GROUP VEL ACCT OF 1ST ALLMERICA FINANCIAL LIFE INS CO, S-6EL24/A, 1996-11-08

GROUP VEL ACCT OF 1ST ALLMERICA FINANCIAL LIFE INS CO
S-6EL24/A, 1996-11-08

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<PAGE>

Registration No. 33-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-6

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2

Pre-effective Amendment No. 1

GROUP VEL ACCOUNT OF
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(Exact Name of Registrant)

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
440 Lincoln Street
Worcester, MA 01653
(Address of Principal Executive Office)

(508) 855-1000
(Registrant's telephone number including area code)

Abigail M. Armstrong, Secretary and Counsel
First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester, Massachusetts 01653
(Name and complete Address of Agent for Service of Process)

It is proposed that this filing will become effective:

____immediately upon filing prsuant to Paragraph (b)
____on (________) pursuant to Paragraph (b)
____60 days after filing pursuant to Paragraph (a) (1)
____on (________) pursuant to Paragraph (a)(1)
____on (________) pursuant to Paragraph (a) (2) of Rule 485

FLEXIBLE PREMIUM VARIABLE LIFE

Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940,
Registrant hereby declares that an indefinite amount of its securities is being
registered under the Securities Act of 1933. The $500 filing fee required by
said rule is paid herewith.

<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8b-2 AND THE PROSPECTUS

Item No. of
Form N-8B-82 Caption in Prospectus
- ------------ ---------------------
1. . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . Cover Page
3. . . . . . . . . . . . . . Not Applicable
4. . . . . . . . . . . . . . Distribution
5. . . . . . . . . . . . . . The Company, The Group VEL Account
6. . . . . . . . . . . . . . The Group VEL Account
7. . . . . . . . . . . . . . Not Applicable
8. . . . . . . . . . . . . . Not Applicable
9. . . . . . . . . . . . . . Legal Proceedings
10 . . . . . . . . . . . . . Summary; Description of the Company, The
Group VEL Account, the Trust, Fidelity VIP,
Fidelity VIP II, T.Rowe Price DGPF and
INVESCO VIF; The Certificate; Certificate
Termination and Reinstatement; Other
Certificate Provisions
11 . . . . . . . . . . . . . Summary; The Trust, Investment Objectives
and Policies
12 . . . . . . . . . . . . . Summary; The Trust;
13 . . . . . . . . . . . . . Summary; The Trust; Fidelity VIP; Fidelity
VIP II; T. Rowe Price; DGPF; and INVESCO VIF
Investment Advisory Services to the Trust;
Investment Advisory Services to Fidelity VIP;
Investment Advisory Services to Fidelity
VIP II; Investment Advisory Services to
T. Rowe Price; Investment Advisory Services
to DGPF; and Investment Advisory Services to
INVESCO VIF; Charges and Deductions
14 . . . . . . . . . . . . . Summary; Enrollment Form for a Certificate
15 . . . . . . . . . . . . . Summary; Enrollment Form for a Certificate;
Premium Payments; Allocation of Net Premiums
16 . . . . . . . . . . . . . The Group VEL Account; The Trust; Fidelity
VIP; Fidelity VIP II; T. Rowe Price; DGPF and
INVESCO VIF; Premium Payments; Allocation of
Net Premiums
17 . . . . . . . . . . . . . Summary; Surrender; Partial Withdrawal;
Charges and Deductions; Certificate
Termination and Reinstatement
18 . . . . . . . . . . . . . The Group VEL Account; The Trust; Fidelity
VIP; Fidelity VIP II; T. Rowe Price; DGPF and
INVESCO VIF; Premium Payments
19 . . . . . . . . . . . . . Reports; Voting Rights
20 . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . Summary; Certificate Loans; Other Certificate
Provisions
22 . . . . . . . . . . . . . Other Certificate Provisions
23 . . . . . . . . . . . . . Not Required
24 . . . . . . . . . . . . . Other Certificate Provisions
25 . . . . . . . . . . . . . The Company

<PAGE>
Item No. of
Form N-8B-2 Caption in Prospectus
- ------------ ---------------------

26 . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . The Company
28 . . . . . . . . . . . . . Directors and Principal Officers of the
Company
29 . . . . . . . . . . . . . The Company
30 . . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . Distribution
36 . . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . . Summary; Distribution
39 . . . . . . . . . . . . . Summary; Distribution
40 . . . . . . . . . . . . . Not Applicable
41 . . . . . . . . . . . . . The Company, Distribution
42 . . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . . Premium Payments; Certificate Value and
Surrender Value
45 . . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . . Certificate Value and Surrender Value;
Federal Tax Considerations
47 . . . . . . . . . . . . . The Company
48 . . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . . The Group VEL Account
51 . . . . . . . . . . . . . Cover Page; Summary; Charges and
Deductions; The Certificate; Certificate
Termination and Reinstatement; Other
Certificate Provisions
52 . . . . . . . . . . . . . Addition, Deletion or Substitution of
Investments
53 . . . . . . . . . . . . . Federal Tax Considerations
54 . . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . . Not Applicable

<PAGE>
This prospectus describes certificates issued under group flexible premium
variable life insurance policies ("Certificates") offered by First Allmerica
Financial Life Insurance Company ("Company") to eligible applicants
("Certificate Owners") who are members of a non-qualified benefit plan. Within
limits, you may choose the amount of initial premium desired and the initial
Death Benefit. You have the flexibility to vary the frequency and amount of
premium payments, subject to certain restrictions and conditions. You may
withdraw a portion of the Certificate's surrender value, or the Certificate may
be fully surrendered at any time, subject to certain limitations.

The Certificates permit you to allocate Net Premiums among up to seven of
twenty sub-accounts ("Sub-Accounts") of the Group VEL Account, a separate
account of the Company, and a fixed interest account ("General Account") of the
Company (together "Accounts"). Each Sub-Account invests its assets in a
corresponding investment portfolio of Allmerica Investment Trust ("Trust"),
Variable Insurance Products Fund ("Fidelity VIP"), Variable Insurance Products
Fund II ("Fidelity VIP II"), T. Rowe Price International Series, Inc. ("T. Rowe
Price"), Delaware Group Premium Fund, Inc. ("DGPF") or INVESCO Variable
Investment Funds, Inc. ("INVESCO VIF"). The Trust is managed by Allmerica
Investment Management Company, Inc. ("Allmerica Investment"). Fidelity VIP and
Fidelity VIP II are managed by Fidelity Management & Research Company ("Fidelity
Management"). T. Rowe Price is managed by Rowe Price-Fleming International, Inc.
("Price-Fleming"). The International Equity Series, which is the only investment
portfolio of DGPF available under the Certificates, is managed by Delaware
International Advisers Ltd. ("Delaware International"). INVESCO VIF, which is
managed by INVESCO Funds Group, Inc. ("INVESCO"), is available only to employees
of INVESCO and its affiliates.

In certain circumstances, a Certificate may be considered a "modified
endowment contract." Under the Internal Revenue Code, any Certificate loan,
partial withdrawal or surrender from a modified endowment contract may be
subject to tax and tax penalties. See "FEDERAL TAX CONSIDERATIONS -- Modified
Endowment Contracts."

IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY OR CERTIFICATE.

THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OF THE
ALLMERICA INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, T. ROWE PRICE INTERNATIONAL SERIES, INC. AND DELAWARE GROUP
PREMIUM FUND, INC. INVESTORS SHOULD RETAIN A COPY OF THIS PROSPECTUS FOR FUTURE
REFERENCE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THE CERTIFICATES ARE OBLIGATIONS OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE
COMPANY AND ARE DISTRIBUTED BY ALLMERICA INVESTMENTS, INC. THE CERTIFICATES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR CREDIT
UNION. THE CERTIFICATES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC), OR ANY OTHER FEDERAL AGENCY. INVESTMENTS
IN THE CERTIFICATES ARE SUBJECT TO VARIOUS RISKS, INCLUDING THE FLUCTUATION OF
VALUE AND POSSIBLE LOSS OF PRINCIPAL.

DATED NOVEMBER 13, 1996
440 LINCOLN STREET
WORCESTER, MASSACHUSETTS 01653
(508) 855-1000

<PAGE>
(Continued from cover page)

The Trust, Fidelity VIP, Fidelity VIP II, T. Rowe Price, DGPF, and INVESCO
VIF are open-end, diversified series investment companies. Eleven different
investment portfolios of the Trust are available under the Certificates: the
Growth Fund, Investment Grade Income Fund, Money Market Fund, Equity Index Fund,
Government Bond Fund, Select International Equity Fund, Select Aggressive Growth
Fund, Select Capital Appreciation Fund, Select Growth Fund, Select Growth and
Income Fund and Small Cap Value Fund (the "Funds"). Four of Fidelity VIP's
investment portfolios are available: Fidelity VIP High Income Portfolio (which
invests in higher yielding, higher risk, lower rated debt securities), Fidelity
VIP Equity-Income Portfolio, Fidelity VIP Growth Portfolio, and Overseas
Portfolio ("Portfolios"). One investment portfolio of Fidelity VIP II
("Portfolio") is available: the Fidelity VIP Asset Manager Portfolio. One
investment portfolio of T. Rowe Price ("Portfolio") is available: the T. Rowe
Price International Stock Portfolio. One investment portfolio of DGPF ("Series")
is available: the International Equity Series. The Total Return Fund and the
Industrial Income Fund of INVESCO VIF are available only to employees of INVESCO
and its affiliates. Each Fund, Portfolio and Series has its own investment
objectives. See "INVESTMENT OBJECTIVES AND POLICIES" in this prospectus. The
accompanying prospectuses of the Trust, Fidelity VIP, Fidelity VIP II, T. Rowe
Price, DGPF and INVESCO VIF describe the investment objectives and certain
attendant risks of each Underlying Fund. Due to state insurance regulations, an
underlying fund may not be available in all states.

There is no guaranteed minimum Certificate value. The value of a Certificate
will vary up or down to reflect the investment experience of allocations to the
Sub-Accounts and the fixed rates of interest earned by allocations to the
General Account. The Certificate value will also be adjusted for other factors,
including the amount of charges imposed. The Certificate will remain in effect
so long as the Certificate value less any outstanding debt is sufficient to pay
certain monthly charges imposed in connection with the Certificate. The
Certificate value may decrease to the point where the Certificate will lapse and
provide no further death benefit without additional premium payments.

If the Certificate is in effect at the death of the Insured, the Company
will pay a death benefit (the "Death Proceeds") to the beneficiary. Prior to the
Final Premium Payment Date, the Death Proceeds equal the Death Benefit, less any
debt, partial withdrawals, and any due and unpaid charges. After the Final
Premium Payment Date, the Death Proceeds equal the Surrender Value of the
Certificate. If the Guideline Premium Test is in effect (See ELECTION OF DEATH
BENEFIT OPTIONS), you may choose either Death Benefit Option 1 (the Death
Benefit is fixed in amount) or Death Benefit Option 2 (the Death Benefit
includes the Certificate value in addition to a fixed insurance amount) and may
change between Death Benefit Option 1 and Option 2, subject to certain
conditions. If the Cash Value Accumulation Test is in effect, Death Benefit
Option 3 (the Death Benefit is fixed in amount) will apply. A Minimum Death
Benefit, equivalent to a percentage of the Certificate value, will apply if
greater than the Death Benefit otherwise payable under Option 1, Option 2 or
Option 3.

2
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
SPECIAL TERMS........................................................................ 5
SUMMARY.............................................................................. 8
PERFORMANCE INFORMATION.............................................................. 15
DESCRIPTION OF THE COMPANY, THE GROUP VEL ACCOUNT,
THE TRUST, FIDELITY VIP, FIDELITY VIP II, T. ROWE PRICE, DGPF AND INVESCO VIF....... 19
INVESTMENT OBJECTIVES AND POLICIES................................................... 21
INVESTMENT ADVISORY SERVICES......................................................... 23
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.................................... 27
VOTING RIGHTS........................................................................ 28
THE CERTIFICATE...................................................................... 28
Enrollment Form for a Certificate.................................................. 28
Free Look Period................................................................... 29
Conversion Privileges.............................................................. 29
Premium Payments................................................................... 30
Allocation of Net Premiums......................................................... 30
Transfer Privilege................................................................. 31
Dollar Cost Averaging and Automatic Rebalancing Options............................ 31
Election of Death Benefit Options.................................................. 32
GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST.............................. 32
Death Proceeds..................................................................... 33
Change in Death Benefit Option..................................................... 35
Change in Face Amount.............................................................. 35
Increases.......................................................................... 35
Decreases.......................................................................... 36
Certificate Value and Surrender Value.............................................. 36
Calculation of Certificate Value................................................... 36
The Unit........................................................................... 37
Net Investment Factor.............................................................. 37
Payment Options.................................................................... 37
Optional Insurance Benefits........................................................ 38
Surrender.......................................................................... 38
Paid-Up Insurance Option........................................................... 38
Partial Withdrawal................................................................. 38
CHARGES AND DEDUCTIONS............................................................... 39
Premium Expense Charge............................................................. 39
Monthly Deduction From Certificate Value........................................... 40
Cost of Insurance.................................................................. 40
Calculation of the Charge.......................................................... 40
Cost of Insurance Rates............................................................ 41
Monthly Certificate Administrative Charge.......................................... 42
Monthly Group VEL Account Administrative Charge.................................... 42
Monthly Mortality and Expense Risk Charge.......................................... 42
Charges Reflected in the Assets of the Group VEL Account........................... 42
Surrender Charge................................................................... 43
Charges on Partial Withdrawal...................................................... 44
Transfer Charges................................................................... 45
Charge for Change in Face Amount................................................... 45
Other Administrative Charges....................................................... 45
CERTIFICATE LOANS.................................................................... 45
CERTIFICATE TERMINATION AND REINSTATEMENT............................................ 47
</TABLE>

3
<PAGE>

<TABLE>
<S> <C>
OTHER CERTIFICATE PROVISIONS......................................................... 48
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY...................................... 49
DISTRIBUTION......................................................................... 50
REPORTS.............................................................................. 50
LEGAL PROCEEDINGS.................................................................... 50
FURTHER INFORMATION.................................................................. 51
INDEPENDENT ACCOUNTANTS.............................................................. 51
FEDERAL TAX CONSIDERATIONS........................................................... 51
Taxation of the Certificates....................................................... 52
Modified Endowment Contracts....................................................... 52
MORE INFORMATION ABOUT THE GENERAL ACCOUNT........................................... 53
FINANCIAL STATEMENTS................................................................. 54
APPENDIX A -- OPTIONAL BENEFITS...................................................... A-1
APPENDIX B -- PAYMENT OPTIONS........................................................ A-2
APPENDIX C -- ILLUSTRATIONS.......................................................... A-3
APPENDIX D -- CALCULATION OF MAXIMUM SURRENDER CHARGES............................... A-11
</TABLE>

4
<PAGE>
SPECIAL TERMS

AGE: The Insured's age as of the nearest birthday measured from a Certificate
anniversary.

BENEFICIARY: The person(s) designated by the owner of the Certificate to
receive the insurance proceeds upon the death of the Insured.

CERTIFICATE CHANGE: Any change in the Face Amount, the addition or deletion of
a rider, or a change in the Death Benefit Option.

CERTIFICATE VALUE: The total amount available for investment under a
Certificate at any time. It is equal to the sum of (a) the value of the Units
credited to a Certificate in the Sub-Accounts and (b) the accumulation in the
General Account credited to that Certificate.

COMPANY: First Allmerica Financial Life Insurance Company.

DATE OF ISSUE: The date set forth in the Certificate used to determine the
Monthly Processing Date, Certificate months, Certificate years, and Certificate
anniversaries.

DEATH BENEFIT: The amount payable upon the death of the Insured, before the
Final Premium Payment Date, prior to deductions for Debt outstanding at the time
of the Insured's death, partial withdrawals and partial withdrawal charges, if
any, and any due and unpaid Monthly Deductions. The amount of the Death Benefit
will depend on the Death Benefit Option chosen, but will always be at least
equal to the Face Amount.

DEATH PROCEEDS: Prior to the Final Premium Payment Date, the Death Proceeds
equal the amount calculated under the applicable Death Benefit Option, less Debt
outstanding at the time of the Insured's death, partial withdrawals, if any,
partial withdrawal charges, and any due and unpaid Monthly Deductions. After the
Final Premium Payment Date, the Death Proceeds equal the Surrender Value of the
Certificate.

DEBT: All unpaid Certificate loans plus interest due or accrued on such loans.

DELIVERY RECEIPT: An acknowledgment, signed by the Certificate Owner and
returned to the Company's Principal Office, that the Certificate Owner has
received the Certificate and the Notice of Withdrawal Rights.

EVIDENCE OF INSURABILITY: Information, satisfactory to the Company, that is
used to determine the Insured's Underwriting Class.

FACE AMOUNT: The amount of insurance coverage applied for. The Face Amount of
each Certificate is set forth in the specification pages of the Certificate.

FINAL PREMIUM PAYMENT DATE: The Certificate anniversary nearest the Insured's
95th birthday. The Final Premium Payment Date is the latest date on which a
premium payment may be made. After this date, the Death Proceeds equal the
Surrender Value of the Certificate.

GENERAL ACCOUNT: All the assets of the Company other than those held in a
Separate Account.

GROUP VEL ACCOUNT: A Separate Account of the Company to which the Certificate
Owner may make Net Premium allocations.

GUIDELINE ANNUAL PREMIUM: The annual amount of premium that would be payable
through the Final Premium Payment Date of a Certificate for the specified Death
Benefit, if premiums were fixed by the Company as to both timing and amount, and
monthly cost of insurance charges were based on the 1980 Commissioners Standard
Ordinary Mortality Tables (Mortality Table B, Smoker or Non-Smoker, for unisex
Certificates), net investment earnings at an annual effective rate of 5%, and
fees and charges as set forth in the Certificate and any Certificate riders. The
Death Benefit Option 1 Guideline Annual Premium is used when calculating the
maximum surrender Charge.

INSURANCE AMOUNT AT RISK: The Death Benefit less the Certificate Value.

5
<PAGE>
ISSUANCE AND ACCEPTANCE: The date the Company mails the Certificate if the
enrollment form is approved with no changes requiring your consent; otherwise,
the date the Company receives your written consent to any changes.

LOAN VALUE: The maximum amount that may be borrowed under the Certificate.

MINIMUM DEATH BENEFIT: The minimum Death Benefit required to qualify the
Certificate as "life insurance" under Federal tax laws. The Minimum Death
Benefit varies by Age. It is calculated by multiplying the Certificate Value by
a percentage determined by the Insured's Age.

MONTHLY PROCESSING DATE: The date on which the Monthly Deduction is deducted
from Certificate Value.

MONTHLY DEDUCTION: Charges deducted monthly from the Certificate Value of a
Certificate prior to the Final Premium Payment Date. The charges include the
monthly cost of insurance, the monthly cost of any benefits provided by rider,
the monthly Certificate administrative charge, the monthly Group VEL Account
administrative charge and the monthly mortality and expense risk charge.

MONTHLY DEDUCTION SUB-ACCOUNT: A Sub-Account of the Separate Account to which
the payor that you name under the Payor Option may allocate Net Premiums to pay
all or a portion of the insurance charges and administrative charges. The
Monthly Deduction Sub-Account is currently Sub-Account 3 which invests in the
Money Market Fund of Allmerica Investment Trust.

NET PREMIUM: An amount equal to the premium less any premium expense charge.

PAID-UP INSURANCE: Life insurance coverage for the life of the Insured, with no
further premiums due.

PRINCIPAL OFFICE: The Company's office, located at 440 Lincoln Street,
Worcester, Massachusetts 01653.

PRO-RATA ALLOCATION: In certain circumstances, you may specify from which
Sub-Account certain deductions will be made or to which Sub-Account Certificate
Value will be allocated. If you do not, the Company will allocate the deduction
or Certificate Value among the General Account and the Sub-Accounts excluding
the Monthly Deduction Sub-Account in the same proportion that the Certificate
Value in the General Account and the Certificate Value in each Sub-Account bear
to the total Certificate Value on the date of deduction or allocation.

SEPARATE ACCOUNT: A Separate Account consists of assets segregated from the
Company's other assets. The investment performance of the assets of each
Separate Account is determined separately from the other assets of the Company.
The assets of a Separate Account which are equal to the reserves and other
contract liabilities are not chargeable with liabilities arising out of any
other business which the Company may conduct.

SUB-ACCOUNT: A subdivision of the Group VEL Account. Each Sub-Account invests
exclusively in the shares of a corresponding Fund of the Allmerica Investment
Trust, a corresponding Portfolio of the Variable Insurance Products Fund or the
Variable Insurance Products Fund II, the T. Rowe Price International Stock
Portfolio of T. Rowe Price International Series, Inc. or the International
Equity Series of the Delaware Group Premium Fund, Inc. The Total Return Fund and
the Industrial Income Fund of INVESCO VIF are available to employees of INVESCO
Inc., and its affiliates.

SURRENDER VALUE: The amount payable upon a full surrender of the Certificate.
It is the Certificate Value, less any Debt and any surrender charges.

UNDERLYING FUNDS: The Funds of Allmerica Investment Trust, the Portfolios of
Variable Insurance Products Fund and Variable Insurance Products Fund II, the
Portfolio of T. Rowe Price International Series, Inc. the Series of Delaware
Group Premium Fund, Inc. and the Funds of INVESCO Variable Investment Funds,
Inc. which are available under the Certificates.

6
<PAGE>
UNDERLYING INVESTMENT COMPANIES: Allmerica Investment Trust, Variable Insurance
Products Fund, Variable Insurance Products Fund II, T. Rowe Price International
Series, Inc., Delaware Group Premium Fund, Inc., and INVESCO Variable Investment
Funds, Inc.

UNDERWRITING CLASS: The risk classification that the Company assigns the
Insured based on the information in the enrollment form and any other Evidence
of Insurability considered by the Company. The Insured's Underwriting Class will
affect the cost of insurance charge and the amount of premium required to keep
the Certificate in force.

UNIT: A measure of your interest in a Sub-Account.

VALUATION DATE: A day on which the net asset value of the shares of any of the
Underlying Funds is determined and Unit values of the Sub-Accounts are
determined. Valuation Dates currently occur on each day on which the New York
Stock Exchange is open for trading, and on such other days (other than a day
during which no payment, partial withdrawal, or surrender of a Certificate is
received) when there is a sufficient degree of trading in an Underlying Fund's
securities such that the current net asset value of the Sub-Accounts may be
materially affected.

VALUATION PERIOD: The interval between two consecutive Valuation Dates.

WRITTEN REQUEST: A Request by the Certificate Owner in writing, satisfactory to
the Company.

YOU OR YOUR: The Certificate Owner, as shown in the enrollment form or the
latest change filed with the Company.

7
<PAGE>
SUMMARY

THE CERTIFICATE -- The Certificate issued under a group flexible premium
variable life policy offered by this prospectus allows you, subject to certain
limitations, to make premium payments in any amount and frequency. As long as
the Certificate remains in force, it will provide for: (a) life insurance
coverage on the named Insured; (b) Certificate Value; (c) surrender rights and
partial withdrawal rights; (d) loan privileges; and (e) in some cases,
additional insurance benefits available by rider for an additional charge.

The Certificates provide death benefits, Certificate Value, and other
features traditionally associated with life insurance policies. The Certificates
are "variable" because, unlike the fixed benefits of ordinary whole life
insurance, the Certificate Value will, and under certain circumstances the Death
Proceeds may, increase or decrease depending on the investment experience of the
Sub-Accounts of the Group VEL Account. They are "flexible premium" Certificates,
because, unlike traditional insurance policies, there is no fixed schedule for
premium payments. Although you may establish a schedule of premium payments
("planned premium payments"), failure to make the planned premium payments will
not necessarily cause a Certificate to lapse nor will making the planned premium
payments guarantee that a Certificate will remain in force. Thus, you may, but
are not required to, pay additional premiums.

The Certificate will remain in force until the Surrender Value is
insufficient to cover the next Monthly Deduction and loan interest accrued, if
any, and a grace period of 62 days has expired without adequate payment being
made by you.

SURRENDER CHARGES -- At any time that a Certificate is in effect, a
Certificate Owner may elect to surrender the Certificate and receive its
Surrender Value. A surrender charge may be calculated upon issuance of the
Certificate and upon each increase in Face Amount. The actual amount of the
Surrender Charge is disclosed on the specifications pages of the Certificate and
in the Company's periodic reports to Certificate Owners. The surrender charge
may be imposed, depending on the group to which the Certificate is issued, for
up to 15 years from the Date of Issue or any increase in the Face Amount and you
request a full surrender or a decrease in Face Amount.

SURRENDER CHARGES FOR THE INITIAL FACE AMOUNT -- The maximum surrender
charge calculated upon issuance of the Certificate is equal to the sum of (a)
plus (b) where (a) is a deferred administrative charge up to $8.50 per thousand
dollars of the initial Face Amount and (b) is a deferred sales charge of up to
50% (less any premium expense charge not associated with state and local premium
taxes) of premiums received up to the Guideline Annual Premium, depending on the
group to which the Certificate is issued. In accordance with limitations under
state insurance regulations, the amount of the maximum surrender charge will not
exceed a specified amount per thousand dollars of initial Face Amount, as
indicated in "APPENDIX C -- CALCULATION OF MAXIMUM SURRENDER CHARGES." The
maximum surrender charge remains level for up to 24 Certificate months, reduces
uniformly each month for the balance of the surrender charge period, and is zero
thereafter. If you surrender the Certificate during the first two years
following the Date of Issue before making premium payments associated with the
initial Face Amount which are at least equal to one Guideline Annual Premium,
the actual surrender charge imposed may be less than the maximum. See "THE
CERTIFICATE -- Surrender" and "CHARGES AND DEDUCTIONS -- Surrender Charge."

SURRENDER CHARGES FOR INCREASES IN FACE AMOUNT -- A separate surrender
charge may apply to and is calculated for each increase in Face Amount. The
maximum surrender charge for the increase is equal to the sum of (a) plus (b)
where (a) is up to $8.50 per thousand dollars of increase, and (b) is a deferred
sales charge of up to 50% (less any premium expense charge not associated with
state and local premium taxes) of premiums associated with the increase, up to
the Guideline Annual Premium for the increase. In accordance with limitations
under state insurance regulations, the amount of the surrender charge will not
exceed a Specified amount per thousand dollars of increase, as indicated in
"APPENDIX C -- CALCULATION OF MAXIMUM SURRENDER CHARGES." As is true for the

8
<PAGE>
initial Face Amount, (a) is a deferred administrative charge and (b) is a
deferred sales charge. This maximum surrender charge remains level for up to 24
Certificate months following the increase, reduces uniformly each month for the
balance of the surrender charge period, and is zero thereafter. During the first
two Certificate years following an increase in Face Amount, before making
premium payments associated with the increase in Face Amount which are at least
equal to one Guideline Annual Premium, the actual surrender charge with respect
to the increase may be less than the maximum. See "THE CERTIFICATE -- Surrender"
and "CHARGES AND DEDUCTIONS -- Surrender Charge."

In the event of a decrease in Face Amount, any surrender charge imposed is a
fraction of the charge that would apply to a full surrender of the Certificate.
See "THE CERTIFICATE -- Surrender" and "CHARGES AND DEDUCTIONS -- Surrender
Charge."

PREMIUM EXPENSE CHARGE -- A charge may be deducted from each premium payment
for state and local premium taxes paid by the Company for the Certificate and to
compensate the Company for federal taxes imposed for deferred acquisition costs
("DAC taxes") and for sales expenses related to the Certificates. State premium
taxes generally range from 0.75% to 5%, while local premium taxes (if any) vary
by jurisdiction within a state. The DAC tax deduction may range from zero to 1%
of premiums, depending on the group to which the Certificate is issued. The DAC
tax deduction is a factor that the Company must use when calculating the maximum
sales load it can charge under SEC rules. The charge for sales expenses may
range from zero to 5%, depending on the characteristics of the group to which
the Certificate is issued and the actual sales expense incurred by the Company.
See "CHARGES AND DEDUCTIONS -- Premium Expense Charge."

MONTHLY DEDUCTIONS FROM CERTIFICATE VALUE -- On the Date of Issue and each
Monthly Processing Date thereafter prior to the Final Premium Payment Date,
certain charges ("Monthly Deductions") will be deducted from the Certificate
Value. The Monthly Deduction includes a charge for cost of insurance, a charge
for the cost of any additional benefits provided by rider and a charge for
Certificate administrative expenses that may be up to $10, depending on the
group to which the Certificate is issued. The Monthly Deduction may also include
a charge for Group VEL administrative expenses and a charge for mortality and
expense risks. The Group VEL administrative charge may continue for up to 10
Certificate years and may be up to 0.25% of Certificate Value in each
Sub-Account, depending on the group to which the Certificate was issued. The
mortality and expense risk charge may be up to 0.90% of Certificate Value in
each Sub-Account.

You may specify from which Sub-Account the cost of insurance charge, the
charge for Certificate administrative expenses and the charge for the cost of
additional benefits provided by rider will be deducted. If the Payor Provision
is in force, all cost of insurance charges and administrative charges will be
deducted from the Monthly Deduction Sub-Account. If no allocation is specified,
the Company will make a Pro-Rata Allocation.

The Group VEL administrative charge and the mortality and expense risk
charge are assessed against each Sub-Account that generates a charge. In the
event that a charge is greater than the value of the Sub-Account to which it
relates on a Monthly Processing Date, the unpaid balance will be totaled and the
Company will make a Pro-Rata Allocation.

Monthly Deductions are made on the Date of Issue and on each Monthly
Processing Date until the Final Premium Payment Date. No Monthly Deductions will
be made on or after the Final Premium Payment Date. See "CHARGES AND DEDUCTIONS
- -- Monthly Deductions from Certificate Value."

TRANSACTION CHARGES -- Each of the charges listed below is designed to
reimburse the Company for administrative costs incurred in the applicable
transaction.

TRANSACTION CHARGE ON PARTIAL WITHDRAWALS -- A transaction charge, which is
up to the smaller of 2% of the amount withdrawn or $25, is assessed at the time
of each partial withdrawal to reimburse

9
<PAGE>
the Company for the cost of processing the withdrawal. In addition to the
transaction charge, a partial withdrawal charge may also be made under certain
circumstances. See "CHARGES AND DEDUCTIONS -- Charges On Partial Withdrawal."

CHARGE FOR CHANGE IN FACE AMOUNT -- For each increase or decrease in Face
Amount, a charge of $2.50 per $1,000 of increase or decrease up to $40, will be
deducted from Certificate Value. This charge is designed to reimburse the
Company for underwriting and administrative costs associated with the change.
See "THE CERTIFICATE -- Change In Face Amount" and "CHARGES AND DEDUCTIONS --
Charge For Change In Face Amount."

TRANSFER CHARGE -- The first twelve transfers of Certificate Value in a
Certificate year will be free of charge. Thereafter, with certain exceptions, a
transfer charge of $10 will be imposed for each transfer request to reimburse
the Company for the costs of processing the transfer. See "THE CERTIFICATE --
Transfer Privilege" and "CHARGES AND DEDUCTIONS -- Transfer Charges."

OTHER ADMINISTRATIVE CHARGES -- The Company reserves the right to impose a
charge for the administrative costs associated with changing the Net Premium
allocation instructions, for changing the allocation of any Monthly Deductions
among the various Sub-Accounts, or for a projection of values. See "CHARGES AND
DEDUCTIONS -- Other Administrative Charges."

CHARGES OF THE UNDERLYING FUNDS -- In addition to the charges described
above, certain fees and expenses are deducted from the assets of the Underlying
Funds. The levels of fees and expenses vary among the Underlying Funds. The
following table shows the expenses of the Underlying Funds for 1995. For more
information, see the prospectuses of the Underlying Funds.

<TABLE>
<CAPTION>
OTHER FUND TOTAL FUND
MANAGEMENT FEES EXPENSES EXPENSES
--------------- ------------- -------------
<S> <C> <C> <C>
Growth Fund..................................................... 0.46% 0.08% 0.54%
Investment Grade Income Fund.................................... 0.41% 0.12% 0.53%#
Money Market Fund............................................... 0.29% 0.07% 0.36%#
Equity Index Fund............................................... 0.34% 0.21% 0.55%#
Government Bond Fund............................................ 0.50% 0.19% 0.69%#
Select International Equity Fund................................ 1.00% 0.24% 1.24%#
T. Rowe Price International Stock Portfolio..................... 1.05% 0.00% 1.05%
Select Aggressive Growth Fund................................... 1.00% 0.09% 1.09%#
Select Capital Appreciation Fund................................ 0.43% 0.92% 1.35%#
Select Growth Fund.............................................. 0.85% 0.12% 0.97%#
Select Growth and Income Fund................................... 0.75% 0.10% 0.85%#
Small Cap Value Fund............................................ 0.85% 0.16% 1.01%#
Fidelity VIP High Income Portfolio.............................. 0.60% 0.11% 0.71%
Fidelity VIP Equity-Income Portfolio............................ 0.51% 0.10% 0.61%*
Fidelity VIP Growth Portfolio................................... 0.61% 0.09% 0.70%*
Fidelity VIP Overseas Portfolio................................. 0.76% 0.15% 0.91%*
Fidelity VIP II Asset Manager Portfolio......................... 0.71% 0.08% 0.79%*@
DGPF International Equity Series................................ 0.65% 0.15% 0.80%+
INVESCO VIF Industrial Income Fund.............................. 0.75% 0.28% 1.03%#*
INVESCO VIF Total Return Fund................................... 0.75 % 0.26 % 1.01 %#*
</TABLE>

- ------------------------

# Under the Management Agreement with the Trust, Allmerica Investment
Management Company, Inc. ("Allmerica Investment") has declared a voluntary
expense limitation of 1.50% of average net assets for the Select
International Equity Fund, 1.35% for the Select Aggressive Growth Fund and
the Select Capital Appreciation Fund, 1.20% for the Select Growth Fund,
1.25% for the Small Cap Value Fund, 1.10% for the Select Growth and Income
Fund, 1.00% for the Investment Grade Income Fund and Government Bond Fund,
and 0.60% for the Money Market Fund and Equity Index Fund. Without the
effect of the expense limitation, in 1995 the total

10
<PAGE>

operating expenses of the Select Capital Appreciation Fund would have been
1.42% of average net assets. The total operating expenses of the other funds
were less than their respective expense limitations throughout 1995. The
declaration of a voluntary expense limitation in any year does not bind
Allmerica Investment to declare future expense limitations with respect to
any fund.

@ A portion of the brokerage expenses paid by the Portfolio was used to reduce
expenses. Without this reduction, total operating expenses would have been
0.81% for the Fidelity VIP II Asset Manager Portfolio.

* Fidelity Management & Research Company ("Fidelity Management") has
voluntarily agreed to temporarily limit total operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses) of the
Fidelity VIP Equity-Income Portfolio, Fidelity VIP Growth Portfolio and
Fidelity VIP Overseas Portfolio to an annual rate of 1.50%, of the Fidelity
VIP High Income Portfolio to an annual rate of 1.00%, and of the Fidelity
VIP II Asset Manager Portfolio to an annual rate of 1.25%, of the respective
Portfolio's net assets. The total operating expenses of the Portfolios were
less than their respective caps in 1995.

+ Delaware International Advisers Ltd., the investment adviser for the
International Equity Series, has agreed to waive its management fee and
reimburse the International Equity Series to limit certain expenses to 8/10
of 1% of the corresponding net assets. This waiver has been in effect from
the commencement of the public offering for the Series has been extended
through December 31, 1996. Without the expense limitation, in 1995 the total
annual expenses of the International Equity Series would have been 0.89%.

#* Various expenses of the Industrial Income and Total Return Funds were
voluntarily absorbed by INVESCO for the year ended December 31, 1995. If
such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 2.31% for Industrial Income Fund and
2.51% for Total Return Fund.

CERTIFICATE VALUE AND SURRENDER VALUE -- The Certificate Value is the total
amount available for investment under a Certificate at any time. It is the sum
of the value of all Units in the Sub-Accounts of the Group VEL Account and all
accumulations in the General Account of the Company credited to the Certificate.
The Certificate Value reflects the amount and frequency of Net Premiums paid,
charges and deductions imposed under the Certificate, interest credited to
accumulations in the General Account, investment performance of the
Sub-Account(s) to which Certificate Value has been allocated, and partial
withdrawals. The Certificate Value may be relevant to the computation of the
Death Proceeds. You bear the entire investment risk for amounts allocated to the
Group VEL Account. The Company does not guarantee a minimum Certificate Value.

The Surrender Value will be the Certificate Value, less any Debt and
surrender charges. The Surrender Value is relevant, for example, in the
computation of the amounts available upon partial withdrawals, Certificate loans
or surrender.

DEATH PROCEEDS -- The Certificate provides for the payment of certain Death
Proceeds to the named Beneficiary upon the death of the Insured. Prior to the
Final Premium Payment Date, the Death Proceeds will be equal to the Death
Benefit, reduced by any outstanding Debt, partial withdrawals, partial
withdrawal charges, and any Monthly Deductions due and not yet deducted through
the Certificate month in which the Insured dies. Three Death Benefit Options are
available. Under Option 1 and Option 3, the Death Benefit is the greater of the
Face Amount of the Certificate or the applicable Minimum Death Benefit. Under
Option 2, the Death Benefit is the greater of the Face Amount of the Certificate
plus the Certificate Value or the Minimum Death Benefit. The Minimum Death
Benefit is equivalent to a percentage (determined each month based on the
Insured's Age) of the Certificate Value. On or after the Final Premium Payment
Date, the Death Proceeds will equal the Surrender Value. See "THE CERTIFICATE --
Death Proceeds."

The Death Proceeds under the Certificate may be received in a lump sum or
under one of the Payment Options the Company offers. See "APPENDIX B -- Payment
Options."

11
<PAGE>
FLEXIBILITY TO ADJUST DEATH BENEFIT -- Subject to certain limitations, you
may adjust the Death Benefit, and thus the Death Proceeds, at any time prior to
the Final Premium Payment Date, by increasing or decreasing the Face Amount of
the Certificate. Any change in the Face Amount will affect the monthly cost of
insurance charges and the amount of the surrender charge. If the Face Amount is
decreased, a pro-rata surrender charge may be imposed. The Certificate Value is
reduced by the amount of the charge. See "THE CERTIFICATE -- Change In Face
Amount."

The minimum increase in Face Amount will vary by group, but will in no event
exceed $10,000. Any increase may also require additional Evidence of
Insurability satisfactory to the Company. The increase is subject to a "free
look period" and, during the first 24 months after the increase, to a conversion
privilege. See "THE CERTIFICATE -- Free Look Period, -- Conversion Privileges."

You may, depending on the group to which the Certificate is issued, have the
flexibility to add additional insurance benefits by rider. These may include the
Waiver of Premium Rider, Other Insured Rider, Children's Insurance Rider,
Accidental Death Benefit Rider, Option to Accelerate Benefits Rider and Exchange
Option Rider. See "APPENDIX A -- OPTIONAL BENEFITS."

