<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1996
REGISTRATION NO. 33-94204
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 1 (X)
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 3 (X)
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
(Exact Name of Registrant)
First Providian Life and Health Insurance Company
(Formerly National Home Life Assurance Company of New York)
(Name of Depositor)
520 Columbia Drive
Johnson City, New York 13790
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (607) 772-8750
Kimberly A. Scouller, Esq.
First Providian Life and Health Insurance Company
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40232
(Name and Address of Agent for Service)
Copies to:
Michael Berenson, Esquire
Ann B. Furman, Esquire
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20007-0805
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[ ] On _____________, pursuant to paragraph (b)(1)(v) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] On _____________, pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant has
elected to register an indefinite amount of securities being offered pursuant to
this Registration Statement.
<PAGE>
This post-effective amendment shall not supercede or effect this Registration
Statement as it applies to Providian Advisor's Edge Variable Annuity.
<PAGE>
<TABLE>
<CAPTION>
FORM N-4
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<S> <C>
1. Cover Page...................... Cover Page
2. Definitions..................... GLOSSARY
3. Synopsis........................ HIGHLIGHTS; FEE TABLE;
Performance Measures
4. Condensed Financial Information. Not Applicable
5. General Description of
Registrant, Depositor, and
Portfolio Companies............. First Providian Life and Health Insurance
Company; First Providian Life and Health
Insurance Company Separate Account C;
Providian Series Trust; The Portfolios;
Voting Rights
6. Deductions...................... Charges and Deductions; FEDERAL TAX
CONSIDERATIONS; FEE TABLE
7. General Description of Variable
Annuity Contracts............... CONTRACT FEATURES; Distribution-at-
Death Rules; Voting Rights; Allocation of
Purchase Payments; Exchanges Among
the Portfolios; Additions, Deletions, or
Substitutions of Investments
8. Annuity Period.................. Annuity Payment Options
9. Death Benefit................... Death of Annuitant Prior to Annuity Date
10. Purchases and Contract Value.... Contract Application and Purchase
Payments; Accumulated Value
11. Redemptions..................... Full and Partial Withdrawals; Annuity
Payment Options; Right to Cancel Period
12. Taxes........................... FEDERAL TAX CONSIDERATIONS
13. Legal Proceedings............... Part B: Legal Proceedings
14. Table of Contents of the
Statement of Additional
Information..................... Table of Contents of the PGA Retirement
Annuity Statement of Additional
Information
</TABLE>
PART B
<TABLE>
<CAPTION>
ITEM OF STATEMENT OF ADDITIONAL
- ------- -----------------------
FORM N-4 INFORMATION CAPTION
- -------- -------------------
<S> <C>
15. Cover Page......................... Cover Page
16. Table of Contents.................. Table of Contents
17. General Information and History.... THE COMPANY
18. Services........................... Part A: Auditors; Part B:
SAFEKEEPING OF ACCOUNT
ASSETS; DISTRIBUTION OF THE
CONTRACTS
19. Purchase of Securities Being
Offered............................ DISTRIBUTION OF THE
CONTRACTS; Exchanges
20. Underwriters....................... DISTRIBUTION OF THE
CONTRACTS
21. Calculation of Performance Data.... PERFORMANCE INFORMATION
22. Annuity Payments................... Computations of Annuity Income
Payments
23. Financial Statements............... FINANCIAL STATEMENTS
</TABLE>
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT C
PROSPECTUS
FOR THE
PGA RETIREMENT ANNUITY
OFFERED BY
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
520 COLUMBIA DRIVE
JOHNSON CITY, NEW YORK 13790
The PGA Retirement Annuity contract (the "Contract"), offered through First
Providian Life and Health Insurance Company (the "Company," "us," "we" or
"our," and formerly, "National Home Life Assurance Company of New York"),
provides a vehicle for investing on a tax-deferred basis in 5 investment
company Portfolios. The Contract is a group variable annuity contract and is
intended for retirement savings or other long-term investment purposes.
The minimum initial Purchase Payment for Non-Qualified Contracts is $3,000.
The minimum initial purchase payment for Qualified Contracts is $2,000 (or $50
monthly by payroll deduction). The Contract is a flexible-premium deferred
variable annuity that provides for a Right to Cancel Period of 10 days (20
days for replacement) plus a 5 day grace period to allow for mail delivery,
during which you may cancel your investment in the Contract.
