214 2,000,000
5 113,834 87,638 87,442 2,000,000 87,518 87,322 2,000,000
6 140,126 104,318 104,318 2,000,000 104,133 104,133 2,000,000
7 167,734 120,721 120,721 2,000,000 120,451 120,451 2,000,000
8 196,721 136,848 136,848 2,000,000 136,471 136,471 2,000,000
9 227,158 152,700 152,700 2,000,000 152,189 152,189 2,000,000
10 259,117 168,278 168,278 2,000,000 167,602 167,602 2,000,000
11 292,674 183,602 183,602 2,000,000 182,706 182,706 2,000,000
12 327,909 198,673 198,673 2,000,000 197,494 197,494 2,000,000
13 364,905 213,489 213,489 2,000,000 211,955 211,955 2,000,000
14 403,751 228,046 228,046 2,000,000 226,077 226,077 2,000,000
15 444,540 242,338 242,338 2,000,000 239,846 239,846 2,000,000
16 487,368 256,359 256,359 2,000,000 253,240 253,240 2,000,000
17 532,337 270,098 270,098 2,000,000 266,239 266,239 2,000,000
18 579,555 283,546 283,546 2,000,000 278,816 278,816 2,000,000
19 629,134 296,689 296,689 2,000,000 290,938 290,938 2,000,000
20 681,192 309,511 309,511 2,000,000 302,566 302,566 2,000,000
25 983,226 368,043 368,043 2,000,000 351,588 351,588 2,000,000
30 1,368,707 413,593 413,593 2,000,000 377,433 377,433 2,000,000
35 1,860,689 435,211 435,211 2,000,000 356,014 356,014 2,000,000
40 2,488,596 408,437 408,437 2,000,000 235,200 235,200 2,000,000
45 3,289,983 270,742 270,742 2,000,000 0 0 0
50 0 0 0 0 0 0 0
55 0 0 0 0 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $19,620 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-9
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 6% (4.43% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $19,620
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ---------------------------------- ---------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ --------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 19,206 18,225 2,000,000 19,202 18,221 2,000,000
2 42,232 39,256 38,471 2,000,000 39,239 38,454 2,000,000
3 64,945 60,186 59,598 2,000,000 60,146 59,557 2,000,000
4 88,793 82,035 81,643 2,000,000 81,957 81,564 2,000,000
5 113,834 104,841 104,645 2,000,000 104,709 104,513 2,000,000
6 140,126 128,644 128,644 2,000,000 128,438 128,438 2,000,000
7 167,734 153,486 153,486 2,000,000 153,182 153,182 2,000,000
8 196,721 179,410 179,410 2,000,000 178,979 178,979 2,000,000
9 227,158 206,497 206,497 2,000,000 205,871 205,871 2,000,000
10 259,117 234,803 234,803 2,000,000 233,898 233,898 2,000,000
11 292,674 264,378 264,378 2,000,000 263,102 263,102 2,000,000
12 327,909 295,276 295,276 2,000,000 293,525 293,525 2,000,000
13 364,905 327,552 327,552 2,000,000 325,209 325,209 2,000,000
14 403,751 361,264 361,264 2,000,000 358,194 358,194 2,000,000
15 444,540 396,470 396,470 2,000,000 392,524 392,524 2,000,000
16 487,368 433,230 433,230 2,000,000 428,237 428,237 2,000,000
17 532,337 471,605 471,605 2,000,000 465,375 465,375 2,000,000
18 579,555 511,662 511,662 2,000,000 503,979 503,979 2,000,000
19 629,134 553,463 553,463 2,000,000 544,088 544,088 2,000,000
20 681,192 597,078 597,078 2,000,000 585,740 585,740 2,000,000
25 983,226 844,898 844,898 2,061,550(3) 818,609 818,609 2,000,000
30 1,368,707 1,147,566 1,147,566 2,352,510(3) 1,093,410 1,093,410 2,241,490(3)
35 1,860,689 1,509,289 1,509,289 2,641,255(3) 1,402,271 1,402,271 2,453,975(3)
40 2,488,596 1,929,604 1,929,604 2,932,999(3) 1,731,247 1,731,247 2,631,496(3)
45 3,289,983 2,396,176 2,396,176 3,258,800(3) 2,053,590 2,053,590 2,792,883(3)
50 4,312,778 2,887,609 2,887,609 3,609,511(3) 2,348,920 2,348,920 2,936,150(3)
55 5,618,153 3,403,110 3,403,110 3,981,639(3) 2,614,149 2,614,149 3,058,555(3)
60 7,284,178 3,983,418 3,983,418 4,421,594(3) 2,867,364 2,867,364 3,182,775(3)
65 9,410,496 4,776,215 4,776,215 4,967,263(3) 3,119,554 3,119,554 3,244,336(3)
</TABLE>
- -------
(1) Assumes a $19,620 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-10
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 12% (10.43% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $19,620
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ----------------------------------- ----------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 20,309 19,328 2,000,000 20,305 19,324 2,000,000
2 42,232 42,730 41,945 2,000,000 42,713 41,928 2,000,000
3 64,945 67,481 66,893 2,000,000 67,438 66,850 2,000,000
4 88,793 94,805 94,413 2,000,000 94,721 94,329 2,000,000
5 113,834 124,968 124,772 2,000,000 124,823 124,627 2,000,000
6 140,126 158,263 158,263 2,000,000 158,034 158,034 2,000,000
7 167,734 195,020 195,020 2,000,000 194,673 194,673 2,000,000
8 196,721 235,650 235,650 2,000,000 235,092 235,092 2,000,000
9 227,158 280,563 280,563 2,000,000 279,680 279,680 2,000,000
10 259,117 330,208 330,208 2,000,000 328,866 328,866 2,000,000
11 292,674 385,086 385,086 2,000,000 383,125 383,125 2,000,000
12 327,909 445,746 445,746 2,000,000 442,978 442,978 2,000,000
13 364,905 512,798 512,798 2,000,000 509,002 509,002 2,000,000
14 403,751 586,906 586,906 2,159,815(3) 581,817 581,817 2,141,085(3)
15 444,540 668,784 668,784 2,367,495(3) 662,053 662,053 2,343,667(3)
16 487,368 759,230 759,230 2,588,975(3) 750,429 750,429 2,558,964(3)
17 532,337 859,125 859,125 2,817,931(3) 847,738 847,738 2,780,582(3)
18 579,555 969,437 969,437 3,063,420(3) 954,838 954,838 3,017,288(3)
19 629,134 1,091,221 1,091,221 3,328,225(3) 1,072,651 1,072,651 3,271,585(3)
20 681,192 1,225,651 1,225,651 3,591,158(3) 1,202,204 1,202,204 3,522,457(3)
25 983,226 2,136,601 2,136,601 5,213,308(3) 2,067,436 2,067,436 5,044,544(3)
30 1,368,707 3,614,600 3,614,600 7,409,931(3) 3,429,804 3,429,804 7,031,097(3)
35 1,860,689 5,979,870 5,979,870 10,464,773(3) 5,514,422 5,514,422 9,650,239(3)
40 2,488,596 9,695,118 9,695,118 14,736,580(3) 8,598,690 8,598,690 13,070,008(3)
45 3,289,983 15,367,547 15,367,547 20,899,864(3) 12,955,358 12,955,358 17,619,286(3)
50 4,312,778 23,759,236 23,759,236 29,699,045(3) 18,899,782 18,899,782 23,624,727(3)
55 5,618,153 36,064,435 36,064,435 42,195,389(3) 26,906,505 26,906,505 31,480,611(3)
60 7,284,178 54,546,585 54,546,585 60,546,709(3) 37,839,700 37,839,700 42,002,067(3)
65 9,410,496 84,764,218 84,764,218 88,154,786(3) 52,892,927 52,892,927 55,008,644(3)
</TABLE>
- -------
(1) Assumes a $19,620 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-11
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 0% (-1.57% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $19,620
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 18,102 17,121 2,018,102 18,098 17,117 2,018,098
2 42,232 35,914 35,129 2,035,914 35,897 35,113 2,035,897
3 64,945 53,438 52,849 2,053,438 53,399 52,810 2,053,399
4 88,793 70,677 70,285 2,070,677 70,603 70,210 2,070,603
5 113,834 87,635 87,439 2,087,635 87,510 87,314 2,087,510
6 140,126 104,312 104,312 2,104,312 104,119 104,119 2,104,119
7 167,734 120,711 120,711 2,120,711 120,428 120,428 2,120,428
8 196,721 136,832 136,832 2,136,832 136,433 136,433 2,136,433
9 227,158 152,675 152,675 2,152,675 152,131 152,131 2,152,131
10 259,117 168,242 168,242 2,168,242 167,518 167,518 2,167,518
11 292,674 183,550 183,550 2,183,550 182,586 182,586 2,182,586
12 327,909 198,601 198,601 2,198,601 197,326 197,326 2,197,326
13 364,905 213,389 213,389 2,213,389 211,724 211,724 2,211,724
14 403,751 227,911 227,911 2,227,911 225,766 225,766 2,225,766
15 444,540 242,158 242,158 2,242,158 239,430 239,430 2,239,430
16 487,368 256,120 256,120 2,256,120 252,693 252,693 2,252,693
17 532,337 269,785 269,785 2,269,785 265,524 265,524 2,265,524
18 579,555 283,140 283,140 2,283,140 277,891 277,891 2,277,891
19 629,134 296,166 296,166 2,296,166 289,750 289,750 2,289,750
20 681,192 308,841 308,841 2,308,841 301,052 301,052 2,301,052
25 983,226 365,926 365,926 2,365,926 346,956 346,956 2,346,956
30 1,368,707 407,583 407,583 2,407,583 364,941 364,941 2,364,941
35 1,860,689 419,312 419,312 2,419,312 325,552 325,552 2,325,552
40 2,488,596 370,335 370,335 2,370,335 173,705 173,705 2,173,705
45 3,289,983 192,904 192,904 2,192,904 0 0 0
50 0 0 0 0 0 0 0
55 0 0 0 0 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $19,620 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-12
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 6% (4.43% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $19,620
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ---------------------------------- ---------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ --------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 19,206 18,225 2,019,206 19,202 18,221 2,019,202
2 42,232 39,256 38,471 2,039,256 39,238 38,454 2,039,238
3 64,945 60,185 59,597 2,060,185 60,144 59,555 2,060,144
4 88,793 82,033 81,641 2,082,033 81,952 81,560 2,081,952
5 113,834 104,837 104,641 2,104,837 104,699 104,503 2,104,699
6 140,126 128,636 128,636 2,128,636 128,420 128,420 2,128,420
7 167,734 153,472 153,472 2,153,472 153,151 153,151 2,153,151
8 196,721 179,388 179,388 2,179,388 178,928 178,928 2,178,928
9 227,158 206,463 206,463 2,206,463 205,790 205,790 2,205,790
10 259,117 234,750 234,750 2,234,750 233,774 233,774 2,233,774
11 292,674 264,299 264,299 2,264,299 262,919 262,919 2,262,919
12 327,909 295,162 295,162 2,295,162 293,260 293,260 2,293,260
13 364,905 327,390 327,390 2,327,390 324,832 324,832 2,324,832
14 403,751 361,037 361,037 2,361,037 357,667 357,667 2,357,667
15 444,540 396,154 396,154 2,396,154 391,796 391,796 2,391,796
16 487,368 432,797 432,797 2,432,797 427,242 427,242 2,427,242
17 532,337 471,018 471,018 2,471,018 464,029 464,029 2,464,029
18 579,555 510,871 510,871 2,510,871 502,175 502,175 2,502,175
19 629,134 552,406 552,406 2,552,406 541,685 541,685 2,541,685
20 681,192 595,674 595,674 2,595,674 582,564 582,564 2,582,564
25 983,226 839,611 839,611 2,839,611 806,904 806,904 2,806,904
30 1,368,707 1,131,734 1,131,734 3,131,734 1,057,682 1,057,682 3,057,682
35 1,860,689 1,466,386 1,466,386 3,466,386 1,305,224 1,305,224 3,305,224
40 2,488,596 1,816,817 1,816,817 3,816,817 1,480,847 1,480,847 3,480,847
45 3,289,983 2,104,990 2,104,990 4,104,990 1,432,090 1,432,090 3,432,090
50 4,312,778 2,168,294 2,168,294 4,168,294 908,544 908,544 2,908,544
55 5,618,153 1,786,152 1,786,152 3,786,152 0 0 0
60 7,284,178 732,981 732,981 2,732,981 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
- -------
(1) Assumes a $19,620 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-13
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
COLONIAL HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE CERTIFICATE
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 12% (10.43% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $19,620
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ----------------------------------- ----------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
- ---- -------------- ------------ ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 20,309 19,328 2,020,309 20,305 19,324 2,020,305
2 42,232 42,730 41,945 2,042,730 42,712 41,927 2,042,712
3 64,945 67,481 66,892 2,067,481 67,436 66,848 2,067,436
4 88,793 94,803 94,411 2,094,803 94,716 94,323 2,094,716
5 113,834 124,963 124,767 2,124,963 124,812 124,616 2,124,812
6 140,126 158,254 158,254 2,158,254 158,012 158,012 2,158,012
7 167,734 195,002 195,002 2,195,002 194,633 194,633 2,194,633
8 196,721 235,620 235,620 2,235,620 235,023 235,023 2,235,023
9 227,158 280,514 280,514 2,280,514 279,566 279,566 2,279,566
10 259,117 330,131 330,131 2,330,131 328,686 328,686 2,328,686
11 292,674 384,967 384,967 2,384,967 382,847 382,847 2,382,847
12 327,909 445,566 445,566 2,445,566 442,559 442,559 2,442,559
13 364,905 512,531 512,531 2,512,531 508,383 508,383 2,508,383
14 403,751 586,526 586,526 2,586,526 580,933 580,933 2,580,933
15 444,540 668,283 668,283 2,668,283 660,883 660,883 2,660,883
16 487,368 758,609 758,609 2,758,609 748,973 748,973 2,748,973
17 532,337 858,394 858,394 2,858,394 846,013 846,013 2,846,013
18 579,555 968,616 968,616 3,060,828(3) 952,890 952,890 3,011,134(3)
19 629,134 1,090,315 1,090,315 3,325,461(3) 1,070,504 1,070,504 3,265,037(3)
20 681,192 1,224,650 1,224,650 3,588,224(3) 1,199,838 1,199,838 3,515,525(3)
25 983,226 2,134,957 2,134,957 5,209,294(3) 2,063,611 2,063,611 5,035,211(3)
30 1,368,707 3,611,912 3,611,912 7,404,421(3) 3,423,685 3,423,685 7,018,555(3)
35 1,860,689 5,975,514 5,975,514 10,457,150(3) 5,504,802 5,504,802 9,633,404(3)