The cost of these optional insurance benefits will be deducted from
Certificate Value as part of the Monthly Deduction. See "CHARGES AND DEDUCTIONS
- -- Monthly Deduction From Certificate Value."

CERTIFICATE ISSUANCE -- If at the time of enrollment you make a payment
equal to at least one Monthly Deduction for the Certificate as applied for, the
Company will provide conditional insurance, equal to the amount applied for but
not to exceed $500,000. If the enrollment form is approved, the Certificate will
be issued as of the date the terms of the conditional insurance agreement are
met.

If you do not wish to make any payment at the time of enrollment form,
insurance coverage will not be in force until delivery of the Certificate and
payment of sufficient premium during the lifetime of the Insured.

If any premiums are paid prior to the issuance of the Certificate, such
premiums will be held in the Company's General Account. If your enrollment form
is approved and the Certificate is issued and accepted, the initial premiums
held in the General Account will be credited with interest at a specified rate
beginning not later than the date of receipt of the premiums at the Company's
Principal Office. IF A CERTIFICATE IS NOT ISSUED AND ACCEPTED, THE INITIAL
PREMIUMS WILL BE RETURNED TO YOU WITHOUT INTEREST.

ALLOCATION OF NET PREMIUMS -- Net Premiums are the premiums paid less any
premium expense charge. The Certificate together with its attached enrollment
form constitutes the entire agreement between the Company and you. Net Premiums
may be allocated to one or more Sub-Accounts of the Group VEL Account, to the
General Account, or to any combination of Accounts. You bear the investment risk
of Net Premiums allocated to the Sub-Accounts. Allocations may be made to no
more than seven Sub-Accounts at any one time. The minimum allocation is 1% of
Net Premium. All allocations must be in whole numbers and must total 100%. See
"THE CERTIFICATE -- Allocation of Net Premiums."

Premiums allocated to the Company's General Account will earn a fixed rate
of interest. Net Premiums and minimum interest are guaranteed by the Company.
For more information, see "MORE INFORMATION ABOUT THE GENERAL ACCOUNT."

12
<PAGE>
INVESTMENT OPTIONS -- The Certificates permit Net Premiums to be allocated
either to the Company's General Account or to the Group VEL Account. The Group
VEL Account is currently comprised of twenty Sub-Accounts. Each Sub-Account
invests exclusively in a corresponding Underlying Fund of the Allmerica
Investment Trust ("Trust") managed by Allmerica Investment, of the Variable
Insurance Products Fund ("Fidelity VIP") or the Variable Insurance Products Fund
II ("Fidelity VIP II") managed by Fidelity Management, of T. Rowe Price
International Series, Inc. ("T. Rowe Price") managed by Rowe Price-Fleming
International, Inc., of the Delaware Group Premium Fund, Inc. ("DGPF") managed
by Delaware International, or of the INVESCO Variable Investment Funds, Inc.,
(available only to employees of INVESCO and its affiliates) managed by INVESCO.
In some states, insurance regulations may restrict the availability of
particular Underlying Funds. The Certificates permit you to transfer Certificate
Value among the available Sub-Accounts and between the Sub-Accounts and the
General Account of the Company, subject to certain limitations described under
"THE CERTIFICATE -- Transfer Privilege."

The Trust, Fidelity VIP, Fidelity VIP II, T. Rowe Price, DGPF and INVESCO
VIF are open-end, diversified series management investment companies. The
following different Underlying Funds of the Trust (each a "Fund") are available
under the Certificates: the Growth Fund, Investment Grade Income Fund, Money
Market Fund, Equity Index Fund, Government Bond Fund, Select International
Equity Fund, Select Aggressive Growth Fund, Select Capital Appreciation Fund,
Select Growth Fund, Select Growth and Income Fund and Small Cap Value Fund. Four
different Underlying Funds of Fidelity VIP (each a "Portfolio") are available
under the Certificates: Fidelity VIP High Income Portfolio, Fidelity VIP
Equity-Income Portfolio, Fidelity VIP Growth Portfolio and Fidelity VIP Overseas
Portfolio. One Underlying Fund of Fidelity VIP II ("Portfolio") is available:
the Fidelity VIP II Asset Manager Portfolio. One Underlying Fund of T. Rowe
Price ("Portfolio") is available: the T. Rowe Price International Stock
Portfolio. One Underlying Fund of DGPF ("Series") is available: the
International Equity Series. The Industrial Income Fund and the Total Return
Fund of INVESCO VIF are available only to employees of INVESCO and its
affiliates.

Each of the Underlying Funds has its own investment objectives. However,
certain Portfolios have investment objectives similar to certain Funds or
Series.

The value of each Sub-Account will vary daily depending upon the performance
of the Underlying Fund in which it invests. Each Sub-Account reinvests dividends
or capital gains distributions received from an Underlying Fund in additional
shares of that Underlying Fund.

There can be no assurance that the investment objectives of the Underlying
Funds can be achieved. For more information, see "DESCRIPTION OF THE COMPANY,
THE GROUP VEL ACCOUNT, ALLMERICA INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS
FUND, VARIABLE INSURANCE PRODUCTS FUND II, T. ROWE PRICE INTERNATIONAL SERIES,
INC., DELAWARE GROUP PREMIUM FUND, INC., AND INVESCO VARIABLE INVESTMENT FUNDS,
INC."

FREE LOOK PERIOD -- The Certificate provides for an initial Free Look
Period. You may cancel the Certificate by mailing or delivering it to the
Principal Office or to an agent of the Company on or before the latest of (a) 45
days after the enrollment form for the Certificate is signed, (b) 10 days after
you receive the Certificate, or (c) 10 days (20 or 30 days if required in your
state) after the Company mails or personally delivers a Notice of Withdrawal
Rights to you.

If your Certificate provides for a full refund of the initial premium under
its "Right to Examine Certificate" provision as required in your state, your
refund will be the greater of (a) your entire premium or (b) the Certificate
Value plus deductions under the Certificate or by the Underlying Funds for
taxes, charges or fees. If your Certificate does not provide for a full refund
of the initial premium, you will receive the Certificate Value in the Group VEL
Account, plus premiums paid, including fees and charges, minus the amounts
allocated to the Group VEL Account, plus the fees and charges imposed on amounts
in the Group VEL Account. After an increase in Face Amount, a right to cancel
the increase also applies. See "THE CERTIFICATE -- Free Look Period."

13
<PAGE>
CONVERSION PRIVILEGES -- During the first 24 Certificate months after the
Date of Issue, subject to certain restrictions, you may convert this Certificate
to a flexible premium fixed adjustable life insurance Certificate by
simultaneously transferring all accumulated value in the Sub-Accounts to the
General Account and instructing the Company to allocate all future premiums to
the General Account. A similar conversion privilege is in effect for 24
Certificate months after the date of an increase in Face Amount. Where required
by state law, and at your request, the Company will issue a flexible premium
adjustable life insurance Certificate to you. The new Certificate will have the
same face amount, issue age, date of issue, and risk classifications as the
original Certificate. See "THE CERTIFICATE -- Conversion Privileges."

PARTIAL WITHDRAWAL -- After the first Certificate year, you may make partial
withdrawals in a minimum amount of $500 from the Certificate Value. Under Option
1, the Face Amount is reduced by the amount of the partial withdrawal, and a
partial withdrawal will not be allowed if it would reduce the Face Amount below
$40,000.

A transaction charge which is described in "CHARGES AND DEDUCTIONS --
Charges On Partial Withdrawal," will be assessed to reimburse the Company for
the cost of processing each partial withdrawal. A partial withdrawal charge may
also be imposed upon a partial withdrawal. Generally, amounts withdrawn during
each Certificate year in excess of 10% of the Certificate Value ("excess
withdrawal") are subject to the partial withdrawal charge. The partial
withdrawal charge is equal to 5% of the excess withdrawal up to the surrender
charge on the date of withdrawal. If no surrender charge is applicable at the
time of withdrawal, no partial withdrawal charge will be deducted. The
Certificate's outstanding surrender charge will be reduced by the amount of the
partial withdrawal charge deducted. See "THE CERTIFICATE -- Partial Withdrawal"
and "CHARGES AND DEDUCTIONS -- Charges On Partial Withdrawal."

LOAN PRIVILEGE -- You may borrow against the Certificate Value. The total
amount you may borrow is the Loan Value. Loan Value in the first Certificate
Year is 75% of an amount equal to Certificate Value less surrender charge,
Monthly Deductions, and interest on Debt to the end of the Certificate year.
Thereafter, Loan Value is 90% of an amount equal to Certificate Value less the
surrender charge.

Certificate loans will be allocated among the General Account and the
Sub-Accounts in accordance with your instructions. If no allocation is made by
you, the Company will make a Pro-Rata Allocation among the Accounts. In either
case, Certificate Value equal to the Certificate loan will be transferred from
the appropriate Sub-Account(s) to the General Account, and will earn monthly
interest at an effective annual rate of at least 6%. Therefore, a Certificate
loan may have a permanent impact on the Certificate Value even though it is
eventually repaid. Although the loan amount is a part of the Certificate Value,
the Death Proceeds will be reduced by the amount of outstanding Debt at the time
of death.

Certificate loans will bear interest at a fixed rate of 8% per year, due and
payable in arrears at the end of each Certificate year. If interest is not paid
when due, it will be added to the loan balance. Certificate loans may be repaid
at any time. You must notify the Company if a payment is a loan repayment;
otherwise, it will be considered a premium payment. Any partial or full
repayment of Debt by you will be allocated to the General Account or
Sub-Accounts in accordance with your instructions. If you do not specify an
allocation, the Company will allocate the loan repayment in accordance with your
most recent premium allocation instructions. See "CERTIFICATE LOANS."

CERTIFICATE LAPSE AND REINSTATEMENT -- The failure to make premium payments
will not cause a Certificate to lapse unless: (a) the Surrender Value is
insufficient to cover the next Monthly Deduction plus loan interest accrued, if
any, or (b) Debt exceeds Certificate Value. A 62-day grace period applies to
each situation. Subject to certain conditions (including Evidence of
Insurability showing that the Insured is insurable according to the Company's
underwriting rules and the payment of sufficient premium), a Certificate may be
reinstated at any time within 3 years after the expiration of the grace period
and prior to the Final Premium Payment Date. See "CERTIFICATE TERMINATION AND
REINSTATEMENT."

14
<PAGE>
TAX TREATMENT -- A Certificate is generally subject to the same federal
income tax treatment as a conventional fixed benefit life insurance policy.
Under current tax law, to the extent there is no change in benefits, you will be
taxed on Certificate Value withdrawn from the Certificate only to the extent
that the amount withdrawn exceeds the total premiums paid. Withdrawals in excess
of premiums paid will be treated as ordinary income. During the first 15
Certificate years, however, an "interest first" rule applies to any distribution
of cash that is required under Section 7702 of the Internal Revenue Code because
of a reduction in benefits under the Certificate. Death Proceeds under the
Certificate are excludable from the gross income of the Beneficiary, but in some
circumstances the Death Proceeds or the Certificate Value may be subject to
federal estate tax. See "FEDERAL TAX CONSIDERATIONS -- Taxation of the
Certificates."

A Certificate offered by this prospectus may be considered a "modified
endowment contract" if it fails a "seven-pay" test. A Certificate fails to
satisfy the seven-pay test if the cumulative premiums paid under the Certificate
at any time during the first seven Certificate years exceeds the sum of the net
level premiums that would have been paid, had the Certificate provided for
paid-up future benefits after the payment of seven level premiums. If the
Certificate is considered a modified endowment contract, all distributions
(including Certificate loans, partial withdrawals, surrenders or assignments)
will be taxed on an "income-first" basis. With certain exceptions, an additional
10% penalty will be imposed on the portion of any distribution that is
includible in income. For more information, see "FEDERAL TAX CONSIDERATIONS --
Modified Endowment Contracts."
------------------------

The Certificate summarizes the provisions of the group policy under which it
is issued, which has the purpose of providing insurance protection for the
Beneficiary named therein. References to Certificate rights and features are
intended to represent a Certificate Owner's rights and benefits under the group
policy. This Summary is intended to provide only a very brief overview of the
more significant aspects of the Certificate. Further detail is provided in this
prospectus, the Certificate and the group policy. No claim is made that the
Certificate is in any way similar or comparable to a systematic investment plan
of a mutual fund.

PERFORMANCE INFORMATION

The Certificates were first offered to the public in 1996. However, the
Company may advertise "Total Return" and "Average Annual Total Return"
performance information based on the periods that the Underlying Funds have been
in existence. The results for any period prior to the Certificates being offered
will be calculated as if the Certificates had been offered during that period of
time, with all charges assumed to be those applicable to the Sub-Accounts, the
Underlying Funds, and (in Table I) under a "representative" Certificate that is
surrendered at the end of the applicable period. For more information on charges
under the Certificates, see CHARGES AND DEDUCTIONS.

In each Table below, "One-Year Total Return" refers to the total of the
income generated by a sub-account, based on certain charges and assumptions as
described in the respective tables, for the one-year period ended December 31,
1995. "Average Annual Total Return" is based on the same charges and
assumptions, but reflects the hypothetical annually compounded return that would
have produced the same cumulative return if the Sub-Account's performance had
been constant over the entire period. Because average annual total returns tend
to smooth out variations in annual performance return, they are not the same as
actual year-by-year results.

Performance information may be compared, in reports and promotional
literature, to: (i) the Standard & Poor's 500 Stock Index ("S & P 500"), Dow
Jones Industrial Average ("DJIA"), Shearson Lehman Aggregate Bond Index or other
unmanaged indices so that investors may compare results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of variable life separate
accounts or other investment products tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds and other
investment products by overall performance, investment objectives, and assets,
or tracked by other services, companies, publications, or persons, such as
Morningstar, Inc.,

15
<PAGE>
who rank such investment products on overall performance or other criteria; or
(iii) the Consumer Price Index (a measure for inflation) to assess the real rate
of return from an investment. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.

The Company may provide information on various topics of interest to
Certificate Owners and prospective Certificate Owners in sales literature,
periodic publications or other materials. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments.

PERFORMANCE INFORMATION REFLECTS ONLY THE PERFORMANCE OF A HYPOTHETICAL
INVESTMENT DURING THE PARTICULAR TIME PERIOD ON WHICH THE CALCULATIONS ARE
BASED. ONE-YEAR TOTAL RETURN AND AVERAGE ANNUAL TOTAL RETURN FIGURES ARE BASED
ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
PERFORMANCE INFORMATION SHOULD BE CONSIDERED IN LIGHT OF THE INVESTMENT
OBJECTIVES AND POLICIES, CHARACTERISTICS AND QUALITY OF THE PORTFOLIO OF THE
UNDERLYING FUND IN WHICH A SUB-ACCOUNT INVESTS AND THE MARKET CONDITIONS DURING
THE GIVEN TIME PERIOD, AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF WHAT
MAY BE ACHIEVED IN THE FUTURE.

16
<PAGE>
TABLE I: SUB-ACCOUNT PERFORMANCE
NET OF ALL CHARGES AND ASSUMING SURRENDER OF THE CERTIFICATE

The following performance information is based on the periods that the
Underlying Funds have been in existence. The data is net of expenses of the
Underlying Funds, all Sub-Account charges, and all Certificate charges
(including surrender charges) for a representative Certificate. It is assumed
that the Insured is male, Age 36, standard (nonsmoker) Premium Class, that the
Face Amount of the Certificate is $250,000, that an annual premium payment of
$3,000 (approximately one Guideline Annual Premium) was made at the beginning of
each Certificate year, that ALL premiums were allocated to EACH Sub-Account
individually, and that there was a full surrender of the Certificate at the end
of the applicable period.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/95
-------------------------------------------
LESSER OF
TEN YEARS
UNDERLYING ONE-YEAR OR SINCE YEARS SINCE
SUB-ACCOUNT FUND TOTAL RETURN 3 YEARS 5 YEARS INCEPTION INCEPTION*
- ----------- ------------------------------------------------------- ------------ ------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 Growth Fund............................................ -93.55% -26.79% -1.98% 2.38% 10.67%
2 Investment Grade Income Fund........................... -100.00% -32.20% -9.58% 0.30% 10.67%
3 Money Market Fund...................................... -100.00% -37.52% -16.09% -1.01% 10.67%
4 Equity Index Fund...................................... -90.85% -23.87% -9.35% -0.35% 5.26%
5 Government Bond Fund................................... -100.00% -34.60% N/A -16.81% 4.35%
6 Select Aggressive Growth Fund.......................... -93.96% -22.70% N/A -12.41% 3.36%
7 Select Growth Fund..................................... -100.00% -33.33% N/A -24.98% 3.36%
8 Select Growth and Income Fund.......................... -95.53% -25.77% N/A -22.88% 3.36%
9 Small Cap Value Fund................................... -100.00% N/A N/A -38.13% 2.67%
11 Select International Equity Fund....................... -100.00% N/A N/A -71.17% 1.67%
12 Select Capital Appreciation Fund....................... N/A N/A N/A -88.61% 0.67%
102 Fidelity VIP High Income Portfolio..................... -100.00% -26.42% 0.93% 2.45% 10.28%
103 Fidelity VIP Equity-Income Portfolio................... -91.72% -17.74% 3.64% 4.34% 9.23%
104 Fidelity VIP Growth Portfolio.......................... -91.50% -20.52% 3.04% 5.98% 9.23%
105 Fidelity VIP Overseas Portfolio........................ -100.00% -23.08% -11.71% -2.69% 8.92%
106 Fidelity VIP II Asset Manager Portfolio................ -100.00% -29.83% -6.17% -3.07% 6.32%
150 T. Rowe Price International Stock Portfolio............ -100.00% N/A N/A -76.13% 1.58%
207 DGPF International Equity Series....................... -100.00% N/A N/A -29.20% 3.17%
301 INVESCO VIF Industrial Income Fund..................... -100.00% N/A N/A -75.69% 1.42%
302 INVESCO VIF Total Return Fund.......................... -96.39% N/A N/A -70.17% 1.59%
</TABLE>

- ------------------------

* The inception dates for the Underlying Funds are: 4/29/85 for Growth,
Investment Grade and Money Market; 9/28/90 for Equity Index; 8/26/91 for
Government Bond; 8/21/92 for Select Aggressive Growth, Select Growth, and Select
Growth and Income; 4/30/93 for Small Cap Value; 5/01/94 for Select International
Equity; 4/28/95 for Select Capital Appreciation; 10/09/86 for Fidelity VIP
Equity-Income and Fidelity VIP Growth; 9/19/85 for Fidelity VIP High Income;
1/28/87 for Fidelity VIP Overseas; 9/06/89 for Fidelity VIP II Asset Manager;
10/29/92 for DGPF International Equity; and 3/31/94 for the T. Rowe Price
International Stock; 8/10/94 for the INVESCO VIF Industrial Income and 6/2/94
for the INVESCO VIF Total Return.

17
<PAGE>
TABLE II: SUB-ACCOUNT PERFORMANCE
EXCLUDING MONTHLY CERTIFICATE CHARGES AND SURRENDER CHARGES

The following performance information is based on the periods that the
Underlying Funds have been in existence. The performance information is net of
total Underlying Fund expenses, all Sub-Account charges, and premium tax and
expense charges. THE DATA DOES NOT REFLECT MONTHLY CHARGES UNDER THE
CERTIFICATES OR SURRENDER CHARGES. It is assumed that an annual premium payment
of $3,000 (approximately one Guideline Annual Premium) was made at the beginning
of each Certificate year and that ALL premiums were allocated to EACH
Sub-Account individually.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/95
-------------------------------------------
LESSER OF
TEN YEARS
UNDERLYING ONE-YEAR OR SINCE YEARS SINCE
SUB-ACCOUNT FUND TOTAL RETURN 3 YEARS 5 YEARS INCEPTION INCEPTION*
- ----------- ------------------------------------------------------- ------------ ------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
1 Growth Fund............................................ 31.26% 11.06% 15.02% 14.03% 10.67%
2 Investment Grade Income Fund........................... 16.47% 6.95% 8.61% 8.27% 10.67%
3 Money Market Fund...................................... 4.61% 3.04% 3.34% 4.73% 10.67%
4 Equity Index Fund...................................... 34.60% 13.33% 8.80% 15.56% 5.26%
5 Government Bond Fund................................... 11.75% 5.17% N/A 6.47% 4.35%
6 Select Aggressive Growth Fund.......................... 30.75% 14.25% N/A 18.77% 3.36%
7 Select Growth Fund..................................... 23.14% 6.11% N/A 8.73% 3.36%
8 Select Growth and Income Fund.......................... 28.81% 11.85% N/A 10.36% 3.36%
9 Small Cap Value Fund................................... 16.24% N/A N/A 8.86% 2.67%
11 Select International Equity Fund....................... 18.24% N/A N/A 7.74% 1.67%
12 Select Capital Appreciation Fund....................... N/A N/A N/A 38.47% 0.67%
102 Fidelity VIP High Income Portfolio..................... 19.32% 11.34% 17.54% 10.50% 10.28%
103 Fidelity VIP Equity-Income Portfolio................... 33.52% 18.21% 19.91% 12.01% 9.23%
104 Fidelity VIP Growth Portfolio.......................... 33.79% 15.98% 19.38% 13.50% 9.23%
105 Fidelity VIP Overseas Portfolio........................ 8.41% 13.95% 6.86% 6.06% 8.92%
106 Fidelity VIP II Asset Manager Portfolio................ 15.60% 8.73% 11.45% 9.95% 6.32%
150 T. Rowe Price Price International Stock Portfolio...... 9.89% N/A N/A 6.06% 1.58%
207 DGPF International Equity Series....................... 12.40% N/A N/A 7.45% 3.17%
301 INVESCO VIF Industrial Income Fund..................... 28.40% N/A N/A 20.10% 1.42%
302 INVESCO VIF Total Return Fund.......................... 21.99% N/A N/A 14.35% 1.59%
</TABLE>

- ------------------------

18
<PAGE>
DESCRIPTION OF THE COMPANY, THE GROUP VEL ACCOUNT,
ALLMERICA INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND II, T. ROWE PRICE INTERNATIONAL
SERIES, DELAWARE GROUP PREMIUM FUND, INC. AND
INVESCO VARIABLE INVESTMENT FUNDS, INC.

THE COMPANY -- The Company, organized under the laws of Massachusetts in
1844, is the fifth oldest life insurance company in America. Effective October
16, 1995, the Company converted from a mutual life insurance company known as
State Mutual Life Assurance Company of America to a stock life insurance company
and adopted its present name. The Company is a wholly-owned subsidiary of
Allmerica Financial Corporation ("AFC"). The Company's principal office is
located at 440 Lincoln Street, Worcester, Massachusetts 01653, telephone
508-855-1000 ("Principal Office").

The Company is subject to the laws of the Commonwealth of Massachusetts
governing insurance companies and to regulation by the Commissioner of Insurance
of Massachusetts. In addition, the Company is subject to the insurance laws and
regulations of other states and jurisdictions in which it is licensed to
operate.

THE GROUP VEL ACCOUNT -- The Group VEL Account was authorized by vote of the
Board of Directors of the Company on August 20, 1991. The Group VEL Account is
registered with the Securities and Exchange Commission ("Commission") as a unit
investment trust under the Investment Company Act of 1940 ("1940 Act"). Such
registration does not involve the supervision of its management or investment
practices or policies of the Group VEL Account or the Company by the Commission.

The assets used to fund the variable portion of the Certificates are set
aside in the Group VEL Account and are kept separate and apart from the general
assets of the Company. Under Massachusetts law, assets equal to the reserves and
other liabilities of the Group VEL Account may not be charged with any
liabilities arising out of any other business of the Company. The Group VEL
Account currently has twenty Sub-Accounts. Each Sub-Account is administered and
accounted for as part of the general business of the Company, but the income,
capital gains, or capital losses of each Sub-Account are allocated to such
Sub-Account, without regard to other income, capital gains, or capital losses of
the Company or the other Sub-Accounts. Each Sub-Account invests exclusively in a
corresponding investment portfolio of the Allmerica Investment Trust, the
Variable Insurance Products Fund, the Variable Insurance Products Fund II, T.
Rowe Price International Series, Inc., the Delaware Group Premium Fund, Inc. or
the INVESCO Variable Investment Fund Inc. ("Underlying Investment Companies").

ALLMERICA INVESTMENT TRUST -- Allmerica Investment Trust is an open-end,
diversified management investment company registered with the Commission under
the 1940 Act. Such registration does not involve supervision by the Commission
of the investments or investment policy of the Trust or its separate investment
Funds.

The Trust was established as a Massachusetts business trust on October 11,
1984, for the purpose of providing a vehicle for the investment of assets of
various separate accounts established by First Allmerica, the Company, or other
affiliated insurance companies. Eleven investment portfolios of the Trust
("Funds") are available under the Certificates, each issuing a series of shares:
the Growth Fund, Investment Grade Income Fund, Money Market Fund, Equity Index
Fund, Government Bond Fund, Select International Equity Fund, Select Aggressive
Growth Fund, Select Capital Appreciation Fund, Select Growth Fund, Select Growth
and Income Fund and Small Cap Value Fund. The assets of each Fund are held
separate from the assets of the other Funds. Each Fund operates as a separate
investment vehicle and the income or losses of one Fund generally have no effect
on the investment performance of another Fund. Shares of the Trust are not
offered to the general public but solely to such separate accounts.

19
<PAGE>
Allmerica Investment serves as investment adviser of the Trust and has
entered into sub-advisory agreements with other investment managers
("Sub-Advisers") who manage the investments of the Funds. See "INVESTMENT
ADVISORY SERVICES TO THE TRUST."

VARIABLE INSURANCE PRODUCTS FUND -- Variable Insurance Products Fund
("Fidelity VIP"), managed by Fidelity Management & Research Company ("Fidelity
Management"), is an open-end, diversified, management investment company
organized as a Massachusetts business trust on November 13, 1981 and registered
with the Commission under the 1940 Act. Four of its investment portfolios are
available under the Certificates: the Fidelity VIP High Income Portfolio, the
Fidelity VIP Equity-Income Portfolio, the Fidelity VIP Growth Portfolio and the
Fidelity VIP Overseas Portfolio.

Various Fidelity companies perform certain activities required to operate
Fidelity VIP. Fidelity Management, a registered investment adviser under the
Investment Advisers Act of 1940, is one of America's largest investment
management organizations and has its principal business address at 82 Devonshire
Street, Boston MA. It is composed of a number of different companies, which
provide a variety of financial services and products. Fidelity Management is the
original Fidelity company, founded in 1946. It provides a number of mutual funds
and other clients with investment research and portfolio management services.
The Portfolios of Fidelity VIP as part of their operating expenses pay an
investment management fee to Fidelity Management. See "INVESTMENT ADVISORY
SERVICES TO FIDELITY VIP AND FIDELITY VIP II."

VARIABLE INSURANCE PRODUCTS FUND II -- Variable Insurance Products Fund II
("Fidelity VIP II"), managed by Fidelity Management (see "INVESTMENT ADVISORY
SERVICES TO FIDELITY VIP AND FIDELITY VIP II"), is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
March 21, 1988 and registered with the Commission under the 1940 Act. One of its
investment portfolios is available under the Certificates: the Fidelity VIP II
Asset Manager Portfolio.

T. ROWE PRICE INTERNATIONAL SERIES, INC. -- T. Rowe Price International
Series, Inc. ("T. Rowe Price"), managed by Rowe Price-Fleming International,
Inc. ("Price-Fleming") (See "INVESTMENT ADVISORY SERVICES TO T. ROWE Price"), is
an open-end, diversified, management investment company organized as a Maryland
corporation in 1994 and registered with the Commission under the 1940 Act. One
of its investment portfolios is available under the Certificates: the T. Rowe
Price International Stock Portfolio.

DELAWARE GROUP PREMIUM FUND, INC. -- Delaware Group Premium Fund, Inc.
("DGPF") is an open-end, diversified management investment company registered
with the Commission under the 1940 Act. DGPF was established to provide a
vehicle for the investment of assets of various separate accounts supporting
variable insurance policies. One investment portfolio ("Series") is available
under the Certificates, the International Equity Series. The investment adviser
for the International Equity Series is Delaware International Advisers Ltd.
("Delaware International"). See "INVESTMENT ADVISORY SERVICES TO DGPF."

INVESCO VARIABLE INVESTMENT FUNDS, INC. -- INVESCO Variable Investment
Funds, Inc. ("INVESCO VIF") is an open-end, diversified management investment
company that was organized as a Maryland Corporation on August 19, 1993 and is
registered with the Commission under the 1940 Act. INVESCO Funds Group, Inc.
("INVESCO") is the investment adviser of the Industrial Income Fund and the
Total Return Fund, the only Funds of INVESCO VIF that are available under the
Certificates. These two Funds are available only to employees of INVESCO and its
affiliates.

20
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

A summary of investment objectives of each of the Underlying Funds is set
forth below. MORE DETAILED INFORMATION REGARDING THE INVESTMENT OBJECTIVES,
RESTRICTIONS AND RISKS, EXPENSES PAID BY THE UNDERLYING FUNDS AND OTHER RELEVANT
INFORMATION REGARDING THE UNDERLYING INVESTMENT COMPANIES MAY BE FOUND IN THEIR
RESPECTIVE PROSPECTUSES, WHICH ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING. The statements of additional information of the
Underlying Funds are available upon request. There can be no assurance that the
investment objectives of the Underlying Funds can be achieved.

SUB-ACCOUNT 1 -- invests solely in shares of the Growth Fund of the Trust.
The Growth Fund is invested in common stocks and securities convertible into
common stocks that are believed to represent significant underlying value in
relation to current market prices. The objective of the Growth Fund is to
achieve long-term growth of capital. Realization of current investment income,
if any, is incidental to this objective.

SUB-ACCOUNT 2 -- invests solely in shares of the Investment Grade Income
Fund of the Trust. The Investment Grade Income Fund is invested in a diversified
portfolio of fixed income securities with the objective of seeking as high a
level of total return (including both income and realized and unrealized capital
gains) as is consistent with prudent investment management.

SUB-ACCOUNT 3 -- invests solely in shares of the Money Market Fund of the
Trust. The Money Market Fund is invested in a diversified portfolio of
high-quality, short-term debt instruments with the objective of obtaining
maximum current income consistent with the preservation of capital and
liquidity.

SUB-ACCOUNT 4 -- invests solely in shares of the Equity Index Fund of the
Trust. The Equity Index Fund seeks to provide investment results that correspond
generally to the composite price and yield performance of United States publicly
traded common stocks. The Equity Index Fund seeks to achieve its objective by
attempting to replicate the composite price and yield performance of the
Standard & Poor's 500 Composite Stock Price Index.

SUB-ACCOUNT 5 -- invests solely in the shares of the Government Bond Fund of
the Trust. The Government Bond Fund has the investment objectives of seeking
high income, preservation of capital and maintenance of liquidity, primarily
through investments in debt instruments issued or guaranteed by the U.S.
Government or its agencies or instrumentalities and in related options, futures
and repurchase agreements.

SUB-ACCOUNT 6 -- invests solely in shares of the Select Aggressive Growth
Fund of the Trust. The Select Aggressive Growth Fund seeks above-average capital
appreciation by investing primarily in common stocks of companies which are
believed to have significant potential for capital appreciation.

SUB-ACCOUNT 7 -- invests solely in shares of the Select Growth Fund of the
Trust. The Select Growth Fund seeks to achieve growth of capital by investing in
a diversified portfolio consisting primarily of common stocks selected on the
basis of their long-term growth potential.

SUB-ACCOUNT 8 -- invests solely in shares of the Select Growth and Income
Fund of the Trust. The Select Growth and Income Fund seeks a combination of
long-term growth of capital and current income. The Fund will invest primarily
in dividend-paying common stocks and securities convertible into common stocks.

SUB-ACCOUNT 9 -- invests solely in shares of the Small Cap Value Fund of the
Trust. The Small Cap Value Fund seeks long-term growth by investing principally
in a diversified portfolio of common stocks of smaller, faster-growing companies
considered to be attractively valued in the smaller company sector of the
market.

21
<PAGE>
SUB-ACCOUNT 11 -- invests solely in shares of the Select International
Equity Fund of the Trust. The Select International Equity Fund seeks maximum
long-term total return (capital appreciation and income) primarily by investing
in common stocks of established non-U.S. companies.

SUB-ACCOUNT 12 -- invests solely in shares of the Select Capital
Appreciation Fund of the Trust. The Select Capital Appreciation Fund seeks
long-term growth of capital in a manner consistent with the preservation of
capital. Realization of income is not a significant investment consideration and
any income realized on the Fund's investments will be incidental to its primary
objective. The Fund will invest primarily in common stock of industries and
companies which are experiencing favorable demand for their products and
services, and which operate in a favorable competitive environment and
regulatory climate.

SUB-ACCOUNT 102 -- invests solely in shares of the Fidelity VIP High Income
Portfolio. The Fidelity VIP High Income Portfolio seeks to obtain a high level
of current income by investing primarily in high-yielding, lower-rated
fixed-income securities (commonly referred to as "junk bonds"), while also
considering growth of capital. These securities are often considered to be
speculative and involve greater risk of default or price changes than securities
assigned a high quality rating. For more information about these lower-rated
securities, see "Risks of Lower-Rated Debt Securities" in the Fidelity VIP
prospectus.

SUB-ACCOUNT 103 -- invests solely in shares of the Fidelity VIP
Equity-Income Portfolio. The Fidelity VIP Equity-Income Portfolio seeks
reasonable income by investing primarily in income-producing equity securities.
In choosing these securities, the Portfolio will also consider the potential for
capital appreciation. The Portfolio's goal is to achieve a yield which exceeds
the composite yield on the securities comprising the Standard & Poor's 500
Composite Stock Price Index. The Portfolio may invest in high yielding,
lower-rated securities (commonly referred to as "junk bonds") which are subject
to greater risk than investments in higher-rated securities. For a further
discussion of lower-rated securities, please see "Risks of Lower-Rated Debt
Securities" in the Fidelity VIP prospectus.

SUB-ACCOUNT 104 -- invests solely in shares of the Fidelity Growth
Portfolio. The Fidelity VIP Growth Portfolio seeks to achieve capital
appreciation. The Portfolio normally purchases common stocks, although its
investments are not restricted to any one type of security. Capital appreciation
may also be found in other types of securities, including bonds and preferred
stocks.

SUB-ACCOUNT 105 -- invests solely in shares of the Fidelity VIP Overseas
Portfolio. The Fidelity VIP Overseas Portfolio seeks long-term growth of capital
primarily through investments in foreign securities and provides a means for
aggressive investors to diversify their own portfolios by participating in
companies and economies outside of the United States.

SUB-ACCOUNT 106 -- invests solely in shares of the Fidelity VIP II Asset
Manager Portfolio. The Fidelity VIP II Asset Manager Portfolio seeks high total
return with reduced risk over the long-term by allocating its assets among
domestic and foreign stocks, bonds and short-term fixed-income instruments.

SUB-ACCOUNT 150 -- invests solely in shares of the T. Rowe Price
International Stock Portfolio. The T. Rowe Price International Stock Portfolio
seeks long-term growth of capital through investments primarily in common stocks
of established, non-U.S. companies.

SUB-ACCOUNT 207 -- invests solely in shares of the DGPF International Equity
Series. The DGPF International Equity Series seeks long-term growth without
undue risk to principal by investing primarily in equity securities of foreign
issuers providing the potential for capital appreciation and income.

SUB-ACCOUNT 301 -- invests solely in shares of the INVESCO VIF Industrial
Income Fund. The INVESCO VIF Industrial Income Fund seeks the best possible
current income while following sound investment practices. Capital growth
potential is an additional but secondary consideration in the selection of
portfolio securities. The Industrial Income Fund Seeks to achieve its objective
by investing

22
<PAGE>
in securities which will provide a relatively high yield and stable return and
which, over a period of years, may also provide capital appreciation. THIS
SUB-ACCOUNT IS AVAILABLE ONLY TO EMPLOYEES OF INVESCO AND ITS AFFILIATES.

SUB-ACCOUNT 302 -- invests solely in shares of the INVESCO VIF Total Return
Fund. The INVESCO VIF Total Return Fund seeks a high total return on investment
through capital appreciation and current income by investing in a combination of
equity securities (consisting of common stocks and, to a lesser degree,
securities convertible into common stock) and fixed income securities. THIS
SUB-ACCOUNT IS AVAILABLE ONLY TO EMPLOYEES OF INVESCO AND ITS AFFILIATES.

CERTAIN UNDERLYING FUNDS HAVE INVESTMENT OBJECTIVES AND/OR POLICIES SIMILAR
TO THOSE OF CERTAIN OTHER UNDERLYING FUNDS. THEREFORE, TO CHOOSE THE
SUB-ACCOUNTS WHICH WILL BEST MEET YOUR NEEDS AND OBJECTIVES, CAREFULLY READ THE
PROSPECTUSES OF THE TRUST, FIDELITY VIP, FIDELITY VIP II, T. ROWE PRICE, DGPF,
AND INVESCO VIF ALONG WITH THIS PROSPECTUS. IN SOME STATES, INSURANCE
REGULATIONS MAY RESTRICT THE AVAILABILITY OF PARTICULAR SUB-ACCOUNTS.

If required in your state, in the event of a material change in the
investment policy of a Sub-Account or the Underlying Fund in which it invests,
you will be notified of the change. If you have Certificate Value in that
Sub-Account, the Company will transfer it without charge on written request by
you to another Sub-Account or to the General Account. The Company must receive
your written request within sixty (60) days of the later of (1) the effective
date of such change in the investment policy or (2) the receipt of the notice of
your right to transfer. You may then change your premium and deduction
allocation percentages.

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISORY SERVICES TO THE TRUST -- The overall responsibility for
the supervision of the affairs of the Trust vests in the Trustees. The Trust has
entered into a Management Agreement with Allmerica Investment Management Company
Inc. ("Allmerica Investment"), an indirect wholly-owned subsidiary of First
Allmerica, to handle the day-to-day affairs of the Trust. Allmerica Investment,
subject to review by the Trustees, is responsible for the general management of
the Funds. Allmerica Investment also performs certain administrative and
management services for the Trust, furnishes to the Trust all necessary office
space, facilities, and equipment, and pays the compensation, if any, of officers
and Trustees who are affiliated with Allmerica Investment.

Other than the expenses specifically assumed by Allmerica Investment under
the Management Agreement, all expenses incurred in the operation of the Trust
are borne by it, including fees and expenses associated with the registration
and qualification of the Trust's shares under the Securities Act of 1933, other
fees payable to the Commission, independent public accountant, legal and
custodian fees, association membership dues, taxes, interest, insurance
premiums, brokerage commission, fees and expenses of the Trustees who are not
affiliated with Allmerica Investment, expenses for proxies, prospectuses, and
reports to shareholders, and other expenses.

Pursuant to the Management Agreement with the Trust, Allmerica Investment
has entered into agreements ("Sub-Adviser Agreements") with other investment
advisers ("Sub-Advisers") under which each Sub-Adviser manages the investments
of one or more of the Funds. Under the Sub-Adviser Agreement, the Sub-Adviser is
authorized to engage in portfolio transactions on behalf of the applicable Fund,
subject to such general or specific instructions as may be given by the
Trustees. The terms of a Sub-Adviser Agreement cannot be materially changed
without the approval of a majority in interest of the shareholders of the
affected Fund.