Your Net Purchase Payments for the Contract may be allocated among 5
Subaccounts of First Providian Life and Health Insurance Company's Separate
Account C. Assets of each Subaccount are invested in one of the following
Portfolios:
m CAPITAL PRESERVATION PORTFOLIO
m INCOME ORIENTED PORTFOLIO
m GROWTH AND INCOME PORTFOLIO
m CAPITAL GROWTH PORTFOLIO
m MAXIMUM APPRECIATION PORTFOLIO
Your initial Net Purchase Payment(s), when your Contract is issued, will be
invested immediately in your chosen Portfolio(s), unless you indicate
otherwise.
The Contract's Accumulated Value varies with the investment performance of the
Portfolio(s) you select. You bear all investment risk associated with the
Portfolios. Investment results for your Contract are not guaranteed.
The Contract offers a number of ways of withdrawing monies at a future date,
including a lump sum payment and several Annuity Payment Options. Full or
partial withdrawals of the Contract's Surrender Value may be made at any time,
although in many instances withdrawals made prior to age 59 1/2 are subject to
a 10% federal tax penalty (and a portion may be subject to ordinary income
taxes). If you elect an Annuity Payment Option, Annuity Payments may be
received on a fixed and/or variable basis. You also have significant
flexibility in choosing the Annuity Date on which Annuity Payments begin.
This Prospectus sets forth the information you should know before investing in
the Contract. It must be accompanied by a current Prospectus for the
Portfolios. Please read the Prospectus carefully and retain it for future
reference. A Statement of Additional Information for the Contract Prospectus,
which has the same date as this Prospectus, has also been filed with the
Securities and Exchange Commission, is incorporated herein by reference and is
available free by calling our Administrative Offices at 1-800-250-1828. The
Table of Contents of the Statement of Additional Information is included at
the end of this Prospectus.
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 Contract is available only in the State of New York.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
The date of this Prospectus is , 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GLOSSARY................................................................... 3
HIGHLIGHTS................................................................. 5
FEE TABLE.................................................................. 7
Financial Statements....................................................... 8
Performance Measures....................................................... 8
Additional Performance Measures............................................ 8
Yield and Effective Yield.................................................. 9
The Company and the Separate Account....................................... 9
Providian Series Trust..................................................... 10
The Portfolios............................................................. 10
CONTRACT FEATURES.......................................................... 10
Right to Cancel Period................................................... 11
Contract Purchase and Purchase Payments.................................. 11
Purchasing by Wire....................................................... 11
Allocation of Purchase Payments.......................................... 11
Charges and Deductions................................................... 12
Accumulated Value........................................................ 13
Exchanges Among the Portfolios........................................... 13
Full and Partial Withdrawals............................................. 13
Systematic Withdrawal Option............................................. 14
IRS-Required Distributions............................................... 14
Minimum Balance Requirement.............................................. 15
Designation of an Annuitant's Beneficiary................................ 15
Death of Annuitant Prior to Annuity Date................................. 15
Annuity Date............................................................. 16
Lump Sum Payment Option.................................................. 16
Annuity Payment Options.................................................. 16
Deferment of Payment..................................................... 17
FEDERAL TAX CONSIDERATIONS................................................. 17
GENERAL INFORMATION........................................................ 20
</TABLE>
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GLOSSARY
Accumulation Unit - A measure of your ownership interest in the Contract prior
to the Annuity Date.
Accumulation Unit Value - The value of each Accumulation Unit which is
calculated each Valuation Period.
Accumulated Value - The value of all amounts accumulated under the Contract
prior to the Annuity Date.
Adjusted Death Benefit - The sum of all Net Purchase Payments made during the
first six Contract Years, less any partial withdrawals taken. During each
subsequent six-year period, the Adjusted Death Benefit will be the Death
Benefit on the last day of the previous six-year period plus any Net Purchase
Payments made, less any partial withdrawals taken during the current six-year
period. After the Annuitant attains age 75, the Adjusted Death Benefit will
remain equal to the Death Benefit on the last day of the six-year period
ending before age 75 occurs plus any Net Purchase Payments subsequently made,
less any partial withdrawals subsequently taken.