40 2,488,596 9,688,145 9,688,145 14,725,980(3) 8,583,898 8,583,898 13,047,524(3)
45 3,289,983 15,356,579 15,356,579 20,884,948(3) 12,933,273 12,933,273 17,589,251(3)
50 4,312,778 23,742,363 23,742,363 29,677,953(3) 18,867,760 18,867,760 23,584,701(3)
55 5,618,153 36,038,907 36,038,907 42,165,521(3) 26,861,111 26,861,111 31,427,500(3)
60 7,284,178 54,508,056 54,508,056 60,503,943(3) 37,776,052 37,776,052 41,931,418(3)
65 9,410,496 84,704,430 84,704,430 88,092,607(3) 52,802,244 52,802,244 54,814,334(3)
</TABLE>
- -------
(1) Assumes a $19,620 premium is paid at the beginning of each Certificate
year. Values would be different if premiums are paid with a different
frequency or in different amounts.
(2) Assumes that no Certificate loans or withdrawals have been made. Zero
values indicate lapse in the absence of an additional premium payment.
(3) Death Benefits are greater than Specified Amount plus Accumulation Value
due to adjustment by the corridor percentage.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE CERTIFICATE OWNER AND DIFFERENT
INVESTMENT RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE,
CASH VALUE AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE
SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF
YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE
YEARS. NO REPRESENTATION CAN BE MADE BY COLONIAL LIFE, SEPARATE ACCOUNT D, OR
CHUBB SERIES TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-14
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
The Colonial Life Insurance Company of America
We have audited the accompanying balance sheet of The Colonial Life Insurance
Company of America as of December 31, 1994, and the related statements of
operations, shareholder's equity, and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Colonial Life Insurance
Company of America at December 31, 1994, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
As described in Note 2 to the financial statements, the Company changed its
method of accounting for certain investments in debt and equity securities in
1994.
Ernst & Young LLP
Boston, Massachusetts
February 3, 1995
F-1
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
BALANCE SHEET
(IN THOUSANDS)
DECEMBER 31, 1994
<TABLE>
<S> <C>
A S S E T S
Invested assets (Note 3)
Fixed maturities, held-to-maturity, at amortized cost.................... $183,531
Fixed maturities, available-for-sale, at market.......................... 283,395
Equity securities, at market............................................. 34,184
Short term investments, at cost.......................................... 31,546
Policy loans............................................................. 22,720
Mortgage loans on real estate............................................ 6,228
--------
TOTAL INVESTED ASSETS................................................ 561,604
Accrued investment income.................................................. 8,832
Uncollected premiums....................................................... 11,210
Reinsurance recoverable on life and health policy liabilities.............. 3,119
Deferred policy acquisition costs (Note 4)................................. 29,303
Federal income tax receivable (Note 5)..................................... 2,414
Deferred federal income tax (Note 5)....................................... 218
Property and equipment (Note 1)............................................ 3,352
Note receivable (Note 8)................................................... 26,000
Other assets............................................................... 5,881
--------
TOTAL ASSETS......................................................... $651,933
========
L I A B I L I T I E S
Policy liabilities
Policy fund balances..................................................... $ 94,339
Future policy benefits................................................... 221,117
Policy and contract claims............................................... 107,580
Premiums paid in advance................................................. 2,454
Other policyholders' funds............................................... 12,560
--------
438,050
Notes payable to Chubb Capital Corporation (Note 12)....................... 26,000
Accrued expenses and other liabilities..................................... 25,530
--------
TOTAL LIABILITIES.................................................... 489,580
Commitments and contingent liabilities (Note 7, 10, and 15)
S H A R E H O L D E R ' S E Q U I T Y
Common stock--$20 par value, 132,000 shares authorized, issued and out-
standing.................................................................. 2,640
Paid-in capital............................................................ 26,460
Unrealized depreciation of investments, net (Note 3)....................... (7,286)
Retained earnings.......................................................... 140,539
--------
TOTAL SHAREHOLDER'S EQUITY .......................................... 162,353
--------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY........................... $651,933
========
</TABLE>
See accompanying notes.
F-2
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
REVENUES
Universal life and investment product policy charges.............. $ 8,129
Traditional life insurance premiums............................... 75,343
Accident and health premiums...................................... 500,378
Net investment income............................................. 47,170
Realized investment gains......................................... 2,786
Other income...................................................... 55
---------
TOTAL REVENUES.............................................. 633,861
BENEFITS, CLAIMS AND EXPENSES
Policy benefits and claims
Death............................................................. 39,141
Accident and health............................................... 453,347
Other............................................................. 41,726
Change in reserves for future policy benefits
Traditional life insurance........................................ (711)
Accident and health insurance..................................... (429)
---------
533,074
Expenses
Commissions and other operating expenses.......................... 114,544
Amortization of deferred policy acquisition costs................. 3,014
---------
117,558
---------
TOTAL BENEFITS, CLAIMS AND EXPENSES......................... 650,632
---------
LOSS BEFORE FEDERAL INCOME TAX.............................. (16,771)
Federal income tax (benefit)
Current........................................................... (9,157)
Deferred.......................................................... 2,495
---------
(6,662)
---------
NET LOSS.................................................... $ (10,109)
=========
</TABLE>
See accompanying notes.
F-3
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF SHAREHOLDER'S EQUITY
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
COMMON STOCK
Balance, beginning and end of year................................. $ 2,640
--------
PAID-IN CAPITAL
Balance, beginning of year......................................... 16,460
Capital contribution by Chubb Life................................. 10,000
--------
Balance, end of year............................................... 26,460
--------
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS, NET
Balance, beginning of year......................................... 3,036
Cumulative effect, as of January 1, 1994, of change in accounting
principle, net (Note 2)........................................... 12,690
Change, net (Note 3)............................................... (23,012)
--------
Balance, end of year............................................... (7,286)
--------
RETAINED EARNINGS
Balance, beginning of year......................................... 150,648
Net loss........................................................... (10,109)
--------
Balance, end of year............................................... 140,539
--------
TOTAL SHAREHOLDER'S EQUITY........................................... $162,353
========
</TABLE>
See accompanying notes.
F-4
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss........................................................... $(10,109)
Adjustments to reconcile net loss to net cash used in operating ac-
tivities:
Decrease in future policy benefits, policy and contract claims
and premiums paid in advance, net............................... (34,639)
Decrease in uncollected premiums................................. 4,842
Increase in deferred policy acquisition costs.................... (1,810)
Decrease in accrued investment income............................ 1,426
Realized investment gains........................................ (2,786)
Accretion of investment discounts................................ (1,051)
Provision for depreciation....................................... 2,268
Provision for deferred income tax................................ 2,495
Decrease in federal income tax receivable........................ 474
Other, net....................................................... (19,143)
--------
Net cash used in operating activities.......................... (58,033)
INVESTING ACTIVITIES
Proceeds from sales of fixed maturities............................ 60,322
Proceeds from maturities of fixed maturities....................... 38,115
Proceeds from sales of equity securities........................... 28,411
Purchases of fixed maturities...................................... (52,112)
Purchases of equity securities..................................... (18,021)
Increase in short term investments, net............................ (16,583)
Policy loans issued, net of repayments............................. (12)
Mortgage loans, net................................................ 1,782
Other, net......................................................... 28
--------
Net cash provided by investing activities...................... 41,930
FINANCING ACTIVITIES
Deposits credited to policyholders' funds.......................... 13,752
Withdrawals from policyholders' funds.............................. (5,838)
Decrease in cash overdraft......................................... (1,811)
Capital contribution by Chubb Life................................. 10,000
--------
Net cash provided by financing activities...................... 16,103
INCREASE IN CASH............................................. 0
--------
CASH, BEGINNING AND END OF YEAR (Note 1)..................... $ 0
========
</TABLE>
See accompanying notes.
F-5
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Colonial Life Insurance Company of America (the
Company) is wholly-owned by Chubb Life Insurance Company of America (Chubb
Life). Chubb Life is a wholly-owned subsidiary of The Chubb Corporation.
Affiliates of the Company include Chubb Sovereign Life Insurance Company
(Sovereign), Chubb America Service Corporation (Chubb Service) and ChubbHealth
Holdings, Inc. (ChubbHealth).
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP).
RECOGNITION OF REVENUES, BENEFITS, CLAIMS AND EXPENSES:
Universal Life Products: Universal life products include universal life
insurance and other interest-sensitive life insurance policies. Revenues
for universal life products consist of policy charges for the cost of
insurance, policy administration and surrenders that have been assessed
against policy account balances during the period.
Policy fund liabilities for universal life and other interest-sensitive
life insurance policies are computed in accordance with the retrospective
deposit method and represent policy account balances before surrender
charges.
Policy claims that are charged to expense include claims incurred in the
period in excess of related policy account balances. Other policy benefits
include interest credited to universal life and other interest-sensitive
life insurance policies. Interest crediting rates ranged from 6 1/4% to 7
1/4%.
Investment Products: Investment products include structured settlement
annuities and other supplementary contracts without life contingencies.