23
<PAGE>
For providing its services under the Management Agreement, Allmerica
Investment will receive a fee, computed daily at an annual rate based on the
average daily net asset value of each Fund as follows:

<TABLE>
<CAPTION>
FUND NET ASSET VALUE RATE
- ----------------------------------------------------------------- ----------------- ---------
<S> <C> <C>
Growth Fund...................................................... First $50 million 0.60%
$50-250 million 0.50%
Over $250 million 0.35%

Investment Grade Income Fund..................................... First $50 million 0.50%
$50-250 million 0.35%
Over $250 million 0.25%

Money Market Fund................................................ First $50 million 0.35%
$50-250 million 0.25%
Over $250 million 0.20%

Equity Index Fund................................................ First $50 million 0.35%
$50-250 million 0.30%
Over $250 million 0.25%

Government Bond Fund............................................. * 0.50%
Select International Equity Fund................................. * 1.00%
Select Aggressive Growth Fund.................................... * 1.00%
Select Capital Appreciation Fund................................. * 1.00%
Select Growth Fund............................................... * 0.85%
Select Growth and Income Fund.................................... * 0.75%
Small Cap Value Fund............................................. * 0.85%
</TABLE>

- ------------------------

* For the Government Bond Fund, Select International Equity Fund, Select
Aggressive Growth Fund, Select Capital Appreciation Fund, Select Growth Fund,
Select Growth and Income Fund and Small Cap Value Fund, each rate applicable to
Allmerica Investment does not vary according to the level of assets in the Fund.

24
<PAGE>
Allmerica Investment's fee computed for each Fund will be paid from the
assets of such Fund. Allmerica Investment is solely responsible for the payment
of all fees for investment management services to the Sub-Advisers, who will
receive from Allmerica Investment a fee, computed daily at an annual rate based
on the average daily net asset value of each Fund as follows:

<TABLE>
<CAPTION>
SUB-ADVISER FUND NET ASSET VALUE RATE
- -------------------------------- ------------------------------- ----------------- ---------
<S> <C> <C> <C>
Miller, Anderson & Sherrerd Growth Fund * *
Allmerica Asset Management, Inc. Investment Grade Income Fund ** 0.20%
Allmerica Asset Management, Inc. Money Market Fund ** 0.10%
Allmerica Asset Management, Inc. Equity Index Fund ** 0.10%
Allmerica Asset Management, Inc. Government Bond Fund ** 0.20%
Bank of Ireland Asset Management Select International Equity
Limited Fund First $50 million 0.45%
Next $50 million 0.40%
Over $100 million 0.30%
Nicholas-Applegate Capital
Management Select Aggressive Growth Fund ** 0.60%
Select Capital Appreciation First $100
Janus Capital Corporation Fund million 0.60%
Over $100 million 0.55%
Putnam Investment Management,
Inc. Select Growth Fund First $50 million 0.50%
$50-150 million 0.45%
$150-250 million 0.35%
$250-350 million 0.30%
Over $350 million 0.25%
First $100
John A. Levin & Co., Inc. Select Growth and Income million 0.40%
Next $200 million 0.25%
Over $300 million 0.30%
David L. Babson & Co. Inc. Small Cap Value ** 0.50%
</TABLE>

For the Investment Grade Income Fund, Money Market Fund, Equity Index Fund,
Government Bond Fund, Select Aggressive Growth Fund and Small Cap Value Fund,
each rate applicable to the Sub-Advisers does not vary according to the level of
assets in the Fund.
* Allmerica Investment will pay a fee to Miller, Anderson & Sherrerd based on
the aggregate assets of the Growth Fund and certain other accounts of First
Allmerica and its affiliates (collectively, the "Affiliated Accounts") which are
managed by Miller, Anderson & Sherrerd, under the following schedule:

<TABLE>
<CAPTION>
AGGREGATE AVERAGE NET
ASSETS RATE
- --------------------------- ---------
<S> <C>
First $50 million 0.500%
$50-100 million 0.375%
$100-500 million 0.250%
$500-850 million 0.200%
Over $850 million 0.150%
</TABLE>

The Prospectus of the Trust contains additional information concerning the
Funds, including information concerning additional expenses paid by the Funds,
and should be read in conjunction with this Prospectus.

25
<PAGE>
The Prospectus of the Trust contains additional information concerning the
Funds, including information concerning additional expenses paid by the Funds,
and should be read in conjunction with this Prospectus.

INVESTMENT ADVISORY SERVICES TO FIDELITY VIP AND FIDELITY VIP II -- For
managing investments and business affairs, each Portfolio pays a monthly fee to
Fidelity Management. The Prospectuses of Fidelity VIP and Fidelity VIP II
contain additional information concerning the Portfolios, including information
concerning additional expenses paid by the Portfolios, and should be read in
conjunction with this Prospectus.

The Fidelity VIP High Income Portfolio pays a monthly fee to Fidelity
Management at an annual fee rate made up of the sum of two components:

1. A group fee rate based on the monthly average net assets of all the
mutual funds advised by Fidelity Management. On an annual basis this rate
cannot rise above 0.37%, and drops as total assets in all these funds
rise.

2. An individual fund fee rate of 0.45% of the Fidelity VIP High Income
Portfolio's average net assets throughout the month. One-twelfth of the
annual management fee rate is applied to net assets averaged over the
most recent month, resulting in a dollar amount which is the management
fee for that month.

The Fidelity VIP Equity-Income, Fidelity VIP Growth, Fidelity VIP II Asset
Manager and Fidelity VIP Overseas Portfolios' fee rates are each made of two
components:

1. A group fee rate based on the monthly average net assets of all of the
mutual funds advised by Fidelity Management. On an annual basis, this
rate cannot rise above 0.52%, and drops as total assets in all these
mutual funds rise.

2. An individual Portfolio fee rate of 0.20% for the Fidelity VIP
Equity-Income Portfolio, 0.30% for the Fidelity VIP Growth Portfolio,
0.40% for the Fidelity VIP II Asset Manager Portfolio and 0.45% for the
Fidelity VIP Overseas Portfolio.

One-twelfth of the sum of these two rates is applied to the respective
Portfolio's net assets averaged over the most recent month, giving a dollar
amount which is the fee for that month.

Thus, the Fidelity VIP High Income Portfolio may have a fee of as high as
0.82% of its average net assets. The Fidelity VIP Equity-Income Portfolio may
have a fee of as high as 0.72% of its average net assets. The Fidelity VIP
Growth Portfolio may have a fee of as high as 0.82% of its average net assets.
The Fidelity VIP II Asset Manager Portfolio may have a fee of as high as 0.92%
of its average net assets. The Fidelity VIP Overseas Portfolio may have a fee of
as high as 0.97% of its average net assets. The actual fee rate may be less
depending on the total assets in the funds advised by Fidelity Management.

INVESTMENT ADVISORY SERVICES TO T. ROWE PRICE -- The Investment Adviser for
the International Stock Portfolio is Rowe Price-Fleming International, Inc.
("Price-Fleming"). Price-Fleming, founded in 1979 as a joint venture between T.
Rowe Price Associates, Inc. and Robert Fleming Holdings, Limited, is one of
America's largest international mutual fund asset managers with approximately
$20 billion under management in its offices in Baltimore, London, Tokyo and Hong
Kong. To cover investment management and operating expenses, the International
Stock Portfolio pays Price-Fleming a single, all-inclusive fee of 1.05% of its
average daily net assets.

INVESTMENT ADVISORY SERVICES TO DGPF -- Each Series of DGPF pays an
investment adviser an annual fee for managing the portfolios and making the
investment decisions for the Series. The investment adviser for the
International Equity Series is Delaware International Advisers Ltd. ("Delaware
International"). The annual fee paid by the International Equity Series to
Delaware International is equal to 0.75% of the average daily net assets of the
Series.

26
<PAGE>
INVESTMENT ADVISORY SERVICES TO INVESCO VIF -- INVESCO Funds Group, Inc.
("INVESCO") is the investment adviser for INVESCO VIF, and is primarily
responsible for providing various administration services and supervising daily
business affairs. INVESCO Trust Company serves as sub-adviser to the Industrial
Income Fund. INVESCO Capital Management, Inc. serves as sub-adviser to the Total
Return Fund.

The Industrial Income Fund and the Total Return Fund each pay INVESCO a
monthly fee equal to 0.75% annually of the first $500 million of the Fund's
average daily net assets; 0.65% of the next $500 million of the Fund's average
net assets and 0.55% of the Fund's average net assets in excess of $1 billion.
The Prospectus of INVESCO VIF contains additional information concerning other
expenses paid by the Funds.

ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS

The Company reserves the right, subject to applicable law, to make additions
to, deletions from, or substitutions for the shares that are held in the
Sub-Accounts or that the Sub-Accounts may purchase. If the shares of any
Underlying Fund are no longer available for investment or if in the Company's
judgment further investment in any Underlying Fund should become inappropriate
in view of the purposes of the Group VEL Account or the affected Sub-Account,
the Company may redeem the shares of that Underlying Fund and substitute shares
of another registered open-end management company. The Company will not
substitute any shares attributable to a Certificate interest in a Sub-Account
without notice to the Certificate Owner and prior approval of the Commission and
state insurance authorities, to the extent required by the 1940 Act or other
applicable law. The Group VEL Account may, to the extent permitted by law,
purchase other securities for other policies or permit a conversion between
policies upon request by a Certificate Owner.

The Company also reserves the right to establish additional Sub-Accounts of
the Group VEL Account, each of which would invest in shares corresponding to a
new Underlying Fund or in shares of another investment company having a
specified investment objective. Subject to applicable law and any required
Commission approval, the Company may, in its sole discretion, establish new Sub-
Accounts or eliminate one or more Sub-Accounts if marketing needs, tax
considerations or investment conditions warrant. Any new Sub-Accounts may be
made available to existing Certificate Owners on a basis to be determined by the
Company.

Shares of the Funds of the Trust are also issued to separate accounts of the
Company and its affiliates which issue variable annuity contracts ("mixed
funding"). Shares of the Portfolios of Fidelity VIP and Fidelity VIP II, the
Portfolio of T. Rowe Price, the Series of DGPF, and the Funds of INVESCO VIF are
also issued to other unaffiliated insurance companies ("shared funding"). It is
conceivable that in the future such mixed funding or shared funding may be
disadvantageous for variable life Certificate Owners or variable annuity
Certificate Owners. Although the Company and the Underlying Investment Companies
do not currently foresee any such disadvantages to either variable life
insurance Certificate Owners or variable annuity Certificate Owners, the Company
and the respective Trustees intend to monitor events in order to identify any
material conflicts between such Certificate Owners and to determine what action,
if any, should be taken in response thereto. If the Trustees were to conclude
that separate funds should be established for variable life and variable annuity
separate accounts, the Company will bear the attendant expenses.

If any of these substitutions or changes are made, the Company may by
appropriate endorsement change the Certificate to reflect the substitution or
change and will notify Certificate Owners of all such changes. If the Company
deems it to be in the best interest of Certificate Owners, and subject to any
approvals that may be required under applicable law, the Group VEL Account or
any Sub-Account(s) may be operated as a management company under the 1940 Act,
may be deregistered under the 1940 Act if registration is no longer required, or
may be combined with other Sub-Accounts or other separate accounts of the
Company.

27
<PAGE>
VOTING RIGHTS

To the extent required by law, the Company will vote Underlying Fund shares
held by each Sub-Account in accordance with instructions received from
Certificate Owners with Certificate Value in such Sub-Account. If the 1940 Act
or any rules thereunder should be amended or if the present interpretation of
the 1940 Act or such rules should change, and as a result the Company determines
that it is permitted to vote shares in its own right, whether or not such shares
are attributable to the Certificates, the Company reserves the right to do so.

Each person having a voting interest will be provided with proxy materials
of the respective Underlying Fund together with an appropriate form with which
to give voting instructions to the Company. Shares held in each Sub-Account for
which no timely instructions are received will be voted in proportion to the
instructions received from all persons with an interest in such Sub-Account
furnishing instructions to the Company. The Company will also vote shares held
in the Group VEL Account that it owns and which are not attributable to
Certificates in the same proportion.

The number of votes which a Certificate Owner has the right to instruct will
be determined by the Company as of the record date established for the
Underlying Fund. This number is determined by dividing each Certificate Owner's
Certificate Value in the Sub-Account, if any, by the net asset value of one
share in the corresponding Underlying Fund in which the assets of the
Sub-Account are invested.

The Company may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as (1) to cause a change in the subclassification or investment
objective of one or more of the Underlying Funds or (2) to approve or disapprove
an investment advisory contract for the Underlying Funds. In addition, the
Company may disregard voting instructions in favor of any change in the
investment policies or in any investment adviser or principal underwriter
initiated by Certificate Owners or the Trustees. The Company's disapproval of
any such change must be reasonable and, in the case of a change in investment
policies or investment adviser, based on a good faith determination that such
change would be contrary to state law or otherwise is inappropriate in light of
the objectives and purposes of the Underlying Funds. In the event the Company
does disregard voting instructions, a summary of and the reasons for that action
will be included in the next periodic report to Certificate Owners.

THE CERTIFICATE

ENROLLMENT FORM FOR A CERTIFICATE -- Upon receipt at its Principal Office of
a completed enrollment form from a prospective Certificate Owner, the Company
will follow certain insurance underwriting procedures designed to determine
whether the proposed Insured is insurable. This process may involve such
verification procedures as medical examinations and may require that further
information be provided by the proposed Certificate Owner before a determination
of insurability can be made. A Certificate cannot be issued until this
underwriting procedure has been completed. The Company reserves the right to
reject an enrollment form which does not meet the Company's underwriting
guidelines, but in underwriting insurance, the Company shall comply with all
applicable federal and state prohibitions concerning unfair discrimination.

If at the time of enrollment a prospective Certificate Owner makes a payment
equal to at least one Monthly Deduction for the Certificate as applied for,
pending underwriting approval, the Company will provide fixed conditional
insurance pursuant to a Conditional Insurance Agreement in the amount of
insurance applied for, up to a maximum of $500,000. This coverage will generally
continue for a maximum of 90 days from the date of the enrollment form or the
completion of a medical exam, should one be required. In no event will any
insurance proceeds be paid under the Conditional Insurance Agreement if death is
by suicide.

If the enrollment form is approved, the Certificate will be issued as of the
date the terms of the Conditional Insurance Agreement were met. If no
Conditional Insurance Agreement is in effect because the prospective Certificate
Owner does not wish to make any payment until the Certificate is

28
<PAGE>
issued or has paid an initial premium that is not sufficient to place the
Certificate in force, upon delivery of the Certificate the Company will require
payment of sufficient premium to place the insurance in force.

Pending completion of insurance underwriting and Certificate issuance
procedures, the initial premium will be held in the Company's General Account.
If the enrollment form is approved and the Certificate is issued and accepted,
the initial premium held in the General Account will be credited with interest
not later than the date of receipt of the premium at the Company's Principal
Office. IF A CERTIFICATE IS NOT ISSUED, THE PREMIUMS WILL BE RETURNED TO YOU
WITHOUT INTEREST.

If your Certificate provides for a full refund of the initial payment under
its "Right to Examine Certificate" provision as required in your state, all
Certificate Value in the General Account that you initially designated to go to
the Sub-Accounts will be transferred to the Money Market Fund of the Trust upon
Issuance and Acceptance of the Certificate. All Certificate Value will be
allocated as you have chosen not later than the expiration of the period during
which you may exercise the "Right to Examine Certificate" provision. If the
"Payor Provision" is in effect, (see "CERTIFICATE TERMINATION AND REINSTATEMENT
- -- Payor Provisions") Payor premiums which are not "excess premiums" will be
transferred to the Monthly Deduction Sub-Account not later than 3 days after
underwriting approval of the Certificate.

FREE LOOK PERIOD -- The Certificate provides for an initial Free Look
Period. You may cancel the Certificate by mailing or delivering it to the
Principal Office or to an agent of the Company on or before the latest of (a) 45
days after the enrollment form for the Certificate is signed, (b) 10 days (20 or
30 days if required in your state) after you receive the Certificate, or (c) 10
days after the Company mails or personally delivers a Notice of Withdrawal
Rights to you.

When you return the Certificate, the Company will mail within seven days a
refund. (The refund of any premium paid by check may be delayed until the check
has cleared your bank.) If your Certificate provides for a full refund of the
initial premium under its "Right to Examine Certificate" provision as required
in your state, your refund will be the greater of (a) your entire premium or (b)
the Certificate Value plus deductions under the Certificate or by the Underlying
Funds for taxes, charges or fees. If your Certificate does not provide for a
full refund of the initial premium, you will receive the Certificate Value in
the Group VEL Account, plus premiums paid, including fees and charges, minus the
amounts allocated to the Group VEL Account, plus the fees and charges imposed on
amounts in the Group VEL Account.

After an increase in Face Amount, a right to cancel the increase also
applies. The Company will mail or personally deliver a notice of a "Free Look"
with respect to the increase. You will have the right to cancel the increase
before the latest of (a) 45 days after the enrollment form for the increase is
signed, (b) 10 days after you receive the new specification pages issued for the
increase, or (c) 10 days (20 or 30 days if required in your state) after the
Company mails or delivers a notice of withdrawal rights to you. Upon canceling
the increase, you will receive a credit to your Certificate Value of charges
which would not have been deducted but for the increase. The amount to be
credited will be refunded if you so request. The Company will also waive any
surrender charge calculated for the increase.

CONVERSION PRIVILEGES -- Once during the first 24 months after the Date of
Issue or after the effective date of an increase in Face Amount, while the
Certificate is in force, you may convert your Certificate without Evidence of
Insurability to a flexible premium adjustable life insurance Certificate with
fixed and guaranteed minimum benefits. Assuming that there have been no
increases in the initial Face Amount, you can accomplish this within 24 months
after the Date of Issue by transferring, without charge, the Certificate Value
in the Group VEL Account to the General Account and by simultaneously changing
your premium allocation instructions to allocate future premium payments to the
General Account. Within 24 months after the effective date of each increase, you
can transfer,

29
<PAGE>
without charge, all or part of the Certificate Value in the Group VEL Account to
the General Account and simultaneously change your premium allocation
instructions to allocate all or part of future premium payments to the General
Account.

Where required by state law, and at your request, the Company will issue a
flexible premium adjustable life insurance Certificate to you. The new
Certificate will have the same face amount, issue ages, dates of issue, and risk
classifications as the original Certificate.

PREMIUM PAYMENTS -- Premium Payments are payable to the Company, and may be
mailed to the Principal Office or paid through an authorized agent of the
Company. All premium payments after the initial premium payment are credited to
the Group VEL Account or General Account as of date of receipt at the Principal
Office.

You may establish a schedule of planned premiums which will be billed by the
Company at regular intervals. Failure to pay planned premiums, however, will not
itself cause the Certificate to lapse. You may also make unscheduled premium
payments at any time prior to the Final Premium Payment Date or skip planned
premium payments, subject to the maximum and minimum premium limitations
described below. Therefore, unlike conventional insurance policies, a
Certificate does not obligate you to pay premiums in accordance with a rigid and
inflexible premium schedule.

You may also elect to pay premiums by means of a monthly automatic payment
("MAP") procedure. Under a MAP procedure, amounts will be deducted each month,
generally on the Monthly Processing Date, from your checking account and applied
as a premium under a Certificate. The minimum payment permitted under MAP is
$50.

Premiums are not limited as to frequency and number. However, no premium
payment may be less than $100 without the Company's consent. Moreover, premium
payments must be sufficient to cover the next Monthly Deduction plus loan
interest accrued, or the Certificate may lapse. See "CERTIFICATE TERMINATION AND
REINSTATEMENT."

In no event may the total of all premiums paid exceed the current maximum
premium limitations set forth in the Certificate, if required by federal tax
laws. These maximum premium limitations will change whenever there is any change
in the Face Amount, the addition or deletion of a rider, or a change in the
Death Benefit Option. If a premium is paid which would result in total premiums
exceeding the current maximum premium limitations, the Company will only accept
that portion of the premiums which shall make total premiums equal the maximum.
Any part of the premiums in excess of that amount will be returned and no
further premiums will be accepted until allowed by the current maximum premium
limitation prescribed by Internal Revenue Service rules. However,
notwithstanding the current maximum premium limitations, the Company will accept
a premium which is needed in order to prevent a lapse of the Certificate during
a Certificate year. See "CERTIFICATE TERMINATION AND REINSTATEMENT."

ALLOCATION OF NET PREMIUMS -- The Net Premium equals the premium paid less
any premium expense charge. In the enrollment form for a Certificate, you
indicate the initial allocation of Net Premiums among the General Account and
the Sub-Accounts of the Group VEL Account. You may allocate premiums to one or
more Sub-Accounts, but may not have Certificate Value in more than seven
Sub-Accounts at any one time. The minimum amount which may be allocated to a
Sub-Account is 1% of Net Premium paid. Allocation percentages must be in whole
numbers (for example, 33 1/3% may not be chosen) and must total 100%. You may
change the allocation of future Net Premiums at any time pursuant to written or
telephone request. If allocation changes by telephone are elected by the
Certificate Owner, a properly completed authorization form must be on file
before telephone requests will be honored. The policy of the Company and its
agents and affiliates is that they will not be responsible for losses resulting
from acting upon telephone requests reasonably believed to be genuine. The
Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; otherwise, the Company may be liable for
any losses due to unauthorized or fraudulent instructions. The procedures the
Company follows for transactions initiated by telephone

30
<PAGE>
include requirements that callers on behalf of a Certificate Owner identify
themselves by name and identify the Certificate Owner by name, date of birth and
social security number. All transfer instructions by telephone are tape
recorded. An allocation change will be effective as of the date of receipt of
the notice at the Principal Office. No charge is currently imposed for changing
premium allocation instructions. The Company reserves the right to impose such a
charge in the future, but guarantees that the charge will not exceed $25.

The Certificate Value in the Sub-Accounts will vary with their investment
experience; you bear this investment risk. The investment performance may affect
the Death Proceeds as well. Certificate Owners should periodically review their
allocations of premiums and Certificate Value in light of market conditions and
overall financial planning requirements.

TRANSFER PRIVILEGE -- Subject to the Company's then current rules, you may
at any time transfer the Certificate Value among the Sub-Accounts or between a
Sub-Account and the General Account. However, the Certificate Value held in the
General Account to secure a Certificate loan may not be transferred.

All requests for transfers must be made to the Principal Office. The amount
transferred will be based on the Certificate Value in the Account(s) next
computed after receipt of the transfer order. The Company will make transfers
pursuant to written or telephone requests. As discussed in "THE CERTIFICATE --
Allocation of Net Premiums," a properly completed authorization form must be on
file at the Principal Office before telephone requests will by honored.

Transfers involving the General Account are currently permitted only if:

(a) There has been at least a ninety (90) day period since the last transfer
from the General Account; and

(b) The amount transferred from the General Account in each transfer does
not exceed 25% of the Accumulated Value under the Certificate.

These rules are subject to change by the Company.

DOLLAR COST AVERAGING AND AUTOMATIC REBALANCING OPTIONS -- You may have
automatic transfers of at least $100 each made on a periodic basis (a) from
Sub-Account 3 or Sub-Account 5 (which invests in the Money Market Fund and
Government Bond Fund of the Trust, respectively) to one or more of the other
Sub-Accounts or ("Dollar Cost Averaging Option") (b) to automatically reallocate
Certificate value among the Sub-Accounts ("Automatic Rebalancing Option").
Automatic transfers may be made on a monthly, bimonthly, quarterly, semiannual
or annual schedule. Generally, all transfers will be processed on the 15th of
each scheduled month. However, if the 15th is not a business day or is the
Monthly Processing Date, the automatic transfer will be processed on the next
business day. The Dollar Cost Averaging Option and the Automatic Rebalancing
Option may not be in effect at the same time.

The transfer privilege is subject to the consent of the Company. The Company
reserves the right to impose limitations on transfers including, but not limited
to: (1) the minimum amount that may be transferred, (2) the minimum amount that
may remain in a Sub-Account following a transfer from that Sub-Account, (3) the
minimum period of time between transfers involving the General Account, and (4)
the maximum amount that may be transferred each time from the General Account.

The first 12 transfers in a Certificate year will be free of any charge.
Thereafter, a $10 transfer charge will be deducted from the amount transferred
for each transfer in that Certificate year. The Company may increase or decrease
this charge, but it is guaranteed never to exceed $25. The first automatic
transfer counts as one transfer towards the twelve free transfers allowed in
each Certificate year; each subsequent automatic transfer is without charge and
does not reduce the remaining number of transfers which may be made free of
charge. Any transfers made with respect to a conversion privilege, Certificate
loan or material change in investment policy will not count towards the twelve
free transfers.

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<PAGE>
ELECTION OF DEATH BENEFIT OPTIONS -- Federal tax law requires a minimum
death benefit in relation to cash value for a Certificate to qualify as life
insurance. Under current Federal tax law, either the Guideline Premium test or
the Cash Value Accumulation test can be used to determine if a Certificate
complies with the definition of "life insurance" in Section 7702 of the Internal
Revenue Code ("Code"). At the time of application, the Employer may elect either
of the tests.

The Guideline Premium Test Limits the amount of premiums payable under a
Certificate to a certain amount for an insured of a particular age and sex.
Under the Guideline Premium test, the Certificate Owner may choose between Death
Benefit Option 1 and Option 2, as described below. After issuance of the
Certificate, the Certificate Owner may change the selection from Option 1 to
Option 2 or vice versa. The Cash Value Accumulation Test requires that the Death
Benefit must be sufficient so that the cash surrender value, as defined in
Section 7702, does not at any time exceed the net single premium required to
fund the future benefits under the Certificate. If the Cash Value Accumulation
test is chosen by the employer, ONLY Death Benefit Option 3 will apply. Death
Benefits Option 1 and Option 2 are NOT available under the Cash Value
Accumulation test.

GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST

There are two main differences between the Guideline Premium test and the
Cash Value Accumulation test. First, the Guideline Premium test limits the
amount of premium that may be paid into a Certificate, while no such limits
apply under the Cash Value Accumulation test. Second, the factors that determine
the minimum Death Benefit relative to the Certificate Value are different.
Required increases in the minimum Death Benefit due to growth in Certificate
Value will generally be greater under the Cash Value Accumulation test than
under the Guideline Premium test. APPLICANTS FOR A POLICY SHOULD CONSULT A
QUALIFIED TAX ADVISER IN CHOOSING A DEATH BENEFIT ELECTION.

OPTION 1 -- LEVEL DEATH BENEFIT. Under Option 1, the Death Benefit is equal
to the greater of Face Amount or the Minimum Death Benefit, as set forth in the
table below. Under Option 1, the Death Benefit will remain level unless the
Minimum Death Benefit is greater than the Face Amount, in which case the Death
Benefit will vary as the Certificate Value varies. Option 1 will offer the best
opportunity for the Certificate Value under a Certificate to increase without
increasing the death benefit as quickly as it might under the other options. The
Death Benefit will never go below the Face Amount.

OPTION 2 -- ADJUSTABLE DEATH BENEFIT. Under Option 2, the Death Benefit is
equal to the greater of the Face Amount plus the Certificate Value or the
Minimum Death Benefit, as set forth in the Table below. The Death Benefit will
therefore vary as the Certificate Value changes, but will never be less than the
Face Amount. Option 2 will offer the best opportunity for the Certificate owner
who would like to have an increasing death benefit as early as possible. The
death benefit will increase whenever there is an increase in the Certificate
Value and will decrease whenever there is a decrease in the Certificate Value,
but will never go below the Face Amount.

OPTION 3 -- LEVEL DEATH BENEFIT WITH CASH VALUE ACCUMULATION TEST. Under
Option 3, the Death Benefit will equal the Face Amount, unless the Certificate
Value, multiplied by the applicable Option 3 Death Benefit Factor, gives a
higher Death Benefit. A complete list of Option 3 Death Benefit Factors is set
forth in the Certificate. The applicable Death Benefit Factor depends upon the
sex, risk classification, and then-attained age of the insured. The Death
Benefit Factor decreases slightly from year to year as the attained age of the
insured increases. Option 3 will offer the best opportunity for the Certificate
Owner who is looking for an increasing death benefit in later Certificate years
and/or would like to fund the Certificate at the "7-pay" limit for the full
seven years. When the Certificate Value multiplied by the applicable Death
Benefit Factor exceeds the Face Amount, the death benefit will increase whenever
there is an increase in the Certificate Value and will decrease whenever there
is a decrease in the Certificate Level, but will never go below the Face Amount.
OPTION 3 MAY NOT BE AVAILABLE IN ALL STATES.

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<PAGE>
DEATH PROCEEDS -- As long as the Certificate remains in force (see
"CERTIFICATE TERMINATION AND REINSTATEMENT"), the Company will, upon due proof
of the Insured's death, pay the Death Proceeds of the Certificate to the named
Beneficiary. The Company will normally pay the Death Proceeds within seven days
of receiving due proof of the Insured's death, but the Company may delay
payments under certain circumstances. See "OTHER CERTIFICATE PROVISIONS --
Postponement of Payments." The Death Proceeds may be received by the Beneficiary
in a lump sum or under one or more of the payment options the Company offers.
See "APPENDIX B -- PAYMENT OPTIONS." The Death Proceeds payable depends on the
current Face Amount and the Death Benefit Option that is in effect on the date
of death. Prior to the Final Premium Payment Date, the Death Proceeds are: (a)
The Death Benefit provided under Option 1, Option 2, or Option 3, whichever is
in effect on the date of death; plus (b) any additional insurance on the
Insured's life that is provided by rider; minus (c) any outstanding Debt, any
partial withdrawals and partial withdrawal charges, and any Monthly Deductions
due and unpaid through the Certificate month in which the Insured dies. After
the Final Premium Payment Date, the Death Proceeds equal the surrender Value of
the Certificate. The amount of Death Proceeds payable will be determined as of
the date of the Company's receipt of due proof of the Insured's death.

MORE INFORMATION ABOUT DEATH BENEFIT OPTIONS 1 AND 2 -- If the Guideline
Premium Test is chosen by the Employer, the Certificate owner may choose between
Death Benefit Option 1 or Option 2. The Certificate Owner may designate the
desired Death Benefit Option in the enrollment form, and may change the option
once per Certificate year by written request. There is no charge for a change in
option.

MINIMUM DEATH BENEFIT UNDER OPTION 1 AND OPTION 2 -- The Minimum Death
Benefit under Option 1 or Option 2 is equal to a percentage of the Certificate
Value as set forth below. The Minimum Death Benefit is determined in accordance
with Internal Revenue Code regulations to ensure that the Certificate qualifies
as a life insurance contract and that the insurance proceeds may be excluded
from the gross income of the Beneficiary.

MINIMUM DEATH BENEFIT TABLE

<TABLE>
<CAPTION>
AGE OF INSURED ON PERCENTAGE OF
DATE OF DEATH CERTIFICATE VALUE
- --------------------------------------------- -----------------
<S> <C>
40 and under................................. 250%
45........................................... 215%
50........................................... 185%
55........................................... 150%
60........................................... 130%
65........................................... 120%
70........................................... 115%
75........................................... 105%
80........................................... 105%
85........................................... 105%
90........................................... 105%
95 and above................................. 100%
</TABLE>

For the Ages not listed, the progression between the listed Ages is linear.

For any Face Amount, the amount of the Death Benefit and thus the Death
Proceeds will be greater under Option 2 than under Option 1, since the
Certificate Value is added to the specified Face Amount and included in the
Death Proceeds only under Option 2. However, the cost of insurance included in
the Monthly Deduction will be greater, and thus the rate at which Certificate
Value will accumulate will be slower, under Option 2 than under Option 1. See
"CHARGES AND DEDUCTIONS -- Monthly Deduction From Certificate Value."

33
<PAGE>
If you desire to have premium payments and investment performance reflected
in the amount of the Death Benefit, you should choose Option 2. If you desire
premium payments and investment performance reflected to the maximum extent in
the Certificate Value, you should select Option 1.

ILLUSTRATION OF OPTION 1 -- For purposes of this illustration, assume that
the Insured is under the Age of 40, and that there is no outstanding Debt. Under
Option 1, a Certificate with a $50,000 Face Amount will generally have a Death
Benefit equal to $50,000. However, because the Death Benefit must be equal to or
greater than 250% of Certificate Value, if at any time the Certificate Value
exceeds $20,000, the Death Benefit will exceed the $50,000 Face Amount. In this
example, each additional dollar of Certificate Value above $20,000 will increase
the Death Benefit by $2.50. For example, a Certificate with a Certificate Value
of $35,000 will have a Minimum Death Benefit of $87,500 ($35,000 X 2.50);
Certificate Value of $40,000 will produce a Minimum Death Benefit of $100,000
($40,000 X 2.50); and Certificate Value of $50,000 will produce a Minimum Death
Benefit of $125,000 ($50,000 X 2.50).

Similarly, so long as Certificate Value exceeds $20,000, each dollar taken
out of Certificate Value will reduce the Death Benefit by $2.50. If, for
example, the Certificate Value is reduced from $25,000 to $20,000 because of
partial withdrawals, charges or negative investment performance, the Death
Benefit will be reduced from $62,500 to $50,000. If at any time, however, the
Certificate Value multiplied by the applicable percentage is less than the Face
Amount, the Death Benefit will equal the Face Amount of the Certificate.

The applicable percentage becomes lower as the Insured's Age increases. If
the Insured's Age in the above example were, for example, 50 (rather than
between 0 and 40), the applicable percentage would be 185%. The Death Benefit
would not exceed the $50,000 Face Amount unless the Certificate Value exceeded
$27,027 (rather than $20,000), and each dollar then added to or taken from
Certificate Value would change the Death Benefit by $1.85.

ILLUSTRATION OF OPTION 2 -- For purposes of this illustration, assume that
the Insured is under the Age of 40 and that there is no outstanding Debt.

Under Option 2, a Certificate with a Face Amount of $50,000 will generally
produce a Death Benefit of $50,000 plus Certificate Value. For example, a
Certificate with Certificate Value of $5,000 will produce a Death Benefit of
$55,000 ($50,000 + $5,000); Certificate Value of $10,000 will produce a Death
Benefit of $60,000 ($50,000 + $10,000); Certificate Value of $25,000 will
produce a Death Benefit of $75,000 ($50,000 + $25,000). However, the Death
Benefit must be at least 250% of the Certificate Value. Therefore, if the
Certificate Value is greater than $33,333, 250% of that amount will be the Death
Benefit, which will be greater than the Face Amount plus Certificate Value. In
this example, each additional dollar of Certificate Value above $33,333 will
increase the Death Benefit by $2.50. For example, if the Certificate Value is
$35,000, the Minimum Death Benefit will be $87,500 ($35,000 x 2.50); Certificate
Value of $40,000 will produce a Minimum Death Benefit of $100,000 ($40,000 x
2.50); and Certificate Value of $50,000 will produce a Minimum Death Benefit of
$125,000 ($50,000 x 2.50).

Similarly, if Certificate Value exceeds $33,333, each dollar taken out of
Certificate Value will reduce the Death Benefit by $2.50. If, for example, the
Certificate Value is reduced from $45,000 to $40,000 because of partial
withdrawals, charges or negative investment performance, the Death Benefit will
be reduced from $112,500 to $100,000. If at any time, however, Certificate Value
multiplied by the applicable percentage is less than the Face Amount plus
Certificate Value, then the Death Benefit will be the current Face Amount plus
Certificate Value.

The applicable percentage becomes lower as the Insured's Age increases. If
the Insured's Age in the above example were 50, the Death Benefit must be at
least 1.85 times the Certificate Value. The amount of the Death Benefit would be
the sum of the Certificate Value plus $50,000 unless the Certificate Value
exceeded $58,824 (rather than $33,333). Each dollar added to or subtracted from
the Certificate would change the Death Benefit by $1.85.

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The Death Benefit under Option 2 will always be the greater of the Face
Amount plus Certificate Value or the Certificate Value multiplied by the
applicable percentage.

CHANGE IN DEATH BENEFIT OPTION -- Generally, if Death Benefit Option 1 or
Option 2 is in effect, the Death Benefit Option in effect may be changed once
each Certificate year by sending a written request for change to the Principal
Office. Changing Death Benefit Options will not require Evidence of
Insurability. The effective date of any such change will be the Monthly
Processing Date on or following the date of receipt of the request. No charges
will be imposed on changes in Death Benefit Options. IF OPTION 3 IS IN EFFECT,
YOU MAY NOT CHANGE TO EITHER OPTION 1 OR OPTION 2.

If the Death Benefit Option is changed from Option 2 to Option 1, the Face
Amount will be increased to equal the Death Benefit which would have been
payable under Option 2 on the effective date of the change (i.e. the Face Amount
immediately prior to the change plus the Certificate Value on the date of the
change). The amount of the Death Benefit will not be altered at the time of the
change. However, the change in option will affect the determination of the Death
Benefit from that point on, since the Certificate Value will no longer be added
to the Face Amount in determining the Death Benefit; the Death Benefit will
equal the new Face Amount (or, if higher, the Minimum Death Benefit). The cost
of insurance may be higher or lower than it otherwise would have been since any
increases or decreases in Certificate Value will, respectively, reduce or
increase the Insurance Amount at Risk under Option 1. Assuming a positive net
investment return with respect to any amounts in the Group VEL Account, changing
the Death Benefit Option from Option 2 to Option 1 will reduce the Insurance
Amount at Risk and therefore the cost of insurance charge for all subsequent
Monthly Deductions, compared to what such charge would have been if no such
change were made.

If the Death Benefit Option is changed from Option 1 to Option 2, the Face
Amount will be decreased to equal the Death Benefit less the Certificate Value
on the effective date of the change. This change may not be made if it would
result in a Face Amount less than $40,000. A change from Option 1 to Option 2
will not alter the amount of the Death Benefit at the time of the change, but
will affect the determination of the Death Benefit from that point on. Because
the Certificate Value will be added to the new specified Face Amount, the Death
Benefit will vary with the Certificate Value. Thus, under Option 2, the
Insurance Amount at Risk will always equal the Face Amount unless the Minimum
Death Benefit is in effect. The cost of insurance may also be higher or lower
than it otherwise would have been without the change in Death Benefit Option.
See "CHARGES AND DEDUCTIONS -- Monthly Deduction From Certificate Value."

A change in Death Benefit Option may result in total premiums paid exceeding
the then current maximum premium limitation determined by Internal Revenue
Service Rules. In such event, the Company will pay the excess to the Certificate
Owner. See "THE CERTIFICATE -- Premium Payments."

CHANGE IN FACE AMOUNT -- Subject to certain limitations, you may increase or
decrease the specified Face Amount of a Certificate at any time by submitting a
written request to the Company. Any increase or decrease in the specified Face
Amount requested by you will become effective on the Monthly Processing Date on
or next following the date of receipt of the request at the Principal Office,
or, if Evidence of Insurability is required, the date of approval of the
request.