Annual Contract Fee - The $30 annual fee charged by the Company to cover the
cost of administering each Contract. The Annual Contract Fee will be deducted
on each Contract Anniversary and upon surrender, on a pro rata basis, from
each Subaccount.
Annuitant - The person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.
Annuitant's Beneficiary - The person(s) to whom any benefits are due upon the
Annuitant's death prior to the Annuity Date.
Annuity Date - The date on which Annuity Payments begin. The Annuity Date is
always the first day of the month you specify.
Annuity Payment - One of a series of payments made under an Annuity Payment
Option.
Annuity Payment Option - One of several ways in which withdrawals from the
Contract may be made. Under a Fixed Annuity Option (see "Annuity Payment
Options," page ), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page ), the dollar amount of each Annuity Payment may change over time,
depending upon the investment experience of the Portfolio or Portfolios you
choose. Annuity Payments are based on the Contract's Accumulated Value as of
10 Business Days prior to the Annuity Date.
Annuity Unit - Unit of measure used to calculate Variable Annuity Payments
(see "Annuity Payment Options," page ).
Annuity Unit Value - The value of each Annuity Unit which is calculated each
Valuation Period.
Business Day - A day when the New York Stock Exchange is open for trading.
Company ("we," "us," "our") - First Providian Life and Health Insurance
Company, a New York stock company.
Contract Anniversary - Any anniversary of the Contract Date.
Contract Date - The date of issue of this Contract.
Contract Owner ("you," "your") - The person or persons designated as the
Contract Owner in the Contract. The term shall also include any person named
as Joint Owner. A Joint Owner shares ownership in all respects with the
Contract Owner. Prior to the Annuity Date, the Contract Owner has the right to
assign ownership, designate beneficiaries, make permitted withdrawals and
Exchanges among Subaccounts.
Contract Year - A period of 12 months starting with the Contract Date or any
Contract Anniversary.
Death Benefit - The greater of the Contract's Accumulated Value on the date
the Company receives due Proof of Death of the Annuitant or the Adjusted Death
Benefit.
3
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Exchange - One Exchange will be deemed to occur with each voluntary transfer
from any Subaccount.
General Account - The account which contains all of our assets other than
those held in our separate accounts.
Net Purchase Payment - Any Purchase Payment less the applicable Premium Tax,
if any.
Non-Qualified Contract - Any Contract other than those described under the
Qualified Contract reference in this Glossary.
Owner's Designated Beneficiary - The person to whom ownership of this Contract
passes upon the Contract Owner's death, unless the Contract Owner was also the
Annuitant, in which case the Annuitant's Beneficiary is entitled to the Death
Benefit. (Note: this transfer of ownership to the Owner's Designated
Beneficiary will generally not be subject to probate, but will be subject to
estate and inheritance taxes. Consult with your tax and estate adviser to be
sure which rules will apply to you.)
Payee - The Contract Owner, Annuitant, Annuitant's Beneficiary, or any other
person, estate, or legal entity to whom benefits are to be paid.
Portfolio - A separate investment series of the Trust. The Trust currently
offers 5 series in the PGA Retirement Annuity: the Capital Preservation
Portfolio, the Income Oriented Portfolio, the Growth and Income Portfolio, the
Capital Growth Portfolio, and the Maximum Appreciation Portfolio (each a
"Portfolio" and, collectively, the "Portfolios"). In this Prospectus,
Portfolio will also be used to refer to the Subaccount that invests in the
corresponding Portfolio.
Premium Tax - A regulatory tax that may be assessed by your state on the
Purchase Payments you make to this Contract. The amount which we must pay as
Premium Tax, if any, will be deducted from each Purchase Payment or from your
Accumulated Value as it is incurred by us.
Proof of Death - (a) A certified death certificate; (b) a certified decree of
a court of competent jurisdiction as to the finding of death; (c) a written
statement by a medical doctor who attended the deceased; or (d) any other
proof of death satisfactory to the Company.
Purchase Payment - Any premium payment. The minimum initial Purchase Payment
is $3,000 for Non-Qualified Contracts and $2,000 for Qualified Contracts (or
$50 monthly by payroll deduction for Qualified Contracts); each additional
Purchase Payment must be at least $500 for Non-Qualified Contracts or $50 for
Qualified Contracts. Purchase Payments may be made at any time prior to the
Annuity Date as long as the Annuitant is living.