Revenues for investment products consist of policy charges for the cost of
insurance, policy administration and surrenders that have been assessed
against policy account balances during the period. Deposits for these
products are recorded as policy fund liabilities, which are increased by
interest credited to the liabilities and decreased by withdrawals and
administrative charges assessed against the contract holders. Interest
crediting rates ranged from 3 1/2% to 8 7/8%.
Traditional Life Insurance Products: Traditional life insurance products
include those products with fixed and guaranteed premiums and benefits.
Premium revenues for traditional life insurance are recognized as revenues
when due. The liabilities for future policy benefits have been computed by
the net level premium method based on estimated future investment yield,
mortality and withdrawal experience. Interest rate assumptions ranged from
3% to 9%. Mortality has been calculated principally on an experience
multiple applied to select and ultimate tables in common usage in the
industry. Estimated withdrawals have been determined principally based on
industry tables. Policy benefits and claims are charged to expense as
incurred.
Accident and Health Insurance: Accident and health insurance premiums are
earned on a monthly pro rata basis over the terms of the policies. Benefits
include paid claims plus an estimate for known claims and claims incurred
but not reported as of the balance sheet date.
Reinsurance: In the ordinary course of business, the Company assumes and
cedes reinsurance with other insurance companies. These arrangements
minimize the maximum net loss potential arising from large risks.
Reinsurance contracts do not relieve the Company from its obligation to
policyholders. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
activities or economic characteristics of the reinsurers to minimize its
exposure to significant losses from reinsurer insolvencies.
Reinsurance recoverable on life and health policy liabilities represent
estimates of the portion of such liabilities that will be recovered from
reinsurers, determined in a manner consistent with the liabilities
associated with the reinsured policies.
Deferred Policy Acquisition Costs: Certain costs of acquiring insurance
contracts, principally commissions, underwriting costs and certain variable
field office expenses, have been deferred. Deferred policy acquisition
costs for universal life and investment contracts are amortized over the
lives of the contracts in relation to the present value of estimated gross
profits expected to be realized. Beginning in 1994, deferred policy
acquisition costs related to universal life and investment contracts are
also adjusted to reflect the effect that the unrealized gains or losses on
F-6
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
investments classified as available-for-sale would have had on the present
value of estimated gross profits had such gains or losses actually been
realized. This adjustment is excluded from income and charged or credited
directly to the unrealized appreciation or depreciation of the investments
component of shareholder's equity, net of applicable deferred income tax.
Traditional life insurance deferred policy acquisition costs are being
amortized over the premium-payment period of the related policies using
assumptions consistent with those used in computing policy benefit
reserves.
Invested Assets: Short term investments, which have an original maturity of
one year or less, are carried at amortized cost.
Fixed maturities, which include bonds and redeemable preferred stocks, are
purchased to support the investment strategies of the Company. These strategies
are developed based on many factors, including rate of return, maturity, credit
risk, tax considerations and regulatory requirements. Those fixed maturities
which the Company has the ability and positive intent to hold to maturity are
considered held-to-maturity (previously referred to as held-for-investment) and
carried at amortized cost. Fixed maturities which may be sold prior to maturity
to support the investment strategies of the Company are considered available-
for-sale and carried at market value as of the balance sheet date. Prior to
1994, fixed maturities considered available-for-sale were carried at the lower
of the aggregate amortized cost or market value as of the balance sheet date.
Equity securities, which include common stocks and non-redeemable preferred
stocks, are carried at market value as of the balance sheet date.
Policy loans are carried at the unpaid balances. Mortgage loans on real
estate are carried at the unpaid balances, adjusted for amortization of premium
or discount.
Realized gains and losses on the sale of investments are determined on the
basis of the cost of the specific investments sold and are credited or charged
to income. Unrealized appreciation or depreciation on those investments which
are carried at market value is excluded from income and credited or charged
directly to a separate component of shareholder's equity.
Property and Equipment: Property and equipment used in operations are carried
at cost less accumulated depreciation of $40,790,000 at December 31, 1994.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets and was $2,268,000 for the year then ended.
Federal Income Taxes: The Company participates in the filing of a
consolidated federal income tax return with Chubb Life. Chubb Life joins in the
filing of a consolidated federal income tax return with its Parent. Federal
income tax is allocated as if the Company and Chubb Life filed separate income
tax returns. Deferred income tax assets and liabilities are recognized for the
expected future tax effects attributable to temporary differences between the
financial reporting and tax bases of assets and liabilities, based on enacted
tax rates and other provisions of tax law. Prior to 1993, deferred income taxes
were provided to recognize timing differences which resulted from reporting
certain revenues and expenses in different periods for financial reporting
purposes, rather than for income tax purposes.
Deferred income taxes related to unrealized appreciation or depreciation of
investments carried at market value are charged or credited directly to the
applicable component of shareholder's equity.
Fair Values of Financial Instruments: Fair values of financial instruments
are based on quoted market prices where available. Fair values of financial
instruments for which quoted market prices are not available are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount
rates and the estimates of future cash flows. Accordingly, the derived fair
value estimates cannot be substantiated by comparison to independent markets
and are not necessarily indicative of the amounts that could be realized in
immediate settlement of the instrument. Certain financial instruments,
particularly insurance contracts, are excluded from fair value disclosure
requirements.
F-7
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
The methods and assumptions used to estimate the fair value of certain
financial instruments are as follows:
. Fair values of fixed maturities with active markets are based on quoted
market prices. For fixed maturities that trade in less active markets,
fair values are obtained from independent pricing services. Fair values
of fixed maturities are principally a function of current interest rates.
Care should be used in evaluating the significance of these estimated
market values.
. Fair values of equity securities are based on quoted market prices.
. The carrying value of short term investments approximates fair value due
to the short maturities of these investments.
. Fair values of policy loans and mortgage loans are estimated using
discounted cash flow analyses and approximate carrying values.
. The carrying value of short term debt approximates fair value due to the
short maturities of the debt.
The carrying value and fair value of financial instruments at December 31,
1994, are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Assets
Fixed maturities
Held-to-maturity...................................... $183,531 $179,695
Available-for-sale.................................... 283,395 283,395
Equity securities....................................... 34,184 34,184
Short term investments.................................. 31,546 31,546
Policy loans............................................ 22,720 22,720
Mortgage loans on real estate........................... 6,228 6,228
Liabilities
Note payable............................................ 26,000 26,000
</TABLE>
Cash Flow Information: In the statement of cash flows, short term investments
are not considered to be cash equivalents. Cash overdrafts included in accrued
expenses and other liabilities were $11,386,000 at December 31, 1994.
2. CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities. Similar to the Company's previous accounting policy for
investments in fixed maturities and equity securities, SFAS No. 115 provides
that the accounting for such securities depends on their classification as
either held-to-maturity (previously referred to as held-for-investment),
available-for-sale or trading. However, SFAS No. 115 establishes more stringent
criteria for classifying fixed maturities as held-to-maturity. Therefore, the
adoption of SFAS No. 115 resulted in an increase in the portion of the
Company's fixed maturities classified as available-for-sale and a similar
decrease in those classified as held-to-maturity. SFAS No. 115 also requires
that fixed maturities classified as available-for-sale be carried at market
value, with unrealized appreciation or depreciation excluded from income and
credited or charged directly to a separate component of shareholder's equity.
Prior to 1994, such fixed maturities were carried at the lower of the aggregate
amortized cost or market value. In conjunction with the Company's adoption of
SFAS No. 115, deferred policy acquisition costs related to universal life and
investment contracts were adjusted to reflect the effects that would have been
recognized had the unrealized gains relating to investments classified as
available-for-sale actually been realized, with a corresponding charge directly
to the separate component of shareholder's equity. SFAS No. 115 may not be
retroactively applied to prior years' financial statements. The cumulative
effect, as of January 1, 1994, of the change in accounting principle on
shareholder's equity, was as follows:
F-8
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. CHANGE IN ACCOUNTING PRINCIPLE--CONTINUED
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Unrealized appreciation of fixed maturities considered
available-for-sale......................................... $21,579
Adjustment to deferred policy acquisition costs............. (2,056)
-------
19,523
Deferred income tax......................................... 6,833
-------
Increase in shareholder's equity.......................... $12,690
=======
</TABLE>
Adoption of SFAS No. 115 did not have an impact on net income in 1994 nor is
it expected to in future years.
3. INVESTED ASSETS
The sources of net investment income for the year ended December 31, 1994
were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Fixed maturities.............................................. $43,196
Equity securities............................................. 2,107
Short term investments........................................ 638
Policy loans.................................................. 1,364
Mortgage loans................................................ 698
Other......................................................... 99
-------
Gross investment income..................................... 48,102
Investment expenses........................................... 932
-------
Net investment income....................................... $47,170
=======
</TABLE>
Realized investment gains and losses for the year ended December 31, 1994
were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Gross realized investment gains:
Fixed maturities............................................ $1,565
Equity securities........................................... 3,597
------
$5,162
======
Gross realized investment losses:
Fixed maturities............................................ $1,671
Equity securities........................................... 705
------
$2,376
======
Net realized investment gains (losses):
Fixed maturities............................................ $ (106)
Equity securities........................................... 2,892
------
$2,786
======
</TABLE>
Proceeds from sales of fixed maturities considered available-for-sale were
$60,322,000 in 1994. Gross gains of $1,565,000 and gross losses of $1,671,000
were realized on such sales.
F-9
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTED ASSETS--CONTINUED
The components of net unrealized appreciation (depreciation) of investments
carried at market value as of December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Equity securities
Gross unrealized appreciation............................... $ 2,532
Gross unrealized depreciation............................... 1,272
-------
1,260
-------
Fixed maturities
Gross unrealized appreciation............................... 4,710
Gross unrealized depreciation............................... 13,874
-------
(9,164)
-------
(7,904)
Deferred policy acquisition costs adjustment.................. 951
-------
(6,953)
Deferred tax asset, net..................................... (2,434)
Tax valuation allowance..................................... 2,767
-------
$(7,286)
=======
</TABLE>
The change in unrealized appreciation or depreciation of investments carried
at market value for the year ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Change in unrealized appreciation of equity securities....... $ (3,412)
Change in unrealized appreciation of fixed maturities........ (30,743)
Change in deferred policy acquisition costs adjustment....... 3,007
--------
(31,148)
Deferred income tax (credit)................................. (10,903)
Change in tax valuation allowance............................ 2,767
--------
(23,012)
Cumulative effect, as of January 1, 1994, of change in ac-
counting principle, net..................................... 12,690
--------
$(10,322)
========
</TABLE>
The cost of equity securities was $32,924,000 at December 31, 1994.
F-10
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTED ASSETS--CONTINUED
The amortized cost and estimated market value of fixed maturities at December
31, 1994, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Held-to-maturity
Tax exempt...................... $ 102 $ 4 $ 106
-------- ------ ------- --------
Taxable
U.S. Government and government
agency and authority obliga-
tions........................ 3,813 $ 45 3,768
Corporate bonds............... 90,015 3,480 694 92,801
Mortgage-backed securities.... 89,601 235 6,816 83,020
-------- ------ ------- --------
Total taxable............... 183,429 3,715 7,555 179,589
-------- ------ ------- --------
Total held-to-maturity...... 183,531 3,719 7,555 179,695
-------- ------ ------- --------
Available-for-sale
Taxable
U.S. Government and government
agency and authority obliga-
tions........................ 2,729 15 62 2,682
Corporate bonds............... 174,467 3,807 8,875 169,399
Mortgage-backed securities.... 113,527 888 4,931 109,484
Redeemable preferred stocks... 1,836 6 1,830
-------- ------ ------- --------
Total available-for-sale.... 292,559 4,710 13,874 283,395
-------- ------ ------- --------
Total fixed maturities...... $476,090 $8,429 $21,429 $463,090
======== ====== ======= ========
</TABLE>
The change in unrealized appreciation or depreciation of fixed maturities
carried at amortized cost is not reflected in the financial statements. The
change in unrealized appreciation or depreciation of such fixed maturities was
a decrease of $41,968,000 for the year ended December 31, 1994. The change in
1994 includes a reduction of $21,579,000 for the cumulative effect adjustment,
as of January 1, 1994, resulting from the adoption by the Company of SFAS No.