INCREASES -- Along with the written request for an increase, you must submit
satisfactory Evidence of Insurability. The consent of the Insured is also
required whenever the Face Amount is increased. A request for an increase in
Face Amount may not be less than an amount determined by the Company. This
amount varies by group but in no event will this amount exceed $10,000. You may
not increase the Face Amount after the Insured reaches Age 80. An increase must
be accompanied by an additional premium if the Certificate Value is less than
$50 plus an amount equal to the sum of two Monthly Deductions. On the effective
date of each increase in Face Amount, a transaction charge of $2.50 per $1,000
of increase up to $40, will be deducted from Certificate Value for
administrative costs. The effective date of the increase will be the first
Monthly Processing Date on or following the date all of the conditions for the
increase are met.

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An increase in the Face Amount will generally affect the Insurance Amount at
Risk and may affect the portion of the Insurance Amount at Risk included in
various Underwriting Classes (if more than one Underwriting Class applies), both
of which may affect the monthly cost of insurance charges. A surrender charge
will also be calculated for the increase. See "CHARGES AND DEDUCTIONS -- Monthly
Deduction From Certificate Value, -- Surrender Charge."

After increasing the Face Amount, you will have the right (1) during a Free
Look Period, to have the increase canceled and the charges which would not have
been deducted but for the increase will be credited to the Certificate and (2)
during the first 24 months following the increase, to transfer any or all
Certificate Value to the General Account free of charge. See "THE CERTIFICATE --
Free Look Period, -- Conversion Privileges." A refund of charges which would not
have been deducted but for the increase will be made at your request.

DECREASES -- The minimum amount for a decrease in Face Amount is $10,000. By
current Company practice, the Face Amount in force after any decrease may not be
less than $50,000. If, following a decrease in Face Amount, the Certificate
would not comply with the maximum premium limitation applicable under the
Internal Revenue Service Rules, the decrease may be limited or Certificate Value
may be returned to the Certificate Owner (at your election) to the extent
necessary to meet the requirements. A return of Certificate Value may result in
tax liability to you.

A decrease in the Face Amount will affect the total Insurance Amount at Risk
and the portion of the Insurance Amount at Risk covered by various Underwriting
Classes, both of which may affect a Certificate Owner's monthly cost of
insurance charges. See "CHARGES AND DEDUCTIONS -- Monthly Deduction From
Certificate Value."

For purposes of determining the cost of insurance charge, any decrease in
the Face Amount will reduce the Face Amount in the following order: (a) the Face
Amount provided by the most recent increase; (b) the next most recent increases
successively; and (c) the initial Face Amount. This order will also be used to
determine whether a surrender charge will be deducted and in what amount. If the
Face Amount is decreased while the "Payor Provisions" apply (see "CERTIFICATE
TERMINATION AND REINSTATEMENT -- Termination"), the above order may be modified
to determine the cost of insurance charge. In such case, you may reduce or
eliminate any Face Amount for which you are paying the insurance charges on a
last-in, first-out basis before you reduce or eliminate amounts of insurance
which are paid by the Payor.

If you request a decrease in the Face Amount, the amount of any surrender
charge deducted will reduce the current Certificate Value. On the effective date
of each decrease in Face Amount, a transaction charge of $2.50 per $1,000 of
decrease up to $40, will be deducted from Certificate Value for administrative
costs. You may specify one Sub-Account from which the transaction charge and, if
applicable, any surrender charge will be deducted. If no specification is
provided, the Company will make a Pro-Rata Allocation. The current surrender
charge will be reduced by the amount of any surrender charge deducted. See
"CHARGES AND DEDUCTIONS -- Surrender Charge."

CERTIFICATE VALUE AND SURRENDER VALUE -- The Certificate Value is the total
amount available for investment and is equal to the sum of the accumulation in
the General Account and the value of the Units in the Sub-Accounts. The
Certificate Value is used in determining the Surrender Value (the Certificate
Value less any Debt and any surrender charge). See "THE CERTIFICATE --
Surrender." There is no guaranteed minimum Certificate Value. Because
Certificate Value on any date depends upon a number of variables, it cannot be
predetermined.

Certificate Value and Surrender Value will reflect frequency and amount of
Net Premiums paid, interest credited to accumulations in the General Account,
the investment performance of the chosen Sub-Accounts, any partial withdrawals,
any loans, any loan repayments, any loan interest paid or credited, and any
charges assessed in connection with the Certificate.

CALCULATION OF CERTIFICATE VALUE -- The Certificate Value is determined
first on the Date of Issue and thereafter on each Valuation Date. On the Date of
Issue, the Certificate Value will be the Net

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Premiums received, plus any interest earned during the period when premiums are
held in the General Account (before being transferred to the Group VEL Account;
see "THE CERTIFICATE -- Enrollment Form For A Certificate") less any Monthly
Deductions due. On each Valuation Date after the Date of Issue the Certificate
Value will be:

(1) the aggregate of the values in each of the Sub-Accounts on the Valuation
Date, determined for each Sub-Account by multiplying the value of a Unit
in that Sub-Account on that date by the number of such Units allocated to
the Certificate; plus

(2) the value in the General Account (including any amounts transferred to
the General Account with respect to a loan).

Thus, the Certificate Value is determined by multiplying the number of Units
in each Sub-Account by the value of the applicable Units on the particular
Valuation Date, adding the products, and adding the amount of the accumulations
in the General Account, if any.

THE UNIT -- Each Net Premium is allocated to the Sub-Account(s) selected by
you. Allocations to the Sub-Accounts are credited to the Certificate in the form
of Units. Units are credited separately for each Sub-Account.

The number of Units of each Sub-Account credited to the Certificate is equal
to the portion of the Net Premium allocated to the Sub-Account, divided by the
dollar value of the applicable Unit as of the Valuation Date the payment is
received at the Company's Principal Office. The number of Units will remain
fixed unless changed by a subsequent split of Unit value, transfer, partial
withdrawal or surrender. In addition, if the Company is deducting the Monthly
Deduction or other charges from a Sub-Account, each such deduction will result
in cancellation of a number of Units equal in value to the amount deducted.

The dollar value of a Unit of each Sub-Account varies from Valuation Date to
Valuation Date based on the investment experience of that Sub-Account. That
experience, in turn, will reflect the investment performance, expenses and
charges of the respective Underlying Fund. The value of a Unit was set at $1.00
on the first Valuation Date for each Sub-Account. The dollar value of a Unit on
a given Valuation Date is determined by multiplying the dollar value of the
corresponding Unit as of the immediately preceding Valuation Date by the
appropriate net investment factor.

NET INVESTMENT FACTOR -- The net investment factor measures the investment
performance of a Sub-Account of the Group VEL Account during the Valuation
Period just ended. The net investment factor for each Sub-Account is equal to
1.0000 plus the number arrived at by dividing (a) by (b), where

(a) is the investment income of that Sub-Account for the Valuation Period,
plus capital gains, realized or unrealized, credited during the Valuation
Period; minus capital losses, realized or unrealized, charged during the
Valuation Period; adjusted for provisions made for taxes, if any; and

(b) is the value of that Sub-Account's assets at the beginning of the
Valuation Period.

The net investment factor may be greater or less than one. Therefore, the
value of a Unit may increase or decrease. You bear the investment risk. Subject
to applicable state and federal laws, the Company reserves the right to change
the methodology used to determine the net investment factor.

Allocations to the General Account are not converted into Units, but are
credited interest at a rate periodically set by the Company. See "MORE
INFORMATION ABOUT THE GENERAL ACCOUNT."

PAYMENT OPTIONS -- During the Insured's lifetime, you may arrange for the
Death Proceeds to be paid in a single sum or under one or more of the payment
options then offered by the Company. These payment options are also available at
the Final Premium Payment Date and if the Certificate is surrendered. If no
election is made, the Company will pay the Death Proceeds in a single sum. See
"APPENDIX B -- PAYMENT OPTIONS."

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OPTIONAL INSURANCE BENEFITS -- Subject to certain requirements, one or more
of the optional insurance benefits described in "APPENDIX A -- OPTIONAL
BENEFITS" may be added to a Certificate by rider. The cost of any optional
insurance benefits will be deducted as part of the Monthly Deduction. See
"CHARGES AND DEDUCTIONS -- Monthly Deduction From Certificate Value."

SURRENDER -- You may at any time surrender the Certificate and receive its
Surrender Value. The Surrender Value is the Certificate Value, less Debt and
applicable surrender charges. The Surrender Value will be calculated as of the
Valuation Date on which a written request for surrender and the Certificate are
received at the Principal Office. A surrender charge will be deducted when a
Certificate is surrendered if less than 15 full Certificate years have elapsed
from the Date of Issue of the Certificate or from the effective date of any
increase in Face Amount. See "CHARGES AND DEDUCTIONS -- Surrender Charge."

The proceeds on surrender may be paid in a single lump sum or under one of
the payment options the Company offers. See "APPENDIX B -- PAYMENT OPTIONS." The
Company will normally pay the Surrender Value within seven days following the
Company's receipt of the surrender request, but the Company may delay payment
under the circumstances described in "OTHER CERTIFICATE PROVISIONS --
Postponement of Payments."

For important tax consequences which may result from surrender see "FEDERAL
TAX CONSIDERATIONS."

PAID-UP INSURANCE -- On written request, you may elect life insurance
coverage, usually for a reduced amount, for the life of the Insured with no
further premiums due. The Paid-Up Insurance will be the amount that the
Surrender Value can purchase for a net single premium at the Insured's age and
underwriting class on the date this option is elected. If the surrender value
exceeds the net single premium, we will pay the excess to you. The net single
premium is based on the Commissioners 1980 Standard Ordinary Mortality Tables,
Smoker or Non-Smoker (Table B for unisex policies) with increases in the tables
for non-standard risks. Interest will not be less than 4.5%.

IF THE PAID-UP INSURANCE OPTION IS ELECTED, THE FOLLOWING CERTIFICATE OWNER
RIGHTS AND BENEFITS WILL BE AFFECTED:

- As described above, the paid-up insurance benefit will be
computed differently from the net death benefit and the death
benefit options will not apply

- We will not allow transfers of Certificate Value from the fixed
account back to the Group VEL Account

- You may not make further payments

- You may not increase or decrease the Face Amount or make
partial withdrawals

- Riders will continue only with our consent

You may, after electing Paid-Up Insurance, surrender the Certificate for its
net cash value. The guaranteed cash value is the net single premium for the
Paid-Up Insurance at the Insured's attained age. The net cash value is the cash
valueless any outstanding loan. We will transfer the Certificate Value in the
Group VEL Account to the fixed account on the date we receive written request to
elect the option.

On election of Paid-Up Insurance, the Certificate often will become a
modified endowment contract. If a Certificate becomes a modified endowment
contract, Certificate loans, partial withdrawals or surrender will receive
unfavorable federal tax treatment. See "FEDERAL TAX CONSIDERATIONS -- Modified
Endowment Contracts."

PARTIAL WITHDRAWAL -- Any time after the first Certificate year, you may
withdraw a portion of the Surrender Value of your Certificate, subject to the
limits stated below, upon written request filed at the Principal Office. The
written request must indicate the dollar amount you wish to receive and the

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Accounts from which such amount is to be withdrawn. You may allocate the amount
withdrawn among the Sub-Accounts and the General Account. If you do not provide
allocation instructions the Company will make a Pro-Rata Allocation. Each
partial withdrawal must be in a minimum amount of $500. Under Option 1, the Face
Amount is reduced by the amount of the partial withdrawal, and a partial
withdrawal will not be allowed if it would reduce the Face Amount below $40,000.

A partial withdrawal from a Sub-Account will result in the cancellation of
the number of Units equivalent in value to the amount withdrawn. The amount
withdrawn equals the amount requested by you plus the transaction charge and any
applicable partial withdrawal charge as described under "CHARGES AND DEDUCTIONS
- -- Charges On Partial Withdrawal." The Company will normally pay the amount of
the partial withdrawal within seven days following the Company's receipt of the
partial withdrawal request, but the Company may delay payment under certain
circumstances described in "OTHER CERTIFICATE PROVISIONS -- Postponement of
Payments." For important tax consequences which may result from partial
withdrawals, see "FEDERAL TAX CONSIDERATIONS."

CHARGES AND DEDUCTIONS

Charges will be deducted in connection with the Certificate to compensate
the Company for providing the insurance benefits set forth in the Certificate
and any additional benefits added by rider, administering the Certificate,
incurring distribution expenses, and assuming certain risks in connection with
the Certificates. Each of the charges identified as an administrative charge is
intended to reimburse the Company for actual administrative costs incurred, and
is not intended to result in a profit to the Company.

Certain of the charges and deductions described below may be reduced for
Certificates issued in connection with a specific group in accordance with the
Company's rules in effect as of the date an enrollment form for a Certificate is
approved. To qualify for such a reduction, a group must satisfy certain criteria
as to, for example, size of the group, expected number of participants and
anticipated premium payments from the group. Generally, the sales contacts and
effort, administrative costs and mortality cost per Certificate vary based on
such factors as the size of the group, the purposes for which Certificates are
purchased and certain characteristics of the group's members. The amount of
reduction and the criteria for qualification will reflect in the reduced sales
effort and administrative costs resulting from, and the different mortality
experience expected as a result of, sales to qualifying groups. The Company may
modify from time to time on a uniform basis both the amounts of reductions and
the criteria for qualification. Reductions in these charges will not be unfairly
discriminatory against any person, including the affected Certificate Owners and
all other Certificate Owners funded by the Group VEL Account.

PREMIUM EXPENSE CHARGE -- A charge may be deducted from each premium payment
for state and local premium taxes paid by the Company. State premium taxes
generally range from 0.75% to 5%, while local premium taxes (if any) vary by
jurisdiction within a state. The Company guarantees that the charge for premium
taxes will not exceed 10%. The premium tax charge may change when either the
applicable jurisdiction changes or the tax rate within the applicable
jurisdiction changes. The Company should be notified of any change in address of
the Insured as soon as possible.

Additional charges are made to compensate the Company for federal taxes
imposed for deferred acquisition costs ("DAC taxes") and for sales expenses
related to the Certificates. The DAC tax deduction may range from zero to 1% of
premiums, depending on the group to which the Certificate is issued. The DAC tax
deduction is a factor that the Company must use when calculating the maximum
sales load it can charge under SEC rules. The charge for sales expenses may
range from zero to 5%. The sales charge may vary depending on the group to which
the Certificates are issued, including average number of participants, average
Face Amount of the Certificates, anticipated average annual premiums and the
actual sales expense incurred by the Company.

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MONTHLY DEDUCTION FROM CERTIFICATE VALUE -- On the Date of Issue and each
Monthly Processing Date thereafter prior to the Final Premium Payment Date,
certain charges ("Monthly Deduction") will be deducted from the Certificate
Value. The Monthly Deduction includes a charge for cost of insurance, a charge
for the cost of any additional benefits provided by rider and a charge for
Certificate administrative expenses that may be up to $10, depending on the
group to which the Certificate is issued. The Monthly Deduction may also include
a charge for Group VEL administrative expenses and a charge for mortality and
expense risks. The Group VEL administrative charge may continue for up to 10
Certificate years and may be up to 0.25% of Certificate Value in each
Sub-Account, depending on the group to which the Certificate was issued. The
mortality and expense risk charge may be up to 0.90% of Certificate Value in
each Sub-Account. The Monthly Deduction on or following the effective date of a
requested change in the Face Amount will also include a charge of $2.50 per
$1,000 of increase or decrease, to a maximum of $40, for administrative costs
associated with the change. See "THE CERTIFICATE -- Change In Face Amount."

COST OF INSURANCE -- This charge is designed to compensate the Company for
the anticipated cost of providing Death Proceeds to Beneficiaries of those
Insureds who die prior to the Final Premium Payment Date. The cost of insurance
is determined on a monthly basis, and is determined separately for the initial
Face Amount and for each subsequent increase in Face Amount. Because the cost of
insurance depends upon a number of variables, it can vary from month to month
and from group to group.

CALCULATION OF THE CHARGE -- If Death Benefit Option 2 is in effect, the
monthly cost of insurance charge for the initial Face Amount will equal the
applicable cost of insurance rate multiplied by the initial Face Amount. If
Death Benefit Option 1 or Option 3 is in effect, however, the applicable cost of
insurance rate will be multiplied by the initial Face Amount less the
Certificate Value (minus charges for rider benefits) at the beginning of the
Certificate month. Thus, the cost of insurance charge may be greater if Death
Benefit Option 2 is in effect than if Death Benefit Option 1 or Option 3 is in
effect, assuming the same Face Amount in each case and assuming that the Minimum
Death Benefit is not in effect.

In other words, since the Death Benefit under Option 1 remains constant
while the Death Benefit under Option 2 varies with the Certificate Value, any
Certificate Value increases will reduce the insurance charge under Option 1 but
not under Option 2.

If Death Benefit Option 2 is in effect, the monthly insurance charge for
each increase in Face Amount (other than an increase caused by a change in Death
Benefit Option) will be equal to the cost of insurance rate applicable to that
increase multiplied by the increase in Face Amount. If Death Benefit Option 1 or
Option 3 is in effect, the applicable cost of insurance rate will be multiplied
by the increase in the Face Amount reduced by any Certificate Value (minus rider
charges) in excess of the initial Face Amount at the beginning of the policy
month.

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If the Minimum Death Benefit is in effect under any Option, a monthly cost
of insurance charge will also be calculated for that portion of the Death
Benefit which exceeds the current Face Amount. This charge will be calculated by
multiplying the cost of insurance rate applicable to the initial Face Amount
times the Minimum Death Benefit (Certificate Value times the applicable
percentage) less the greater of the Face Amount or the Certificate Value under
Death Benefit Option 1 or Option 3, or less the Face Amount plus the Certificate
Value under Death Benefit Option 2. When the Minimum Death Benefit is in effect,
the cost under insurance charge for the initial Face Amount and for any
increases will be calculated as set forth in the preceding two paragraphs.

The monthly cost of insurance charge will also be adjusted for any decreases
in Face Amount. See "THE CERTIFICATE -- Change In Face Amount: Decreases."

COST OF INSURANCE RATES -- This Certificate is sold to eligible individuals
who are members of a non-qualified benefit plan having a minimum, depending on
the group, of ten or more members. A portion of the initial face amount may be
issued on a guaranteed or simplified underwriting basis. The amount of this
portion will be determined for each group, and may vary based on characteristics
within the group.

The determination of the underwriting class for the guaranteed or simplified
issue portion will, in part, be based on the type of group; the number of
persons eligible to participate in the plan; expected percentage of eligible
persons participating in the plan; and the amount of guaranteed or simplified
underwriting insurance to be issued. Larger groups, higher participation rates
and occupations with historically favorable mortality rates will generally
result in the individuals within that group being placed in a more favorable
underwriting class.

Cost of insurance rates are based on a blended unisex rate table, Age and
Underwriting Class of the Insured at the Date of Issue, the effective date of an
increase or date of rider, as applicable, the amount of premiums paid less any
debt and any partial withdrawals and withdrawal charges. For those Certificates
issued on a unisex basis, sex-distinct rates do not apply. The cost of insurance
rates are determined at the beginning of each Certificate year for the initial
Face Amount. The cost of insurance rates for an increase in Face Amount or rider
are determined annually on the anniversary of the effective date of each
increase or rider. The cost of insurance rates generally increase as the
Insured's Age increases. The actual monthly cost of insurance rates will be
based on the Company's expectations as to future mortality experience. They will
not, however, be greater than the guaranteed cost of insurance rates set forth
in the Certificate. These guaranteed rates are based on the 1980 Commissioners
Standard Ordinary Mortality Tables (Mortality Table B, Smoker or Non-smoker, for
unisex Certificates) and the Insured's Age. The Tables used for this purpose may
set forth different mortality estimates for smokers and non-smokers. Any change
in the cost of insurance rates will apply to all persons of the same insuring
Age and Underwriting Class whose Certificates have been in force for the same
length of time.

The Underwriting Class of an Insured will affect the cost of insurance
rates. The Company currently places Insureds into preferred Underwriting
Classes, standard Underwriting Classes and substandard Underwriting Classes. In
an otherwise identical Contract, an Insured in the preferred Underwriting Class
will have a lower cost of insurance than an Insured in a standard Underwriting
Class who, in turn, will have a lower cost of insurance than an Insured in a
substandard Underwriting Class with a higher mortality risk. The Underwriting
Classes may be divided into two categories or aggregated: smokers and
nonsmokers. Nonsmoking Insureds will incur lower cost of insurance rates than
Insureds who are classified as smokers but who are otherwise in the same
Underwriting Class. Any Insured with an Age at issuance under 18 will be
classified initially as regular, unless substandard. The Insured then will be
classified as a smoker at Age 18 unless the Insured provides satisfactory
evidence that the Insured is a nonsmoker. The Company will provide notice to you
of the opportunity for the Insured to be classified as a nonsmoker when the
Insured reaches Age 18.

The cost of insurance rate is determined separately for the initial Face
Amount and for the amount of any increase in Face Amount. For each increase in
Face Amount you request, at a time when

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the Insured is in a less favorable Underwriting Class than previously, a
correspondingly higher cost of insurance rate will apply only to that portion of
the Insurance Amount at Risk for the increase. For the initial Face Amount and
any prior increases, the Company will use the Underwriting Class previously
applicable. On the other hand, if the Insured's Underwriting Class improves on
an increase, the lower cost of insurance rate generally will apply to the entire
Insurance Amount at Risk.

MONTHLY CERTIFICATE ADMINISTRATIVE CHARGE -- Prior to the Final Premium
Payment Date a monthly Certificate administrative charge of up to $10 per month,
depending on the group to which the Certificate was issued, will be deducted
from the Certificate Value. This charge will be used to compensate the Company
for expenses incurred in the administration of the Certificate and will
compensate the Company for first year underwriting and other start-up expenses
incurred in connection with the Certificate. These expenses include the cost of
processing enrollment forms, conducting medical examinations, determining
insurability and the Insured's Underwriting Class, and establishing Certificate
records. The Company does not expect to derive a profit from these charges.

MONTHLY GROUP VEL ACCOUNT ADMINISTRATIVE CHARGE -- The Company can make an
administrative charge on an annual basis of up to 0.25% of the Certificate Value
in each Sub-Account. The duration of this charge can be for up to 10 years. This
charge is designed to reimburse the Company for the costs of administering the
Group VEL Account and Sub-Accounts. The charge is not expected to be a source of
profit. The administrative expenses assumed by the Company in connection with
the Group VEL Account and Sub-Accounts include, but are not limited to,
clerical, accounting, actuarial and legal services, rent, postage, telephone,
office equipment and supplies, expenses of preparing and printing registration
statements, expenses of preparing and typesetting prospectuses and the cost of
printing prospectuses not allocable to sales expense, filing and other fees.

MONTHLY MORTALITY AND EXPENSE RISK CHARGE -- The Company can make a
mortality and expense risk charge on an annual basis of up to 0.90% of the
Certificate Value in each Sub-Account. This charge is for the mortality risk and
expense risk which the Company assumes in relation to the variable portion of
the Certificates. The total charges may be different between groups and
increased or decreased within a group, subject to compliance with applicable
state and federal requirements, but may not exceed 0.90% on an annual basis.

The mortality risk assumed by the Company is that Insureds may live for a
shorter time than anticipated, and that the Company will therefore pay an
aggregate amount of Death Proceeds greater than anticipated. The expense risk
assumed is that the expenses incurred in issuing and administering the
Certificates will exceed the amounts realized from the administrative charges
provided in the Certificates. If the charge for mortality and expense risks is
not sufficient to cover actual mortality experience and expenses, the Company
will absorb the losses. If costs are less than the amounts provided, the
difference will be a profit to the Company. To the extent this charge results in
a current profit to the Company, such profit will be available for use by the
Company for, among other things, the payment of distribution, sales and other
expenses. Since mortality and expense risks involve future contingencies which
are not subject to precise determination in advance, it is not feasible to
identify specifically the portion of the charge which is applicable to each.

CHARGES REFLECTED IN THE ASSETS OF THE GROUP VEL ACCOUNT -- Because the
Sub-Accounts purchase shares of the Underlying Funds, the value of the Units of
the Sub-Accounts will reflect the investment advisory fee and other expenses
incurred by the Underlying Investment Companies. See "Charges of the Underlying
Funds" in the Summary. The prospectuses and statements of additional information
of the Trust, Fidelity VIP, Fidelity VIP II, T. Rowe Price, DGPF and INVESCO VIF
contain additional information concerning such fees and expenses.

No charges are currently made against the Sub-Accounts for federal or state
income taxes. Should the Company determine that taxes will be imposed, the
Company may make deductions from the Sub-Account to pay such taxes. See "FEDERAL
TAX CONSIDERATIONS." The imposition of such taxes would result in a reduction of
the Certificate Value in the Sub-Accounts.

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<PAGE>

SURRENDER CHARGE -- The Certificate may provide for a contingent surrender
charge. A separate surrender charge, described in more detail below, may be
calculated upon the issuance of the Certificate and for each increase in the
Face Amount. The actual amount of the surrender charges are disclosed on the
specifications pages of the Certificate and in the Company's periodic reports to
Certificate Owners. The surrender charge is comprised of a contingent deferred
administrative charge and a contingent deferred sales charge. The contingent
deferred administrative charge compensates the Company for expenses incurred in
administering the Certificate. The contingent deferred sales charge compensates
the Company for expenses relating to the distribution of the Certificate,
including agents' commissions, advertising and the printing of the prospectus
and sales literature.

SURRENDER CHARGE FOR THE INITIAL FACE AMOUNT -- A surrender charge may be
deducted if you request a full surrender of the Certificate or a decrease in
Face Amount. The duration of the surrender charge may be up to 15 years from the
Date of Issue or from the effective date of any increase in the Face Amount. The
maximum surrender charge calculated upon issuance of the Certificate is an
amount up to the sum of (a) plus (b) where (a) is a deferred administrative
charge of up to $8.50 per thousand dollars of the initial Face Amount and (b) is
a deferred sales charge of up to 50% (less any premium expense charge not
associated with state and local premium taxes) of premiums received up to the
Guideline Annual Premium. In accordance with limitations under state insurance
regulations, the amount of the maximum surrender charge will not exceed a
specified amount per thousand dollars of initial Face Amount, as indicated in
"APPENDIX C -- CALCULATION OF MAXIMUM SURRENDER CHARGES." The maximum surrender
charge remains level for up to 24 Certificate months, reduces uniformly each
month for the balance of the surrender charge period, and is zero thereafter.
This reduction in the maximum surrender charge will reduce the deferred sales
charge and the deferred administrative charge proportionately.

If you surrender the Certificate during the first two years following the
Date of Issue before making premium payments associated with the initial Face
Amount which are at least equal to one Guideline Annual Premium, the deferred
administrative charge will be up to $8.50 per thousand dollars of initial Face
Amount, as described above, but the deferred sales charge will not exceed 30%
(less any premium expense charge not associated with state and local premium
taxes) of premiums received, up to one Guideline Annual Premium, plus 9% of
premiums received in excess of one Guideline Annual Premium. See "APPENDIX C --
CALCULATION OF MAXIMUM SURRENDER CHARGES."

SURRENDER CHARGES FOR INCREASES IN FACE AMOUNT -- A separate surrender
charge may apply to and is calculated for each increase in Face Amount. The
surrender charge for the increase is in addition to that for the initial Face
Amount. The maximum surrender charge for the increase is an amount up to the sum
of (a) plus (b), where (a) of up to $8.50 per thousand dollars of increase, and
(b) is a deferred sales charge of up to 50% (less any premium expense charge not
associated with state and local premium taxes) of premiums associated with the
increase, up to the Guideline Annual Premium for the increase. In accordance
with limitations under state insurance regulations, the amount of the surrender
charge will not exceed a specified amount per thousand dollars of increase, as
indicated in "APPENDIX C -- CALCULATION OF MAXIMUM SURRENDER CHARGES."

As is true for the initial Face Amount, (a) is a deferred administrative
charge and (b) is a deferred sales charge. The maximum surrender charge for the
increase remains level for up to 24 Certificate months, reduces uniformly each
month for the balance of the surrender charge period, and is zero thereafter.
During the first two Certificate years following an increase in Face Amount
before making premium payments associated with the increase in Face Amount which
are at least equal to one Guideline Annual Premium, the deferred administrative
charge will be up to $8.50 per thousand dollars of increase in Face Amount, as
described above, but the deferred sales charge imposed will be less than the
maximum described above. Upon such a surrender, the deferred sales charge will
not exceed 30% (less any premium expense charge not associated with state and
local premium taxes) of premiums associated with the increase, up to one
Guideline Annual Premium (for the increase), plus 9% of premiums associated with
the increase in excess of one Guideline Annual Premium. See

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<PAGE>

"APPENDIX C -- CALCULATION OF MAXIMUM SURRENDER CHARGES." The premiums
associated with the increase are determined as described below. Additional
premium payments may not be required to fund a requested increase in Face
Amount.

Therefore, a special rule, which is based on relative Guideline Annual
Premium payments, applies to allocate a portion of existing Certificate Value to
the increase and to allocate subsequent premium payments between the initial
Certificate and the increase. For example, suppose the Guideline Annual Premium
is equal to $1,500 before an increase and is equal to $2,000 as a result of the
increase. The Certificate Value on the effective date of the increase would be
allocated 75% ($1,500/$2,000) to the initial Face Amount and 25% to the
increase. All future premiums would also be allocated 75% to the initial Face
Amount and 25% to the increase. Thus, existing Certificate Value associated with
the increase will equal the portion of Certificate Value allocated to the
increase on the effective date of the increase, before any deductions are made.
Premiums associated with the increase will equal the portion of the premium
payments actually made on or after the effective date of the increase which are
allocated to the increase.

See "APPENDIX C -- CALCULATION OF MAXIMUM SURRENDER CHARGES," for examples
illustrating the calculation of the maximum surrender charge for the initial
Face Amount and for any increases, as well as for the surrender charge based on
actual premiums paid or associated with any increases.

A surrender charge may be deducted on a decrease in the Face Amount. In the
event of a decrease, the surrender charge deducted is a fraction of the charge
that would apply to a full surrender of the Certificate. The fraction will be
determined by dividing the amount of the decrease by the current Face Amount and
multiplying the result by the surrender charge. If more than one surrender
charge is in effect (i.e., pursuant to one or more increases in the Face Amount
of a Certificate), the surrender charge will be applied in the following order:
(1) the most recent increase; (2) the next most recent increases successively;
and (3) the initial Face Amount. Where a decrease causes a partial reduction in
an increase or in the initial Face Amount, a proportionate share of the
surrender charge for that increase or for the initial Face Amount will be
deducted.

CHARGES ON PARTIAL WITHDRAWAL -- After the first Certificate year, partial
withdrawals of Surrender Value may be made. The minimum withdrawal is $500.
Under Option 1, the Face Amount is reduced by the amount of the partial
withdrawal, and a partial withdrawal will not be allowed if it would reduce the
Face Amount below $40,000. A transaction charge which is the smaller of 2% of
the amount withdrawn or $25 will be assessed on each partial withdrawal to
reimburse the Company for the cost of processing the withdrawal. The Company
does not expect to make a profit on this charge.

A partial withdrawal charge may also be deducted from Certificate Value. For
each partial withdrawal you may withdraw an amount equal to 10% of the
Certificate Value on the date the written withdrawal request is received by the
Company less the total of any prior withdrawals in that Certificate year which
were not subject to the Partial Withdrawal charge, without incurring a partial
withdrawal charge. Any partial withdrawal in excess of this amount ("excess
withdrawal") will be subject to the partial withdrawal charge. The partial
withdrawal charge is equal to 5% of the excess withdrawal up to the amount of
the surrender charge(s) on the date of withdrawal. There will be no partial
withdrawal charge if there is no surrender charge on the date of withdrawal
(i.e., 15 years have passed from the Date of Issue and from the effective date
of any increase in the Face Amount).

This right is not cumulative from Certificate year to Certificate year. For
example, if only 8% of Certificate Value were withdrawn in Certificate year two,
the amount you could withdraw in subsequent Certificate years would not be
increased by the amount you did not withdraw in the second Certificate year.

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<PAGE>
The Certificate's outstanding surrender charge will be reduced by the amount
of the partial withdrawal charge deducted, by proportionately reducing the
deferred sales charge component and the deferred administrative charge
component. The partial withdrawal charge deducted will decrease existing
surrender charges in the following order:

- first, the surrender charge for the most recent increase in
Face Amount;

- second, the surrender charge for the next most recent increase
successively;

- last, the surrender charge for the initial Face Amount.

See "APPENDIX C -- CALCULATION OF MAXIMUM SURRENDER CHARGES" for an example
illustrating the calculation of the charges on partial withdrawal and their
impact on the surrender charge(s).

TRANSFER CHARGES -- The first twelve transfers in a Certificate year will be
free of charge. Thereafter, a transfer charge of $10 will be imposed for each
transfer request to reimburse the Company for the administrative costs incurred
in processing the transfer request. The Company reserves the right to increase
the charge, but it will never exceed $25. The Company also reserves the right to
change the number of free transfers allowed in a Certificate Year. See "THE
CERTIFICATE -- Transfer Privilege."

You may have automatic transfers of at least $100 made on a periodic basis,
every 1, 2 or 3 months (a) from Sub-Account 3 or Sub-Account 5 (which invest in
the Money Market Fund and Government Bond Fund of the Trust, respectively) to
one or more of the other Sub-Accounts or (b) to reallocate Certificate Value
among the Sub-Accounts. The first automatic transfer counts as one transfer
towards the twelve free transfers allowed in each Certificate year. Each
subsequent automatic transfer is without charge and does not reduce the
remaining number of transfers which may be made without charge.

If you utilize the Conversion Privilege, Loan Privilege, or reallocate
Certificate Value within 20 days of the Date of Issue of the Certificate, any
resulting transfer of Certificate Value from the Sub-Accounts to the General
Account will be free of charge, and in addition to the twelve free transfers in
a Certificate year. See "THE CERTIFICATE -- Conversion Privileges" and
"CERTIFICATE LOANS."

CHARGE FOR CHANGE IN FACE AMOUNT -- For each increase or decrease in Face
Amount you request, a transaction charge of $2.50 per $1,000 of increase or
decrease, to a maximum of $40, will be deducted from Certificate Value to
reimburse the Company for administrative costs associated with the change. This
charge is guaranteed not to increase and the Company does not expect to make a
profit on this charge.

OTHER ADMINISTRATIVE CHARGES -- The Company reserves the right to impose a
charge for the administrative costs incurred for changing the Net Premium
allocation instructions, for changing the allocation of any Monthly Deductions
among the various Sub-Accounts, or for a projection of values. No such charges
are currently imposed and any such charge is guaranteed not to exceed $25.

CERTIFICATE LOANS

Loans may be obtained by request to the Company on the sole security of this
Certificate. The total amount which may be borrowed is the Loan Value. In the
first Certificate year, the Loan Value is 75% of Certificate Value reduced by
applicable surrender charges as well as Monthly Deductions and interest on Debt
to the end of the Certificate year. The Loan Value in the second Certificate
year and thereafter is 90% of an amount equal to Certificate Value reduced by
applicable surrender charges. There is no minimum limit on the amount of the
loan. The loan amount will normally be paid within seven days after the Company
receives the loan request at its Principal Office, but the Company may delay
payments under certain circumstances. See "OTHER CERTIFICATE PROVISIONS --
Postponement of Payments."

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<PAGE>
A Certificate loan may be allocated among the General Account and one or
more Sub-Accounts. If you do not make an allocation, the Company will make a
Pro-Rata Allocation based on the amounts in the Accounts on the date the Company
receives the loan request. Certificate Value in each Sub-Account equal to the
Certificate loan allocated to such Sub-Account will be transferred to the
General Account, and the number of Units equal to the Certificate Value so
transferred will be cancelled. This will reduce the Certificate Value in these
Sub-Accounts. These transactions are not treated as transfers for purposes of
the transfer charge.

As long as the Certificate is in force, Certificate Value in the General
Account equal to the loan
amount will be credited with interest at an effective annual yield of at least
6.00% per year (8% for preferred loans). NO ADDITIONAL INTEREST WILL BE CREDITED
TO SUCH CERTIFICATE VALUE.

PREFERRED LOAN OPTION -- This option is available to you upon written
request after the first Certificate year. It may be revoked by you at any time.
THE PREFERRED LOAN OPTION IS NOT AVAILABLE IN ALL STATES.

The preferred loan option is available during Certificate years 2-10 only if
your Certificate value, minus the surrender charge, is $50,000 or more. The
option applies to up to 10% of this amount. After the 10th Certificate year, the
preferred loan option is available on all loans or on all or part of the loan
value, as you request. The guaranteed annual interest rate credited to the
Certificate value securing a preferred loan will be 8%.

There is some uncertainty as to the tax treatment of preferred loans.
Consult a qualified tax adviser (and see "FEDERAL TAX CONSIDERATIONS").

LOAN INTEREST CHARGED -- Interest accrues daily and is payable in arrears at
the annual rate of 8%. Interest is due and payable at the end of each
Certificate year or on a pro-rata basis for such shorter period as the loan may
exist. Interest not paid when due will be added to the loan amount and bear
interest at the same rate. After the due and unpaid interest is added to loan
amount, if the new loan amount exceeds the Certificate Value in the General
Account, the Company will transfer Certificate Value equal to that excess loan
amount from the Certificate Value in each Sub-Account to the General Account as
security for the excess loan amount. The Company will allocate the amount
transferred among the Sub-Accounts in the same proportion that the Certificate
Value in each Sub-Account bears to the total Certificate Value in all
Sub-Accounts.

REPAYMENT OF DEBT -- Loans may be repaid at any time prior to the lapse of
the Certificate. Upon repayment of Debt, the portion of the Certificate Value
that is in the General Account securing the Debt repaid will be allocated to the
various Accounts and increase the Certificate Value in such accounts in
accordance with your instructions. If you do not make a repayment allocation,
the Company will allocate Certificate Value in accordance with your most recent
premium allocation instructions; provided, however, that loan repayments
allocated to the Group VEL Account cannot exceed Certificate Value previously
transferred from the Group VEL Account to secure the Debt.

If Debt exceeds the Certificate Value less the surrender charge, the
Certificate will terminate. A notice of such pending termination will be mailed
to the last known address of you and any assignee. If you do not make sufficient
payment within 62 days after this notice is mailed, the Certificate will
terminate with no value. See "CERTIFICATE TERMINATION AND REINSTATEMENT."

EFFECT OF CERTIFICATE LOANS -- Although Certificate loans may be repaid at
any time prior to the lapse of the Certificate, Certificate loans will
permanently affect the Certificate Value and Surrender Value, and may
permanently affect the Death Proceeds. The effect could be favorable or
unfavorable, depending upon whether the investment performance of the
Sub-Account(s) is less than or greater than the interest credited to the
Certificate Value in the General Account attributable to the loan.

Moreover, outstanding Certificate loans and the accrued interest will be
deducted from the proceeds payable upon the death of the Insured or surrender.