Qualified Contract - An annuity contract as defined under Sections 403(b) and
408(b) of the Internal Revenue Code of 1986, as amended (the "Code").
Right to Cancel Period - The period during which the Contract can be canceled
and treated as void from the Contract Date.
Separate Account - That portion of First Providian Life and Health Insurance
Company's Separate Account C dedicated to the Contract. The Separate Account
consists of assets that are segregated by First Providian Life and Health
Insurance Company and, for Contract Owners, invested in the Portfolios. The
Separate Account is independent of the general assets of the Company.
Subaccount - That portion of the Separate Account that invests in shares of
the Portfolios. Each Subaccount will only invest in a single Portfolio. The
investment performance of each Subaccount is linked directly to the investment
performance of one of the Portfolios.
Surrender Value - The Accumulated Value less any Premium Taxes incurred but
not yet deducted.
Trust - The Providian Series Trust.
Underlying Funds - Four series of the Trust in which the Portfolios invest.
The four series are the High Quality Stock Fund, Fixed Income Fund,
International Active Fund, and Money Market Fund.
Valuation Period -- The performance of your Contract is measured by using the
Accumulation Unit Value. This value is calculated at the close of each
Business Day. A Valuation Period is defined as the period of time between the
close of business on one Business Day and the close of business on the
following Business Day.
4
<PAGE>
HIGHLIGHTS
YOU CAN FIND DEFINITIONS OF IMPORTANT TERMS IN THE GLOSSARY (PAGE ).
PGA RETIREMENT ANNUITY
The Contract provides a vehicle for investing on a tax-deferred basis in 5
investment company Portfolios. Monies may be subsequently withdrawn from the
Contract either as a lump sum or as annuity income as permitted under the
Contract. Accumulated Values and Annuity Payments depend on the investment
experience of the selected Portfolio(s). The investment performance of the
Portfolios is not guaranteed. Thus, you bear all investment risk for monies
invested under the Contract.
WHO SHOULD INVEST
The Contract is designed for investors seeking long term, tax-deferred
accumulation of funds, generally for retirement but also for other long-term
investment purposes. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state marginal income tax
brackets. The Contract is offered as both a Qualified Contract and a Non-
Qualified Contract. Both Qualified and Non-Qualified Contracts offer tax-
deferral on increases in the Contract's value prior to withdrawal or
distribution; however, Purchase Payments made by Contract Owners of Qualified
Contracts may be excludible or deductible from gross income in the year such
payments are made, subject to certain statutory restrictions and limitations.
(See "Federal Tax Considerations," page .)
INVESTMENT CHOICES
Your investment in the Contract may be allocated among 5 Subaccounts of the
Separate Account. The Subaccounts in turn invest exclusively in the following
5 Portfolios offered by the Trust: the Capital Preservation Portfolio, the
Income Oriented Portfolio, the Growth and Income Portfolio, the Capital Growth
Portfolio, and the Maximum Appreciation Portfolio. The assets of each
Portfolio are separate. Each Portfolio has distinct investment objectives and
policies as described in the prospectus for the Portfolios. (See page .)
CONTRACT OWNER
The Contract Owner is the person designated as the owner of the Contract in
the Contract application. The Contract Owner may designate any person as a
Joint Owner. A Joint Owner shares ownership in all respects with the Contract
Owner. Prior to the Annuity Date, the Contract Owner has the right to assign
ownership, designate beneficiaries, and make permitted withdrawals and
Exchanges among the Subaccounts.
ANNUITANT
The Annuitant is a person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid. The Annuitant may not be older than age 75.
ANNUITANT'S BENEFICIARY
The Contract Owner may designate any person to receive benefits under the
Contract which are payable upon the death of the Annuitant prior to the
Annuity Date.
HOW TO INVEST
To invest in the Contract, you will need to provide the necessary information
to us in the Contract application. You will need to select an Annuitant. The
Annuitant may not be older than age 75 at the time the Contract is issued. The
minimum initial Purchase Payment is $3,000 for Non-Qualified Contracts, and
$2,000 for Qualified Contracts (or $50 monthly by payroll deduction for
Qualified Contracts). Subsequent Purchase Payments must be at least $500 for
Non-Qualified Contracts or $50 for Qualified Contracts. You may make
subsequent Purchase Payments at any time before the Contract's Annuity Date,
as long as the Annuitant specified in the Contract is living. (See page .)