115.
The amortized cost and estimated market value of fixed maturities at December
31, 1994 by contractual maturity were as follows:
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------- -------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less............. $ 100 $ 101
Due after one year through five
years.............................. $ 21,429 $ 21,999 43,711 44,662
Due after five years through ten
years.............................. 30,704 32,621 65,836 63,120
Due after ten years................. 41,797 42,055 69,385 66,028
-------- -------- -------- --------
Subtotal.......................... 93,930 96,675 179,032 173,911
Mortgage-backed securities.......... 89,601 83,020 113,527 109,484
-------- -------- -------- --------
$183,531 $179,695 $292,559 $283,395
======== ======== ======== ========
</TABLE>
Actual maturities could differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
F-11
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs deferred and the related amortization charged to
income were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Balance, beginning of year................................... $26,542
Cumulative effect, as of January 1, 1994, of change in ac-
counting principle.......................................... (2,056)
Costs deferred during year................................... 4,824
Amortization during year..................................... (3,014)
Change in adjustment to reflect the effects of unrealized de-
preciation of investments................................... 3,007
-------
Balance, end of year......................................... $29,303
=======
</TABLE>
5. FEDERAL INCOME TAXES
The federal income tax provision for the year ended December 31, 1994 has
been computed using the tax rates and regulations in effect during the year.
The provision for federal income tax gives effect to permanent differences
between financial and taxable income. Accordingly, the effective tax rate is
higher than the statutory federal corporate tax rate. The reasons for the
higher effective tax rate were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Tax benefit at statutory federal income tax rate (35%)........ $(5,870)
Dividends received deduction and tax exempt income............ (940)
Other......................................................... 148
-------
Federal income tax benefit.................................... $(6,662)
=======
</TABLE>
The tax effects of temporary differences that gave rise to deferred income
tax assets and liabilities at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Deferred income tax assets:
Future policy benefits and policy fund balances............. $ 5,948
Valuation allowance......................................... (2,767)
Other....................................................... 4,375
-------
Total deferred income tax assets.............................. 7,556
Deferred income tax liabilities:
Deferred policy acquisition costs........................... 7,338
-------
Net deferred income tax assets................................ $ 218
=======
</TABLE>
The tax valuation allowance has been established primarily for the deferred
income tax asset related to the unrealized depreciation of investments at
December 31, 1994, due to the uncertainty as to when, if ever, such losses
might be realized.
Prior to 1984, life insurance companies were allowed certain special
deductions for federal income tax purposes which could become subject to tax at
normal rates under certain circumstances, including distribution to
shareholders. These special deductions were set aside in a Policyholders'
Surplus Account. Under the 1984 Act, no further additions to this account are
permitted. At December 31, 1994, approximately $4,664,000 of untaxed retained
earnings remained. No income taxes have been provided since management does not
anticipate any transaction that would cause this remaining amount to become
taxable. The unrecognized deferred tax related to the Policyholders' Surplus
Account is $1,632,000.
Federal income taxes received in 1994 were $9,631,000.
F-12
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
(A) The Company participates in the Pension Plan for the Employees of Chubb
Life Insurance Company of America and Participating Affiliates, which is a
defined noncontributory plan. The benefits are generally based on an employee's
years of service and average compensation during the last five years of
employment. Pension costs are determined using the projected unit credit
method. It is Chubb Life's policy to make annual contributions that meet the
minimum funding requirements of the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits attributed to
service but also for those expected to be earned in the future.
Accumulated plan benefits, net assets and net periodic pension costs by
component for the Company are not readily determinable. As of December 31,
1994, total plan assets at fair value were $66,833,000 and the projected
benefit obligation for service rendered to date was $71,280,000. The weighted
average discount rate used in determining the actuarial present value of the
projected benefit obligations at December 31, 1994 was 7 3/4% and the rate of
increase in future compensation levels was 6%. The expected long-term rate of
return on assets was 9%.
(B) The Company, with Chubb Life and its affiliates, provides certain other
postretirement benefits, principally health care and life insurance, to retired
employees and their beneficiaries and covered dependents. Substantially all
employees may become eligible for these benefits upon retirement if they meet
minimum age and years of service requirements.
The Company does not fund these benefits in advance. Benefits are paid as
covered expenses are incurred. Health care coverage is contributory. Retiree
contributions vary based upon a retiree's age, type of coverage and years of
service with the Company. Life insurance coverage is noncontributory.
Net postretirement benefit cost and accumulated postretirement benefit
obligation by component for the Company are not readily determinable. Net
postretirement benefit costs allocated to the Company for the year ended
December 31, 1994 were $1,072,000 and include service cost of the current
period and interest cost on accumulated benefit obligation. At December 31,
1994, the Company's allocated portion of the unfunded accumulated
postretirement benefit obligation for retirees and other fully eligible and
vested participants included in other liabilities was $10,465,000.
The weighted average discount rate used in determining the actuarial present
value of the accumulated postretirement benefit obligation at December 31, 1994
was 7 3/4%. The health care cost trend rate used to measure the accumulated
postretirement cost for medical benefits was 14 1/2% for 1994. The rate is
assumed to decrease gradually to 7 1/2% for the year 2005 and remain at that
level thereafter. The health care cost trend rate assumption has a significant
effect on the amount of the accumulated postretirement benefit obligation and
the net postretirement benefit cost reported. To illustrate, a one percent
increase in the trend rate for each year would increase the accumulated
postretirement benefit obligation of the Company and its affiliates at December
31, 1994 by $2,590,000 and the aggregate of the service and interest cost
components of net postretirement benefit cost for the year ended December 31,
1994 by $349,000.
7. STOCK OWNERSHIP AND INCENTIVE PLANS
Substantially all of the Company's employees are eligible to participate in
the stock ownership and incentive plans of The Chubb Corporation. The aggregate
costs associated with the plans were approximately $2,027,000 for the year
ended December 31, 1994.
8. RELATED-PARTY TRANSACTIONS
Debt and Credit Arrangements: The Company entered into an agreement, whereby
it guaranteed a $10,000,000 first mortgage obtained by Chubb Life on December
9, 1985. The first mortgage loan is secured by a home office building, located
at One Granite Place, Concord, NH. The outstanding balance of the loan at
December 31, 1994 was $5,965,000.
Service Agreement: The Company entered into an agreement with Chubb Service,
whereby Chubb Service agreed to furnish to the Company, Chubb Life and other
affiliated companies, employee and administrative services and joint operations
as may be mutually-agreed upon. The net reimbursements paid to Chubb Service
during 1994 were $64,109,000. Amounts payable to Chubb Service, included in
other liabilities, at December 31, 1994 were $8,263,000.
F-13
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. RELATED-PARTY TRANSACTIONS--CONTINUED
Reinsurance: The Company assumes from Chubb Life, under a modified-
coinsurance agreement, premiums and benefits related to interest-sensitive
whole life and single premium whole life contracts. The net reimbursements paid
to Chubb Life during 1994 were $16,156,000. At December 31, 1994, the net
receivable from Chubb Life was $851,000.
The Company had a stop-loss reinsurance agreement, whereby it ceded premiums
and benefits related to group health products to Chubb Life. The premiums and
benefits ceded during 1994 were $8,572,000 and $6,109,000, respectively.
Receivables: The Company has a loan agreement with an affiliate providing a
$29,000,000 revolving line of credit. The interest rate is variable and is
based on the Company's cost of short term funds. At December 31, 1994, the
Company had a note receivable of $26,000,000 under this agreement. Interest
earned on this loan in 1994 was $1,328,000.
9. REINSURANCE
The Company is involved in both the cession and assumption of reinsurance
with other insurance companies. Risks are reinsured with other companies to
permit the recovery of a portion of the direct losses. The Company's
reinsurance activity is primarily with Chubb Life. The maximum amount of
individual life insurance retained on any one life, including accidental death
benefits, is $1,400,000.
Selected data regarding reinsurance amounts appearing in the financial
statements for 1994 were as follows:
<TABLE>
<CAPTION>
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER NET
AMOUNT COMPANIES COMPANIES AMOUNT
-------- --------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Premiums earned and policy charges
for the year:
Life insurance................... $ 39,061 $ 1,849 $46,260 $ 83,472
Accident and health insurance.... 510,122 9,753 9 500,378
-------- ------- ------- --------
Total premiums and policy
charges......................... $549,183 $11,602 $46,269 $583,850
======== ======= ======= ========
</TABLE>
Reinsurance recoveries of the Company which have been deducted from benefits,
claims and expenses were $8,002,000 in 1994.
10. ACCIDENT AND HEALTH UNPAID CLAIMS
The process of estimating loss reserves is an imprecise science and reflects
significant judgmental factors. Management considers facts currently known and
the present state of health care markets in which it operates when establishing
accident and health claim reserves. Management believes that the aggregate
claim liabilities at December 31, 1994 are adequate to cover claims for losses
which have occurred, including both those known and those yet to be reported.
However, changes in market conditions may require additional increases in claim
reserves which may adversely affect results in future periods. This emergence
cannot be precisely estimated.
F-14
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. ACCIDENT AND HEALTH UNPAID CLAIMS--CONTINUED
A reconciliation of the beginning and ending liability for accident and
health unpaid claims, net of reinsurance recoverable, and a reconciliation of
the net liability to the corresponding liability on a gross basis at December
31, 1994, is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Gross liability at beginning of year.......................... $132,382
Less: reinsurance recoverable............................... 847
--------
Net liability at beginning of year............................ 131,535
Incurred:
Current year................................................ 462,993
Prior years................................................. (15,052)
--------
Total incurred................................................ 447,941
Paid:
Current year................................................ 359,464
Prior years................................................. 116,482
--------
Total paid.................................................... 475,946
--------
Net liability at end of year.................................. 103,530
Plus: reinsurance recoverable............................... 1,545
--------
Gross liability at end of year................................ $105,075
========
</TABLE>
During 1994, the accident and health business experienced overall favorable
development of $15,052,000 on claim reserves established as of the previous
year end. This difference has been reflected in operating results. Claims
settlement costs are not developed as part of the claim liability and are
reflected in operating results in the years the claims are paid.
11. DIVIDEND RESTRICTIONS
The Company is required to file annual statements with state insurance
regulatory authorities prepared on an accounting basis prescribed or permitted
by such authorities (statutory basis). GAAP differs in certain respects from
statutory accounting practices.
A comparison of shareholder's equity on a GAAP basis and policyholders'
surplus on a statutory basis as of December 31, 1994 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
GAAP.......................................................... $162,353
Statutory..................................................... 99,322
</TABLE>
A comparison of GAAP and statutory net loss for the year ended December 31,
1994 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
GAAP.......................................................... $(10,109)
Statutory..................................................... (12,677)
</TABLE>
The Company may pay dividends from statutory earned surplus as determined in
accordance with accounting practices prescribed or permitted by regulatory
authorities and the State of New Jersey. Dividend distributions exceeding the
greater of 10% of policyholders' surplus or statutory net income during the
preceding year are considered "extraordinary" and are subject to the prior
approval of the State of New Jersey Department of Insurance. The maximum
ordinary dividend distribution that may be made by the Company to Chubb Life
during 1995 is approximately $9,900,000.
F-15
<PAGE>
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
12. DEBT AND CREDIT ARRANGEMENTS
The Company has borrowed in the short term commercial paper market during
1994. These notes were issued by Chubb Capital Corporation, a subsidiary of The
Chubb Corporation. The interest rate is variable and based on Chubb Capital
Corporation's cost of funds. Interest paid on the borrowings in 1994 was
$1,094,000. In addition, the Company has a loan agreement with a bank providing
for a line of credit of $26,000,000 at a variable interest rate. At December
31, 1994, there were no borrowings against this line of credit.