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CERTIFICATE TERMINATION AND REINSTATEMENT

TERMINATION -- The failure to make premium payments will not cause the
Certificate to lapse unless: (a) the Surrender Value is insufficient to cover
the next Monthly Deduction plus loan interest accrued; or (b) if Debt exceeds
the Certificate Value. If one of these situations occurs, the Certificate will
be in default. You will then have a grace period of 62 days, measured from the
date of default, to make sufficient payments to prevent termination. On the date
of default, the Company will send a notice to you and to any assignee of record.
The notice will state the amount of premium due and the date on which it is due.

Failure to make a sufficient payment within the grace period will result in
termination of the Certificate. If the Insured dies during the grace period, the
Death Proceeds will still be payable, but any Monthly Deductions due and unpaid
through the Certificate month in which the Insured dies and any other overdue
charges will be deducted from the Death Proceeds.

PAYOR PROVISIONS -- Subject to approval in the state in which your
Certificate was issued, if you name a "Payor" in your enrollment form
supplement, then the following "Payor Provisions" will apply:

The Payor may designate what portion, if any, of each payment of a premium
is "excess premium" to be allocated to the General Account and Sub-Accounts
according to your allocation instructions then in effect. Except for excess
premium, the Payor's premium will automatically be allocated to the Monthly
Deduction Sub-Account, from which the Monthly Deductions will be made. Payor
premiums which are initially held in the General Account (which are not "excess
premiums") will be transferred to the Monthly Deduction Sub-Account not later
than 3 days after underwriting approval of the Certificate. No Certificate
loans, partial withdrawals or transfers may be made from the amount in the
Monthly Deduction Sub-Account attributable to premiums allocated thereto by
Payor.

If the amount in the Monthly Deduction Sub-Account attributable to premiums
allocated thereto by Payor is insufficient to cover the next Monthly Deduction,
the Company will send to the Payor a notice of the due date and amount of
premium which is due. The premium may be paid during a grace period of 62 days
beginning on the premium due date. If the premium payable is not received by the
Company within 31 days of the end of the grace period, a second notice will be
sent to the Payor. A 31-day grace period notice at this time will also be sent
to you if your Certificate Value is insufficient to cover the Monthly Deductions
then due.

If the amount in Monthly Deduction Sub-Account attributable to premiums
allocated thereto by Payor is insufficient to cover the Monthly Deductions due
at the end of the grace period, the balance of such Monthly Deductions will be
withdrawn on a Pro-Rata Allocation from the Certificate Value, if any, in the
General Account and the Sub-Accounts.

A lapse occurs if the Certificate Value is insufficient, at the grace
period, to pay the Monthly Deductions which are due. The Certificate terminates
on the date of lapse. Any death benefit payable during the grace period will be
reduced by any overdue charges.

The above Payor Provisions, if applicable, are in lieu of the grace-period
notice and default provisions applicable when "(a) the Surrender Value is
insufficient to cover the next Monthly Deduction plus loan interest accrued,"
but do not apply to "(b) if Debt exceeds the Certificate Value." See the first
paragraph of this section captioned "TERMINATION." You or the Payor may upon
written request discontinue the above Payor Provisions. If the Payor makes
written request to discontinue the Payor Provisions, we will send you a notice
of the discontinuance to your last known address.

REINSTATEMENT -- If the Certificate has not been surrendered and the Insured
is alive, the terminated Certificate may be reinstated anytime within 3 years
after the date of default and before the Final Premium Payment Date. The
reinstatement will be effective on the Monthly Processing Date following the
date you submit the following to the Company: (1) a written enrollment form for
reinstatement; (2) Evidence of Insurability showing that the Insured is
insurable according to the

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<PAGE>
Company's underwriting rules; and (3) a premium that, after the deduction of the
premium expense charge, is large enough to cover the Monthly Deductions for the
three-month period beginning on the date of reinstatement.

SURRENDER CHARGE -- The surrender charge on the date of reinstatement is the
surrender charge which should have been in effect had the Certificate remained
in force from the Date of Issue.

CERTIFICATE VALUE ON REINSTATEMENT -- The Certificate Value on the date of
reinstatement is:

- the Net Premium paid to reinstate the Certificate increased by
interest from the date the payment was received at the
Company's Principal Office; plus

- an amount equal to the Certificate Value less Debt on the date
of default; minus

- the Monthly Deduction due on the date of reinstatement. You may
reinstate any Debt outstanding on the date of default or
foreclosure.

OTHER CERTIFICATE PROVISIONS

CERTIFICATE OWNER -- The Certificate Owner is the Insured unless another
Certificate Owner has been named in the enrollment form for the Certificate. The
Certificate Owner is generally entitled to exercise all rights under a
Certificate while the Insured is alive, subject to the consent of any
irrevocable Beneficiary (the consent of a revocable Beneficiary is not
required). The consent of the Insured is required whenever the Face Amount of
insurance is increased.

BENEFICIARY -- The Beneficiary is the person or persons to whom the
insurance proceeds are payable upon the Insured's death. Unless otherwise stated
in the Certificate, the Beneficiary has no rights in the Certificate before the
death of the Insured. While the Insured is alive, you may change any Beneficiary
unless you have declared a Beneficiary to be irrevocable. If no Beneficiary is
alive when the Insured dies, the owner (or the owner's estate) will be the
Beneficiary. If more than one Beneficiary is alive when the Insured dies, they
will be paid in equal shares, unless you have chosen otherwise. Where there is
more than one Beneficiary, the interest of a Beneficiary who dies before the
Insured will pass to surviving Beneficiaries proportionally.

ASSIGNMENT -- The owner may assign a Certificate as collateral or make an
absolute assignment of the Certificate. All rights under the Certificate will be
transferred to the extent of the assignee's interest. The Consent of the
assignee may be required in order to make changes in premium allocations, to
make transfers, or to exercise other rights under the Certificate. The Company
is not bound by an assignment or release thereof, unless it is in writing and is
recorded at the Company's Principal Office. When recorded, the assignment will
take effect as of the date the written request was signed. Any rights created by
the assignment will be subject to any payments made or actions taken by the
Company before the assignment is recorded. The Company is not responsible for
determining the validity of any assignment or release.

THE FOLLOWING CERTIFICATE PROVISIONS MAY VARY BY STATE:

INCONTESTABILITY -- The Company will not contest the validity of a
Certificate after it has been in force during the Insured's lifetime for two
years from the Date of Issue. The Company will not contest the validity of any
rider or any increase in the Face Amount after such rider or increase has been
in force during the Insured's lifetime for two years from its effective date.

SUICIDE -- The Death Proceeds will not be paid if the Insured commits
suicide, while sane or insane, within two years from the Date of Issue. Instead,
the Company will pay the Beneficiary an amount equal to all premiums paid for
the Certificate, without interest, less any outstanding Debt and less any
partial withdrawals. If the Insured commits suicide, while sane or insane,
within two years from the effective date of any increase in the Death Benefit,
the Company's liability with respect to such increase will be limited to a
refund of the cost thereof. The Beneficiary will receive the administrative
charges and insurance charges paid for such increase.

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<PAGE>
AGE -- If the Insured's Age as stated in the enrollment form for a
Certificate is not correct, benefits under a Certificate will be adjusted to
reflect the correct Age, if death occurs prior to the Final Premium Payment
Date. The adjusted benefit will be that which the most recent cost of insurance
charge would have purchased for the correct Age. In no event will the Death
Benefit be reduced to less than the Minimum Death Benefit.

POSTPONEMENT OF PAYMENTS -- Payments of any amount due from the Group VEL
Account upon surrender, partial withdrawals, or death of the Insured, as well as
payments of a Certificate loan and transfers may be postponed whenever: (i) the
New York Stock Exchange is closed other than customary weekend and holiday
closings, or trading on the New York Stock Exchange is restricted as determined
by the SEC or (ii) 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 Group VEL Account's net
assets. Payments under the Certificate of any amounts derived from the premiums
paid by check may be delayed until such time as the check has cleared your bank.

The Company also reserves the right to defer payment of any amount due from
the General Account upon surrender, partial withdrawal, or death of the Insured,
as well as payments of Certificate loans and transfers from the General Account,
for a period not to exceed six months.

DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY

<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Bruce C. Anderson Director of First Allmerica since 1996; Vice President, First
Director and Vice President Allmerica
Abigail M. Armstrong Secretary of First Allmerica since 1996; Counsel, First Allmerica
Secretary and Counsel
John P. Kavanaugh Director of First Allmerica since 1996; Vice President, First
Director and Vice President Allmerica
John F. Kelly Director of First Allmerica since 1996; Senior Vice President,
Director, Senior Vice President and General Counsel and Assistant Secretary, First Allmerica
General Counsel
James R. McAuliffe Director of First Allmerica since 1996; President and CEO, Citizens
Director Insurance Company of America since 1994; Vice President, First
Allmerica, 1982 to 1994; Chief Investment Officer, First Allmerica,
1986 to 1994
John F. O'Brien Director, Chairman of the Board, President and Chief Executive
Director, President and Chief Executive Officer, First Allmerica
Officer
Edward J. Parry Vice President and Treasurer of First Allmerica since 1993; Assistant
Vice President and Treasurer (Chief Vice President, 1992 to 1993; Manager, Price Waterhouse, 1987 to 1992
Accounting Officer)
Richard M. Reilly Director of First Allmerica since 1996; Vice President, First
Director and Vice President Allmerica; Director, Allmerica Investments, Inc.; Director and
President, Allmerica Investment Management Company, Inc.
Larry C. Renfro Director of First Allmerica since 1996; Vice President, First
Director and Vice President Allmerica
Eric A. Simonsen Director of First Allmerica since 1996; Vice President and Chief
Director, Vice President and Chief Financial Officer, First Allmerica
Financial Officer
Phillip E. Soule Director of First Allmerica since 1996; Vice President, First
Director and Vice President Allmerica
</TABLE>

49
<PAGE>
DISTRIBUTION

Allmerica Investments, Inc., a subsidiary of First Allmerica, acts as the
principal underwriter of the Certificates pursuant to a Sales and Administrative
Services Agreement with the Company and the Group VEL Account. Allmerica
Investments, Inc. is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
The Certificates are sold by agents of the Company who are registered
representatives of Allmerica Investments, Inc. or of independent broker-dealers.

The Company pays commissions to broker-dealers which sell the Certificates
based on a commission schedule. After issue of the Certificate or an increase in
Face Amount, commissions may be up to 25% of the first year premiums up to a
basic premium amount established by the Company. Thereafter, commissions may be
up to 10% of any additional premiums. Certain registered representatives,
including registered representatives enrolled in the Company's training program
for new agents, may receive additional first year and renewal commissions and
training reimbursements. General Agents of the Company and certain registered
representatives may also be eligible to receive expense reimbursements based on
the amount of earned commissions. General Agents may also receive overriding
commissions, which will not exceed 2.5% of first year or 4% of renewal premiums.
To the extent permitted by NASD rules, promotional incentives or payments may
also be provided to broker-dealers based on sales volumes, the assumption of
wholesaling functions or other sales-related criteria. Other payments may be
made for other services that do not directly involve the sale of the
Certificates. These services may include the recruitment and training of
personnel, production of promotional literature, and similar services.

The Company intends to recoup the commission and other sales expense through
a combination of the deferred sales charge component of the anticipated
surrender and partial withdrawal charges, and the investment earnings on amounts
allocated to accumulate on a fixed basis in excess of the interest credited on
fixed accumulations by the Company. There is no additional charge to the
Certificate Owners or to the Group VEL Account. Any surrender charge assessed on
a Certificate will be retained by the Company except for amounts it may pay to
Allmerica Investments, Inc. for services it performs and expenses it may incur
as principal underwriter and general distributor.

REPORTS

The Company will maintain the records relating to the Group VEL Account. You
will be promptly sent statements of significant transactions such as premium
payments (other than payments made pursuant to the MAP procedure), changes in
specified Face Amount, changes in Death Benefit Option, transfers among
Sub-Accounts and the General Account, partial withdrawals, increases in loan
amount by you, loan repayments, lapse, termination for any reason, and
reinstatement. An annual statement will also be sent to you. The annual
statement will summarize all of the above transactions and deductions of charges
during the Certificate year. It will also set forth the status of the Death
Proceeds, Certificate Value, Surrender Value, amounts in the Sub-Accounts and
General Account, and any Certificate loan(s).

In addition, you will be sent periodic reports containing financial
statements and other information for the Group VEL Account and the Underlying
Investment Companies as required by the Investment Company Act of 1940.

LEGAL PROCEEDINGS

There are no legal proceedings pending to which the Group VEL Account is a
party, or to which the assets of the Group VEL Account are subject. The Company
is not involved in any litigation that is of material importance in relation to
its total assets or that relates to the Group VEL Account.

50
<PAGE>
FURTHER INFORMATION

A Registration Statement under the Securities Act of 1933 relating to this
offering has been filed with the Securities and Exchange Commission. Certain
portions of the Registration Statement and amendments have been omitted from
this prospectus pursuant to the rules and regulations of the Securities and
Exchange Commission. Statements contained in this prospectus concerning the
Certificate and other legal documents are summaries. The complete documents and
omitted information may be obtained from the Securities and Exchange
Commission's principal office in Washington, D.C., upon payment of the
Securities and Exchange Commission's prescribed fees.

INDEPENDENT ACCOUNTANTS

The financial statements of the Company as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 included in
this Prospectus constituting part of the Registration Statement, have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

The financial statements of the Company included herein should be considered
only as bearing on the ability of the Company to meet its obligations under the
Certificates.

FEDERAL TAX CONSIDERATIONS

The effect of federal income taxes on the value of a Certificate, on loans,
withdrawals, or surrenders, on death benefit payments, and on the economic
benefit to you or the Beneficiary depends upon a variety of factors. The
following discussion is based upon the Company's understanding of the present
federal income tax laws as they are currently interpreted. From time to time
legislation is proposed which, if passed, could significantly, adversely and
possibly retroactively affect the taxation of the Certificates. No
representation is made regarding the likelihood of continuation of current
federal income tax laws or of current interpretations by the Internal Revenue
Service (IRS). Moreover, no attempt has been made to consider any applicable
state or other tax laws.

It should be recognized that the following summary of federal income tax
aspects of amounts received under the Certificates is not exhaustive, does not
purport to cover all situations and is not intended as tax advice. Specifically,
the discussion below does not address certain tax provisions that may be
applicable if the Certificate Owner is a corporation or the Trustee of an
employee benefit plan. A qualified tax adviser should always be consulted with
regard to the enrollment form of law to individual circumstances.

THE COMPANY AND THE GROUP VEL ACCOUNT -- The Company is taxed as a life
insurance company under Subchapter L of the Internal Revenue Code of 1986 (the
"Code") and files a consolidated tax return with its parent and affiliates. The
Company does not expect to incur any income tax upon the earnings or realized
capital gains attributable to the Group VEL Account. Based on these
expectations, no charge is made for federal income taxes which may be
attributable to the Group VEL Account.

The Company will review periodically the question of a charge to the Group
VEL Account for federal income taxes. Such a charge may be made in future years
for any federal income taxes incurred by the Company. This might become
necessary if the tax treatment of the Company is ultimately determined to be
other than what the Company believes it to be, if there are changes made in the
federal income tax treatment of variable life insurance at the Company level, or
if there is a change in the Company's tax status. Any such charge would be
designed to cover the federal income taxes attributable to the investment
results of the Group VEL Account.

Under current laws the Company may also incur state and local taxes (in
addition to premium taxes) in several states. At present these taxes are not
significant. If there is a material change in applicable state or local tax
laws, charges may be made for such taxes paid, or reserves for such taxes,
attributable to the Group VEL Account.

51
<PAGE>
TAXATION OF THE CERTIFICATES -- The Company believes that the Certificates
described in this prospectus will be considered life insurance contracts under
Section 7702 of the Code, which generally provides for the taxation of life
insurance policies and places limitations on the relationship of the Certificate
Value to the Insurance Amount at Risk. As a result, the Death Proceeds payable
are excludable from the gross income of the Beneficiary. Moreover, any increase
in Certificate Value is not taxable until received by the Certificate Owner or
the Certificate Owner's designee. But see "MODIFIED ENDOWMENT CONTRACTS."

The Code also requires that the investment of each Sub-Account be adequately
diversified in accordance with Treasury regulations in order to be treated as a
life insurance policy for tax purposes. Although the Company does not have
control over the investments of the Underlying Funds, the Company believes that
the Underlying Funds currently meet the Treasury's diversification requirements,
and the Company will monitor continued compliance with these requirements. In
connection with the issuance of previous regulations relating to diversification
requirements, the Treasury Department announced that such regulations do not
provide guidance concerning the extent to which Certificate Owners may direct
their investments to particular divisions of a separate account. Regulations in
this regard may be issued in the future. It is possible that if and when
regulations are issued, the Certificates may need to be modified to comply with
such regulations. For these reasons, the Certificates or the Company's
administrative rules may be modified as necessary to prevent a Certificate Owner
from being considered the owner of the assets of the Group VEL Account.

The Company believes that loans received under a Certificate will be treated
as indebtedness of the Certificate Owner for federal tax purposes, and under
current law will not constitute income to the Certificate Owner so long as the
Certificate remains in force. But see "MODIFIED ENDOWMENT CONTRACTS." Deducting
interest on Certificate loans is, however, subject to the restrictions of
Section 264 of the Code. Consumer interest paid on Certificate loans under a
Certificate owned by an individual is not tax deductible. In addition, no tax
deduction is allowed for any interest on any loan under one or more life
insurance policies (purchased after June 20, 1986) owned by a taxpayer covering
the life of any individual who is an officer or employee of or is financially
interested in, any business carried on by that taxpayer, to the extent the
aggregate amount of such loans exceeds $50,000.

The Company believes that non-preferred loans received under a Certificate
will be treated as indebtedness of the Certificate Owner for federal income tax
purposes. Under current law, these loans will not constitute income for the
Certificate Owner while the Certificate is in force (but see "MODIFIED ENDOWMENT
POLICIES"). However, there is a risk that a preferred loan may be characterized
by the IRS as a withdrawal and taxed accordingly. At the present time, the IRS
has not issued any guidance on whether loans with the attributes of a preferred
loan should be treated differently than a non-preferred loan. This lack of
specific guidance makes the tax treatment of preferred loans uncertain. In the
event IRS guidelines are issued in the future, you may revoke your request for a
preferred loan.

Depending upon the circumstances, a surrender, partial withdrawal, change in
the Death Benefit Option, change in the Face Amount, lapse with Certificate loan
outstanding, or assignment of the Certificate may have tax consequences. In
particular, under specified conditions, a distribution under the Certificate
during the first fifteen years from Date of Issue that reduces future benefits
under the Certificate will be taxed to the Certificate Owner as ordinary income
to the extent of any investment earnings in the Certificate. Federal, state and
local income, estate, inheritance, and other tax consequences of ownership or
receipt of Certificate proceeds depend on the circumstances of each Insured,
Certificate Owner, or Beneficiary.

MODIFIED ENDOWMENT CONTRACTS -- The Technical and Miscellaneous Revenue Act
of 1988 ("Act") adversely affects the tax treatment of distributions under
so-called "modified endowment contracts." Under the Act, any life insurance
policy, including a Certificate offered by this prospectus, that fails to
satisfy a "seven-pay" test is considered a modified endowment contract. A

52
<PAGE>
Certificate fails to satisfy the seven-pay test if the cumulative premiums paid
under the Certificate at any time during the first seven Certificate years
exceed the sum of the net level premiums that would have been paid, had the
Certificate provided for paid-up future benefits after the payment of seven
level premiums.

If a Certificate is considered a modified endowment contract, all
distributions under the Certificate will be taxed on an "income first" basis.
Most distributions received by a Certificate Owner directly or indirectly
(including loans, withdrawals, partial surrenders, or the assignment or pledge
of any portion of the value of the Certificate) will be includible in gross
income to the extent that the cash Surrender Value of the Certificate exceeds
the Certificate Owner's investment in the contract. Any additional amounts will
be treated as a return of capital to the extent of the Certificate Owner's basis
in the Certificate. With certain exceptions, an additional 10% tax will be
imposed on the portion of any distribution that is includible in income. All
modified endowment contracts issued by the same insurance company to the same
Certificate Owner during any 12-month period will be treated as a single
modified endowment contract in determining taxable distributions.

Currently, each Certificate is reviewed when premiums are received to
determine if it satisfies the seven-pay test. If the Certificate does not
satisfy the seven-pay test, the Company will notify the Certificate Owner of the
option of requesting a refund of the excess premium. The refund process must be
completed within 60 days after the Certificate anniversary, or the Certificate
will be permanently classified as a modified endowment contract.

MORE INFORMATION ABOUT THE GENERAL ACCOUNT

As discussed earlier, you may allocate Net Premiums and transfer Certificate
Value to the General Account. Because of exemption and exclusionary provisions
in the securities law, any amount in the General Account is not generally
subject to regulation under the provisions of the Securities Act of 1933 or the
Investment Company Act of 1940. Accordingly, the disclosures in this Section
have not been reviewed by the Securities and Exchange Commission. Disclosures
regarding the fixed portion of the Certificate and the General Account may,
however, be subject to certain generally applicable provisions of the Federal
securities laws concerning the accuracy and completeness of statements made in
prospectuses.

GENERAL DESCRIPTION -- The General Account of the Company is made up of all
of the general assets of the Company other than those allocated to any separate
account. Allocations to the General Account become part of the assets of the
Company and are used to support insurance and annuity obligations. Subject to
applicable law, the Company has sole discretion over the investment of assets of
the General Account.

A portion or all of Net Premiums may be allocated or transferred to
accumulate at a fixed rate of interest in the General Account. Such net amounts
are guaranteed by the Company as to principal and a minimum rate of interest.
The allocation or transfer of funds to the General Account does not entitle you
to share in the investment experience of the General Account.

GENERAL ACCOUNT VALUE -- The Company bears the full investment risk for
amounts allocated to the General Account and guarantees that interest credited
to each Certificate Owner's Certificate Value in the General Account will not be
less than an annual rate of 4% ("Guaranteed Minimum Rate"). (Under a
Certificate, the Guaranteed Minimum Rate may be higher than 4%.)

The Company may, AT ITS SOLE DISCRETION, credit a higher rate of interest
("excess interest"), although it is not obligated to credit interest in excess
of the Guaranteed Minimum Rate, and might not do so. However, the excess
interest rate, if any, in effect on the date a premium is received at the
Principal Office is guaranteed on that premium for one year, unless the
Certificate Value associated with the premium becomes security for a Certificate
loan. AFTER SUCH INITIAL ONE YEAR

53
<PAGE>
GUARANTEE OF INTEREST ON NET PREMIUM, ANY INTEREST CREDITED ON THE CERTIFICATE
VALUE IN THE GENERAL ACCOUNT IN EXCESS OF THE GUARANTEED MINIMUM RATE PER YEAR
WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE CERTIFICATE OWNER
ASSUMES THE RISK THAT INTEREST CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM
RATE.

Even if excess interest is credited to accumulated value in the General
Account, no excess interest will be credited to that portion of the Certificate
Value which is equal to Debt. However, such Certificate Value will be credited
interest at an effective annual yield of at least 6% (8% for preferred loans).

The Company guarantees that, on each Monthly Processing Date, the
Certificate Value in the General Account will be the amount of the Net Premiums
allocated or Certificate Value transferred to the General Account, plus interest
at the Guaranteed Minimum Rate, plus any excess interest which the Company
credits, less the sum of all Certificate charges allocable to the General
Account and any amounts deducted from the General Account in connection with
loans, partial withdrawals, surrenders or transfers.

THE CERTIFICATE -- This prospectus describes certificates issued under a
flexible premium variable life insurance policy and is generally intended to
serve as a disclosure document only for the aspects of the Certificate relating
to the Group VEL Account. For complete details regarding the General Account,
see the Certificate itself.

TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND CERTIFICATE LOANS -- If a
Certificate is surrendered or if a partial withdrawal is made, a surrender
charge or partial withdrawal charge, as applicable, is imposed if such event
occurs before the Certificate, or an increase in Face Amount, has been in force
for 15 Certificate years. In the event of a decrease in Face Amount, the
surrender charge deducted is a fraction of the charge that would apply to a full
surrender of the Certificate. Partial withdrawals are made on a
last-in/first-out basis from Certificate Value allocated to the General Account.

The first twelve transfers in a Certificate year are free of charge.
Thereafter, a $10 transfer charge will be deducted for each transfer in that
Certificate year. The transfer privilege is subject to the consent of the
Company and to the Company's then current rules.

Certificate loans may also be made from the Certificate Value in the General
Account.

Transfers, surrenders, partial withdrawals, Death Proceeds and Certificate
loans payable from the General Account may be delayed up to six months. However,
if payment is delayed for 30 days or more, the Company will pay interest at
least equal to an effective annual yield of 3% per year for the period of
deferment. Amounts from the General Account used to pay premiums on policies
with the Company will not be delayed.

FINANCIAL STATEMENTS

The most current financial statements of the Company are those as of the end
of the most recent fiscal year. The Company does not prepare financial
statements more often than annually and believes that any incremental benefit to
prospective policy holders that may result from preparing and delivering more
current financial statements, though unaudited, does not justify the additional
cost that would be incurred. In additional, the Company represents that there
have been no adverse changes in the financial condition or operations of the
company between the end of the most current fiscal year and the date of this
prospectus.

54
<PAGE>
FIRST ALLMERICA
FINANCIAL LIFE
INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholder of
First Allmerica Financial Life Insurance Company
(formerly known as State Mutual Life Assurance Company of America)

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholder's equity, and of cash flows
present fairly, in all material respects, the financial position of First
Allmerica Financial Life Insurance Company and its subsidiaries at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in the accompanying notes to the consolidated financial
statements, the Company changed its method of accounting for investments (Notes
1 and 3) and postemployment benefits (Notes 11) in 1994 and for postretirement
benefits (Note 10) in 1993.

[SIG]

Price Waterhouse LLP
Boston, Massachusetts
February 5, 1996

<PAGE>
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS, EXCEPT PER SHARE DATA) 1995 1994 1993
----------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
REVENUES
Premiums................................... $2,222.8 $2,181.8 $2,079.3
Universal life and investment product
policy fees............................... 170.4 156.8 143.7
Net investment income...................... 710.1 743.1 782.8
Net realized investment gains.............. 19.1 1.1 61.0
Realized gain on sale of subsidiary........ -- -- 35.7
Realized gain on sale of mutual fund
processing business....................... 20.7 -- --
Realized gain on issuance of subsidiary
common stock.............................. -- -- 62.9
Other income............................... 95.4 112.3 73.8
--------- --------- ---------
Total revenues......................... 3,238.5 3,195.1 3,239.2
--------- --------- ---------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses....................... 2,008.3 2,047.0 1,987.2
Policy acquisition expenses................ 470.3 475.7 435.8
Other operating expenses................... 455.0 518.9 421.3
--------- --------- ---------
Total benefits, losses and expenses.... 2,933.6 3,041.6 2,844.3
--------- --------- ---------
Income before federal income taxes............. 304.9 153.5 394.9
--------- --------- ---------
FEDERAL INCOME TAX EXPENSE (BENEFIT)
Current.................................... 119.7 45.4 95.1
Deferred................................... (37.0) 8.0 (20.4)
--------- --------- ---------
Total federal income tax expense....... 82.7 53.4 74.7
--------- --------- ---------
Income before minority interest, extraordinary
item, and cumulative effect of accounting
change........................................ 222.2 100.1 320.2
Minority interest.............................. (73.1) (51.0) (122.8)
--------- --------- ---------
Income before extraordinary item and cumulative
effect of accounting changes.................. 149.1 49.1 197.4
Extraordinary item -- demutualization
expenses...................................... (12.1) (9.2) (4.6)
Cumulative effect of changes in accounting
principles.................................... -- (1.9) (35.4)
--------- --------- ---------
Net income..................................... $ 137.0 $ 38.0 $ 157.4
--------- --------- ---------
--------- --------- ---------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

F-1
<PAGE>
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS, EXCEPT PER SHARE DATA) 1995 1994
-------------------------------------------------------- ---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities--at amortized cost (fair value of
$949.9 in 1994).................................... $ -- $ 959.3
Fixed maturities--at fair value (amortized cost of
$7,467.9 and $6,724.6)............................. 7,739.3 6,512.0
Equity securities--at fair value (cost of $410.6 and
$260.4)............................................ 517.2 286.4
Mortgage loans...................................... 799.5 1,106.7
Real estate......................................... 179.6 180.3
Policy loans........................................ 123.2 364.9
Other long-term investments......................... 71.9 68.1
---------- ----------
Total investments............................... 9,430.7 9,477.7
---------- ----------
Cash and cash equivalents............................. 236.6 539.7
Accrued investment income............................. 163.0 186.6
Deferred policy acquisition costs..................... 735.7 802.8
---------- ----------
Reinsurance receivables:
Future policy benefits.............................. 97.1 59.7
Outstanding claims, losses and loss adjustment
expenses........................................... 799.6 741.0
Unearned premiums................................... 43.8 61.9
Other............................................... 58.9 62.1
---------- ----------
Total reinsurance receivables................... 999.4 924.7
---------- ----------
Deferred federal income taxes......................... 81.2 189.1
Premiums, accounts and notes receivable............... 526.7 510.3
Other assets.......................................... 361.4 324.9
Closed Block assets................................... 818.9 --
Separate account assets............................... 4,348.8 2,965.7
---------- ----------
Total assets.................................... $17,702.4 $15,921.5
---------- ----------
---------- ----------
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............................. $ 2,639.3 $ 3,416.4
Outstanding claims, losses and loss adjustment
expenses........................................... 3,081.3 2,991.5
Unearned premiums................................... 800.9 796.6
Contractholder deposit funds and other policy
liabilities........................................ 2,737.4 3,435.7
---------- ----------
Total policy liabilities and accruals........... 9,258.9 10,640.2
---------- ----------
Expenses and taxes payable............................ 600.3 589.2
Reinsurance premiums payable.......................... 42.0 65.8
Short-term debt....................................... 28.0 32.8
Deferred federal income taxes......................... 47.8 13.8
Long-term debt........................................ 2.8 2.7
Closed Block liabilities.............................. 902.0 --
Separate account liabilities.......................... 4,337.8 2,954.9
---------- ----------
Total liabilities............................... 15,219.6 14,299.4
---------- ----------
Minority interest..................................... 758.5 629.7
Commitments and contingencies (Notes 14 and 19)
SHAREHOLDERS' EQUITY
Common stock, $10 par value, 1 million shares
authorized, 500,000 shares issued and outstanding.... 5.0 --
Additional paid-in-capital............................ 392.4 --
Unrealized appreciation (depreciation) on investments,
net.................................................. 153.0 (79.0)
Retained earnings..................................... 1,173.9 1,071.4
---------- ----------
Total shareholders' equity...................... 1,724.3 992.4
---------- ----------
Total liabilities and shareholders' equity...... $17,702.4 $15,921.5
---------- ----------
---------- ----------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

F-2
<PAGE>
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
----------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year............... $ -- $ -- $ --
Demutualization transaction................ 5.0 -- --
--------- --------- ---------
Balance at end of year..................... 5.0 -- --
--------- --------- ---------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year............... -- -- --
Contributed from parent.................... 392.4 -- --
--------- --------- ---------
Balance at end of year..................... 392.4 -- --
--------- --------- ---------
RETAINED EARNINGS
Balance at beginning of year............... 1,071.4 1,033.4 876.0
Net income prior to demutualization........ 93.2 38.0 157.4
--------- --------- ---------
1,164.6 1,071.4 1,033.4
Demutualization transaction................ (34.5) -- --
Net income subsequent to demutualization... 43.8 -- --
--------- --------- ---------
Balance at end of year..................... 1,173.9 1,071.4 1,033.4
--------- --------- ---------
NET UNREALIZED APPRECIATION (DEPRECIATION) ON
INVESTMENTS
Balance at beginning of year............... (79.0) 17.5 20.6
--------- --------- ---------
Cumulative effect of accounting change:
Net appreciation on available-for-sale
debt securities....................... -- 296.1 --
Provision for deferred federal income
taxes and minority interest........... -- (149.1) --
--------- --------- ---------
-- 147.0 --
--------- --------- ---------
Effect of transfer of securities from
held-to-maturity to available-for-sale:
Net appreciation on available-for-sale
debt securities....................... 22.4 -- --
Provision for deferred federal income
taxes and minority interest........... (9.6) -- --
--------- --------- ---------
12.8 -- --
--------- --------- ---------
Appreciation (depreciation) during the
period:
Net appreciation (depreciation) on
available-for-sale securities......... 466.0 (492.1) (9.6)
(Provision) benefit for deferred
federal income taxes.................. (163.1) 171.9 2.8
Minority interest...................... (83.7) 76.7 3.7
--------- --------- ---------
219.2 (243.5) (3.1)
--------- --------- ---------
Balance at end of year................. 153.0 (79.0) 17.5
--------- --------- ---------
Total shareholders' equity......... $1,724.3 $ 992.4 $1,050.9
--------- --------- ---------
--------- --------- ---------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

F-3
<PAGE>
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
-------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................. $ 137.0 $ 38.0 $ 157.4
Adjustments to reconcile net income to
net cash provided by operating
activities:
Minority interest................... 73.1 50.1 112.7
Net realized gains.................. (39.8) (1.1) (159.6)
Deferred federal income taxes
(benefits)......................... (37.0) 8.0 (20.4)
Increase in deferred policy
acquisition costs.................. (38.4) (34.6) (51.8)
Increase in premiums and notes
receivable, net of reinsurance
payable............................ (42.0) (25.6) (37.5)
(Increase) decrease in accrued
investment income.................. 7.0 4.6 (1.6)
Increase in policy liabilities and
accruals, net...................... 116.2 175.9 131.7
(Increase) decrease in reinsurance
receivable......................... (75.6) (31.9) 18.6
Increase in expenses and taxes
payable............................ 7.5 88.0 104.7
Separate account activity, net (0.1) 0.4 21.4
Other, net.......................... 23.9 59.9 2.7
---------- ---------- ----------
Net cash provided by operating
activities..................... 131.8 331.7 278.3
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities
of available-for-sale fixed
maturities............................. 2,738.4 2,097.8 --
Proceeds from disposals of
held-to-maturity fixed maturities...... 271.3 304.4 2,094.9
Proceeds from disposals of equity
securities............................. 120.0 143.9 585.8
Proceeds from disposals of other
investments............................ 40.5 25.9 74.0
Proceeds from mortgages matured or
collected.............................. 230.3 256.4 291.2
Purchase of available-for-sale fixed
maturities............................. (3,273.3) (2,150.1) --
Purchase of held-to-maturity fixed
maturities............................. -- (111.6) (2,577.1)
Purchase of equity securities........... (254.0) (172.2) (673.3)
Purchase of other investments........... (24.8) (26.6) (46.5)
Proceeds from sale of businesses........ 32.9 -- 79.5
Capital expenditures.................... (14.1) (43.1) (37.5)
Other investing activities, net......... 4.7 2.4 1.3
---------- ---------- ----------
Net cash (used in) provided by
investing activities........... (128.1) 327.2 (207.7)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits and interest credited to
contractholder deposit funds........... 445.8 786.3 738.7
Withdrawals from contractholder deposit
funds.................................. (1,069.9) (1,187.0) (894.0)
Change in short-term debt............... (4.8) (6.0) 1.4
Change in long-term debt................ 0.2 0.3 --
Dividends paid to minority
shareholders........................... (4.1) (4.2) (3.9)
Capital contributed from parent......... 392.4 -- 156.2
Payments for policyholders' membership
interests.............................. (27.9) -- --
Net proceeds from issuance of long-term
debt................................... -- -- --
Other, net.............................. (20.9) -- (1.3)
---------- ---------- ----------
Net cash used in financing
activities..................... (289.2) (410.6) (2.9)
---------- ---------- ----------
Net (decrease) increase in cash and cash
equivalents................................ (285.5) 248.3 67.7
Net change in cash held in the Closed
Block...................................... (17.6) -- --
Cash and cash equivalents, beginning of
year....................................... 539.7 291.4 223.7
---------- ---------- ----------
Cash and cash equivalents, end of year...... $ 236.6 $ 539.7 $ 291.4
---------- ---------- ----------
---------- ---------- ----------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid........................... $ 4.1 $ 4.3 $ 1.7
Income taxes paid....................... $ 90.6 $ 46.1 $ 57.3
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.

F-4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

First Allmerica Financial Life Insurance Company ("FAFLIC" or the "Company",
formerly State Mutual Life Assurance Company of America ["State Mutual"]) was
organized as a mutual life insurance company until October 16, 1995. FAFLIC
converted to a stock life insurance company pursuant to a plan of reorganization
effective October 16, 1995 and became a wholly owned subsidiary of Allmerica
Financial Corporation ("AFC"). The consolidated financial statements have been
prepared as if FAFLIC were organized as a stock life insurance company for all
periods presented. Thus, generally accepted accounting principles for stock life
insurance companies have been applied retroactively for all periods presented.

The consolidated financial statements of FAFLIC include the accounts of
Allmerica Financial Life Insurance and Annuity Company ("AFLIAC", formerly SMA
Life Assurance Company) its wholly owned life insurance subsidiary,
non-insurance subsidiaries (principally brokerage and investment advisory
subsidiaries), and Allmerica Property and Casualty Companies, Inc. ("Allmerica
P&C", a 58.3%-owned non-insurance holding company). The Closed Block assets and
liabilities at December 31, 1995 and its results of operations subsequent to
demutualization are presented in the consolidated financial statements as single
line items. Prior to demutualization such amounts are presented line by line in
the consolidated financial statements (see Note 6). Unless specifically stated,
all disclosures contained herein supporting the consolidated financial
statements as of December 31, 1995 and the year then ended exclude the Closed
Block related amounts. All significant intercompany accounts and transactions
have been eliminated.

Minority interest relates to the Company's investment in Allmerica P&C and
its only significant subsidiary, The Hanover Insurance Company ("Hanover").
Hanover's 81.1%-owned subsidiary is Citizens Corporation, the holding company
for Citizens Insurance Company of America ("Citizens"). Minority interest also
includes an amount related to the minority interest in Citizens Corporation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

B. CLOSED BLOCK

As of October 16, 1995, the Company established and began operating a closed
block (the "Closed Block") for the benefit of the participating policies
included therein, consisting of certain individual life insurance participating
policies, individual deferred annuity contracts and supplementary contracts not
involving life contingencies which were in force on October 16, 1995; such
policies constitute the "Closed Block Business". The purpose of the Closed Block
is to protect the policy dividend expectations of such FAFLIC dividend paying
policies and contracts after the demutualization. Unless the Commissioner
consents to an earlier termination, the Closed Block will continue to be in
effect until the date none of the Closed Block policies are in force. On October
16, 1995, FAFLIC allocated to the Closed Block assets in an amount that is
expected to produce cash flows which, together with future revenues from the
Closed Block Business, are reasonably sufficient to support the Closed Block
Business, including provision for payment of policy benefits, certain future
expenses and taxes and for continuation of policyholder dividend scales payable
in 1994 so long as the experience underlying such dividend scales continues. The
Company expects that the factors underlying such experience will fluctuate in
the future and policyholder dividend scales for Closed Block Business will be
set accordingly.