5
<PAGE>
ALLOCATION OF PURCHASE PAYMENTS
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in the Portfolio(s) you selected immediately upon our receipt
thereof, IN WHICH CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS
ALLOCATED TO THE PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD. You must fill
out and send us the appropriate form or comply with other designated Company
procedures if you would like to change how subsequent Net Purchase Payments
are allocated. (See page .)
RIGHT TO CANCEL PERIOD
The Contract provides for a Right to Cancel Period of 10 days (20 days for
replacement) plus a 5 day grace period to allow for mail delivery, during
which you may cancel your investment in the Contract. To cancel your
investment, please return your Contract to us. When we receive the Contract,
we will return the Accumulated Value of your Purchase Payment(s) invested in
the Portfolios plus any fees and/or Premium Taxes that may have been
subtracted from such amount. (See page .)
EXCHANGES
You may make unlimited Exchanges among the Portfolios provided you maintain a
minimum balance of $1,000, except in cases where Purchase Payments are made by
monthly payroll deduction, in each Subaccount to which you have allocated a
portion of your Accumulated Value. A $15 fee is currently imposed for
Exchanges in excess of 12 per Contract Year. Exchanges must not reduce the
value of any Subaccount below $1,000, except in cases where Purchase Payments
are made by monthly payroll deduction, or that remaining amount will be
transferred to your other Subaccounts on a pro rata basis. (See also "Charges
and Deductions," page .)
DEATH BENEFIT
If the Annuitant specified in your Contract dies prior to the Annuity Date,
your named Annuitant's Beneficiary will receive the Death Benefit under the
Contract. The Death Benefit is the greater of your Accumulated Value or the
Adjusted Death Benefit on the date we receive due proof of the Annuitant's
death. During the first six Contract Years, the Adjusted Death Benefit will be
the sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period, the Adjusted Death Benefit will be the
Death Benefit on the last day of the previous six-year period plus any Net
Purchase Payments made, less any partial withdrawals taken during the current
six-year period. After the Annuitant attains age 75, the Adjusted Death
Benefit will remain equal to the Death Benefit on the last day of the six-year
period ending before age 75 occurs plus any Net Purchase Payments subsequently
made, less any partial withdrawals subsequently taken. The Annuitant's
Beneficiary may elect to receive these proceeds as a lump sum or as Annuity
Payments. If the Annuitant dies on or after the Annuity Date, any unpaid
payments certain will be paid, generally to the Annuitant's Beneficiary, in
accordance with the Contract. (See page .)
ANNUITY PAYMENT OPTIONS
In addition to the full and partial withdrawal privileges, you may also choose
to create an income stream by requesting an annuity income from us. As the
Contract Owner, you may elect one of several Annuity Payment Options. By
electing an Annuity Payment Option, you are asking us to systematically
liquidate your Contract. We provide you with a variety of options as it
relates to those payments. At your discretion, payments may be either fixed or
variable or both. Fixed payouts are guaranteed for a designated period or for
life (either single or joint). Variable payments will vary depending on the
performance of the Portfolio(s) selected. (See page .)
CONTRACT AND POLICYHOLDER INFORMATION
If you have questions about your Contract, please telephone our Administrative
Offices at 1-800-250-1828 between the hours of 8:00 A.M. to 5:00 P.M. Eastern
time. Please have the Contract number and the Contract Owner's name ready when
you call. As Contract Owner you will receive periodic statements confirming
any financial transactions that take place, as well as quarterly statements
and an annual statement.
CHARGES AND DEDUCTIONS UNDER THE CONTRACT
The Contract has no sales charges and has an annual mortality and expense risk
charge of .55%. Contract Owners may withdraw up to 100% of the Accumulated
Value without incurring a surrender charge. The Contract also includes
6
<PAGE>
administrative charges and policy fees, which pay for administering the
Contract, as well as portions of the management, advisory and other fees,
which reflect the costs of operating the Portfolios. (See page .)
FULL AND PARTIAL WITHDRAWALS
You may withdraw all or part of the Surrender Value of the Contract before the
earlier of the Annuity Date or the Annuitant's death. Withdrawals made prior
to age 59 1/2 may be subject to a 10% federal tax penalty (and a portion
thereof may be subject to ordinary income taxes). (See page .)