13. BUSINESS SEGMENTS
The Company is principally engaged in the sale of individual and group life
and health insurance products. Insurance revenues, net investment income and
earnings before federal income taxes for each class of business for the year
ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Revenues:
Individual insurance:
Premiums and policy charges................................. $ 68,123
Investment income........................................... 34,682
Group insurance:
Premiums.................................................... 515,727
Investment income........................................... 12,488
Earnings (loss) before federal income taxes:
Individual insurance........................................ 2,645
Group insurance............................................. (22,202)
Realized gains.............................................. 2,786
--------
$(16,771)
========
</TABLE>
It is not practicable to determine identifiable assets and capital
expenditures applicable to the foregoing classes of business.
Earnings before federal income taxes by class of business reflect allocations
of investment income and significant expenses using allocation methods deemed
to be reasonable. Other acceptable allocation methods could produce different
results by groupings of classes of business.
14. ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS No.
114, Accounting by Creditors for Impairment of a Loan. Under SFAS No. 114, a
loan is considered impaired and a valuation allowance is established when it is
probable that a creditor will be unable to collect all principal and interest
amounts due according to the contractual terms of the loan agreement. SFAS No.
114 requires creditors to measure impairment of a loan based on the present
value of expected future cash flows discounted at the loans's effective
interest rate or, as a practical expedient, based on the market price of the
loan or the fair value of the collateral if the loan is collateral dependent.
Currently, the Company measures impairment of a loan based on undiscounted
expected future cash flows. SFAS No. 114 is effective for fiscal years
beginning after December 15, 1994. Restatement of prior years' financial
statements is not permitted. The Company will adopt SFAS No. 114 in the first
quarter of 1995. The adoption will not have a significant effect on net income
in 1995.
15. LITIGATION
The Company is involved in pending or threatened lawsuits arising from the
normal conduct of its insurance business. Several suits have been brought
against the Company seeking both punitive and compensatory damages. Management
is of the opinion that these suits are substantially without merit, that valid
defenses exist, and that such litigation will not have a material effect on the
financial statements.
F-16
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following pages and documents:
The facing sheet
The prospectus consisting of 68 pages
The undertaking to file reports/4/
The undertaking pursuant to Rule 484(b)(1) under the Securities Act of
1933 regarding indemnification/4/
The signatures
Written consents of the following persons:
(a) Michael J. LeBoeuf, FSA, MAAA, contained in Exhibit 6 below.
(b) Ernst & Young LLP, independent auditors, contained in Exhibit 7
below.
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
(a) Certified Copy of Resolution of the Board of Directors of The
Colonial Life Insurance Company of America establishing the Colonial
Separate Account D/4/.
(b) Not Applicable
(c)(i) Form of Distribution Agreement among The Colonial Life Insurance
Company of America, Colonial Separate Account D, and Chubb Securities
Corporation/4/.
(ii) Specimen Variable Contracts Selling Agreement between Chubb
Securities Corporation and Selling Broker-Dealers/4/.
(iii) Specimen District Manager's Agreement of Chubb Securities
Corporation/4/.
(iv) Specimen Registered Representative's Agreement of Chubb
Securities Corporation/4/.
(v) Schedule of Commissions/4/.
(d) Not Applicable
(e)(i) Specimen group flexible premium variable life insurance policy and
certificate./4/
(ii) Specimen group joint and last survivor flexible premium variable
life insurance policy and certificate/4/.
(iii) Forms of Riders/4/
(f)(i) Amended and Restated Charter, with all amendments, of The Colonial
Life Insurance Company of America/1/.
(ii) By-Laws of The Colonial Life Insurance Company of America/1/.
(g) Not Applicable
(h)(i) Investment Management Agreement between Chubb Series Trust and
Chubb Investment Advisory Corporation with respect to the Resolute Treasury
Money Market Portfolio/2/.
(ii) Investment Management Agreement between Chubb Series Trust and
Chubb Investment Advisory Corporation with respect to the Resolute Bond
Portfolio/2/.
(iii) Investment Management Agreement between Chubb Series Trust and
Chubb Investment Advisory Corporation with respect to the Resolute
Equity Portfolio/2/.
(iv) Investment Management Agreement between Chubb Series Trust and
Chubb Investment Advisory Corporation with respect to the Resolute
Small Company Portfolio/2/.
II-1
<PAGE>
(v) Investment Management Agreement between Chubb Series Trust and
Chubb Investment Advisory Corporation with respect to the Resolute
International Equity Portfolio/2/.
(vi) Sub-Investment Management Agreement among Chubb Series Trust,
Chubb Investment Advisory Corporation and Morgan Guaranty Trust Company
of New York with respect to the Resolute Treasury Money Market
Portfolio/2/.
(vii) Sub-Investment Management Agreement among Chubb Series Trust,
Chubb Investment Advisory Corporation and Morgan Guaranty Trust Company
of New York with respect to the Resolute Bond Portfolio/2/.
(viii) Sub-Investment Management Agreement among Chubb Series Trust,
Chubb Investment Advisory Corporation and Morgan Guaranty Trust Company
of New York with respect to the Resolute Equity Portfolio/2/.
(ix) Sub-Investment Management Agreement among Chubb Series Trust,
Chubb Investment Advisory Corporation and Morgan Guaranty Trust Company
of New York with respect to the Resolute Small Company Portfolio/2/.
(x) Sub-Investment Management Agreement among Chubb Series Trust,
Chubb Investment Advisory Corporation and Morgan Guaranty Trust Company
of New York with respect to the Resolute International Equity
Portfolio/2/.
(xi) Custodial Services Agreement between Chubb Series Trust, and
Morgan Guaranty Trust Company of New York/3/.
(i) Not applicable
(j) Application/4/
2. Specimen Policy (Same as 1(e)).
3. Opinion of counsel as to securities being registered/4/.
4. Not applicable.
5. Not applicable.
6. Actuarial opinions and consents of Michael J. LeBoeuf, FSA, MAAA/4/.
7. Consent of Ernst & Young LLP, independent auditors.
8. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) under the 1940
Act.
9. Representations, description and undertakings regarding mortality and
expense risk charge, pursuant to Rule 6e-3(T)(b)(13)(iii)(F)/4/.
10. Form of Reinsurance Agreement/4/.
11. Form of Trust Agreement between The Colonial Life Insurance Company of
America and financial institution acting as trustee and Policyholder of the
Group Policies/4/.
12. (a) Memorandum regarding reliance on Order of the Commission/4/.
(b) Memorandum regarding reliance on Order of the Commission to deduct
the DAC tax charge.
13. EDGAR Financial Data Schedule. Not applicable.
/1/ Incorporated by reference to the Registration Statement on Form S-6 of
Colonial Separate Account B, filed April 8, 1994, File No. 33-77496.
/2/ Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A of Chubb Series Trust, filed on July 22,
1994, File No. 33-72834.
/3/ Incorporated by reference to the Registration Statement on Form N-1A of
Chubb Series Trust, filed on December 10, 1993, File No. 33-72834.
/4/ Incorporated by reference to the Registration Statement on Form S-6 of
Colonial Separate Account D, filed on January 19, 1995, File No. 33-88632.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
COLONIAL SEPARATE ACCOUNT D, HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, AND ITS SEAL
TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN CONCORD, NEW HAMPSHIRE, ON THE 19TH
DAY OF JULY, 1995.
Colonial Separate Account D
(SEAL) (Registrant)
The Colonial Life Insurance Company
of America
(Depositor)
By: /s/ Theresa M. Stone
-----------------------------------------
THERESA M. STONE
Title: President and Chief Executive Officer
---------------------------------------
Attest:
/s/ Charles C. Cornelio
- -------------------------------------
CHARLES C. CORNELIO, ASSISTANT
SECRETARY
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COLONIAL LIFE
INSURANCE COMPANY OF AMERICA AS DEPOSITOR HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN CONCORD,
NEW HAMPSHIRE ON THE 19TH DAY OF JULY, 1995.
The Colonial Life Insurance Company
(SEAL) of America (Depositor)
By: /s/ Theresa M. Stone
-------------------------------------------
THERESA M. STONE
Title: President and Chief Executive Officer
----------------------------------------
Attest: /s/ Charles C. Cornelio
- -------------------------------------
Charles C. Cornelio, Assistant
Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
SIGNATURES TITLE
---------- -----
Director and Vice
* Chairman
- -------------------------------------
PERCY CHUBB, III
Director, Senior
* Vice President,
- ------------------------------------- General Counsel,
FREDERICK H. CONDON and Secretary
Director
*
- -------------------------------------
RANDALL G. CRAIG
Director
*
- -------------------------------------
DAVID S. FOWLER
Director and
* Chairman
- -------------------------------------
DEAN R. O'HARE
II-4
<PAGE>
SIGNATURES TITLE
---------- -----
Vice President and
* Treasurer
- -------------------------------------
RUSSELL C. SIMPSON
/s/ Theresa M. Stone Director, President
- ------------------------------------- and Chief Executive
THERESA M. STONE Officer
Director, Executive
* Vice President, and
- ------------------------------------- Chief Financial
RICHARD V. WERNER Officer
/s/ Theresa M. Stone
By:
THERESA M. STONE
Theresa M. Stone, Attorney-in-Fact, executed on the 19th day of July, 1995,
pursuant to Powers of Attorney filed as exhibit 14 of Post-Effective Amendment
No. 1 to the Registration Statement on Form S-6 for Colonial Separate Account B
(File No. 33-77496) filed on April 14, 1995, and hereby incorporated herein by
reference.
II-5
<PAGE>
EXHIBIT INDEX
Exhibit 8 - Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii)
Exhibit 12(b) - Actuarial Memorandum Regarding Deduction of the DAC Tax
Charge
Exhibit 23.1 - Consent of Ernst & Young LLP, independent auditors
<PAGE>
Exhibit 8
Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii)
<PAGE>
PROCEDURES MEMORANDUM
---------------------
THE CHUBB HERITAGE SERIES
COLONIAL SEPARATE ACCOUNT D
THE COLONIAL LIFE INSURANCE COMPANY OF AMERICA
(DATED JULY 1, 1995)
Administrative Procedures for "Group Flexible Premium Variable Life
Insurance Policy and Certificates" ("Colonial Heritage I") and "Group Joint and
Last Survivor Flexible Premium Variable Life Insurance Policy and Certificates"
("Colonial Heritage II").
This document sets forth the information called for under Rule 6e-
3(T)(b)(12)(iii) under the Investment Company Act of 1940 (the "1940 Act"). The
Rule provides exemptions from sections 22(d), 22(e), and 27(c)(1) of the 1940
Act, and Rule 22c-1 thereunder, for issuance, transfer and redemption procedures
under the Colonial Heritage I and Colonial Heritage II Policies and Certificates
to the extent necessary to comply with other provisions of Rule 6e-3(T), state
insurance law or established administrative procedures of The Colonial Life
Insurance Company of America ("Colonial Life"). To qualify for the exemptions,
procedures must be reasonable, fair and not discriminatory and must be disclosed
in the registration statement filed by Colonial Separate Account D.
Colonial Life believes its procedures meet the requirements of Rule 6e-
3(T)(b)(12)(iii), as described below.
1. PURCHASE AND RELATED TRANSACTIONS
---------------------------------
Colonial Life sells two forms of group flexible premium variable life
insurance policies offered through its Colonial Separate Account D (the
"Separate Account"): a group flexible
<PAGE>
premium variable life insurance policy ("Colonial Heritage I") and a group joint
and last survivor flexible premium variable life insurance policy ("Colonial
Heritage II"). The persons and legal entities covered under Colonial Heritage I
and Colonial Heritage II (the "Certificate Owners") possess all rights and
interests under the group policies. The Certificate Owners are provided with
certificates of insurance (the "Certificates") describing each Certificate
Owner's rights, benefits, and options under the group policies.