F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Although the assets and income allocated to the Closed Block inure solely to
the benefit of the holders of policies included in the Closed Block, the excess
of Closed Block liabilities over Closed Block assets at October 16, 1995
measured on a GAAP basis represent the expected future post-tax income from the
Closed Block which may be recognized in income over the period the policies and
contracts in the Closed Block remain in force.

If the actual income from the Closed Block in any given period equals or
exceeds the expected income for such period as determined at October 16, 1995,
the expected income would be recognized in income for that period. Further, any
excess of the actual income over the expected income would also be recognized in
income to the extent that the aggregate expected income for all prior periods
exceeded the aggregate actual income. Any remaining excess of actual income over
expected income would be accrued as a liability for policyholder dividends in
the Closed Block to be paid to the Closed Block policyholders. This accrual for
future dividends effectively limits the actual Closed Block income recognized in
income to the Closed Block income expected to emerge from operation of the
Closed Block as determined as of October 16, 1995.

If, over the period the policies and contracts in the Closed Block remain in
force, the actual income from the Closed Block is less than the expected income
from the Closed Block, only such actual income (which could reflect a loss)
would be recognized in income. If the actual income from the Closed Block in any
given period is less than the expected income for that period and changes in
dividends scales are inadequate to offset the negative performance in relation
to the expected performance, the income inuring to shareholders of the Company
will be reduced. If a policyholder dividend liability had been previously
established in the Closed Block because the actual income to the relevant date
had exceeded the expected income to such date, such liability would be reduced
by this reduction in income (but not below zero) in any periods in which the
actual income for that period is less than the expected income for such period.

C. VALUATION OF INVESTMENTS

Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (SFAS No. 115). SFAS No. 115 requires that an
enterprise classify debt and equity securities into one of three categories;
held-to-maturity, available-for-sale, or trading. Investments classified as
held-to-maturity shall be investments that the enterprise has the positive
intent and ability to hold until maturity. Trading securities are investments
which are bought and held principally for the purpose of selling them in the
near term. Investments classified as neither trading securities nor held-to-
maturity shall be classified as available-for-sale securities. SFAS No. 115 also
requires that unrealized holding gains and losses for trading securities be
included in earnings, while unrealized gains and losses for available-for-sale
securities be excluded from earnings and reported as a separate component of
shareholder equity until realized. SFAS No. 115 also requires that for a decline
in the fair value which is judged to be other than temporary, the cost basis of
the security should be written down to fair value, and the amount of the
write-down recognized in earnings as a realized loss.

Previously, the Company classified all of its fixed maturities and equity
securities as available-for-sale or held-to-maturity investments. Fixed
maturities held-to-maturity consist of certain bonds, presented at amortized
cost, that management intends and has the ability to hold until maturity. Fixed
maturities available-for-sale consist of certain bonds and redeemable preferred
stocks, presented at fair value, that management may not hold until maturity.
Equity securities available-for-sale are comprised of common stocks which are
carried at fair value. Prior to January 1, 1994, all fixed maturity investments,
which included bonds and redeemable preferred stocks, were principally carried
at amortized cost. Equity securities, which included common and non-redeemable
preferred stock, were carried at fair value. Unrealized gains or losses on
investments classified as available-for-sale, net of deferred federal income
taxes, minority interest, deferred policy acquisition expenses and

F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
amounts attributable to participating contractholders, are included as a
separate component of shareholders' equity. As discussed in Note 3, the Company
transferred all securities classified as held-to-maturity to available-for-sale
on November 30, 1995.

Realized gains and losses on sales of fixed maturities and equity securities
are determined on the specific-identification basis using amortized cost for
fixed maturities and cost for equity securities. Fixed maturities and equity
securities with other than temporary declines in fair value are written down to
estimated fair value resulting in the recognition of realized losses.

Mortgage loans on real estate are stated at unpaid principal balances, net
of unamortized discounts and reserves. Reserves on mortgage loans are based on
losses expected by management to be realized on transfers of mortgage loans to
real estate (upon foreclosure), on the disposition or settlement of mortgage
loans and on mortgage loans which management believes may not be collectible in
full. In establishing reserves, management considers, among other things, the
estimated fair value of the underlying collateral.

Fixed maturities and mortgage loans that are delinquent are placed on
non-accrual status, and thereafter interest income is recognized only when cash
payments are received.

Policy loans are carried principally at unpaid principal balances.

Real estate that has been acquired through the foreclosure of mortgage loans
is valued at the estimated fair value at the time of foreclosure. The Company
considers several methods in determining fair value at foreclosure, using
primarily third-party appraisals and discounted cash flow analyses. After
foreclosure, the Company makes a determination as to whether the asset should be
held for production of income or held for sale.

Real estate investments held for the production of income and held for sale
are carried at depreciated cost less valuation allowances, if necessary, to
reduce the carrying value to fair value. Depreciation is generally calculated
using the straight-line method.

Realized investment gains and losses, other than those related to separate
accounts for which the Company does not bear the investment risk, are reported
as a component of revenues based upon specific identification of the investment
assets sold. When an other-than-temporary impairment of the value of a specific
investment or a group of investments is determined, a realized investment loss
is recorded. Changes in the valuation allowance for mortgage loans and real
estate are included in realized investment gains or losses.

D. FINANCIAL INSTRUMENTS

In the normal course of business, the Company enters into transactions
involving various types of financial instruments, including debt, investments
such as fixed maturities, mortgage loans and equity securities, investment and
loan commitments, and interest rate futures contracts. These instruments involve
credit risk and also may be subject to risk of loss due to interest rate
fluctuation. The Company evaluates and monitors each financial instrument
individually and, when appropriate, obtains collateral or other security to
minimize losses.

E. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less.

F. DEFERRED POLICY ACQUISITION COSTS

Acquisition costs consist of commissions, underwriting costs and other
costs, which vary with, and are primarily related to, the production of
revenues. Property and casualty, group life and group health insurance business
acquisition costs are deferred and amortized over the terms of the insurance
policies. Acquisition costs related to universal life products and
contractholder deposit funds are

F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
deferred and amortized in proportion to total estimated gross profits over the
expected life of the contracts using a revised interest rate applied to the
remaining benefit period. Acquisition costs related to annuity and other life
insurance businesses are deferred and amortized, generally in proportion to the
ratio of annual revenue to the estimated total revenues over the contract
periods based upon the same assumptions used in estimating the liability for
future policy benefits. Deferred acquisition costs for each product are reviewed
to determine if they are recoverable from future income, including investment
income. If such costs are determined to be unrecoverable, they are expensed at
the time of determination.

Although realization of deferred policy acquisition costs is not assured,
management believes it is more likely than not that all of these costs will be
realized. The amount of deferred policy acquisition costs considered realizable,
however, could be reduced in the near term if the estimates of gross profits or
total revenues discussed above are reduced. The amount of amortization of
deferred policy acquisition costs could be revised in the near term if any of
the estimates discussed above are revised.

G. PROPERTY AND EQUIPMENT

Property, equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. Depreciation is provided using the
straight-line or accelerated method over the estimated useful lives of the
related assets which generally range from 3 to 30 years. Amortization of
leasehold improvements is provided using the straight-line method over the
lesser of the term of the leases or the estimated useful life of the
improvements.

H. SEPARATE ACCOUNTS

Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of certain pension,
variable annuity and variable life insurance contractholders. Assets consist
principally of bonds, common stocks, mutual funds, and short-term obligations at
market value. The investment income, gains, and losses of these accounts
generally accrue to the contractholders and, therefore, are not included in the
Company's net income. Appreciation and depreciation of the Company's interest in
the separate accounts, including undistributed net investment income, is
reflected in shareholders' equity or net investment income.

I. POLICY LIABILITIES AND ACCRUALS

Future policy benefits are liabilities for life, health and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. The liabilities associated
with traditional life insurance products are computed using the net level
premium method for individual life and annuity policies, and are based upon
estimates as to future investment yield, mortality and withdrawals that include
provisions for adverse deviation. Future policy benefits for individual life
insurance and annuity policies are computed using interest rates ranging from
2 1/2% to 6% for life insurance and 2% to 9 1/2% for annuities. Estimated
liabilities are established for group life and health policies that contain
experience rating provisions. Mortality, morbidity and withdrawal assumptions
for all policies are based on the Company's own experience and industry
standards. Liabilities for universal life include deposits received from
customers and investment earnings on their fund balances, less administrative
charges. Universal life fund balances are also assessed mortality and surrender
charges.

Liabilities for outstanding claims, losses and loss adjustment expenses are
estimates of payments to be made on property and casualty and health insurance
for reported losses and estimates of losses incurred but not reported. These
liabilities are determined using case basis evaluations and statistical analyses
and represent estimates of the ultimate cost of all losses incurred but not
paid. These estimates are continually reviewed and adjusted as necessary; such
adjustments are reflected in current operations. Estimated amounts of salvage
and subrogation on unpaid property and casualty losses are deducted from the
liability for unpaid claims.

F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Premiums for property and casualty, group life, and accident and health
insurance are reported as earned on a pro-rata basis over the contract period.
The unexpired portion of these premiums is recorded as unearned premiums.

Contractholder deposit funds and other policy liabilities include
investment-related products such as guaranteed investment contracts, deposit
administration funds and immediate participation guarantee funds and consist of
deposits received from customers and investment earnings on their fund balances.

All policy liabilities and accruals are based on the various estimates
discussed above. Although the adequacy of these amounts cannot be assured,
management believes that it is more likely than not that policy liabilities and
accruals will be sufficient to meet future obligations of policies in force. The
amount of liabilities and accruals, however, could be revised in the near term
if the estimates discussed above are revised.

J. PREMIUM AND FEE REVENUE AND RELATED EXPENSES

Premiums for individual life and health insurance and individual and group
annuity products, excluding universal life and investment-related products, are
considered revenue when due. Property and casualty and group life, accident and
health insurance premiums are recognized as revenue over the related contract
periods. Benefits, losses and related expenses are matched with premiums,
resulting in their recognition over the lives of the contracts. This matching is
accomplished through the provision for future benefits, estimated and unpaid
losses and amortization of deferred policy acquisition costs. Revenues for
investment-related products consist of net investment income and contract
charges assessed against the fund values. Related benefit expenses primarily
consist of net investment income credited to the fund values after deduction for
investment and risk charges. Revenues for universal life products consist of net
investment income, and mortality, administration and surrender charges assessed
against the fund values. Related benefit expenses include universal life benefit
claims in excess of fund values and net investment income credited to universal
life fund values.

K. POLICYHOLDER DIVIDENDS

Prior to demutualization, certain life, health and annuity insurance
policies contained dividend payment provisions that enabled the policyholder to
participate in the earnings of the Company. The amount of policyholders'
dividends was determined annually by the Board of Directors. The aggregate
amount of policyholders' dividends was related to the actual interest,
mortality, morbidity and expense experience for the year and the Company's
judgment as to the appropriate level of statutory surplus to be retained. The
participating life insurance in force was 16.2% of the face value of total life
insurance in force at December 31, 1994. The premiums on participating life,
health and annuity policies were 11.3%, 6.4% and 6.6% of total life, health and
annuity statutory premiums prior to demutualization in 1995, 1994 and 1993,
respectively. Total policyholders' dividends were $23.3 million, $32.8 million
and $24.2 million prior to demutualization in 1995, 1994 and 1993, respectively.

L. FEDERAL INCOME TAXES

AFC, FAFLIC, AFLIAC and FAFLIC's non-insurance domestic subsidiaries file a
consolidated United States federal income tax return. Entities included within
the consolidated group are segregated into either a life insurance or non-life
insurance company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions on the percentage of eligible non-life tax losses
that can be applied to offset life company taxable income. Allmerica P&C and its
subsidiaries file a separate United States federal income tax return.

Deferred income taxes are generally recognized when assets and liabilities
have different values for financial statement and tax reporting purposes, and
for other temporary taxable and deductible

F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
differences as defined by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109). These differences result primarily
from loss reserves, policy acquisition expenses, and unrealized
appreciation/depreciation on investments.

M. NEW ACCOUNTING PRONOUNCEMENTS

In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" was issued. This statement
requires companies to write down to fair value long-lived assets whose carrying
value is greater than the undiscounted cash flows of those assets. The statement
also requires that long-lived assets of which management is committed to
dispose, either by sale or abandonment, be valued at the lower of their carrying
amount or fair value less costs to sell. This statement is effective for fiscal
years beginning after December 15, 1995. Management expects that adoption of
this statement will not have a material effect on the financial statements.

N. RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current
year presentation.

2. SIGNIFICANT TRANSACTIONS

Pursuant to the plan of reorganization effective October 16, 1995, AFC
issued 37.5 million shares of its common stock to eligible policyholders. AFC
also issued 12.6 million shares of its common stock at a price of $21.00 per
share in a public offering, resulting in net proceeds of $248.0 million, and
issued Senior Debentures in the principal amount of $200.0 million which
resulted in net proceeds of $197.2 million. AFC contributed $392.4 million of
these proceeds to FAFLIC.

Effective March 31, 1995, the Company entered into an agreement with TSSG, a
division of First Data Corporation, pursuant to which the Company sold its
mutual fund processing business and agreed not to engage in this business for
four years after that date. In accordance with this agreement, the Company
received proceeds of $32.1 million. A gain of $13.5 million, net of taxes of
$7.2 million, was recorded in March 1995.

In March and April, 1993, Citizens Corporation, a newly formed holding
company for Citizens, issued approximately 19.35% of its common stock in an
initial public offering, generating net proceeds of $156.2 million (7.0 million
shares at $24.00 per share). Proceeds to Citizens Corporation were reduced by
underwriting and other stock issuance costs. A non-taxable gain of $62.9 million
was recorded in 1993 in connection with this initial public offering. This gain
is non-taxable because only newly-issued shares of Citizens Corporation were
issued to the public.

Effective December 31, 1992, Hanover entered into a definitive agreement to
sell its wholly owned subsidiary, Beacon Insurance Company of America, and its
wholly owned subsidiary, American Select Insurance Company, for $89.7 million. A
gain of $20.7 million, net of taxes of $15.0 million, was recorded in 1993.

3. INVESTMENTS

A. FIXED MATURITIES AND EQUITY SECURITIES

Effective January 1, 1994, the Company adopted SFAS No. 115, which requires
that investments be classified into one of three categories: held-to-maturity,
available-for-sale, or trading.

The effect of implementing SFAS No. 115 as of January 1, 1994 was an
increase in the carrying value of fixed maturity investments of $335.3 million,
a decrease in deferred policy acquisition costs of $20.8 million, an increase in
policyholder liabilities of $18.4 million, a net increase in deferred income tax
liabilities of $103.7 million, an increase in minority interest of $45.4
million, and an increase in shareholders' equity of $147.0 million, which
resulted from changing the carrying value of certain fixed maturities from
amortized cost to fair value and related adjustments. The implementation had no
effect on net income.

F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

In November 1995, the Financial Accounting Standards Board issued a Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES, which permitted companies to
reclassify securities, where appropriate, based on the new guidance. As a
result, the Company transferred securities with amortized cost and fair value of
$696.4 million and $725.6 million, respectively, from the held-to-maturity
category to the available-for-sale category, which resulted in a net increase in
shareholders' equity of $12.8 million.

The amortized cost and fair value of available-for-sale and held-to-maturity
fixed maturities and equity securities were as follows:

<TABLE>
<CAPTION>
1995
---------------------------------------------
GROSS GROSS
DECEMBER 31 AMORTIZED UNREALIZED UNREALIZED FAIR
(IN MILLIONS) COST (1) GAINS LOSSES VALUE
- ---------------------------------------- ---------- --------- --------- --------

<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. Treasury securities and U.S.
government and agency securities....... $ 377.0 $ 21.0 $ -- $ 398.0
States and political subdivisions....... 2,110.6 60.7 4.0 2,167.3
Foreign governments..................... 60.6 3.4 0.6 63.4
Corporate fixed maturities.............. 4,582.1 200.8 16.4 4,766.5
U.S. government mortgage-backed
securities............................. 337.6 8.6 2.1 344.1
Total fixed maturities
available-for-sale..................... $ 7,467.9 $ 294.5 $ 23.1 $ 7,739.3
---------- --------- --------- --------
Equity securities....................... $ 410.6 $ 111.7 $ 5.1 $ 517.2
---------- --------- --------- --------
---------- --------- --------- --------
</TABLE>
<TABLE>
<CAPTION>
1995
-----------------------------------------------
GROSS GROSS
December 31 AMORTIZED UNREALIZED UNREALIZED FAIR
(In millions) COST (1) GAINS LOSSES VALUE
- ---------------------------------------- --------- ---------- ----------- --------

<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. Treasury securities and U.S.
government and agency securities....... $ 280.2 $ 4.8 $ 9.1 $ 275.9
States and political subdivisions....... 2,011.3 14.9 76.2 1,950.0
Foreign governments..................... 96.8 1.8 12.8 85.8
Corporate fixed maturities.............. 4,201.4 24.7 157.4 4,068.7
U.S. government mortgage-backed
securities........................... 134.9 0.4 3.7 131.6
--------- ---------- ----------- --------
Total fixed maturities
available-for-sale..................... $ 6,724.6 $ 46.6 $ 259.2 $ 6,512.0
--------- ---------- ----------- --------
--------- ---------- ----------- --------
Equity securities....................... $ 260.4 $ 35.3 $ 9.3 $ 286.4
--------- ---------- ----------- --------
--------- ---------- ----------- --------

<CAPTION>
HELD-TO-MATURITY
<S> <C> <C> <C> <C>

State and political subdivisions........ $ 8.1 $ 0.1 $ 0.8 7.4
Foreign governments..................... 20.7 0.2 0.2 20.7
Corporate fixed maturities.............. 927.3 13.7 22.5 918.5
Corporate mortgage-backed securities.... 3.2 0.1 -- 3.3
--------- ---------- ----------- --------
Total fixed maturities
held-to-maturity....................... $ 959.3 $ 14.1 $ 23.5 $ 949.9
--------- ---------- ----------- --------
--------- ---------- ----------- --------
</TABLE>

(1) Amortized cost for fixed maturities and cost for equity securities.

In March 1994, AFLIAC voluntarily withdrew its license in New York in order
to provide for certain commission arrangements prohibited by New York comparable
to AFLIAC's competitors. In connection with the withdrawal, FAFLIC, which is
licensed in New York, became qualified to sell the products previously sold by
AFLIAC in New York. AFLIAC agreed with the New York Department of

F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Insurance to maintain, through a custodial account in New York, a security
deposit, the market value of which will at all times equal 102% of all
outstanding general account liabilities of AFLIAC for New York policyholders,
claimants and creditors. At December 31, 1995, the amortized cost and market
value of assets on deposit were $295.0 million and $303.6 million, respectively.
At December 31, 1994, the amortized cost and market value of assets on deposit
were $327.9 million and $323.5 million, respectively. In addition, fixed
maturities, excluding those securities on deposit in New York, with an amortized
cost of $82.2 million and $67.0 million were on deposit with various state and
governmental authorities at December 31, 1995 and 1994, respectively.

There were approximately $21.8 million of contractual fixed maturity
investment commitments at December 31, 1994 and none at December 31, 1995.

The amortized cost and fair value by maturity periods for fixed maturities
are shown below. Actual maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties, or the Company may have the right to put
or sell the obligations back to the issuers. Mortgage backed securities are
included in the category representing their ultimate maturity.

<TABLE>
<CAPTION>
1995
--------------------
AVAILABLE-FOR-SALE
--------------------
DECEMBER 31 AMORTIZED FAIR
(IN MILLIONS) COST VALUE
- ---------------------------------------- --------- --------

<S> <C> <C>
Due in one year or less................. $ 970.8 $ 975.6
Due after one year through five years... 3,507.9 3,657.1
Due after five years through ten
years.................................. 1,794.0 1,866.0
Due after ten years..................... 1,195.2 1,240.6
--------- --------
Total............................... $ 7,467.9 $ 7,739.3
--------- --------
--------- --------
</TABLE>

The proceeds from sales of available-for-sale securities and the gross
realized gains and gross realized losses on those sales were as follows:

<TABLE>
<CAPTION>
PROCEEDS FROM
SALES OF
FOR THE YEARS ENDED DECEMBER 31 AVAILABLE-FOR-SALE GROSS GROSS
(IN MILLIONS) SECURITIES GAINS LOSSES
- --------------------------------------------- ------------------ ----- ------

<S> <C> <C> <C>
1995
Fixed maturities............................. $ 1,612.3 $ 23.7 $ 33.0
-------- ----- ------
Equity securities............................ $ 122.2 $ 23.1 $ 6.9
-------- ----- ------
1994
Fixed maturities............................. $ 1,026.2 $ 12.6 $ 21.6
-------- ----- ------
Equity securities............................ $ 124.3 $ 17.4 $ 4.5
-------- ----- ------
</TABLE>

F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Unrealized gains and losses on available-for-sale and other securities, are
summarized as follows:

<TABLE>
<CAPTION>
EQUITY
SECURITIES
FOR THE YEARS ENDED DECEMBER 31 FIXED AND OTHER
(IN MILLIONS) MATURITIES (1) TOTAL
- ---------------------------------------- ---------- ----------- -------

<S> <C> <C> <C>
1995
Net appreciation (depreciation),
beginning of year...................... $ (89.4) $ 10.4 $ (79.0)
---------- ----------- -------
Effect of transfer of securities between
classifications:
Net appreciation on available-for-sale
fixed maturities..................... 29.2 -- 29.2
Effect of transfer on deferred policy
acquisition costs and on policy
liabilities.......................... (6.8) -- (6.8)
Provision for deferred federal income
taxes and minority interest.......... (9.6) -- (9.6)
---------- ----------- -------
12.8 -- 12.8
---------- ----------- -------
Net appreciation on available-for-sale
securities............................. 465.4 87.5 552.9
Net depreciation from the effect on
deferred policy acquisition costs and
on policy liabilities.................. (86.9) (86.9)
Provision for deferred federal income
taxes and minority interest............ (193.2) (53.6) (246.8)
---------- ----------- -------
185.3 33.9 219.2
---------- ----------- -------
Net appreciation, end of year........... $ 108.7 $ 44.3 $ 153.0
---------- ----------- -------
---------- ----------- -------

1994
Net appreciation, beginning of year..... $ -- $ 17.5 $ 17.5
---------- ----------- -------
Cumulative effect of accounting change:
Net appreciation on available-for-sale
fixed maturities..................... 335.3 -- 335.3
Net depreciation from the effect of
accounting change on deferred policy
acquisition costs and on policy
liabilities.......................... (39.2) -- (39.2)
Provision for deferred federal income
taxes and minority interest.......... (149.1) -- (149.1)
---------- ----------- -------
147.0 17.5 164.5
---------- ----------- -------
Net depreciation on available-for-sale
securities............................. (547.9) (17.4) (565.3)
Net appreciation from the effect on
deferred policy acquisition costs and
on policy liabilities.................. 73.2 -- 73.2
Benefit for deferred federal income
taxes and minority interest............ 238.3 10.3 248.6
---------- ----------- -------
Net appreciation (depreciation), end of
year................................... $ (89.4) $ 10.4 $ (79.0)
---------- ----------- -------
---------- ----------- -------
</TABLE>

(1) Includes net appreciation on other investments of $6.9 million and $0.6
million in 1995 and 1994, respectively.

B. MORTGAGE LOANS AND REAL ESTATE

FAFLIC's mortgage loans and real estate are diversified by property type and
location. Real estate investments have been obtained primarily through
foreclosure. Mortgage loans are collateralized by the related properties and
generally are no more than 75% of the property's value at the time the original
loan is made.

F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The carrying values of mortgage loans and real estate investments net of
applicable reserves were as follows:

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1995 1994
- ---------------------------------------- ------ --------

<S> <C> <C>
Mortgage loans.......................... $ 799.5 $ 1,106.7
------ --------
Real estate:
Held for sale......................... 168.9 134.5
Held for production of income......... 10.7 45.8
------ --------
Total real estate................... 179.6 180.3
------ --------
------ --------
Total mortgage loans and real estate.... $ 979.1 $ 1,287.0
------ --------
------ --------
</TABLE>

Reserves for mortgage loans were $33.8 million and $47.2 million as of
December 31, 1995 and 1994, respectively.

During 1995, 1994 and 1993, non-cash investing activities included real
estate acquired through foreclosure of mortgage loans, which had a fair value of
$26.1 million, $39.2 million and $26.7 million, respectively.

At December 31, 1995, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $8.2 million in
the Closed Block. These commitments generally expire within one year. There are
no contractual commitments to extend credit under commercial mortgage loan
agreements outside the Closed Block.

Mortgage loans and real estate investments comprised the following property
types and geographic regions:

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1995 1994
- ---------------------------------------- ------ --------

<S> <C> <C>
Property type:
Office building....................... $ 435.9 $ 553.6
Residential........................... 145.3 207.3
Retail................................ 205.6 246.5
Industrial / warehouse................ 93.8 144.1
Other................................. 151.9 205.6
Valuation allowances.................. (53.4) (70.1)
------ --------
Total................................... $ 979.1 $ 1,287.0
------ --------
------ --------
Geographic region:
South Atlantic........................ $ 281.4 $ 374.2
Pacific............................... 191.9 238.7
East North Central.................... 118.2 138.5
Middle Atlantic....................... 148.9 151.2
West South Central.................... 79.7 102.3
New England........................... 94.9 103.1
Other................................. 117.5 249.1
Valuation allowances.................. (53.4) (70.1)
------ --------
Total................................... $ 979.1 $ 1,287.0
------ --------
------ --------
</TABLE>

At December 31, 1995, scheduled mortgage loan maturities were as follows:
1996 -- $206.1 million; 1997 -- $143.7 million; 1998 -- $167.4 million; 1999 --
$109.9 million; 2000 -- $124.2 million;

F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
and $48.2 million thereafter. Actual maturities could differ from contractual
maturities because borrowers may have the right to prepay obligations with or
without prepayment penalties and loans may be refinanced. During 1995, the
Company refinanced $24.0 million of mortgage loans based on terms which differed
from those granted to new borrowers.

C. INVESTMENT VALUATION ALLOWANCES

Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the consolidated balance sheets and
changes thereto are shown below.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED BALANCE AT
DECEMBER 31 BALANCE AT DECEMBER
(IN MILLIONS) JANUARY 1 ADDITIONS DEDUCTIONS 31
- ------------------------- ---------- --------- ---------- ----------

<S> <C> <C> <C> <C>
1995
Mortgage loans........... $ 47.2 $ 1.5 $ 14.9 $ 33.8
Real estate.............. 22.9 (0.6) 2.7 19.6
----- --------- ----- -----
Total................ $ 70.1 $ 0.9 $ 17.6 $ 53.4
----- --------- ----- -----
----- --------- ----- -----

1994
Mortgage loans........... $ 73.8 $ 14.6 $ 41.2 $ 47.2
Real estate.............. 21.0 3.2 1.3 22.9
----- --------- ----- -----
Total................ $ 94.8 $ 17.8 $ 42.5 $ 70.1
----- --------- ----- -----
----- --------- ----- -----

1993
Mortgage loans........... $ 86.7 $ 4.6 $ 17.5 $ 73.8
Real estate.............. 8.3 12.7 -- 21.0
----- --------- ----- -----
Total................ $ 95.0 $ 17.3 $ 17.5 $ 94.8
----- --------- ----- -----
----- --------- ----- -----
</TABLE>

D. FUTURES CONTRACTS

FAFLIC purchases and sells futures contracts on margin to hedge against
interest rate fluctuations and their effect on the net cash flows from the sales
of guaranteed investment contracts. The notional amount of such futures
contracts outstanding were $74.7 million and $126.6 million at December 31, 1995
and 1994, respectively. Because the Company purchases and sells futures
contracts through brokers who assume the risk of loss, the Company's exposure to
credit risk under futures contracts is limited to the margin deposited with the
broker. The maturity of all futures contracts outstanding are less than one
year. The fair value of futures contracts outstanding were $75.7 million and
$126.5 million at December 31, 1995 and 1994, respectively.

Gains and losses on hedge contracts related to interest rate fluctuations
are deferred and recognized in income over the period being hedged corresponding
to related guaranteed investment contracts. Deferred hedging gains and (losses)
were $5.6 million, $(7.7) million, and $6.9 million in 1995, 1994 and 1993,
respectively. Gains and losses on hedge contracts that are deemed ineffective by
management are realized immediately.

A reconciliation of the notional amount of futures contracts is as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------- ------ ------ ------

<S> <C> <C> <C>
Contracts outstanding, beginning of year..... $ 126.6 $ 141.7 $ 120.0
New contracts................................ 343.5 816.0 493.3
Contracts terminated......................... (395.4) (831.1) $(471.6)
------ ------ ------
Contracts outstanding, end of year........... $ 74.7 $ 126.6 $ 141.7
------ ------ ------
------ ------ ------
</TABLE>

F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

E. FOREIGN CURRENCY SWAP CONTRACTS

The Company enters into foreign currency swap contracts to hedge exposure to
currency risk on foreign fixed maturity investments. Interest and principal
related to foreign fixed maturity investments payable in foreign currencies, at
current exchange rates, are exchanged for the equivalent payment translated at a
specific currency exchange rate. The Company's maximum exposure to counterparty
credit risk is the difference between the foreign currency exchange rate, as
agreed upon in the swap contract, and the foreign currency spot rate on the date
of the exchange. The fair values of the foreign currency swap contracts
outstanding were $104.2 million and $117.5 million at December 31, 1995 and
1994, respectively.

The difference between amounts paid and received on foreign currency swap
contracts is reflected in the net investment income related to the underlying
assets and is not material in 1995, 1994, and 1993. The Company had no deferred
gains or losses on foreign currency swap contracts.

A reconciliation of the notional amount of swap contracts is as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------- ------ ------ ------

<S> <C> <C> <C>
Contracts outstanding, beginning of year..... $ 118.7 $ 128.8 $ 95.0
New Contracts................................ -- 5.0 50.8
Contracts expired............................ -- (10.1) (17.0)
Contracts terminated......................... (14.1) (5.0) --
------ ------ ------
Contracts outstanding, end of year........... $ 104.6 $ 118.7 $ 128.8
------ ------ ------
------ ------ ------
</TABLE>

Expected maturities of foreign currency swap contracts are $36.0 million in
1996, $28.8 million in 1997, and $39.8 million in 1998 and thereafter.

F. OTHER

At December 31, 1995, FAFLIC had no concentration of investments in a single
investee exceeding 10% of shareholders' equity.

4. INVESTMENT INCOME AND GAINS AND LOSSES

A. NET INVESTMENT INCOME

The components of net investment income were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------- ------ ------ ------

<S> <C> <C> <C>
Fixed maturities............................. $ 554.0 $ 578.3 $ 601.5
Mortgage loans............................... 97.0 119.9 155.7
Equity securities............................ 16.8 12.1 7.1
Policy loans................................. 20.3 23.3 23.5
Real estate.................................. 48.5 44.6 43.4
Other long-term investments.................. 4.4 4.3 2.1
Short-term investments....................... 21.4 9.5 7.4
Gross investment income...................... 762.4 792.0 840.7
ess investment expenses...................... (52.3) (48.9) (57.9)
------ ------ ------
Net investment income........................ $ 710.1 $ 743.1 $ 782.8
------ ------ ------
------ ------ ------
</TABLE>

As of December 31, 1995, fixed maturities and mortgage loans on non-accrual
status were $1.4 million and $85.4 million, including restructured loans of
$46.8 million. The effect of non-accruals,

F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
compared with amounts that would have been recognized in accordance with the
original terms of the investments, was to reduce net income by $0.6 million,
$5.1 million and $14.0 million in 1995, 1994 and 1993, respectively.

The payment terms of mortgage loans may from time to time be restructured or
modified. The investment in restructured mortgage loans, based on amortized
cost, amounted to $98.9 million , $126.8 million and $167.0 million at December
31, 1995, 1994 and 1993, respectively. Interest income on restructured mortgage
loans that would have been recorded in accordance with the original terms of
such loans amounted to $11.1 million, $14.4 million and $18.1 million in 1995,
1994 and 1993, respectively. Actual interest income on these loans included in
net investment income aggregated $7.1 million, $8.2 million and $10.6 million in
1995, 1994 and 1993, respectively.

At December 31, 1995, fixed maturities with a carrying value of $1.4 million
were non-income producing for the twelve months ended December 31, 1995. There
were no mortgage loans which were non-income producing for the twelve months
ended December 31, 1995.

B. REALIZED INVESTMENT GAINS AND LOSSES

Realized gains (losses) on investments were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------- ----- ------ ------

<S> <C> <C> <C>
Fixed maturities............................. $ (7.0) $ 2.4 $ 48.8
Mortgage loans............................... 1.4 (12.1) (0.5)
Equity securities............................ 16.2 12.4 29.8
Real estate.................................. 5.3 1.4 (14.5)
Other........................................ 3.2 (3.0) (2.6)
----- ------ ------
Net realized investment gains................ $ 19.1 $ 1.1 $ 61.0
----- ------ ------
----- ------ ------
</TABLE>

Proceeds from voluntary sales of investments in fixed maturities were
$1,612.3 million, $1,036.5 million and $817.5 million in 1995, 1994 and 1993,
respectively. Realized gains on such sales were $23.7 million, $12.9 million and
$38.8 million; and realized losses were $33.0 million, $21.6 million and $2.6
million for 1995, 1994 and 1993, respectively.

5. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires disclosure of fair value information about certain financial
instruments (insurance contracts, real estate, goodwill and taxes are excluded)
for which it is practicable to estimate such values, whether or not these
instruments are included in the balance sheet. The fair values presented for
certain financial instruments are estimates which, in many cases, may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of fair
value are based on discounted cash flow analyses which utilize current interest
rates for similar financial instruments which have comparable terms and credit
quality. Fair values of interest rate futures were not material at December 31,
1995 and 1994.

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:

CASH AND CASH EQUIVALENTS

For these short-term investments, the carrying amount approximates fair
value.

F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

FIXED MATURITIES

Fair values are based on quoted market prices, if available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models using discounted cash
flow analyses.

EQUITY SECURITIES

MORTGAGE LOANS

Fair values are estimated by discounting the future contractual cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings. The fair value of below investment grade mortgage loans
are limited to the lesser of the present value of the cash flows or book value.

REINSURANCE RECEIVABLES

The carrying amount reported in the consolidated balance sheets approximates
fair value.

POLICY LOANS

The carrying amount reported in the consolidated balance sheets approximates
fair value since policy loans have no defined maturity dates and are inseparable
from the insurance contracts.

INVESTMENT CONTRACTS (WITHOUT MORTALITY FEATURES)

Fair values for the Company's liabilities under guaranteed investment type
contracts are estimated using discounted cash flow calculations using current
interest rates for similar contracts with maturities consistent with those
remaining for the contracts being valued. Other liabilities are based on
surrender values.

DEBT

The carrying value of short-term debt reported in the balance sheet
approximates fair value. The fair value of long-term debt was estimated using
market quotes, when available, and, when not available, discounted cash flow
analyses.

F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The estimated fair values of the financial instruments were as follows:

<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
DECEMBER 31 CARRYING FAIR CARRYING FAIR
(IN MILLIONS) VALUE VALUE VALUE VALUE
- --------------------------------------------- --------- -------- --------- --------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents.................. $ 236.6 $ 236.6 $ 539.7 $ 539.7
Fixed maturities........................... 7,739.3 7,739.3 7,471.3 7,461.9
Equity securities.......................... 517.2 517.2 286.4 286.4
Mortgage loans............................. 799.5 845.4 1,106.7 1,105.8
Policy loans............................... 123.2 123.2 364.9 364.9
--------- -------- --------- --------
$ 9,415.8 $ 9,461.7 $ 9,769.0 $ 9,758.7
--------- -------- --------- --------
--------- -------- --------- --------
FINANCIAL LIABILITIES
Guaranteed investment contracts............ $ 1,632.8 $ 1,677.0 $ 2,170.6 $ 2,134.0
Supplemental contracts without life
contingencies............................. 24.4 24.4 25.3 25.3
Dividend accumulations..................... 86.2 86.2 84.5 84.5
Other individual contract deposit funds.... 95.7 92.8 111.3 108.0
Other group contract deposit funds......... 894.0 902.8 980.3 969.6
Individual annuity contracts............... 966.3 810.0 988.9 870.6
Short-term debt............................ 28.0 28.0 32.8 32.8
Long-term debt............................. 2.8 2.9 2.7 2.7
--------- -------- --------- --------
$ 3,730.2 $ 3,624.1 $ 4,396.4 $ 4,227.5
--------- -------- --------- --------
--------- -------- --------- --------
</TABLE>

6. CLOSED BLOCK

Included in other income in the Consolidated Statement of Income in 1995 is
a net pre-tax contribution from the Closed Block of $2.9 million. Summarized
financial information of the Closed Block as of September 30, 1995 (date used to
estimate financial information for the date of establishment of October 16,
1995) and December 31, 1995 and for the period October 1, 1995 through December
31, 1995 is as follows:

<TABLE>
<CAPTION>
1995
-------------------------
SEPTEMBER
(IN MILLIONS) DECEMBER 31 30
- --------------------------------------------- ----------- -----------
<S> <C> <C>
Assets
Fixed maturities, at fair value (amortized
cost of $447.4 and $313.3,
respectively)............................. $ 458.0 $ 318.4
Mortgage loans............................. 57.1 61.6
Policy loans................................. 242.4 245.3
Cash and cash equivalents.................. 17.6 12.3
Accrued investment income.................. 16.6 15.3
Deferred policy acquisition costs............ 24.5 24.8
Other assets............................... 2.7 6.4
----------- -----------
Total assets................................. $ 818.9 $ 684.1
----------- -----------
----------- -----------
Liabilities
Policy liabilities and accruals............ $ 899.2 $ 894.3
Other liabilities.......................... 2.8 4.2
----------- -----------
Total liabilities............................ $ 902.0 $ 898.5
----------- -----------
----------- -----------
</TABLE>

F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

<TABLE>
<CAPTION>
PERIOD FROM OCTOBER 1 THROUGH DECEMBER 31
(IN MILLIONS) 1995
- --------------------------------------------- ------
<S> <C>
Revenues
Premiums................................... $ 11.5
Net investment income...................... 12.8
------
Total revenues............................... 24.3
------
Benefits and expenses
Policy benefits............................ 20.6
Policy acquisition expenses................ 0.8
------
Total benefits and expenses.................. 21.4
------
Contribution from the Closed Block........... $ 2.9
------
------
Cash flows
Cash flows from operating activities:
Contribution from the Closed Block....... $ 2.9
Initial cash transferred to the Closed
Block................................... 139.7
Change in deferred policy acquisition
costs, net.............................. 0.4
Change in premiums and other
receivables............................. (0.1)
Change in policy liabilities and
accruals................................ 2.0
Change in accrued investment income...... (1.3)
Other, net............................... 0.8
------
Net cash provided by operating activities.... 144.4
------
------
Cash flows from investing activities:
Sales, maturities and repayments of
investments............................. 29.0
Purchases of investments................. (158.8)
Other, net............................... 3.0
------
Net cash used by investing activities...... (126.8)
------
Change in cash and cash equivalents and
ending balance.............................. $ 17.6
------
------
</TABLE>

On October 16, 1995, there were no valuation allowances transferred to the
Closed Block on mortgage loans. There are no valuation allowances on mortgage
loans at December 31, 1995.