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that
may be assessed by your state) that you would incur as an owner of a Contract
(see page ). The purpose of this table is to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as a
purchaser of the Contract. The fee table reflects all expenses for both the
Separate Account and the Portfolios. For a complete discussion of Contract
costs and expenses, see "Charges and Deductions," page .
<TABLE>
<S> <C>
CONTRACTOWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases......................................... None
Contingent Deferred Sales Load (surrender charge)....................... None
Exchange Fees (for Exchanges in excess of twelve per Contract Year)..... $ 15
ANNUAL CONTRACT FEE..................................................... $ 30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in the
Separate Account)
Mortality and Expense Risk Charge....................................... .55%
Administrative Charge................................................... .15%
----
Total Annual Separate Account Expenses.................................. .70%
</TABLE>
PORTFOLIO ANNUAL EXPENSES
The Portfolios will operate at a zero expense level during the first three
years of operations. However, while those Portfolios are expected to operate
without expenses, including management fees, Contract Owners in those
Portfolios bear indirectly the expenses of the Underlying Funds in which those
Portfolios invest. The following chart illustrates the indirect expense ratio
that each Portfolio is estimated to incur based on certain allocations among
the Underlying Funds. Except as may be indicated, the figures below are based
on estimated expenses for the first fiscal year of operation (as a percentage
of each such Portfolio's average net assets after fee waiver and/or expense
reimbursement).
<TABLE>
<CAPTION>
TOTAL
PORTFOLIO
ANNUAL
EXPENSES
---------
<S> <C>
Capital Preservation Portfolio.................................. 0.77%*
Income Oriented Portfolio....................................... 0.89%*
Growth and Income Portfolio..................................... 0.90%*
Capital Growth Portfolio........................................ 0.94%*
Maximum Appreciation Portfolio.................................. 0.96%*
</TABLE>
* These numbers are based on an agreement by Providian Investment Advisors,
Inc. (the "Adviser") to limit the other expenses of each Underlying Fund
to 0.25% during the first three years of operations. In the absence of
this agreement and the agreement that the Portfolio will operate at a
zero expense level during the first three years of operations, it is
estimated that the total Portfolio annual expenses would have been as
follows: Capital Preservation Portfolio 4.40%; Income Oriented Portfolio
4.30%; Growth and Income Portfolio 4.19%; Capital Growth Portfolio 4.23%;
and Maximum Appreciation Portfolio 4.66%.
7
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The following example illustrates the expenses that you would incur on a $1,000
Purchase Payment over various periods, assuming (1) a 5% annual rate of return
and (2) redemption at the end of each period. As noted in the table above, the
Contract imposes no surrender or withdrawal charges of any kind. Your expenses
are identical whether you continue the Contract or withdraw the entire value of
your Contract at the end of the applicable period as a lump sum or under one of
the Contract's Annuity Payment Options.
<TABLE>
<CAPTION>
3
1 YEAR YEARS
------ ------
<S> <C> <C>
Capital Preservation Portfolio............................. $22.22 $67.99
Income Oriented Portfolio.................................. $23.47 $71.80
Growth and Income Portfolio................................ $23.60 $72.17
Capital Growth Portfolio................................... $23.85 $72.93
Maximum Appreciation Portfolio............................. $24.10 $73.69
</TABLE>
The Annual Contract Fee in these examples is estimated and reflects a
percentage equal to the total amount of fees collected during a calendar year
divided by the total average net assets of the Portfolios during the same
calendar year. The fee is assumed to remain the same in each year of the above
periods. (With respect to partial year periods, if any, in the examples, the
Annual Contract Fee is pro-rated to reflect only the applicable portion of the
partial year period.) The Annual Contract Fee will be deducted on each
Contract Anniversary and upon surrender or annuitization of the Contract, on a
pro rata basis, from each Subaccount. The Company may also deduct Premium
Taxes, if any, as incurred by the Company.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be higher or lower than those
shown, subject to the guarantees in the Contract.
FINANCIAL STATEMENTS
The audited statutory-basis financial statements of the Company (as well as
the Independent Auditors' Report thereon) are contained in the Statement of
Additional Information. No financial statements are included for the Separate
Account because, as of the date of this Prospectus, the Subaccounts of the
Separate Account offered by the PGA Retirement Annuity had not commenced
operations, and consequently had no assets or liabilities.