(a) Premium Schedule and Underwriting Standards
-------------------------------------------
Premiums for the Certificates will not be the same for all Certificate
Owners. Certificate Owners, with the help of the registered representative, may
determine a Planned Periodic Premium and Premium Frequency that provides for a
level premium payable at a fixed interval for a specified period of time.
Factors considered in setting the Planned Periodic Premium payment schedule and
selection of death benefit option include, but are not limited to, the insured's
age, sex and risk classification; the Certificate Owner's economic
circumstances, including future obligations, retirement and tax sheltering
needs; the Certificate Owner's judgment regarding market needs; and the death
benefit needs of the beneficiary. Payment of premiums in accordance with this
schedule is not, however, mandatory and failure to make payments in accordance
with the schedule will not of itself cause the Certificate to lapse. Instead,
Certificate Owners
<PAGE>
may make premium payments in any amount, at any frequency, subject only to the
minimum initial premium payment and the minimum subsequent premium amount of
$500.00.
The Internal Revenue Code of 1986, as amended (the "Code") provides for
significant tax consequences if Certificates are deemed to be modified endowment
contracts. Colonial Life's procedures for monitoring whether a Certificate may
become a modified endowment contract are set forth herein. On or about the
anniversary date of the Certificate, Colonial Life will calculate whether the
Technical and Miscellaneous Revenue Act guidelines have been violated and excess
premiums have been remitted which would cause the Certificate to be deemed a
modified endowment contract. If a violation has occurred in the past year,
Colonial Life will give written notice of this fact to the Certificate Owner;
this notice will set forth the Certificate Owner's options with respect to the
Certificate. The notice gives the Certificate Owner the right to request a
refund of the excess premium, or the right to request an increase of the
Certificate's face amount (subject to medical evidence); these options would
avoid having the Certificate deemed a modified endowment contract. In the
alternative, the notice also gives the Certificate Owner the right to continue
to treat the Certificate as a modified endowment contract.
The Certificate Owner may choose, by returning an election form provided by
Colonial Life, any option. If the
<PAGE>
Certificate Owner does not return the election form within 60 days, Colonial
Life will take no action with respect to the Certificate and it will become a
modified endowment contract. The written notice also includes some general
information regarding modified endowment contracts and their tax aspects.
The Certificate will remain in force so long as the cash value, less any
outstanding Certificate debt, is sufficient to pay certain monthly charges
imposed in connection with the Certificate. Thus, the amount of a premium, if
any, that must be paid to keep the Certificate in force depends upon the cash
value of the Certificate, which in turn depends on such factors as the
investment experience and the cost of insurance charge. The cost of insurance
rate utilized in computing the cost of insurance charge will not be the same for
each insured. The chief reason is that the principle of pooling and distribution
of mortality risks is based upon the assumption that each insured incurs an
insurance rate commensurate with his or her mortality risk which is actuarially
determined based upon factors such as issue age, Certificate year, sex, rating
class, and the Specified Amount of the Certificate. For two Policies with the
same sex, rating class and attained age, the cost of insurance rate for the
Certificate with the younger age on its Certificate date will never exceed, and
in some cases will be less than, that for a Certificate with an older age on its
Certificate date. Accordingly, while not all insureds will be subject to the
same cost of insurance rate, there will be a single "rate"
<PAGE>
for all insureds in a given actuarial category.
The use of Certificate year as a factor in defining an actuarial category
is appropriate because the recovery of the cost of a Certificate depends, in
part, upon the length of time such Certificate has been in force. For example,
an insured who was younger at issue has maintained his Certificate in force for
a longer period in order to achieve the same attained age as the insured who was
older at issue. Thus, part of the cost of the Certificate which was supported by
surplus of Colonial Life has been recovered for the insured who was younger at
issue. This allows Colonial Life to reduce the cost of insurance rate below that
of the insured whose Certificate has been in force for a shorter period. For
administrative convenience, Certificate year is not used as an actuarial factor
after the tenth Certificate year.
Current cost of insurance rates will be determined by Colonial Life based
upon expectations as to future mortality experience. The cost of insurance rates
are guaranteed not to exceed rates based upon the 1980 CSO Male/Female,
Smoker/Nonsmoker Mortality Tables for attained ages 15 and above and the 1980
CSO Male/Female Mortality Tables for attained ages 14 and below.
The Certificates will be offered and sold pursuant to established
underwriting standards and in accordance with state insurance laws. State
insurance laws prohibit unfair discrimination among insureds but recognize that
premiums may
<PAGE>
be based upon factors such as issue age, Certificate year, sex, health and
occupation.
(b) Application and Initial Premium Processing
------------------------------------------
Upon receipt of a completed application, Colonial Life will follow certain
insurance underwriting (e.g., evaluation of risks) procedures designed to
determine whether the applicant is insurable. This process may involve such
verification procedures as medical examinations and may require that further
information be provided by the proposed applicant before a determination can be
made. A Certificate will not be issued until the underwriting procedure has been
completed. A Certificate will not be issued on a conditional receipt basis.
The insurance coverage will begin on the Certificate date, unless otherwise
required by insurance law or concepts. Ordinarily, the Certificate date will be
the date requested by the Certificate Owner. If no date is requested, it is the
date the Certificate is issued. The Certificate Owner may request that the
Certificate be backdated for the purposes of saving insurance age or conforming
to employment related requirements (e.g. common enrollment date). If the
Certificate date is after the dates of the application and any required medical
examination, the contestable period starts from the date of the application or
required medical examination, whichever is later. If the Certificate date is
before the dates of the application and any required medical examination, the
contestable period starts from the
<PAGE>
Certificate date.
The initial net premium will be placed in the General Account prior to the
allocation date. On the allocation date the initial net premium deposited in the
General Account, plus interest earned, will be allocated, as directed by the
Certificate Owner in the application, among the divisions of the Separate
Account and the General Account. Any other premiums received prior to the
allocation date will also be deposited in the General Account. The allocation
date is 20 days from the date the Certificate is delivered to the Certificate
Owner.
Under Colonial Life's current rules, the minimum Specified Amount at issue
is $500,000 for Colonial Heritage I and $2,000,000 for Colonial Heritage II.
Colonial Life reserves the right to revise its rules from time to time to
specify a different minimum Specified Amount at issue.
(c) Reinstatement
-------------
A Certificate which terminates under the grace period provision may be
reinstated at any time within five (5) years after the date of termination. The
Certificate year of reinstatement will be measured from the Certificate date.
The reinstatement must occur prior to the maturity date of the Certificate. The
following items must be submitted to Colonial Life for each reinstatement:
(1) A written application for reinstatement.
(2) Evidence of insurability sufficient to prove to Colonial Life's satisfaction
that the insured under Colonial
<PAGE>
Heritage I or the insureds or surviving insured under Colonial Heritage II
are still able to meet the underwriting standards for the "actuarial
category" to which the Certificate was originally assigned.
(3) A premium large enough, after the deduction of premium expense charges, to
cover monthly deductions for at least three Certificate months following the
effective date of reinstatement.
Upon request for reinstatement, Colonial Life will determine the premium
amount needed to reinstate the Certificate based on the insured's attained age,
sex, Certificate year, rating class, and the Specified Amount of the
Certificate.
Colonial Life will notify the Certificate Owner of the premium amount
needed to reinstate the Certificate. Colonial Life will also require repayment
or reinstatement of any Certificate loan which existed on the date of lapse
before a Certificate may be reinstated. Upon approval of the reinstatement, the
effective date of the reinstated Certificate will be the next Monthly
Anniversary Date following the date Colonial Life approves the application for
reinstatement.
(d) Misstatement of Age or Sex
--------------------------
If Colonial Life discovers that the age or sex of the insured has been
misstated, Colonial Life will adjust the proceeds to reflect the correct age or
sex. In such event, the amount payable at death will be the sum of the
following:
<PAGE>
(1) The accumulation value on the date of death of the insured less any
outstanding debt, and
(2) The death benefit, less the accumulation value on the date of death,
multiplied by the ratio of:
a. The cost of insurance actually deducted at the beginning of the
Certificate month in which death occurs, to
b. The cost of insurance that should have been deducted at the insured's
true age or sex.
(e) Exchange of Certificate
-----------------------
Colonial Heritage II provides for the exchange of a Colonial Heritage II
Certificate for two individual Colonial Heritage I Certificates upon the
occurrence of certain limited specified events that make ownership of a
survivorship Certificate inappropriate or unnecessary (the "Exchange Rider").
Each Colonial Heritage I Certificate issued under the Exchange Rider will have a
face amount equal to one half of the face amount and accumulation value equal to
one half the accumulation value under the Colonial Heritage II Certificate at
the time of the exchange. There is no charge for the Exchange Rider and a
surrender charge will not be imposed upon the Colonial Heritage II Certificate
at the time of the surrender of the Certificate in connection with the exercise
of the Exchange Rider. For purposes of computing the surrender charge under the
Colonial Heritage I Certificates, the date of issuance of the Colonial Heritage
II Certificate will be used. No additional evidence of
<PAGE>
insurability is required in connection with the issuance of the Colonial
Heritage I Certificates.
The option provided by the Exchange Rider only may be exercised if one of
the following events occurs: (i) a final divorce decree on the joint insureds'
marriage must be in effect for at least 180 days, but not more than one year,
prior to the time of the exchange; or (ii) the Federal tax law is changed so as
to repeal the unlimited marital deduction provision, or there is a reduction of
at least 50% in the maximum federal estate tax bracket.
The owner of each Colonial Heritage I Certificate must have an insurable
interest in the individual insured's life. The owner of each Colonial Heritage I
Certificate and the insured both must sign the application for the new Colonial
Heritage I Certificates. The request for exercise of the Exchange Rider must be
received by Colonial Life on or within 180 days after the date the enabling
event occurs.
For Colonial Heritage I, no separate exchange provision is provided.
Instead, the Certificate Owner may at any time, while the Certificate is in
force, transfer all accumulation value to the General Account. This transfer
will not incur the normal transfer fee. While 100% of the accumulation value is
allocated to the General Account, minimum benefits are fixed and guaranteed.
(f) Certificate Owner Illustrations
-------------------------------
Colonial Life intends to utilize field office and service center
microcomputers in preparing illustrations for
<PAGE>
the Certificates. General Agents and Agents who are licensed with Colonial Life
and with Chubb Securities Corporation or other broker-dealers who have entered
into a selling agreement with Chubb Securities Corporation will be supplied with
diskettes containing approved illustrations for the Certificates. In addition,
Colonial Life's service center in Concord, New Hampshire will be supplied such
diskettes and will prepare illustrations at the request of duly registered
representatives.
2. "REDEMPTION PROCEDURES": SURRENDER AND RELATED TRANSACTIONS
-----------------------------------------------------------
Set out below is a summary of the principal Certificate provisions and
administrative procedures which might be deemed to constitute, either directly
or indirectly, a "redemption" transaction. The summary shows that, because of
the insurance nature of the Certificates, the procedures involved necessarily
differ in certain significant respects from the procedures for mutual funds and
contractual plans.
(a) Surrender, Withdrawal
---------------------
At any time while the Certificate is in force, the Certificate Owner may,
with the approval of the irrevocable beneficiary or assignee, if any, request
surrender or withdrawal of the Certificate by sending a written request to
Colonial Life. In the case of a complete surrender, the Certificate Owner must
also send the Certificate to Colonial Life. At the time the written request is
received, it will
<PAGE>
be reviewed for completeness. Incomplete requirements will result in returning,
within twenty-four (24) hours, the items to the Certificate Owner for
completion.
The amount payable upon surrender of the Certificate is the cash value at
the end of valuation period during which the request is received, less any
Certificate debt. The surrender transaction will be processed upon receipt of
the completed request, with an effective date of the date received. The check
will be mailed to the Certificate Owner within seven (7) days of receipt of the
written request.