Many expenses related to Closed Block operations are charged to operations
outside the Closed Block; accordingly, the contribution from the Closed Block
does not represent the actual profitability of the Closed Block operations.
Operating costs and expenses outside of the Closed Block are, therefore,
disproportionate to the business outside the Closed Block.

7. DEBT

Short- and long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1995 1994
- --------------------------------------------- ----- -----
<S> <C> <C>
Short-Term
Commercial paper........................... $ 27.7 $ 32.8
Other...................................... 0.3
----- -----
Total short-term debt........................ $ 28.0 $ 32.8
----- -----
----- -----
Long-term debt............................... $ 2.8 $ 2.7
----- -----
----- -----
</TABLE>

F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

FAFLIC issues commercial paper primarily to manage imbalances between
operating cash flows and existing commitments. Commercial paper borrowing
arrangements are supported by various lines of credit. As of December 31, 1995,
the weighted average interest rate for outstanding commercial paper was 5.8%.

As of December 31, 1995, FAFLIC had approximately $245.0 million in
committed lines of credit provided by U.S. banks, of which $217.3 million was
available for borrowing. These lines of credit generally have terms of less than
one year, and require the Company to pay annual commitment fees ranging from
0.10% to 0.125% of the available credit. Interest that would be charged for
usage of these lines of credit is based upon negotiated arrangements.

Interest expense was $4.1 million, $4.3 million and $1.6 million in 1995,
1994 and 1993, respectively.

In October, 1995, AFC issued $200.0 million face amount of Senior Debentures
for proceeds of $197.2 million net of discounts and issuance costs. These
securities have an effective interest rate of 7.65%, and mature on October 16,
2025. Interest is payable semiannually on October 15 and April 15 of each year.
The Senior Debentures are subject to certain restrictive covenants, including
limitations on issuance of or disposition of stock of restricted subsidiaries
and limitations on liens. AFC is in compliance with all covenants. The primary
source of cash for repayment of the debt by AFC is dividends from FAFLIC.

8. FEDERAL INCOME TAXES

Provisions for federal income taxes have been calculated in accordance with
the provisions of SFAS No. 109. A summary of the federal income tax expense
(benefit) in the consolidated statements of income is shown below:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------- ------ ----- ------
<S> <C> <C> <C>
Federal income tax expense (benefit)
Current.................................... $ 119.7 $ 45.4 $ 95.1
Deferred................................... (37.0) 8.0 (20.4)
------ ----- ------
Total........................................ $ 82.7 $ 53.4 $ 74.7
------ ----- ------
------ ----- ------
</TABLE>

The federal income taxes attributable to the consolidated results of
operations are different from the amounts determined by multiplying income
before federal income taxes by the expected federal income tax rate. The sources
of the difference and the tax effects of each were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Expected federal income tax expense.......... $ 105.6 $ 53.7 $ 138.2
Tax-exempt interest........................ (32.2) (35.9) (32.8)
Differential earnings amount............... (7.6) 35.0 (10.9)
Non-taxable gain........................... -- -- (22.0)
Dividend received deduction................ (4.0) (2.5) (1.3)
Foreign tax credit......................... (0.7) (0.8) (0.9)
Changes in tax reserve estimates........... 19.3 4.0 3.5
Other, net................................. 2.3 (0.1) 0.9
------ ------ ------
Federal income tax expense................... $ 82.7 $ 53.4 $ 74.7
------ ------ ------
------ ------ ------
</TABLE>

Until conversion to a stock life insurance company, FAFLIC, as a mutual
company, reduced its deduction for policyholder dividends by the differential
earnings amount. This amount was computed, for each tax year, by multiplying the
average equity base of the FAFLIC/AFLIAC consolidated group,

F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
as determined for tax purposes, by the estimate of an excess of an imputed
earnings rate over the average mutual life insurance companies' earnings rate.
The differential earnings amount for each tax year was subsequently recomputed
when actual earnings rates were published by the Internal Revenue Service (IRS).
For its 1995 federal income tax return, FAFLIC has estimated that there will be
no tax effect from a differential earnings amount, including the expected effect
of future recomputations by the IRS. As a stock life company, FAFLIC is no
longer required to reduce its policyholder dividend deduction by the
differential earnings amount.

The deferred income tax asset represents the tax effects of temporary
differences attributable to Allmerica P&C, a separate consolidated group for
federal tax return purposes. Its components were as follows:

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1995 1994
- --------------------------------------------- ------- -------
<S> <C> <C>
Deferred tax (assets) liabilities
AMT carryforwards.......................... $ (9.8) $ (11.9)
Loss reserve discounting................... (178.3) (187.6)
Deferred acquisition costs................. 55.1 54.2
Employee benefit plans..................... (25.5) (22.0)
Investments, net........................... 77.4 (22.7)
Fixed assets............................... 2.5 4.5
Bad debt reserve........................... (1.8) (1.8)
Other, net................................. (0.8) (1.8)
------- -------
Deferred tax asset, net...................... $ (81.2) $ (189.1)
------- -------
------- -------
</TABLE>

The deferred income tax liability represents the tax effects of temporary
differences attributable to the FAFLIC/AFLIAC consolidated federal tax return
group. Its components were as follows:

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1995 1994
- --------------------------------------------- ------- -------
<S> <C> <C>
Deferred tax (assets) liabilities
NOL carryforwards.......................... $ -- $ (3.3)
AMT carryforwards.......................... -- (1.5)
Loss reserve discounting................... (129.1) (118.2)
Deferred acquisition costs................. 169.7 199.0
Differential earnings amount............... -- 27.7
Employee benefit plans..................... (14.6) (15.4)
Investments, net........................... 67.0 (30.9)
Fixed assets............................... (1.7) (0.9)
Bad debt reserve........................... (26.3) (27.9)
Other, net................................. (17.2) (14.8)
------- -------
Deferred tax liability, net.................. $ 47.8 $ 13.8
------- -------
------- -------
</TABLE>

Gross deferred income tax assets totaled $405.1 million and $460.7 million
at December 31, 1995 and 1994, respectively. Gross deferred income tax
liabilities totaled $371.1 million and $285.4 million at December 31, 1995 and
1994, respectively.

Management believes, based on the Company's recent earnings history and its
future expectations, that the Company's taxable income in future years will be
sufficient to realize all deferred tax assets. In determining the adequacy of
future income, management considered the future reversal of its existing
temporary differences and available tax planning strategies that could be
implemented, if necessary. At December 31, 1995, there are no available non-life
net operating loss carryforwards, and there are available alternative minimum
tax credit carryforwards of $9.8 million.

F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The Company's federal income tax returns are routinely audited by the IRS,
and provisions are routinely made in the financial statements in anticipation of
the results of these audits. The IRS has examined the FAFLIC/AFLIAC consolidated
group's federal income tax returns through 1988. The IRS has also examined the
Allmerica P&C consolidated group's federal income tax returns through 1988.
Deficiencies asserted with respect to tax years 1977 through 1981 have been paid
and recorded, and the Company has filed a recomputation of such years with
appeals claiming a refund with respect to certain agreed upon issues. The
Company is currently considering its response to certain adjustments proposed by
the IRS with respect to FAFLIC/AFLIAC's federal income tax returns for 1982 and
1983, and to possible adjustments under consideration by the IRS with respect to
Allmerica P&C's federal income tax returns for 1989, 1990, and 1991. If upheld,
these adjustments would result in additional payments; however, the Company will
vigorously defend its position with respect to these adjustments. In
management's opinion, adequate tax liabilities have been established for all
years. However, the amount of these tax liabilities could be revised in the near
term if estimates of the Company's ultimate liability are revised.

9. PENSION PLANS

FAFLIC provides retirement benefits to substantially all of its employees
under three separate defined benefit pension plans. Through December 31, 1994,
retirement benefits were based primarily on employees' years of service and
compensation during the highest five consecutive plan years of employment.
Benefits under this defined benefit formula were frozen for most employees (but
not for eligible agents) effective December 31, 1994. In their place, the
Company adopted a defined benefit cash balance formula, under which the Company
annually provides an allocation to each eligible employee as a percentage of
that employee's salary, similar to a defined contribution plan arrangement. The
1995 allocation was based on 7.0% of each eligible employee's salary.
Continuation of the defined benefit cash balance formula is subject to the
resolution of certain technical issues, and may be subject to receipt of a
favorable determination letter from the IRS that the Company's pension plans, as
amended to reflect the cash balance formula, will continue to satisfy the
requirements of Section 401(a) of the Internal Revenue Code. The Company's
policy for the plans is to fund at least the minimum amount required by the
Employee Retirement Income Security Act of 1974.

Components of net pension expense were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Service cost -- benefits earned during the
year........................................ $ 19.7 $ 13.0 $ 9.8
Interest accrued on projected benefit
obligations................................. 21.1 20.0 16.9
Actual return on assets...................... (89.3) (2.6) (15.1)
Net amortization and deferral................ 66.1 (16.3) (5.8)
------ ------ ------
Net pension expense.......................... $ 17.6 $ 14.1 $ 5.8
------ ------ ------
------ ------ ------
</TABLE>

F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The following table summarizes the combined status of the three pension
plans. At December 31, 1995 and 1994, each plan's projected benefit obligation
exceeded its assets.

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1995 1994
- --------------------------------------------- ------ ------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation.................. $ 325.6 $ 221.7
Unvested benefit obligation................ 5.0 3.5
------ ------
Accumulated benefit obligation............... $ 330.6 $ 225.2
------ ------
------ ------
Pension liability included in Consolidated
Balance Sheets:
Projected benefit obligation............... $ 367.1 $ 254.6
Plan assets at fair value.................. 321.2 239.7
------ ------
Plan assets less than projected benefit
obligation.............................. (45.9) (14.9)
Unrecognized net loss from past
experience................................ 48.8 42.3
Unrecognized prior service benefit......... (13.8) (17.3)
Unamortized transition asset............... (26.5) (28.3)
------ ------
Net pension liability........................ $ (37.4) $ (18.2)
------ ------
------ ------
</TABLE>

Determination of the projected benefit obligations was based on a weighted
average discount rate of 7.0% in 1995 and 8.5% in 1994, and the assumed
long-term rate of return on plan assets was 9%. The actuarial present value of
the projected benefit obligations was determined using assumed rates of increase
in future compensation levels ranging from 5.5% to 6.5%. The effect of changes
in actuarial assumptions, including the decrease in the weighted average
discount rate, was an increase in the Company's projected benefit obligation of
$76.7 million at December 31, 1995. Plan assets are invested primarily in
various separate accounts and the general account of FAFLIC. The plans also hold
stock of AFC.

The Company has a profit sharing and 401(k) plan for its employees.
Effective for plan years beginning after 1994, the profit sharing formula for
employees has been discontinued and a 401(k) match feature has been added to the
continuing 401(k) plan for the employees. Total plan expense in 1995, 1994 and
1993 was $5.2 million, $12.6 million and $22.6 million, respectively. In
addition to this Plan, the Company has a defined contribution plan for
substantially all of its agents. The Plan expense in 1995, 1994 and 1993 was
$3.5 million, $2.7 million and $2.4 million, respectively.

10. OTHER POSTRETIREMENT BENEFIT PLANS

In addition to the Company's pension plans, the Company currently provides
postretirement medical and death benefits to certain full-time employees and
dependents, under several plans sponsored by FAFLIC, Hanover and Citizens.
Generally, employees become eligible at age 55 with at least 15 years of
service. Spousal coverage is generally provided for up to two years after death
of the retiree. Benefits include hospital, major medical and a payment at death
equal to retirees' final compensation up to certain limits. Effective January 1,
1996, the Company revised these benefits so as to establish limits on future
benefit payments and to restrict eligibility to current employees. The medical
plans have varying copayments and deductibles, depending on the plan. These
plans are unfunded.

Effective January 1, 1993, the Company adopted the provisions of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions".
SFAS No. 106 requires employers to recognize the costs and obligations of
postretirement benefits other than pensions over the period ending with the date
an employee is fully eligible to receive benefits. Previously, such costs were
generally recognized as expenses when paid. The adoption increased accrued
liabilities by $69.1 million. The effect on the consolidated income statement
was $35.4 million, net of tax of $23.5 million

F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
and minority interest of $10.2 million, reported as a cumulative effect of a
change in accounting principle. The ongoing effect of adopting the new standard
increased 1993 net periodic postretirement benefit expense by $6.6 million, and
decreased net income by $4.3 million.

The plans' funded status reconciled with amounts recognized in the Company's
consolidated balance sheet were as follows:

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1995 1994
- --------------------------------------------- ------ -----
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees................................... $ 44.9 $ 35.2
Fully eligible active plan participants.... 14.0 15.2
Other active plan participants............. 45.9 38.5
------ -----
104.8 88.9
Plan assets at fair value.................... -- --
------ -----
Accumulated postretirement benefit obligation
in excess of plan assets.................... 104.8 88.9
Unrecognized loss............................ 13.4 4.7
------ -----
Accrued postretirement benefit costs......... $ 91.4 $ 84.2
------ -----
------ -----
</TABLE>

The components of net periodic postretirement benefit expense were as
follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
- --------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Service cost................................. $ 4.2 $ 6.6 $ 3.8
Interest cost................................ 6.9 6.9 5.7
Amortization of (gain) loss.................. (0.5) 1.4 --
----- ----- -----
Net periodic postretirement benefit
expense..................................... $ 10.6 $ 14.9 $ 9.5
----- ----- -----
----- ----- -----
</TABLE>

For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1995, health care costs were assumed to increase 10% in 1996,
declining thereafter until the ultimate rate of 5.5% is reached in 2001 and
remains at that level thereafter. The health care cost trend rate assumption has
a significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation at December 31, 1995
by $10.1 million, and the aggregate of the service and interest cost components
of net periodic postretirement benefit expense for 1995 by $1.2 million.

The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation at January 1, 1993 was 8.5%. The rate was 7.0%
and 8.5% at December 31, 1995 and 1994, respectively. The effect of changes in
actuarial assumptions, including the decrease in the weighted average discount
rate, was an increase in the Company's accumulated postretirement benefit
obligation of $15.1 million at December 31, 1995.

11. POSTEMPLOYMENT BENEFITS

Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112, (SFAS No. 112), "Employers'
Accounting for Postemployment Benefits", which requires employers to recognize
the costs and obligations of severance, disability and related life insurance
and health care benefits to be paid to inactive or former employees after
employment but before retirement. Prior to adoption, the Company had recognized
the cost of these benefits on an accrual or paid basis, depending on the plan.
Implementation of SFAS No. 112 resulted in a transition

F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
obligation of $1.9 million, net of federal income taxes and minority interest,
and is reported as a cumulative effect of a change in accounting principle in
the consolidated statement of income. The impact of this accounting change,
after recognition of the cumulative effect, was not significant.

12. DIVIDEND RESTRICTIONS

Massachusetts, Delaware, New Hampshire and Michigan have enacted laws
governing the payment of dividends to stockholders by insurers. These laws
affect the dividend paying ability of FAFLIC, AFLIAC, Hanover and Citizens,
respectively.

Massachusetts' statute limits the dividends an insurer may pay in any twelve
month period, without the prior permission of the Commonwealth of Massachusetts
Insurance Commissioner, to the greater of (i) 10% of its statutory policyholder
surplus as of the preceding December 31 or (ii) the individual company's
statutory net gain from operations for the preceding calendar year (if such
insurer is a life company), or its net income for the preceding calendar year
(if such insurer is not a life company). In addition, under Massachusetts law,
no domestic insurer shall pay a dividend or make any distribution to its
shareholders from other than unassigned funds unless the Commissioner shall have
approved such dividend or distribution. At January 1, 1996, FAFLIC could pay
dividends of $144.9 million to AFC without prior approval of the Commissioner.

Dividends from FAFLIC to AFC will be the primary source of cash for
repayment of the debt by AFC and payment of dividends to AFC stockholders.

Pursuant to Delaware's statute, the maximum amount of dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the Delaware Commissioner of Insurance, is limited to the
greater of (i) 10% of its policyholders' surplus as of the preceding December 31
or (ii) the individual company's statutory net gain from operations for the
preceding calendar year (if such insurer is a life company) or its net income
(not including realized capital gains) for the preceding calendar year (if such
insurer is not a life company). Any dividends to be paid by an insurer, whether
or not in excess of the aforementioned threshold, from a source other than
statutory earned surplus would also require the prior approval of the Delaware
Commissioner of Insurance. At January 1, 1996, AFLIAC could pay dividends of
$4.3 million to FAFLIC without prior approval.

Pursuant to New Hampshire's statute, the maximum dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the New Hampshire Insurance Commissioner, is limited to 10% of
such insurer's statutory policyholder surplus as of the preceding December 31.
At January 1, 1996, the maximum dividend and other distributions that could be
paid to Allmerica P&C by Hanover, without prior approval of the Insurance
Commissioner, was approximately $72.8 million.

Pursuant to Michigan's statute, the maximum dividends and other
distributions that an insurer may pay in any twelve month period, without prior
approval of the Michigan Insurance Commissioner, is limited to the greater of
10% of policyholders' surplus as of December 31 of the immediately preceding
year or the statutory net income less realized gains, for the immediately
preceding calendar year. At January 1, 1996, Citizens Insurance could pay
dividends of $45.6 million to Citizens Corporation without prior approval.

13. SEGMENT INFORMATION

The Company offers financial products and services in two major areas: Risk
Management and Retirement and Asset Management. Within these broad areas, the
Company conducts business principally in five operating segments.

The Risk Management group includes two segments: Regional Property and
Casualty and Corporate Risk Management Services. The Regional Property and
Casualty segment includes property and

F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
casualty insurance products, such as automobile insurance, homeowners insurance,
commercial multiple-peril insurance, and workers' compensation insurance. These
products are offered by Allmerica P&C through its operating subsidiaries,
Hanover and Citizens. Substantially all of the Regional Property and Casualty
segment's earnings are generated in Michigan and the Northeast (Connecticut,
Massachusetts, New York, New Jersey, New Hampshire, Rhode Island, Vermont and
Maine). The Corporate Risk Management Services segment, formerly known as the
Employee Benefit Services segment, includes group life and health insurance
products and services which assist employers in administering employee benefit
programs and in managing the related risks.

The Retirement and Asset Management group includes three segments: Retail
Financial Services, Institutional Services and Allmerica Asset Management. The
Retail Financial Services segment, formerly known as the Individual Financial
Services segment, includes variable annuities, variable universal life-type,
traditional and health insurance products distributed via retail channels to
individuals across the country. The Institutional Services segment includes
primarily group retirement products such as 401(k) plans, tax-sheltered
annuities and GIC contracts which are distributed to institutions across the
country via work-site marketing and other arrangements. Allmerica Asset
Management, formerly included in the results of the Institutional Services
segment, is a Registered Investment Advisor which provides investment advisory
services to other institutions, such as insurance companies and pension plans.

F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Summarized below is financial information with respect to business segments
for the year ended and as of December 31.

<TABLE>
<CAPTION>
(IN MILLIONS) 1995 1994 1993
-------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Risk Management
Regional Property and Casualty.......... $ 2,095.1 $ 2,004.8 $ 2,051.1
Corporate Risk Management............... 328.5 302.4 296.0
---------- ---------- ----------
Subtotal.............................. 2,423.6 2,307.2 2,347.1
---------- ---------- ----------
Retirement and Asset Management
Retail Financial Services............... 486.7 507.9 524.0
Institutional Services.................. 344.1 397.9 382.0
Allmerica Asset Management.............. 4.4 4.0 --
---------- ---------- ----------
Subtotal.............................. 835.2 909.8 906.0
Eliminations.............................. (20.3) (21.9) (13.9)
---------- ---------- ----------
Total....................................... $ 3,238.5 $ 3,195.1 $ 3,239.2
---------- ---------- ----------
---------- ---------- ----------
Income (loss) from continuing operations
before income taxes:
Risk Management
Regional Property and Casualty.......... $ 206.3 $ 113.1 $ 331.3
Corporate Risk Management............... 18.3 19.9 18.1
---------- ---------- ----------
Subtotal.............................. 224.6 133.0 349.4
---------- ---------- ----------
---------- ---------- ----------
Retirement and Asset Management
Retail Financial Services 35.2 14.2 61.6
Institutional Services.................. 42.8 4.4 (16.1)
Allmerica Asset Management.............. 2.3 1.9
---------- ---------- ----------
Subtotal.............................. 80.3 20.5 45.5
---------- ---------- ----------
Total....................................... $ 304.9 $ 153.5 $ 394.9
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets:
Risk Management
Regional Property and Casualty.......... $ 5,741.8 $ 5,408.7 $ 5,198.1
Corporate Risk Management............... 458.9 386.3 367.6
---------- ---------- ----------
Subtotal.............................. 6,200.7 5,795.0 5,565.7
---------- ---------- ----------
Retirement and Asset Management
Retail Financial Services............... 7,218.7 5,639.8 5,104.5
Institutional Services.................. 4,280.9 4,484.5 4,708.2
Allmerica Asset Management.............. 2.1 2.2 --
---------- ---------- ----------
Subtotal.............................. 11,501.7 10,126.5 9,812.7
---------- ---------- ----------
Total....................................... $17,702.4 $15,921.5 $15,378.4
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

14. LEASE COMMITMENTS

Rental expenses for operating leases, principally with respect to buildings,
amounted to $36.4 million, $35.2 million and $31.9 million in 1995, 1994 and
1993, respectively. At December 31, 1995, future minimum rental payments under
non-cancelable operating leases were approximately $84.6 million, payable as
follows: 1996 -- $29.4 million; 1997 -- $21.5 million; 1998 -- $14.6 million;
1999 -- $8.7 million; 2000 -- $5.5 million; and $4.9 million thereafter.

F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

15. REINSURANCE

In the normal course of business, the Company seeks to reduce the loss that
may arise from catastrophes or other events that cause unfavorable underwriting
results by reinsuring certain levels of risk in various areas of exposure with
other insurance enterprises or reinsurers. Reinsurance transactions are
accounted for in accordance with the provisions of SFAS No. 113.

Amounts recoverable from reinsurers are estimated in a manner consistent
with the claim liability associated with the reinsured policy. Reinsurance
contracts do not relieve the Company from its obligations to policyholders.
Failure of reinsurers to honor their obligations could result in losses to the
Company; consequently, allowances are established for amounts deemed
uncollectible. The Company determines the appropriate amount of reinsurance
based on evaluation of the risks accepted and analyses prepared by consultants
and reinsurers and on market conditions (including the availability and pricing
of reinsurance). The Company also believes that the terms of its reinsurance
contracts are consistent with industry practice in that they contain standard
terms with respect to lines of business covered, limit and retention,
arbitration and occurrence. Based on its review of its reinsurers' financial
statements and reputations in the reinsurance marketplace, the Company believes
that its reinsurers are financially sound.

The Company is subject to concentration of risk with respect to reinsurance
ceded to various residual market mechanisms. As a condition to the ability to
conduct certain business in various states, the Company is required to
participate in various residual market mechanisms and pooling arrangements which
provide various insurance coverages to individuals or other entities that are
otherwise unable to purchase such coverage voluntarily provided by private
insurers. These market mechanisms and pooling arrangements include the
Massachusetts Commonwealth Automobile Reinsurers ("CAR"), the Maine Workers'
Compensation Residual Market Pool ("MWCRP") and the Michigan Catastrophic Claims
Association ("MCCA"). As of December 31, 1995, the MCCA and CAR were the only
two reinsurers which represented 10% or more of the Company's reinsurance
business. As a servicing carrier in Massachusetts, the Company cedes a
significant portion of its private passenger and commercial automobile premiums
to CAR. Net premiums earned and losses and loss adjustment expenses ceded to CAR
in 1995, 1994 and 1993 were $49.1 million and $37.9 million, $50.0 million and
$34.6 million, and $45.0 million and $31.7 million, respectively.

From 1988 through 1992, the Company was a servicing carrier in Maine, and
ceded a significant portion of its workers' compensation premiums to the Maine
Workers' Compensation Residual Market Pool, which is administered by The
National Council on Compensation Insurance ("NCCI"). The Company is currently
involved in legal proceedings regarding the MWCRP's deficit which through a
legislated settlement issued on June 23, 1995 provided for an initial funding of
$220.0 million, of which the insurance carriers were responsible for $65.0
million. Hanover paid its allocation of $4.2 million in December 1995. Some of
the small carriers are currently appealing this decision. The Company's right to
recover reinsurance balances for claims properly paid is not at issue in any
such proceedings. The Company expects to collect its reinsurance balance;
however, funding of the cash flow needs of the MWCRP may in the future be
affected by issues related to certain litigation, the outcome of which the
Company cannot predict. The Company ceded to MCCA net premiums earned and losses
and loss adjustment expenses in 1995, 1994 and 1993 of $66.8 million and $62.9
million, $80.0 million and $24.2 million, and $76.4 million and $126.8 million,
respectively. Because the MCCA is supported by assessments permitted by statute,
and all amounts billed by the Company to CAR, MWCRP and MCCA have been paid when
due, the Company believes that it has no significant exposure to uncollectible
reinsurance balances.

F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The effects of reinsurance were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
----------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Life insurance premiums:
Direct....................................... $ 438.9 $ 447.2 $ 453.0
Assumed 71.0 54.3 31.3
Ceded........................................ (150.3) (111.0) (83.2)
--------- --------- ---------
Net premiums................................... $ 359.6 $ 390.5 $ 401.1
--------- --------- ---------
--------- --------- ---------
Property and casualty premiums written:
Direct....................................... $2,039.4 $1,992.4 $1,906.2
Assumed...................................... 125.0 128.6 106.3
Ceded........................................ (279.1) (298.1) (267.4)
--------- --------- ---------
Net premiums................................... $1,885.3 $1,822.9 $1,745.1
--------- --------- ---------
--------- --------- ---------
Property and casualty premiums earned:
Direct....................................... $2,021.7 $1,967.1 $1,870.1
Assumed...................................... 137.7 116.1 114.8
Ceded........................................ (296.2) (291.9) (306.7)
--------- --------- ---------
Net premiums................................... $1,863.2 $1,791.3 $1,678.2
--------- --------- ---------
--------- --------- ---------
Life insurance and other individual policy
benefits, claims, losses and loss adjustment
expenses:
Direct....................................... $ 749.6 $ 773.0 $ 819.4
Assumed...................................... 38.5 28.9 6.8
Ceded........................................ (69.5) (61.6) (38.4)
--------- --------- ---------
Net policy benefits, claims, losses and loss
adjustment expenses........................... $ 718.6 $ 740.3 $ 787.8
--------- --------- ---------
--------- --------- ---------
Property and casualty benefits, claims, losses
and loss adjustment expenses:
Direct....................................... $1,372.7 $1,364.4 $1,310.3
Assumed...................................... 146.1 102.7 98.8
Ceded........................................ (229.1) (160.4) (209.7)
--------- --------- ---------
Net policy benefits, claims, losses and loss
adjustment expenses........................... $1,289.7 $1,306.7 $1,199.4
--------- --------- ---------
--------- --------- ---------
</TABLE>

16. DEFERRED POLICY ACQUISITION EXPENSES

The following reflects the amount of policy acquisition expenses deferred
and amortized:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
-------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year...................... $ 802.8 $ 746.9 $ 700.4
Acquisition expenses deferred................... 504.8 510.3 482.3
Amortized to expense during the year............ (470.3) (475.7) (435.8)
Adjustment to equity during the year............ (50.4) 21.3 --
Transferred to the Closed Block................. (24.8) -- --
Adjustment for cession of term life insurance... (26.4) -- --
-------- -------- --------
Balance at end of year............................ $ 735.7 $ 802.8 $ 746.9
-------- -------- --------
-------- -------- --------
</TABLE>

17. LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES

The Company regularly updates its estimates at liabilities for outstanding
claims, losses and loss adjustment expenses as new information becomes available
and further events occur which may

F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
impact the resolution of unsettled claims for its property and casualty and its
accident and health lines of business. Changes in prior estimates are reflected
in results of operations in the year such changes are determined to be needed
and recorded.

The liability for outstanding claims, losses and loss adjustment expenses
related to the Company's accident and health business was $375.9 million, $305.0
million and $276.3 million at December 31, 1995, 1994 and 1993, respectively.
Accident and health claim liabilities have been re-estimated for all prior years
and were increased by $26.4 million, $6.5 million and $12.7 million in 1995,
1994 and 1993, respectively. Unfavorable development in the accident and health
business during 1995 is primarily due to reserve strengthening and adverse
experience in the Company's individual disability line of business.

The following table provides a reconciliation of the beginning and ending
property and casualty reserve for unpaid losses and loss adjustment expenses
(LAE):

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
(IN MILLIONS) 1995 1994 1993
----------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Reserve for losses and LAE, beginning of
year.......................................... $2,821.7 $2,717.3 $2,598.9
Incurred losses and LAE, net of reinsurance
recoverable:
Provision for insured events of the current
year........................................ 1,427.3 1,434.8 1,268.2
Decrease in provision for insured events of
prior years................................. (137.6) (128.1) (68.8)
--------- --------- ---------
Total incurred losses and LAE.................. 1,289.7 1,306.7 1,199.4
--------- --------- ---------
Payments, net of reinsurance recoverable:
Losses and LAE attributable to insured events
of current year............................. 652.2 650.2 523.5
Losses and LAE attributable to insured events
of prior years.............................. 614.3 566.9 564.3
--------- --------- ---------
Total payments................................. 1,266.5 1,217.1 1,087.8
--------- --------- ---------
Less reserves assumed by purchaser of Beacon... -- -- (28.8)
--------- --------- ---------
Change in reinsurance recoverable on unpaid
losses........................................ 51.1 14.8 35.6
--------- --------- ---------
Reserve for losses and LAE, end of year........ $2,896.0 $2,821.7 $2,717.3
--------- --------- ---------
--------- --------- ---------
</TABLE>

As part of an ongoing process, the property and casualty reserves have been
re-estimated for all prior accident years and were decreased by $137.6 million,
$128.1 million and $68.8 million in 1995, 1994 and 1993, respectively. The
increase in favorable development on prior years' reserves of $9.5 million in
1995 results primarily from a $34.6 million increase in favorable development at
Citizens. Favorable development in Citizens' personal automobile and workers'
compensation lines increased $16.6 million and $15.5 million, to favorable
development of $4.4 million and $32.7 million, respectively. Hanover's favorable
development, not including the effect of voluntary and involuntary pools, was
relatively unchanged at $90.2 million in 1995 compared to $91.7 million in 1994.
Favorable development in Hanover's workers' compensation line increased $27.7
million to $31.0 million during 1995. This was offset by decreases of $14.6
million and $12.6 million, to $45.5 million and $0.1 million, in the personal
automobile and commercial multiple peril lines, respectively. Favorable
development in Hanover's voluntary and involuntary pools decreased $23.6 million
to $0.4 million during 1995.

The increase in favorable development on prior years' reserves of $59.3
million in 1994 primarily results from an increase in favorable development in
the voluntary and involuntary pools of $47.0 million in 1994. The remainder of
the favorable reserve development in 1994 is the result of favorable severity
trends, primarily in the personal automobile and commercial multiple peril
lines.

This favorable development reflects the Regional Property and Casualty
subsidiaries' reserving philosophy consistently applied over these periods.
Conditions and trends that have affected development of the loss and LAE
reserves in the past may not necessarily occur in the future.

F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Due to the nature of business written by the Regional Property and Casualty
subsidiaries, the exposure to environmental liabilities is relatively small.
Losses and LAE reserves related to environmental damage and toxic tort
liability, included in the total reserve for losses and LAE, were $28.6 million
and $19.4 million, net of reinsurance of $8.4 million and $8.1 million, at the
end of 1995 and 1994, respectively. During 1995, the Regional Property and
Casualty subsidiaries redefined their environmental liabilities in conformity
with new guidelines issued by the NAIC. The 1994 liability has been conformed to
the 1995 presentation. This had no impact on results of operations. Management
believes that, notwithstanding the evolution of case law expanding such
liability, recorded reserves for environmental liability are adequate, and is
not aware of any litigation or pending claims that may result in additional
material liabilities in excess of recorded reserves. During 1995, Hanover
performed an actuarial review of its environmental reserves. This resulted in
Hanover's providing additional reserves for "IBNR" (incurred but not reported)
claims, in addition to existing reserves for reported claims. At Citizens,
environmental reserves are primarily related to reported claims. Although these
claims are not material, their existence gives rise to uncertainty and is
discussed because of the possibility, however remote, that they may become
material. The environmental liability could be revised in the near term if the
estimates used in determining the liability are revised.

18. MINORITY INTEREST

The Company's interest in Allmerica P&C, is represented by ownership of
58.3%, 57.4% and 57.4% of the outstanding shares of common stock at December 31,
1995, 1994 and 1993, respectively. Earnings and shareholders' equity
attributable to minority shareholders are included in minority interest in the
consolidated financial statements.

19. CONTINGENCIES

REGULATORY AND INDUSTRY DEVELOPMENTS

Unfavorable economic conditions have contributed to an increase in the
number of insurance companies that are under regulatory supervision. This is
expected to result in an increase in mandatory assessments by state guaranty
funds, or voluntary payments by, solvent insurance companies to cover losses to
policyholders of insolvent or rehabilitated companies. Mandatory assessments,
which are subject to statutory limits, can be partially recovered through a
reduction in future premium taxes in some states. The Company is not able to
reasonably estimate the potential effect on it of any such future assessments or
voluntary payments.

LITIGATION

On June 23, 1995, the governor of Maine approved a legislative settlement
for the Maine Workers' Compensation Residual Market Pool deficit for the years
1988 through 1992. The settlement provides for an initial funding of $220.0
million toward the deficit. The insurance carriers are liable for $65.0 million
payable on or before January 1, 1996, and employers will contribute $110.0
million payable through surcharges on premiums over the course of the next ten
years. The major insurers are responsible for 90% of the $65.0 million.
Hanover's allocated share of the settlement is approximately $4.2 million, which
was paid in December 1995. The remainder of the deficit of $45.0 million will be
paid by the Maine Guaranty Fund Surplus payable in quarterly contributions over
ten years. The smaller carriers have recently filed litigation to appeal the
settlement. The Company believes that adequate reserves have been established
for any additional liability.

The Company has been named a defendant in various other legal proceedings
arising in the normal course of business. In the opinion of management, based on
the advice of legal counsel, the ultimate resolution of these proceedings will
not have a material effect on the Company's consolidated financial statements.
However, liabilities related to these proceedings could be established in the
near term if estimates of the ultimate resolution of these proceedings are
revised.

F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

RESIDUAL MARKETS

The Company is required to participate in residual markets in various
states. The results of the residual markets are not subject to the
predictability associated with the Company's own managed business, and are
significant to the workers' compensation line of business and both the private
passenger and commercial automobile lines of business.

20. STATUTORY FINANCIAL INFORMATION

The insurance subsidiaries are required to file annual statements with state
regulatory authorities prepared on an accounting basis prescribed or permitted
by such authorities (statutory basis). Statutory surplus differs from
shareholders' equity reported in accordance with generally accepted accounting
principles for stock life insurance companies primarily because policy
acquisition costs are expensed when incurred, investment reserves are based on
different assumptions, postretirement benefit costs are based on different
assumptions and reflect a different method of adoption, life insurance reserves
are based on different assumptions and income tax expense reflects only taxes
paid or currently payable. Statutory net income and surplus are as follows:

<TABLE>
<CAPTION>
(IN MILLIONS) 1995 1994 1993
--------------------------------------------------- --------- ------- -------
<S> <C> <C> <C>
Statutory net income (Unconsolidated)
Property and Casualty Companies.................. $ 139.8 $ 74.5 $166.8
Life and Health Companies........................ 134.3 40.7 114.8
--------- ------- -------
Statutory Shareholders' Surplus (Unconsolidated)
Property and Casualty Companies.................. $1,151.7 $989.8 $960.1
Life and Health Companies........................ 965.6 465.3 526.4
--------- ------- -------
</TABLE>

21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The quarterly results of operations for 1995 and 1994 are summarized below:

<TABLE>
<S> <C> <C> <C> <C>
1995 March 30 June 30 Sept. 30 Dec. 31
Total revenues............................ $ 841.4 $ 793.4 $ 819.2 $ 784.5
-------- ------- -------- -------
Income before extraordinary item $ 39.2 $ 29.9 $ 34.8 $ 45.2
Extraordinary item -- demutualization
expenses................................. (2.5) (3.5) (4.7) (1.4)
-------- ------- -------- -------
Net income................................ $ 36.7 $ 26.4 $ 30.1 $ 43.8
-------- ------- -------- -------
-------- ------- -------- -------
1994
Total revenues............................ $815.4 $786.8 $799.3 $793.6
-------- ------- -------- -------
Income (loss) before extraordinary item $(10.9) $ 15.7 $ 26.6 $ 17.7
Extraordinary item -- demutualization
expenses................................. (1.6) (2.5) (2.8) (2.3)
Cumulative effect of changes in accounting
principles............................... (1.9) -- -- --
-------- ------- -------- -------
Net income................................ $(14.4) $ 13.2 $ 23.8 $ 15.4
-------- ------- -------- -------
-------- ------- -------- -------
</TABLE>

F-33
<PAGE>
APPENDIX A
OPTIONAL BENEFITS

This Appendix is intended to provide only a very brief overview of
additional insurance benefits available by rider. The following supplemental
benefits are available for issue under the Certificates for an additional
charge.

WAIVER OF PREMIUM RIDER

This rider provides that, during periods of total disability continuing for
more than the period of time specified in the rider, the Company will add to the
Certificate Value each month an amount selected by you or the amount necessary
to maintain Certificate in force, whichever is greater. This benefit is subject
to the Company's maximum issue benefits. Its cost may change yearly.

OTHER INSURED RIDER

This rider provides a term insurance benefit for up to five Insureds. At
present this benefit is only available for the spouse and children of the
primary Insured. The rider includes a feature that allows the "Other Insured" to
convert the coverage to a flexible premium adjustable life insurance
Certificate.

CHILDREN'S INSURANCE RIDER

This rider provides coverage for eligible minor children. It also covers
future children, including adopted children and step children.

ACCIDENTAL DEATH BENEFIT RIDER

This rider pays an additional benefit for death resulting from a covered
accident prior to the Certificate anniversary nearest the Insured's Age 70.

OPTION TO ACCELERATE BENEFITS RIDER

This rider permits part of the proceeds of the Certificate to be available
before death if the Insured becomes terminally ill and, depending on the group
to which the Certificate is issued, may also pay part of the proceeds if the
Insured is permanently confined to a nursing home.

EXCHANGE OPTION RIDER

This rider allows you to use the Certificate to insure a different person,
subject to Company guidelines.