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and the total return of all Subaccounts, may appear in reports and promotional
literature to current or prospective Contract Owners.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's and Subaccount's yield and total return, and a list of the indexes
and other benchmarks used in evaluating a Portfolio's and Subaccount's
performance.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
When advertising performance of the Subaccounts, the Company will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the Securities and Exchange Commission ("SEC"), is the
effective annual compounded rate of return that would have produced the cash
redemption value over the stated period had the performance remained constant
throughout. The Standardized Average Annual Total Return assumes a single
$1,000 payment made at the beginning of the period and full redemption at the
end of the period. It reflects the deduction of the Annual Contract Fee and
all other Portfolio, Separate Account and Contract level charges except
Premium Taxes, if any.
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE
ANNUAL TOTAL RETURN
The Company may show actual Total Return (i.e., the percentage change in the
value of an Accumulation Unit) for one or more Subaccounts with respect to one
or more periods, including Total Return Year-to-Date with respect to certain
periods. The Company may also show actual Average Annual Total Return (i.e.,
the average annual change in
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Accumulation Unit Values) with respect to one or more periods. For one year,
the actual Total Return and the actual Average Annual Total Return are
effective annual rates of return and are equal. For periods greater than one
year, the actual Average Annual Total Return is the effective annual
compounded rate of return for the periods stated. Because the value of an
Accumulation Unit reflects the Separate Account and Portfolio expenses (see
"Fee Table"), the actual Total Return and actual Average Annual Total Return
also reflect these expenses. These percentages, however, do not reflect the
Annual Contract Fee or Premium Taxes (if any) which, if included, would reduce
the percentages reported.
YIELD AND EFFECTIVE YIELD
From time to time a Portfolio may advertise its yield and total return
investment performance. For each Subaccount for which the Company advertises
yield, the Company shall furnish a yield quotation referring to the Portfolio
computed in the following manner: the net investment income per Accumulation
Unit earned during a recent one month period is divided by the Accumulation
Unit Value on the last day of the period.
Please refer to the Statement of Additional Information for a description of
the method used to calculate a Portfolio's yield and total return, and a list
of the indexes and other benchmarks used in evaluating a Portfolio's
performance.
The performance measures discussed above reflect results of the Portfolios and
are not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.
Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service which ranks mutual funds and other investment companies by
overall performance, investment objectives and assets. Performance may also be
tracked by other ratings services, companies, publications or persons who rank
separate accounts or other investment products on overall performance or other
criteria, including Morningstar, Inc. Performance figures will be calculated
in accordance with standardized methods established by each reporting service.
THE COMPANY AND THE SEPARATE ACCOUNT
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
The Company (formerly National Home Life Assurance Company of New York) is a
stock life insurance company incorporated under the laws of the State of New
York on March 23, 1970, with administrative offices at 520 Columbia Drive,
Johnson City, New York 13790. The Company is principally engaged in offering
life insurance, annuity contracts, and accident and health insurance and is
admitted to do business in 10 states and the District of Columbia. The Company
is wholly-owned, directly and indirectly, by Providian Corporation, a
publicly-held diversified consumer financial services company whose shares are
traded on the New York Stock Exchange with assets of $26.8 billion as of
December 31, 1995.
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT C
The Separate Account was established by the Company as a separate account
under the laws of the State of New York on November 4, 1994, pursuant to a
resolution of the Company's Board of Directors. The Separate Account is a unit
investment trust registered with the SEC under the Investment Company Act of
1940 (the "1940 Act"). Such registration does not signify that the SEC
supervises the management or the investment practices or policies of the
Separate Account. The Separate Account meets the definition of a "separate
account" under the federal securities laws.
The assets of the Separate Account are owned by the Company and the
obligations under the Contract are obligations of the Company. These assets
are held separately from the other assets of the Company and are not
chargeable with liabilities incurred in any other business operation of the
Company (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of the Separate Account). Income, gains and
losses incurred on the assets in the Separate Account, whether or not
realized, are credited to or charged against the Separate Account without
regard to other income, gains or losses of the Company. Therefore, the
investment performance of the Separate Account is entirely independent of the
investment performance of the General Account assets or any other separate
account maintained by the Company.
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The Separate Account has dedicated 5 Subaccounts to the Contract, each of
which invests solely in a corresponding Portfolio of the Trust. Additional
subaccounts may be established at the discretion of the Company. The Separate
Account also includes other subaccounts which are not available under the
Contract.