The Certificate Owner may withdraw part of the Certificate's cash value at
any time in which the Certificate has cash value. The amount payable upon
withdrawal cannot exceed the Certificate cash value, less any Certificate debt
at the end of the valuation period during which the request is received. The
minimum amount that may be withdrawn is $5,000. If for any reason the withdrawal
request would be for an amount less than $5,000, Colonial Life will furnish,
within twenty-four (24) hours, the Certificate Owner with a written explanation
of why the request cannot be processed. A withdrawal charge equal to $100 will
be deducted from the amount of each withdrawal. A withdrawal will also invoke
imposition of a pro-rata portion of any surrender charge.
The withdrawal transaction will be processed the day following receipt of
the request, with an effective date of the date received. Upon processing the
withdrawal Colonial Life will pay the amount out of its General Account and
<PAGE>
transfer assets pro-rata from the divisions of the Separate Account to the
General Account, unless the Certificate Owner designates a specific division be
used otherwise. The amount payable for a withdrawal request that would cause the
Specified Amount to be reduced to less than $250,000 for Colonial Heritage I and
$500,000 for Colonial Heritage II will be adjusted to the amount that would not
reduce the Specified Amount below these minimums. In this event, the Certificate
Owner will be contacted prior to processing the check for the withdrawal.
A surrender charge will be assessed upon surrender or withdrawal during the
first five Certificate years. The surrender charge will be 5% of the first year
premiums for surrender during the first Certificate year, declining annually 1%
each Certificate year until the fifth Certificate year, after which time no
Surrender Charge is assessed.
For a withdrawal, the charge will be proportionately the same as for
surrenders. The charge will be calculated by dividing (i) by (ii) and
multiplying the result by (iii) where:
(i) is the amount of the cash value withdrawn
(ii) is the cash value
(iii) is the amount of the surrender charge on a surrender.
(b) Changes in Specified Amount
---------------------------
At any time after the first Certificate anniversary, the Certificate Owner
may, with the approval of the irrevocable
<PAGE>
beneficiary or assignee, if any, by written request, increase or decrease the
Specified Amount. Any change is subject to the following conditions:
(1) Any decrease will become effective on the Month Anniversary Date after
the date of receipt of the request. Any such decrease will be deducted in the
following order:
a. From the most recent Specified Amount increase, if any;
b. Successively from the next most recent Specified Amount increase, if
any;
c. From the Initial Specified Amount.
The minimum decrease in Specified Amount is $250,000 for Colonial Heritage
I and $500,000 for Colonial Heritage II. No decrease may reduce the Specified
Amount to less than $250,000 for Colonial Heritage I and $1,000,000 for Colonial
Heritage II. When a request for a Specified Amount reduction is received which
would cause the Specified Amount to be less than the Certificate minimums as
described above, the request will be adjusted to the amount that would reduce
the Specified Amount to $250,000 for Colonial Heritage I and $1,000,000 for
Colonial Heritage II. In this event, the Certificate Owner will be contacted as
to the reason the requested Specified Amount change cannot be and was not
processed as requested.
(2) Any request for an increase must be applied for on a supplemental
application and shall be subject to evidence of insurability satisfactory to
Colonial Life. The minimum
<PAGE>
increase in Specified Amount is $250,000 for Colonial Heritage I and $500,000
for Colonial Heritage II.
(3) Any increase approved by Colonial Life will become effective on the
date shown in the Supplemental Certificate Specifications Page, which generally
will be the Month Anniversary Date that coincides with or next follows the day
the change is approved, subject to deduction of the first month's cost of
increased insurance.
(4) The Certificate Owner may request in writing to change the death
benefit option. If the request is to change from Option I to Option II, the
Specified Amount will be decreased by the Certificate's accumulation value on
the effective date of the change. Evidence of insurability satisfactory to
Colonial Life will be required on a change from Option I to Option II. If the
request is to change from Option II to Option I, the Specified Amount will be
increased by the amount of the Certificate's accumulation value on the effective
date of the change. The effective date of either change shall be the Month
Anniversary Date that coincides with or next follows the day the request for
change is received.
(c) Benefit Claims
--------------
So long as it remains in force, Colonial Heritage I provides for the
payment of a death benefit upon the death of the insured and Colonial Heritage
II provides for a death benefit payable upon the death of the last surviving
insured. Colonial Life will usually pay a death benefit to the named
<PAGE>
beneficiary in accordance with the designated death benefit option within seven
(7) days after receipt in its service center of due proof of death of the
insured. The registered representative may deliver the death benefit payment. If
the registered representative intends to deliver the payment, notice will be
sent to the named beneficiary informing him or her of the issuance of the check.
If the registered representative does not intend to deliver the check, the
payment check will be mailed to the named beneficiary. Payment of death benefits
may, however, be postponed due to the nature of the death, contestability, such
as suicide, misrepresentation and under certain other circumstances, such as:
(i) the New York Stock Exchange is closed other than customary weekend and
holiday closing; (ii) the SEC, by order, permits postponement for the protection
of the policyholders; or (iii) an emergency exists, as determined by the SEC, 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 net
assets.
The amount of the death benefit is determined at the end of the valuation
period during which the insured dies. The death benefit will be reduced by any
outstanding Certificate debt and any due and payable charges.
Certificate Owners designate in the initial application one of two death
benefit options offered under the Certificates. The amount of the life insurance
proceeds payable under a Certificate will depend upon the option in
<PAGE>
effect as follows. Under Option I, the death benefit equals the greater of the
current specified amount or the accumulation value of the Certificate at the
date of death multiplied by the corridor percentage. Under Option II, the death
benefit equals the current Specified Amount plus the accumulation value of the
Certificate on the date of death. The death benefit will not be less than the
accumulation value on the date of death multiplied by the corridor percentage.
The amount of the benefit payable at maturity is the cash value of the
Certificate on the maturity date. These proceeds will be reduced by any
outstanding indebtedness. This benefit will only be paid if the insured is
living on the Certificate's maturity date. The Certificate will mature on: a
Certificate anniversary, (ii) at least one year from the date of receipt of the
request, (iii) after the tenth Certificate year and (iv) on or before the
Certificate anniversary nearest to the insured's 100th birthday for Colonial
Heritage I and the younger insured's 100th birthday for Colonial Heritage II.
Payments of benefits will be made by Colonial Life out of its General
Account and assets will be transferred from the divisions of the Separate
Account to the General Account.
(d) Certificate Loans
-----------------
The Certificate Owner may by phone, fax or in writing, and with the
approval of the irrevocable beneficiary or assignee, if any, request a
Certificate loan at any time
<PAGE>
after the first Certificate anniversary. Generally, the maximum amount which may
be borrowed at any time is ninety percent (90)% of the cash value on the date of
the loan. Any prior Certificate debt will be deducted from any advances made on
the loan. Certificate loan checks will be mailed to the Certificate Owner within
seven (7) days of receipt of the loan request.
There are two types of loans available. A Type A loan is charged the same
interest rate as the interest credited to the amount of accumulation value held
in the General Account to secure loans. The amount available at any time for a
Type A loan equals the maximum loan amount less the guideline single premium at
issue, as set forth in the Code, less any outstanding Type A loans. Any other
loans are Type B loans. A Type B loan is charged an interest rate of 6.85%. It
is possible for one loan request to result in both a Type A and a Type B loan. A
request for a loan will be granted first as a Type A loan, to the extent
available, and then as a Type B loan. Once a Certificate loan is granted, it
remains a Type A or Type B until it is repaid. Increases in the Specified Amount
will affect the determination of the amount available for a Type A loan;
however, decreases in the Specified Amount will not have any such effect.
When the unloaned Type A balance before the loan is taken exceeds zero, but
is less than the loan requested, Colonial Life will grant a Type A loan equal to
the unloaned Type A balance. The remainder of the requested loan will be
<PAGE>
a Type B loan. Colonial Life will grant a Type A loan first before a Type B
loan. Once a Certificate loan is granted, it remains a Type A or a Type B until
it is repaid. If the interest due on a loan, either Type A or Type B, remains
unpaid when due, the interest will become principal. Colonial Life will treat
that as though it were a request for a new loan in the principal amount of the
unpaid interest; the calculation of which type of loan is available will take
place and the unpaid interest will become principal of either a Type A or Type B
loan.
3. TRANSFERS
---------
Set forth below is a summary of the administrative procedures which
Colonial Life will utilize in processing transfers between and among the
divisions of the Separate Account and the General Account. The summary shows
that, due to the insurance nature of the Certificates, the procedures involved
necessarily differ in certain significant respects from the procedures for
mutual funds and contractual plans.
The Separate Account currently has five (5) divisions. Certificate Owners
may transfer amounts between the General Account and the divisions of the
Separate Account and among the divisions of the Separate Account. The total
amount transferred each time must be at least $1,000 unless a lesser amount
represents the entire amount in the General Account or in a division of the
Separate Account. Colonial Life allows Certificate Owners to authorize transfers
in writing or by telephone. In order to make a transfer by telephone, the
<PAGE>
proper authorization form must be on file with Colonial Life. Colonial Life will
process transfers and determine all values in connection with transfers at the
end of the valuation period during which the transfer request is received. For
transfers in excess of 12 in any Certificate year, a transfer charge equal to
$100 will be imposed each time amounts are transferred and will be deducted on a
pro-rata basis from the division or divisions or the General Account into which
the amount is being transferred. If a Certificate Owner requests a transfer
which does not meet the minimum required amount, or cannot be processed for any
other reason, Colonial Life will, within 24 hours, provide the Certificate Owner
with a written explanation of why the transfer cannot be processed.
Currently a Certificate Owner may make up to 24 transfers per year, with
the first twelve being free. There is no limit to the number of transfers which
may be made, except for the 24 transfers per year limitation described above.
Should Colonial Life further limit the timing or number of transfers at some
future date, the Certificate Owner will be notified of such change.
4. REFUNDS
-------
(a) Free Look Period
----------------
The Certificate Owner, with the approval of the irrevocable beneficiary or
assignee, if any, may cancel the Certificate within twenty (20) days after the
delivery of the Certificate to the Certificate Owner. A written request to
Colonial Life together with the Certificate will be required.
<PAGE>
The Certificate will be deemed void from the Certificate date and all premiums
paid will be refunded within seven (7) days of receipt by Colonial Life of the
request. The registered representative will be required to return any
commissions paid in connection with the sale.
(b) Suicide
-------
In the event the insured commits suicide, whether sane or insane, within
two (2) years of the Certificate date, Colonial Life's liability will be limited
to the return of the premiums paid, without interest, less any Certificate debt
and any withdrawal, unless otherwise specified by state law. In the event of
suicide within two (2) years of the effective date of any increase in Specified
Amount, the only liability of Colonial Life in connection with said increase
will be a refund of the cost of insurance for such increase. Under Colonial
Heritage II, if the first death is by suicide and the surviving insured is
classified by Colonial Life as insurable on the Certificate date, Colonial Life
will issue, upon request of the Certificate Owner and without evidence of
insurability, an individual Certificate providing coverage on the life of the
surviving insured equal to the coverage of the insured for which premiums or
cost of insurance was refunded.
(c) Incontestability
----------------
After the Certificate has been in force during the lifetime of the insured
for a period of two (2) years from the later of its Certificate date or from the
date of
<PAGE>
application or any medical examination required, or after two (2) years from the
date of reinstatement, Colonial Life will not contest the Certificate except for
an increase in the Specified Amount. Further, Colonial Life will not contest any
increase in the Specified Amount after such increase has been in force during
the lifetime of the insured for two (2) years following the effective date of
said increase.
In the event of contest of the Certificate during the first two (2)
Certificate years as to statements made in the original application, the only
liability of Colonial Life will be a refund of premiums paid less any
Certificate debt and withdrawal. In the event of a contest during the two years
following an increase in the Specified Amount, the only liability of Colonial
Life for such increase will be a refund of the cost of insurance for such
increase. Any increase will be contestable, within the two (2) year period, only
with regard to statements concerning the increase.