A-1
<PAGE>
APPENDIX B
PAYMENT OPTIONS

PAYMENT OPTIONS -- Upon written request, the Surrender Value or all or part
of the Death Proceeds may be placed under one or more of the payment options
then offered by the Company. If you do not make an election, the Company will
pay the benefits in a single sum. A certificate will be provided to the payee
describing the payment option selected.

If a payment option is selected, the Beneficiary may pay to the Company any
amount that would otherwise be deducted from the Death Benefit.

The amounts payable under a payment option are paid from the General
Account. These amounts are not based on the investment experience of the Group
VEL Account.

SELECTION OF PAYMENT OPTIONS -- The amount applied under any one option for
any one payee must be at least $5,000. The periodic payment for any one payee
must be at least $50. Subject to your and/or the Beneficiary's provision any
option selection may be changed before the Death Proceeds becomes payable. If
you make no selection, the Beneficiary may select an option when the Death
Proceeds becomes payable.

A-2
<PAGE>
APPENDIX C
ILLUSTRATIONS OF SUM INSURED, CERTIFICATE VALUES
AND ACCUMULATED PREMIUMS

The tables illustrate the way in which a Certificate's Sum Insured and
Certificate Value could vary over an extended period of time. They assume that
all premiums are allocated to and remain in the Group VEL Account for the entire
period shown and are based on hypothetical gross investment rates of return for
the Underlying Fund (i.e., investment income and capital gains and losses,
realized or unrealized) equivalent to constant gross (after tax) annual rates of
0%, 6%, and 12%.

The tables illustrate a Certificate issued to a person, Age 30, under a
standard Premium Class and qualifying for the non-smoker discount and a
Certificate issued to a person, Age 45, under a standard Premium Class and
qualifying for the non-smoker discount. The tables illustrate the guaranteed
cost of insurance rates the current cost of insurance rates as presently in
effect.

The Certificate Values and Death Proceeds would be different from those
shown if the gross annual investment rates of return averaged 0%, 6%, and 12%
over a period of years, but fluctuated above or below such averages for
individual Certificate years. The values would also be different depending on
the allocation of a Certificate's total Certificate Value among the Sub-Accounts
of the Group VEL Account, if the actual rates of return averaged 0%, 6% or 12,
but the rates of each Underlying Fund varied above and below such averages.

The amounts shown for the Death Proceeds and Certificate Values take into
account the deduction from premium for the premium tax charge, the Monthly
Deduction from Certificate Value, and the daily charge against the Group VEL
Account for mortality and expense risks equivalent to an effective annual rate
of 0.90% of the average daily value of the assets in the Group VEL Account
attributable to the Certificates. The amounts shown in the tables also take into
account the Underlying Investment Company advisory fees and operating expenses,
which are assumed to be at an annual rate of 0.85% of the average daily net
assets of the Underlying Investment Company. The actual fees and expenses of
each Underlying Investment Company vary, and in 1995 ranged from an annual rate
of 0.35% to an annual rate of 1.36% of average daily net assets. The fees and
expenses associated with your Certificate may be more or less than 0.85% in the
aggregate, depending upon how you make allocations of Certificate Value among
the Sub-Accounts.

Under its Management Agreement with the Trust, Allmerica Investments has
declared a voluntary expense limitation of 1.50% of average net average assets
for the Select International Equity Fund, 1.20% for the Growth Fund, 1.00% for
the Investment Grade Income Fund, 0.60% for the Money Market Fund, 0.60% for the
Equity Index Fund, 1.00% for the Government Bond Fund, 1.35% for the Select
Aggressive Growth Fund and the Select Capital Appreciation Fund, 1.20% for the
Select Growth Fund, 1.10% for the Select Growth and Income Fund, and 1.25% for
the Small Cap Value Fund. Without the effect of the expense limitation, in 1995
the total operation expenses of the Select Capital Appreciation Fund would have
been 1.42% of average net assets. Fidelity Management has voluntarily agreed to
temporarily limit the total operating expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses) of the Fidelity VIP
Equity-Income, Fidelity VIP Growth and Fidelity VIP Overseas Portfolios to an
annual rate of 1.50%, and of the Fidelity VIP High Income Portfolio to an annual
rate of 1.00%, and of the Fidelity VIP II Asset Manager Portfolio to an annual
rate of 1.25%, of each Portfolio's average net assets. Delaware International
has agreed voluntarily to waive its management fees and reimburse the
International Equity Series to limit certain expenses to 8/10 of 1% of the
average daily net assets. Without the effect of the expense limitations, in 1995
the total operating expenses of the International Equity Series would have been
0.89% of its average net assets. For the Industrial Income Fund and Total Return
Fund of INVESCO VIF, the ratio of total expenses, less expenses voluntarily
absorbed by the investment adviser, were 1.03% and 1.01%, respectively. If such
expenses had not been voluntarily absorbed, the total operation expenses of the
Industrial Income Fund and the Total Return Fund would have been 2.31% and
2.51%, respectively.

A-3
<PAGE>
Taking into account the 0.90% charge to the Group VEL Account and the
assumed 0.85% charge for Underlying Investment Company advisory fees and
operating expenses, the gross annual rates of investment return of 0%, 6% and
12% correspond to net annual rates of -1.75%, 4.25% and 10.25%, respectively.

The hypothetical returns shown in the table do not reflect any charges for
income taxes against the Group VEL Account since no charges are currently made.
However, if in the future such charges are made, in order to produce illustrated
death benefits and cash values, the gross annual investment rate of return would
have to exceed 0%, 6% or 12% by a sufficient amount to cover the tax charges.

The second column of the tables show the amount which would accumulate if an
amount equal to the Guideline Annual Premium were invested to earn interest,
(after taxes) at 5% compounded annually.

The tables illustrate the Certificate Values that would result based upon
the assumptions that no Certificate loans have been made, that you have not
requested an increase or decrease in the initial Face Amount, that no partial
withdrawals have been made, and that no transfers above 6 have been made in any
Certificate year (so that no transaction or transfer charges have been
incurred).

Upon request, the Company will provide a comparable illustration based upon
the proposed Insured's Age, sex, and underwriting classification, and the
requested Face Amount, Sum Insured Option, and riders.

A-4
<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE POLICY
NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
SUM INSURED OPTION 1
CURRENT COST OF INSURANCE CHARGES

<TABLE>
<CAPTION>
PREMIUMS
PAID HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST --------------------------------- --------------------------------- ---------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---------- -------- --------- ----------- ------- --------- ----------- ------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 153 3,502 250,000 382 3,731 250,000 611 3,960 250,000
2 9,040 3,565 6,914 250,000 4,242 7,591 250,000 4,948 8,297 250,000
3 13,903 6,887 10,236 250,000 8,236 11,585 250,000 9,699 13,048 250,000
4 19,008 10,249 13,464 250,000 12,500 15,715 250,000 15,039 18,254 250,000
5 24,368 13,787 16,601 250,000 17,174 19,987 250,000 21,150 23,963 250,000
6 29,996 17,232 19,644 250,000 21,993 24,405 250,000 27,814 30,225 250,000
7 35,906 20,577 22,587 250,000 26,958 28,967 250,000 35,083 37,093 250,000
8 42,112 23,823 25,431 250,000 32,074 33,682 250,000 43,024 44,632 250,000
9 48,627 26,969 28,174 250,000 37,348 38,554 250,000 51,708 52,913 250,000
10 55,469 30,010 30,814 250,000 42,783 43,587 250,000 61,212 62,015 250,000
11 62,652 33,346 33,346 250,000 48,784 48,784 250,000 72,025 72,025 250,000
12 70,195 35,735 35,735 250,000 54,122 54,122 250,000 83,014 83,014 250,000
13 78,114 37,977 37,977 250,000 59,604 59,604 250,000 95,092 95,092 250,000
14 86,430 40,076 40,076 250,000 65,244 65,244 250,000 108,393 108,393 250,000
15 95,161 42,023 42,023 250,000 71,043 71,043 250,000 123,055 123,055 250,000
16 104,330 43,806 43,806 250,000 77,002 77,002 250,000 139,237 139,237 250,000
17 113,956 45,448 45,448 250,000 83,155 83,155 250,000 157,141 157,141 250,000
18 124,064 46,935 46,935 250,000 89,504 89,504 250,000 176,973 176,973 250,000
19 134,677 48,253 48,253 250,000 96,054 96,054 250,000 198,972 198,972 250,000
20 145,820 49,388 49,388 250,000 102,813 102,813 250,000 223,320 223,320 272,451
Age 60 95,161 42,023 42,023 250,000 71,043 71,043 250,000 123,055 123,055 250,000
Age 65 145,820 49,388 49,388 250,000 102,813 102,813 250,000 223,320 223,320 272,451
Age 70 210,477 51,357 51,357 250,000 139,910 139,910 250,000 386,432 386,432 448,262
Age 75 292,995 44,916 44,916 250,000 184,624 184,624 250,000 649,170 649,170 694,611
</TABLE>

(1) Assumes a $4,200 premium is paid at the beginning of each Certificate Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.

(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate Value.

THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A CERTIFICATE
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE VALUE OF
UNITS, CASH VALUE, AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGES 0%, 6%, AND 12%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR
INDIVIDUAL CERTIFICATE YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE
TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIVES CAN BE MADE THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.

A-5
<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE POLICY
NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
SUM INSURED OPTION 1
GUARANTEED COST OF INSURANCE CHARGES

<TABLE>
<CAPTION>
PREMIUMS
PAID HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST --------------------------------- --------------------------------- --------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---------- -------- --------- ----------- ------- --------- ----------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 0 3,167 250,000 36 3,385 250,000 255 3,604 250,000
2 9,040 2,879 6,228 250,000 3,514 6,863 250,000 4,177 7,526 250,000
3 13,903 5,833 9,182 250,000 7,087 10,436 250,000 8,447 11,796 250,000
4 19,008 8,807 12,022 250,000 10,884 14,099 250,000 13,231 16,446 250,000
5 24,368 11,935 14,748 250,000 15,043 17,857 250,000 18,702 21,515 250,000
6 29,996 14,947 17,358 250,000 19,298 21,709 250,000 24,635 27,046 250,000
7 35,906 17,829 19,839 250,000 23,639 25,648 250,000 31,066 33,075 250,000
8 42,112 20,574 22,182 250,000 28,061 29,669 250,000 38,044 39,651 250,000
9 48,627 23,170 24,376 250,000 32,558 33,764 250,000 45,619 46,825 250,000
10 55,469 25,603 26,407 250,000 37,119 37,923 250,000 53,849 54,652 250,000
11 62,652 28,268 28,268 250,000 42,145 42,145 250,000 63,206 63,206 250,000
12 70,195 29,950 29,950 250,000 46,426 46,426 250,000 72,568 72,568 250,000
13 78,114 31,445 31,445 250,000 50,762 50,762 250,000 82,830 82,830 250,000
14 86,430 32,744 32,744 250,000 55,154 55,154 250,000 94,103 94,103 250,000
15 95,161 33,837 33,837 250,000 59,598 59,598 250,000 106,511 106,511 250,000
16 104,330 34,697 34,697 250,000 64,077 64,077 250,000 120,186 120,186 250,000
17 113,956 35,302 35,302 250,000 68,583 68,583 250,000 135,293 135,293 250,000
18 124,064 35,617 35,617 250,000 73,094 73,094 250,000 152,015 152,015 250,000
19 134,677 35,596 35,596 250,000 77,583 77,583 250,000 170,572 170,572 250,000
20 145,820 35,194 35,194 250,000 82,028 82,028 250,000 191,230 191,230 250,000
Age 60 95,161 33,837 33,837 250,000 59,598 59,598 250,000 106,511 106,511 250,000
Age 65 145,820 35,194 35,194 250,000 82,028 82,028 250,000 191,230 191,230 250,000
Age 70 210,477 26,069 26,069 250,000 103,101 103,101 250,000 331,550 331,550 384,598
Age 75 292,995 0 0 0 119,588 119,588 250,000 555,584 555,584 594,475
</TABLE>

(1) Assumes a $4,200 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.

(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate Value.

A-6
<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE POLICY
NON-SMOKER AGE 30
SPECIFIED FACE AMOUNT = $75,000
SUM INSURED OPTION 2
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
CURRENT COST OF INSURANCE CHARGES

<TABLE>
<CAPTION>
PREMIUMS
PAID HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST --------------------------------- --------------------------------- ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---------- -------- --------- ----------- ------- --------- ----------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,470 393 1,221 76,221 471 1,299 76,299 549 1,377 76,377
2 3,014 1,592 2,420 77,420 1,824 2,652 77,652 2,066 2,894 77,894
3 4,634 2,768 3,596 78,596 3,234 4,062 79,062 3,728 4,566 79,566
4 6,336 3,955 4,750 79,750 4,734 5,529 80,529 5,611 6,406 81,406
5 8,123 5,185 5,881 80,881 6,360 7,055 82,055 7,736 8,432 83,432
6 9,999 6,392 6,989 81,989 8,048 8,644 83,644 10,066 10,663 85,663
7 11,969 7,576 8,073 83,073 9,799 10,296 95,296 12,621 13,118 88,118
8 14,037 8,737 9,135 84,135 11,616 12,013 87,013 15,422 15,820 90,820
9 16,209 9,874 10,172 85,172 13,500 13,798 88,798 18,495 18,793 93,793
10 18,490 10,986 11,185 86,185 15,454 15,653 90,653 22,865 22,064 97,064
11 20,884 12,174 12,174 87,174 17,579 17,579 92,579 25,644 25,644 100,664
12 23,398 13,137 13,137 88,137 19,580 19,580 94,580 29,625 29,625 104,625
13 26,038 14,077 14,077 89,077 21,657 21,657 96,657 33,983 33,983 108,983
14 28,810 14,991 14,991 89,991 23,814 23,814 98,814 38,779 38,779 113,779
15 31,720 15,880 15,880 90,880 26,054 26,054 101,054 44,057 44,057 119,057
16 34,777 16,743 16,743 91,743 28,377 28,377 103,377 49,865 49,865 124,865
17 37,985 17,580 17,580 92,580 30,788 30,788 105,788 56,256 56,256 131,256
18 41,355 18,391 18,391 93,391 33,290 33,290 108,290 63,290 63,290 138,290
19 44,892 19,174 19,174 94,174 35,884 35,884 110,884 71,031 71,031 146,031
20 48,607 19,930 19,930 94,930 38,574 38,574 113,574 79,550 79,550 154,550
Age 60 97,665 25,579 25,579 100,579 71,166 71,166 146,166 229,234 229,234 307,173
Age 65 132,771 26,546 26,546 101,546 91,516 91,516 166,516 378,082 378,082 461,260
Age 70 177,576 25,537 25,537 100,537 114,403 114,403 189,403 617,137 617,137 715,879
Age 75 234,759 21,566 21,566 96,566 139,062 139,062 214,062 1,001,969 1,001,969 1,076,969
</TABLE>

A-7
<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE POLICY
NON-SMOKER AGE 30
SPECIFIED FACE AMOUNT = $75,000
SUM INSURED OPTION 2
GUARANTEED COST OF INSURANCE CHARGES

<TABLE>
<CAPTION>
PREMIUMS
PAID HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST --------------------------------- --------------------------------- ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---------- -------- --------- ----------- ------- --------- ----------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,470 349 1,178 76,178 426 1,254 76,254 503 1,331 76,331
2 3,014 1,504 2,332 77,332 1,731 2,559 77,559 1,968 2,796 77,796
3 4,634 2,637 3,465 78,465 3,090 3,918 78,918 3,580 4,408 79,408
4 6,336 3,779 4,574 79,574 4,536 5,331 80,331 5,388 6,183 81,183
5 8,123 4,963 5,658 80,658 6,102 6,798 81,798 7,438 8,133 83,133
6 9,999 6,123 6,719 81,719 7,726 8,322 83,322 9,683 10,279 85,279
7 11,969 7,258 7,755 82,755 9,408 9,905 84,905 12,140 12,637 87,637
8 14,037 8,367 8,765 83,765 11,149 11,547 86,547 14,832 15,229 90,229
9 16,209 9,449 9,747 84,747 12,951 13,249 88,249 17,779 18,077 93,077
10 18,490 10,503 10,702 85,702 14,813 15,012 90,012 21,006 21,205 96,205
11 20,884 11,629 11,629 86,629 16,839 16,839 91,839 24,642 24,642 99,642
12 23,398 12,526 12,526 87,526 18,730 18,730 93,730 28,417 28,417 103,417
13 26,038 13,396 13,396 88,396 20,688 20,688 95,688 32,565 32,565 107,565
14 28,810 14,234 14,234 89,234 22,712 22,712 97,712 37,122 37,122 112,122
15 31,720 15,042 15,042 90,042 24,808 24,808 99,808 42,131 42,131 117,131
16 34,777 15,818 15,818 90,818 26,974 26,974 101,974 47,632 47,632 122,632
17 37,985 16,562 16,562 91,562 29,212 29,212 104,212 53,678 53,678 128,678
18 41,355 17,272 17,272 92,272 31,524 31,524 106,524 60,322 60,322 135,322
19 44,892 17,947 17,947 92,947 33,911 33,911 108,911 67,623 67,623 142,623
20 48,607 18,586 18,586 93,586 36,375 36,375 111,375 75,646 75,646 150,646
Age 60 97,665 22,267 22,267 97,267 64,992 64,992 139,992 215,170 215,170 290,170
Age 65 132,771 21,310 21,310 96,310 81,383 81,383 156,383 352,366 352,366 429,887
Age 70 177,576 16,934 16,934 91,934 97,538 97,538 172,538 570,328 570,328 661,581
Age 75 234,759 7,121 7,121 82,121 110,763 110,763 185,763 917,144 917,144 992,144
</TABLE>

(1) Assumes a $1,400 premium is paid at the beginning of each Certificate Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A CERTIFICATE
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE VALUE OF
UNITS, CASH VALUE, AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGES 0%, 6%, AND 12%
OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE AVERAGES FOR
INDIVIDUAL CERTIFICATE YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE
TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIVES CAN BE MADE THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.

A-8

<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE POLICY *
NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
SUM INSURED OPTION 3
GUARANTEED COST OF INSURANCE CHARGES

<TABLE>
<CAPTION>
PREMIUMS
PAID HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST --------------------------------- --------------------------------- ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---------- -------- --------- ----------- ------- --------- ----------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,818 8,429 11,778 250,000 9,173 12,522 250,000 9,918 13,267 250,000
2 28,327 19,983 23,332 250,000 22,213 25,562 250,000 24,533 27,882 250,000
3 43,561 31,317 34,666 250,000 35,795 39,144 250,000 40,643 43,992 250,000
4 59,557 42,566 45,781 250,000 50,080 53,295 250,000 58,544 61,759 250,000
5 76,353 53,872 56,685 250,000 65,235 68,048 250,000 78,555 81,368 250,000
6 93,989 64,971 67,382 250,000 81,024 83,435 250,000 100,551 102,962 275,938
7 112,506 75,862 77,871 250,000 97,456 99,465 258,608 124,533 126,542 329,009
8 131,950 86,546 88,154 250,000 114,395 116,003 292,327 150,669 152,277 383,738
9 152,365 97,028 98,234 250,000 131,846 133,052 324,646 179,141 180,347 440,048
10 173,801 108,044 108,044 256,065 150,604 150,604 356,931 210,931 210,931 499,905
11 196,309 117,547 117,547 270,357 168,663 168,663 387,926 244,236 244,236 561,744
12 219,943 126,743 126,743 282,638 187,237 187,237 417,538 280,493 280,493 625,498
13 244,758 135,641 135,641 292,984 206,332 206,332 445,676 319,950 319,950 691,092
14 270,814 144,235 144,235 302,894 225,942 225,942 474,479 362,856 362,856 761,997
15 298,173 152,532 152,532 311,165 246,075 246,075 501,993 409,498 409,498 835,375
16 326,899 160,510 160,510 319,414 266,692 266,692 530,717 460,110 460,110 915,618
17 357,062 168,192 168,192 324,611 287,824 287,824 555,501 515,061 515,061 994,067
18 388,733 175,554 175,554 330,041 309,420 309,420 581,710 574,599 574,599 1,080,247
19 421,988 182,586 182,586 334,133 331,452 331,452 606,557 639,032 639,032 1,169,429
20 456,905 189,291 189,291 336,938 353,905 353,905 629,951 708,707 708,707 1,261,499
Age 60 298,173 152,532 152,532 311,165 246,075 246,075 501,993 409,498 409,498 835,375
Age 65 456,905 189,291 189,291 336,938 353,905 353,905 629,951 708,707 708,707 1,261,499
Age 70 659,493 217,841 217,841 344,189 471,552 471,552 745,053 1,148,569 1,148,569 1,814,739
Age 75 918,052 238,343 238,343 338,447 595,761 595,761 845,980 1,780,948 1,780,948 2,528,946
</TABLE>

(1) Assumes a $13,160 premium is paid at the beginning of each Certificate Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.
(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate Value.

A-9
<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE POLICY *
NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
SUM INSURED OPTION 3
CURRENT COST OF INSURANCE CHARGES

<TABLE>
<CAPTION>
PREMIUMS
PAID HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST --------------------------------- --------------------------------- ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---------- -------- --------- ----------- ------- --------- ----------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,818 8,752 12,101 250,000 9,506 12,855 250,000 10,261 13,610 250,000
2 28,327 20,632 23,981 250,000 22,900 26,249 250,000 25,259 28,608 250,000
3 43,561 32,294 35,643 250,000 36,857 40,206 250,000 41,795 45,144 250,000
4 59,557 43,875 47,090 250,000 51,537 54,753 250,000 60,163 63,378 250,000
5 76,353 55,515 58,328 250,000 67,105 69,918 250,000 80,683 83,496 250,000
6 93,989 66,950 69,361 250,000 83,324 85,735 250,000 103,233 105,644 283,127
7 112,506 78,181 80,190 250,000 100,190 102,199 265,718 127,918 129,927 337,811
8 131,950 89,215 90,823 250,000 117,656 119,264 300,544 154,940 156,548 394,501
9 152,365 100,055 101,260 250,000 135,742 136,947 334,151 184,522 185,728 453,176
10 173,801 111,447 111,447 264,129 155,262 155,262 367,972 217,699 217,699 515,946
11 196,309 121,382 121,382 279,179 174,227 174,227 400,722 252,719 252,719 581,254
12 219,943 131,047 131,047 292,234 193,825 193,825 432,229 291,022 291,022 648,979
13 244,758 140,442 140,442 303,355 214,070 214,070 462,390 332,901 332,901 719,067
14 270,814 149,574 149,574 314,106 234,978 234,978 493,454 378,683 378,683 795,234
15 298,173 158,441 158,441 323,220 256,560 256,560 523,382 428,707 428,707 874,562
16 326,899 167,033 167,033 332,396 278,805 278,805 554,822 483,312 483,312 961,790
17 357,062 175,391 175,391 338,505 301,791 301,791 582,457 543,016 543,016 1,048,020
18 388,733 183,504 183,504 344,987 325,511 325,511 611,960 608,234 608,234 1,143,480
19 421,988 191,372 191,372 350,211 349,977 349,977 640,458 679,453 679,453 1,243,398
20 456,905 199,000 199,000 354,221 375,207 375,207 667,868 757,208 757,208 1,347,831
Age 60 298,173 158,441 158,441 323,220 256,560 256,560 523,382 428,707 428,707 874,562
Age 65 456,905 199,000 199,000 354,221 375,207 375,207 667,868 757,208 757,208 1,347,831
Age 70 659,493 233,168 233,168 368,406 512,262 512,262 809,374 1,263,390 1,263,390 1,996,156
Age 75 918,052 261,169 261,169 370,860 668,451 668,451 949,200 2,035,582 2,035,582 2,890,526
</TABLE>

A-10
<PAGE>
APPENDIX D -- CALCULATION OF MAXIMUM SURRENDER CHARGES

A separate surrender charge may be calculated upon issuance of the
Certificate and upon each increase in Face Amount. The maximum surrender charge
calculated upon issuance of the Certificate is up to $8.50 per thousand dollars
of the initial Face Amount plus up to 50% (less any premium expense charge not
associated with state and local premium taxes) of the Guideline Annual Premium,
depending on the group to which the Certificate is issued. The maximum surrender
charge for an increase in Face Amount is an amount up to $8.50 per thousand
dollars of increase, plus up to 50% (less any premium expense charge not
associated with state and local premium taxes) of the Guideline Annual Premium
for the increase. The calculation may be summarized in the following formula:

Maximum Surrender Charge = (8.5 X Face Amount) + (up to 50% X Guideline Annual
Premium)
1000

A further limitation is imposed based on the Standard Non-Forfeiture Law of
each state. The maximum surrender charges upon issuance of the Certificate and
upon each increase in Face Amount are shown in the table below. During the first
two Certificate years following issue or an increase in Face Amount, the actual
surrender charge may be less than the maximum. See "CHARGES AND DEDUCTIONS --
Surrender Charge."

The maximum surrender charge remains level for up to 24 Certificate months,
reduces uniformly for the balance of the surrender charge period, and is zero
thereafter. The actual surrender charge imposed may be less than the maximum.

The Factors used in calculating the maximum surrender charges vary with the
issue Age and Underwriting Class as indicated in the table below.

A-11
<PAGE>
MAXIMUM SURRENDER CHARGE PER $1000 FACE AMOUNT

<TABLE>
<CAPTION>
AGE AT AGE AT
ISSUE OR UNISEX UNISEX UNISEX ISSUE OR UNISEX UNSEX UNISEX
INCREASE NONSMOKER SMOKER UNISMOKE INCREASE NONSMOKER SMOKER UNISMOKE
- ------------- ------------- ----------- ----------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
0 14.89 14.37 41 27.74 32.73 29.39
1 14.84 14.31 42 28.55 33.79 30.27
2 15.00 14.44 43 29.41 34.91 31.19
3 15.17 14.58 44 30.31 36.08 32.17
4 15.35 14.73 45 31.26 37.31 33.19
5 15.53 14.88 46 32.27 38.60 34.27
6 15.73 15.05 47 33.33 39.95 35.40
7 15.94 15.23 48 34.46 41.38 36.59
8 16.16 15.41 49 35.64 42.89 37.86
9 16.39 15.61 50 36.90 44.48 39.19
10 16.64 15.82 51 38.24 46.17 40.60
11 16.91 16.05 52 39.66 47.95 42.10
12 17.18 16.28 53 41.17 49.84 43.68
13 17.47 16.52 54 42.76 51.82 45.36
14 17.77 16.77 55 44.46 53.91 47.12
15 18.08 17.02 56 46.25 56.11 48.98
16 18.38 17.28 57 48.16 56.87 50.95
17 18.67 17.54 58 50.18 56.76 53.03
18 17.15 18.98 17.80 59 52.34 56.65 55.24
19 17.40 19.29 18.07 60 54.64 56.54 56.71
20 17.65 19.62 18.35 61 56.54 56.44 56.59
21 17.92 19.95 18.64 62 56.41 56.34 56.47
22 18.20 20.31 18.95 63 56.29 56.26 56.36
23 18.49 20.68 19.27 64 56.16 56.18 56.25
24 18.80 21.08 19.61 65 56.03 56.10 56.13
25 19.13 21.49 19.97 66 55.90 56.01 56.00
26 19.48 21.94 20.35 67 55.74 55.90 55.85
27 19.85 22.42 20.75 68 55.58 55.76 55.70
28 20.24 22.92 21.18 69 55.41 55.63 55.53
29 20.65 23.45 21.63 70 55.27 55.49 55.37
30 21.08 24.02 22.11 71 55.12 55.38 55.22
31 21.54 24.62 22.61 72 54.96 55.29 55.10
32 22.03 25.25 23.15 73 54.85 55.23 54.99
33 22.54 25.92 23.71 74 54.75 55.19 54.89
34 23.03 26.62 24.30 75 54.64 55.16 54.80
35 23.64 27.36 24.92 76 54.52 55.10 54.69
36 24.24 28.15 25.57 77 54.36 55.01 54.53
37 24.87 28.97 26.26 78 54.18 54.86 54.35
38 25.53 29.84 26.99 79 53.97 54.68 54.14
39 26.23 30.76 27.75 80 53.75 54.49 53.91
40 26.97 31.72 28.55
</TABLE>

EXAMPLES

For the purposes of these examples, assume that a unisex, Age 35, non-smoker
purchases a $100,000 Certificate. In this example the Guideline Annual Premium
("GAP") equals $944.21. The maximum surrender charge is calculated as follows:

<TABLE>
<S> <C>
(1) Deferred Administrative Charge ($8.50/$1,000 of Face Amount) $ 850.00
(2) Deferred Sales Charge (50% x GAP) $ 472.11
---------
$1,322.11
Maximum Surrender Charge per Table (23.64 x 100) $2,364.00
</TABLE>

A-12
<PAGE>
During the first two Certificate years after the Date of Issue, the actual
surrender charge is the smaller of the maximum surrender charge and the
following sum:

<TABLE>
<S> <C>
(1) Deferred Administrative Charge ($8.50/$1,000 of Face
Amount) $ 850.00
(2) Deferred Sales Charge (not to exceed 30% of premiums
received, up to one GAP, plus 9% of premiums
received in excess of one GAP) Varies
------------------
Sum of (1) and (2)
</TABLE>

The maximum surrender charge is $1,322.11. All premiums are associated with
the initial Face Amount unless the Face Amount is increased.

EXAMPLE 1: Assume the Certificate Owner surrenders the Certificate in the
10th Certificate month, having paid total premiums of $900. The actual surrender
charge would be $1,120.

EXAMPLE 2: Assume the Certificate Owner surrenders the Certificate in the
120th month. Also assume that after the 24th Certificate month, the maximum
surrender charge decreases by 1/156 per month thereby reaching zero at the end
of the 15th Certificate year. In this example, the maximum surrender charge
would be $508.50.

A-13
<PAGE>

Part II

UNDERTAKING TO FILE REPORTS

Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.

RULE 484 UNDERTAKING

To the fullest extent permissible under Massachusetts General Laws, no director
shall be personally liable to the Company or any policy holder for monetary
damages for any breach of fiduciary duty as a director, notwithstanding any
provisions of law to the contrary; provided, however, that this provision shall
not eliminate or limit the liability of a director;

1. for any breach of the director's duty of loyalty to the Company or its
policy holders;

2. for acts or omissions not in good faith, or which involve intentional
misconduct or a knowing violation of law;

3. for liability, if any, imposed on directors of mutual insurance companies
pursuant to M.G.L.A. c. 156B Section 61 or M.G.L.A. c. 156B Section 62;

4. for any transactions from which the director derived an improper personal
benefit.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

RULE 26(e) REPRESENTATIONS

Registrant makes the following representations

The Company represents that the aggregate fees and charges under
the Contracts and Certificates offered by this Registration Statement
are reasonable in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by the Company.

<PAGE>

B. Distribution Costs

Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(4)(ii)(A), Registrant represents that
the Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the Registrant will benefit the Registrant
and contract holders and will keep and make available to the Commission on
request a memorandum setting forth the basis for this representation. Pursuant
to Section 6e-3(T)(b)(13)(iii)(F)(4)(ii)(B)(2), Registrant also represents that
it will invest only in management investment companies which have undertaken to
have a board of directors, a majority of whom are not interested persons of the
company, formulate and approve any plan under Rule 12b-1 under the Investment
Company Act of 1940 to finance distribution expenses.

CONTENTS OF THE REGISTRATION STATEMENT

This registration statement comprises the following papers and documents:

The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consists of ____ pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484 under the Securities Act of 1933.
Representatives, descriptions and undertaking pursuant to Rule 6e-
3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940 (the "1940 Act").
The signatures.

Written consents of the following persons:

1. Price Waterhouse LLP

2. Actuarial Consent

3. Consent of Counsel

The following exhibits:

1. Exhibit 1

(Exhibits required by paragraph A of the instructions to Form N-8B-2)

(1) Certified copy of Resolutions of the Board of Directors of
the Company of November 22, 1993 authorizing the
establishment of the Group VEL Account were previously
filed with Registrant's initial Registration Statement on
June 16, 1996 and are herein incorporated by reference.

(2) Not Applicable.

(3) (a) Form of Underwriting and Administrative Services
Agreement between the Company and Allmerica
Investments, Inc. were previously filed with Registrant's
Initial Registration Statement on June 16, 1996 and are
herein incorporated by reference.

(b) Registered Representative Agreement and Resident
Sponsor Agreement of Allmerica Investment, Inc. were
previously filed on June 3, 1987 in Registration
Statement No. 33-14672 and are incorporated herein by
reference.
<PAGE>

(4) Not Applicable.

(5)(a) Policy and Policy riders were previously filed with
Registrant's Initial Registration Statement on June 16, 1996
and are herein incorporated by reference.

(5)(b) Form of Certificate were previously filed with
Registrant's Initial Registration Statement on June 16, 1996
and are herein incorporated by reference.

(6)(a) Company's Articles of Incorporation were previously filed with
Registrant's Initial Registration Statement on June 16, 1996
and are herein incorporated by reference.

(b) Company's restated By-Laws were previously filed with
Registrant's Initial Registration Statement on June 16, 1996
and are herein incorporated by reference.

(7) Not Applicable.

(8) (a) Form of Participation Agreement with Allmerica Investment
Trust were previously filed with Registrant's Initial
Registration Statement on June 16, 1996 and are herein
incorporated by reference.

(b) Participation Agreement with Variable Insurance Products
Fund were previously filed with Registrant's Initial
Registration Statement on June 16, 1996 and are herein
incorporated by reference.

(c) Participation Agreement with Variable Insurance Products
Fund II were previously filed with Registrant's Initial
Registration Statement on June 16, 1996 and are herein
incorporated by reference.

(d) Participation Agreement with Delaware Group Premium Fund,
Inc. were previously filed with Registrant's Initial
Registration Statement on June 16, 1996 and are herein
incorporated by reference.

(e) Participation Agreement with T. Rowe Price International
Series, Inc. were previously filed with Registrant's Initial
Registration Statement on June 16, 1996 and are herein
incorporated by reference.

(f) Participation Agreement with INVESCO Funds Group, Inc.
were previously filed with Registrant's Initial Registration
Statement on June 16, 1996 and are herein incorporated by
reference.

(9) Not Applicable.

(10) Form of Application were previously filed with Registrant's
Initial Registration Statement on June 16, 1996 and are herein
incorporated by reference.

2. Form of Policy and Policy riders are included in Exhibit 1 above.

3. Opinion of Counsel.

4. Not Applicable.

5. Not Applicable.

6. Actuarial consent.

7. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) under
the 1940 Act which includes conversion procedures pursuant to
Rule 6e-3(T)(b)(13)(v)(B) were previously filed with Registrant's
Initial Registration Statement on June 16, 1996 and are herein
incorporated by reference.

8. Consent of Independent Accountants is filed herewith.

9. Not Applicable

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Pre-effective
Amendment No. 1 to the Registration Statement to be signed by the undersigned,
in the City of Worcester, and Commonwealth of Massachusetts, on the 5th day
of November, 1996.

FIRST ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY
GROUP VEL ACCOUNT

By: /s/ John F. O'Brien
------------------------------
John F. O'Brien, President

SIGNATURES TITLE DATE
- ---------- ----- ----

/s/ John F. O'Brien Director, President and Chief
John F. O'Brien Executive Officer

/s/ Bruce C. Anderson Director and Vice President
Bruce C. Anderson

/s/ John P. Kavanaugh Director and Vice President November 5, 1996
John P. Kavanaugh

/s/ John F. Kelly Director, Senior Vice President
John F. Kelly and General Counsel

/s/ James R. McAuliffe Director
James R. McAuliffe

/s/ Richard M. Reilly Director and Vice President
Richard M. Reilly

/s/ Larry C. Renfro Director and Vice President
Larry C. Renfro

/s/ Eric A. Simonsen Director, Vice President and Chief
Eric A. Simonsen Financial Officer

/s/ Phillip E. Soule Director and Vice President
Phillip E. Soule

<PAGE>

FORM S-6 EXHIBIT TABLE

Exhibit 3 Opinion of Counsel

Exhibit 6 Actuarial Consent

Exhibit 8 Consent of Independent Accountants

<PAGE>

November 5, 1996

First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester, MA 01653

Gentlemen:

In my capacity as Counsel of First Allmerica Financial Life Insurance Company
(the "Company"), I have participated in the preparation of Pre-Effective
Amdendment No. 1 to the Initial Registration Statement for the Group VEL
Account on Form S-6 and N-8B-2 under the Securities Act of 1933 and the
Investment Company Act of 1940, with respect to the group flexible premium
variable life policies and certificates issued by the Company.

I am of the following opinion:

1. The Group VEL Account is a separate account of the Company validly existing
pursuant to the Massachusetts Insurance Code and the regulations issued
thereunder.

2. The assets held in the Group VEL Account are not chargeable with
liabilities arising out of any other business the Company may conduct.

3. The Policies and Certificates, when issued in accordance with the
Prospectus contained in the initial Registration Statement and upon
compliance with applicable local law, will be legal and binding obligations
of the Company in accordance with their terms and when sold will be legally
issued, fully paid and non-assessable.

In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.

I hereby consent to the filing of this opinion as an exhibit to Pre-Effective
Amendment No. 1 to the initial Registration Statement of the Group VEL
Account filed under the Securities Act of 1933.

Very truly yours,

/s/ Sheila B. St. Hilaire
Sheila B. St. Hilaire
Counsel

<PAGE>

November 5, 1996

First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester, MA 01653

Gentlemen:

This opinion is furnished in connection with the filing by First Allmerica
Financial Life Insurance Company of Pre-Effective Amendment No. 1 to the
Initial Registration Statement on Form S-6 of its flexible premium variable
life insurance policies ("Policies") allocated to the Group VEL Account under
the Securities Act of 1933. The Prospectus included in the Pre-Effective
Amendment No. 1 to the Initial Registration Statement on Form S-6 describes
the Policies. I am familiar with and have provided actuarial advice concerning
the preparation of the Registration Statement, including exhibits.

In my professional opinion, the illustration of death benefits and cash values
included in Appendix C of the prospectus, based on the assumptions stated in the
illustrations, are consistent with the provisions of the Policy. The rate
structure of the Policies has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Policy for a person age 30 or a person
age 45 than to prospective purchasers of Policies for people at other ages or
underwriting classes. It is my opinion that the aggregate fees and charges
under the Policies are reasonable in relation to the services rendered, the
expenses expected to the incurred, and the risks assumed by First Allmerica.

I hereby consent to the use of this opinion as an exhibit to Pre-Effective
Amendment No. 1 to the Initial Registration Statement of the Group VEL
Account filed under the Securities Act of 1933.

Sincerely,

/s/ William M. Mawdsley, FSA, MAAA
William M. Mawdsley
Vice President and Actuary

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Pre-Effective Amendment No. 1 to the Registration Statement for the Group
VEL Account of First Allmerica Financial Life Insurance Company on Form S-6
of our report dated February 5, 1996, relating to the consolidated financial
statements of First Allmerica Financial Life Insurance Company which appears
in such Prospectus. We also consent to the reference to us under the heading
"Independent Accountants" in such Prospectus.

/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
November 5, 1996