In the event of contest of the Certificate due to statements made in the
reinstatement application, the only liability of Colonial Life will be a refund
of premiums paid since the date of reinstatement less any Certificate debt and
withdrawals.
5. BILLING AND COLLECTION PROCEDURES
---------------------------------
Colonial Life will assign a separate ten-digit block of numbers to be used
as Certificate numbers for the Certificate business. Premium billing notices
will be system-generated and will be mailed by Corporate Accounts Operation
Department
<PAGE>
personnel. In addition to the unique range of Certificate numbers, Flexible
Premium Variable Life Certificates will have the message, "Flexible Premium
Variable Life" on the billing notices to distinguish them from other types of
life insurance contracts.
Certificate premiums in response to billing notices will be sent directly
to Colonial Life's bank and deposited in Colonial Life's bank account.
Unsolicited premiums will be received at Colonial Life's service center and
deposited in Colonial Life's account at a depository bank. Certificate pre-
authorized check or debit collections will be determined from the Policy
Administrative System and subsequently deposited in Colonial Life's bank
account.
For convenience, Colonial Life will offer the "List Billing" mode of
payment which allows the employer to deduct premiums from the Certificate
Owner's pay checks and remit the premiums directly to Colonial Life. All
Certificates, paid as billed, will be entered into the Collection System
together with payments on other life contracts. Premium payments not paid as
billed will be entered into the system and checks will be deposited into
Colonial Life's account at a depository bank. When the system generated reports
are received on the day following the processing of premium payment
transactions, the total for deposits other than Certificate deposits will be
deducted from the total bank deposit. This difference will represent the total
Certificate deposit, and will be reconciled to the premium
<PAGE>
clearing entry on the Policy System accounting journal.
Based on the system-generated report, funds will be transferred from
Colonial Life's regular bank account to the divisions of the Separate Account
for inclusion in the Certificate Owner's unit holdings.
6. CHANGE IN DIVISION ALLOCATION
-----------------------------
The Certificate Owner may change the allocation of future premium payments
among the General Account and the divisions of the Separate Account by written
notice or by telephone, without payment of any fees or penalties. In order to
make an allocation change by telephone, the proper authorization form must be on
file with Colonial Life. The minimum allocation percentage allowed for the
General Account or any division of the Separate Account is one percent (1%) of
net premium, unless the allocation percentage is zero.
The allocation change will be processed with an effective date of the date
the correctly completed written request is received or the telephone request is
received.
7. INCOMPLETE ALLOCATION REQUEST
-----------------------------
If an incomplete written change in premium allocation request is received,
future premium payments will be allocated in accordance with the previous valid
allocation. A letter requesting a corrected allocation request will be sent to
the Certificate Owner within twenty-four (24) hours of receipt of the incomplete
allocation request.
8. TELEPHONE TRANSFERS AND REALLOCATIONS
-------------------------------------
Certificate Owners may request by telephone transfers of
<PAGE>
accumulation value, loans or reallocation of premiums (including allocation
changes pursuant to existing Dollar Cost Averaging and Automatic Portfolio Re-
Balancing programs), provided that the appropriate authorization form is on file
with Colonial Life. All restrictions which apply to a transfer or reallocation,
as outlined in the current prospectus, including any charges, apply to transfers
or reallocation by telephone. Any changes which would effect the telephone
authorization, including cancellation, will become effective no later than 3
days after receipt of written notice from the Certificate Owner. Colonial Life
will require the Certificate Owner's birth date and social security number or
taxpayer identification number as verification each time the Certificate Owner
requests a transfer or reallocation by telephone.
9. COMBINED REQUESTS
-----------------
The Certificate Owner may combine requests for changes in the Specified
Amount and the death benefit option and requests for withdrawals. Such combined
requests will be considered as a single transaction becoming effective as of the
monthly anniversary date following the date the last of the requests is
completed. For example, if the combined request consists of a withdrawal and an
increase back to the original Specified Amount, evidence of insurability will be
required for the increase portion of this combined request. Due to the length of
time of the underwriting process, the withdrawal portion will be delayed until
the increase can be
<PAGE>
processed, to insure maximum benefit coverage at all times. The Certificate
Owner may submit a combined request for any number or combination or changes not
addressed above. These requests will be processed in the order and with timing
to ensure fair, reasonable and beneficial treatment relative to the Certificate
Owner.
10. UNPAID CHECKS
-------------
When an unpaid item is received, a suspense account will be charged for the
amount of the check. The Certificate Owner will be notified in writing of the
unpaid item and given ten (10) days to make the payment before any action is
taken. The registered representative of record will receive a copy of the
letter.
If the item remains open after the 14th day, a premium reversal will be
made effective the date of the original premium payment and the General Account
of Colonial Life will absorb the gain or loss of this backdated transaction.
Commissions paid as a result of the original premium payment will be recovered.
If the item is covered within the fourteen (14) day period, the Certificate
Owner will receive the investment results effective from the day of the original
transaction.
11. NOTIFICATIONS
-------------
Written Certificate Owner notifications will be sent to the Certificate
Owner promptly when selected transactions are processed. Transactions which will
be documented include, but are not limited to, the following:
<PAGE>
(a) Scheduled premium payments that are billed by direct notice, pre-
authorized premium payments and any payment not-paid-as-billed;
(b) Loan Repayments;
(c) Transfers; including the initial allocation transfer from the
General Account on the allocation date;
(d) Premium Reallocations;
(e) Withdrawals;
(f) Increases or Decreases in Specified Amount;
(g) Reinstatements;
(h) Certificate Issue;
(i) Beneficiary/Ownership Changes;
(j) Assignment/Release of Assignment;
(k) Refunds;
(l) Loans;
(m) Surrenders;
(n) Lapses;
(o) First Premium Payments;
(p) Unpaid Checks;
(q) Dollar Cost Averaging; and
(r) Automatic Portfolio Re-Balancing.
12. ROLE OF CHUBB SECURITIES
------------------------
Chubb Securities, or such other registered broker-dealers with whom Chubb
Securities has executed a distribution agreement, will be responsible for
administering the Certificates under the guidelines of the various state
<PAGE>
and federal laws and the rules, regulations, and requirements of the NASD.
Personnel of Chubb Securities (or such other broker-dealers having a
distribution agreement with Chubb Securities) will be registered representatives
or principals except for clerical support. The duties to be performed by Chubb
Securities (or such other broker-dealers) include, but are not limited to:
(a) Approving suitability of applications for insurance and
investment in the Separate Account,
(b) Reviewing items identified in 13., 14., and 15., after being
processed by the appropriate department in order to insure they
were processed correctly.
13. ROLE OF COLONIAL LIFE POLICY ISSUE AND UNDERWRITING DEPARTMENT
--------------------------------------------------------------
After an application has been approved for suitability requirements by
Chubb Securities or such other broker-dealer having a distribution agreement
with Chubb Securities, the application is processed by the Underwriting
Department for selection of the risk. The Policy Issue Department issues,
prepares and delivers the completed Certificate to the Corporate Accounts
Operations Department, who then mails it to the registered representative for
delivery to the Certificate Owner. For 90 days after issue, this Department will
also be responsible for processing the following based on review and
authorization by Chubb Securities:
<PAGE>
(a) Beneficiary/Ownership Changes;
(b) Increases or Decreases in Specified Amount; and
(c) Changes of Certificate Type between Option I and Option II.
14. ROLE OF COLONIAL LIFE CORPORATE ACCOUNTS HERITAGE OPERATIONS
------------------------------------------------------------
DEPARTMENT
----------
The Corporate Accounts Heritage Operations Department, based on review and
authorization by Chubb Securities, will be responsible for each of the following
types of transactions:
(a) All Customer Calls;
(b) Telephone Authorizations;
(c) Fund Transfers;
(d) Premium Allocation Changes;
(e) Dollar Cost Averaging;
(f) Automatic Portfolio Re-Balancing;
(g) Confirmations;
(h) Quarterly and Annual Statements;
(i) Premium Payments;
(j) Premium Payment Reversals;
(k) Loans;
(l) Loan Repayments;
(m) Loan Repayment Reversals;
(n) Full Cash Surrenders;
(o) Certificate Information;
(p) Address Changes;
(q) Name Changes;
<PAGE>
(r) Owner Changes;
(s) Beneficiary Changes;
(t) Mode Changes;
(u) Assignments; and
(v) Billings (except PAC).
15. ROLE OF COLONIAL LIFE SPECIAL ACCOUNTS CUSTOMER SERVICE DEPARTMENT
------------------------------------------------------------------
The Customer Service Department, based on review and authorization by Chubb
Securities, will be responsible for each of the following types of transactions:
(a) Duplicate Certificates;
(b) Increases/Decreases;
(c) Add/Delete Riders;
(d) UL Waiver Processing;
(e) UL Manual Lapses;
(f) UL Option Changes;
(g) Exchanges/Replacements;
(h) PAC Bank Drafts;
(i) Certificate Exchange Option Rider;
(j) Complex Certificate Information;
(k) Removal of Ratings;
(l) UL PDF Processing;
(m) Partial Surrenders/Withdrawals;
(n) Special Lapses;
(o) 1035 Exchanges; and
(p) Reinstatements.
<PAGE>
Exhibit 12(b)
Actuarial Memorandum Regarding Deduction of the DAC Tax Charge
<PAGE>
June 22, 1995
The Colonial Insurance Company of America
One Granite Place
Concord, New Hampshire 03301
Re: Colonial Separate Account D
Gentlemen:
This opinion is furnished in connection with an Order of Exemption, pursuant to
section 6(c) of the Investment Company Act of 1940 from section 27(c)(2) of the
Act and rules 6e-3(T)(b)(13) and 6e-3(T)(c)(4) thereunder, granted on August 10,
1994 to Chubb Life Insurance Company of America ("Chubb Life") and its Chubb
Separate Account C; which order also granted relief to certain future policies
and separate accounts, including those established by life insurance companies
affiliated with Chubb Life. Chubb Life Insurance Company of America, et.al.,
Release No. IC-20401 (July 12, 1994) (notice) and Release No. IC-20471 (Aug. 10,
1994) (order).
This opinion covers Colonial Separate Account D of The Colonial Insurance
Company of America ("Colonial Life"), a wholly-owned subsidiary of Chubb Life,
to support certain group flexible premium variable life insurance policies and
certificates and group joint and last survivor flexible premium variable life
insurance policies and certificates ("collectively, "flexible premium
contracts") issued by Colonial Life and Chubb Securities Corporation.
I am familiar with the financial impact of the increased federal tax burden
under Section 848 of the Internal Revenue Code of 1986, as amended, resulting
from the receipt of premiums for the flexible premium contracts, and I am
familiar with the Order of Exemption. In my opinion:
1. The DAC Tax charge is reasonable is relation to Colonial Life's increased
federal tax burden under Section 848 resulting from the receipt of
premiums.
2. The targeted rate of return used to calculate the DAC Tax charge is
reasonable.
3. The factors taken into account by Colonial Life to determine the targeted
rate of return are appropriate for this purpose.
<PAGE>
The Colonial Life Insurance Company of America
June 22, 1995
Page Two
I hereby consent to the use of this opinion as an Exhibit to Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-6 filed in connection
with the registration of interests in Colonial Separate Account D.
/s/: MICHAEL J. LEBOEUF
Michael J. LeBoeuf, FSA, MAAA
Assistant Vice President and
Product Actuary
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 3, 1995 for The Colonial Life Insurance Company
of America in Pre-Effective Amendment No. 1 to the Registration Statement (Form
S-6 No. 33-88632) and related Prospectus for the registration of units of
interest in the Colonial Separate Account D under group flexible premium
variable life insurance and group joint and last survivor flexible premium
variable life insurance policies offered by The Colonial Life Insurance Company
of America.
/s/: ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
July 18, 1995