PROVIDIAN SERIES TRUST
The Trust is a diversified investment company presently consisting of 9
separate series each having different investment objectives and policies. This
Contract offers 5 series of shares, each a professionally managed investment
Portfolio. Each Portfolio seeks to achieve its objective by investing in a
number of other series offered by the Trust. The Adviser has retained Atlanta
Capital Management Company, L.L.C. ("Atlanta Capital") to serve as sub-adviser
for the Portfolios. Subject to the supervision and direction of the Board of
Trustees of the Trust, Atlanta Capital determines how each of its Portfolio's
assets will be invested in the Underlying Funds. Atlanta Capital receives a
fee, which is paid by the Adviser and is a percentage of the annual net asset
value of the Underlying Funds for which Atlanta Capital serves as sub-adviser
and in which the Portfolios invest. The advisory fee is deducted automatically
from the assets of the Underlying Funds, and is therefore paid indirectly by
the Portfolios.
THE PORTFOLIOS (SEE ACCOMPANYING PROSPECTUS)
For more information concerning the risks associated with each Portfolio's
investments, please refer to the prospectus for the Portfolios.
THE CAPITAL PRESERVATION PORTFOLIO-seeks high current income with low
volatility of principal.
THE INCOME ORIENTED PORTFOLIO-seeks income and, secondarily, long term growth
of capital.
THE GROWTH AND INCOME PORTFOLIO-seeks growth of capital and income.
THE CAPITAL GROWTH PORTFOLIO-seeks long term growth of capital and,
secondarily, current income.
THE MAXIMUM APPRECIATION PORTFOLIO-seeks capital appreciation.
OTHER PORTFOLIO INFORMATION
There is no assurance that a Portfolio will achieve its stated investment
objective.
Additional information concerning the investment objectives and policies of
the Portfolios and the investment advisory services, total expenses and
charges can be found in the current prospectuses for the Portfolios. THE
PORTFOLIOS' PROSPECTUS SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF NET PURCHASE PAYMENTS TO A PORTFOLIO.
The Portfolios may, in the future, be made available to registered separate
accounts offering variable annuity and variable life products of the Company
as well as other insurance companies or to a person or plan, including a
pension or retirement plan receiving favorable tax treatment under the Code,
that qualifies to purchase shares of the Portfolios under Section 817(h) of
the Code. Although we believe it is unlikely, a material conflict could arise
among the interests of the Separate Account and one or more of the other
participating separate accounts and other qualified persons or plans. In the
event of a material conflict, the affected insurance companies agree to take
any necessary steps, including removing their separate accounts from the
Portfolios if required by law, to resolve the matter.
CONTRACT FEATURES
The rights and benefits under the Contract are described below and in the
Contract. The Company reserves the right to make any modification to conform
the Contract to, or give the Contract Owner the benefit of, any federal or
state statute or any rule or regulation of the United States Treasury
Department.
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RIGHT TO CANCEL PERIOD
A Right to Cancel Period exists for 10 days after you receive the Contract (20
days for replacement) plus a 5 day grace period to allow for mail delivery.
The Contract permits you to cancel the Contract during the Right to Cancel
Period by returning the Contract to our Administrative Offices, 520 Columbia
Drive, Johnson City, New York 13790 or mailing it to us at P.O. Box 1950,
Binghamton, New York 13902. Upon cancellation, the Contract is treated as void
from the Contract Date and when we receive the Contract, we will return the
Accumulated Value of your Purchase Payment(s) invested in the Portfolios plus
any fees and/or Premium Taxes that may have been subtracted from such amount.
CONTRACT PURCHASE AND PURCHASE PAYMENTS
If you wish to purchase a Contract, you should complete the application and
forward it and the initial Purchase Payment to the address indicated on the
application, or to such address as the Company may from time to time
designate. If you wish to make personal delivery by hand or courier to the
Company of the completed application form and the initial Purchase Payment
(rather than through the mail), you must do so at our Administrative Offices
at 520 Columbia Drive, Johnson City, New York 13790. The initial Purchase
Payment for a Non-Qualified Contract must be equal to or greater than the
$3,000 minimum investment requirement. The Initial Purchase Payment for a
Qualified Contract must be equal to or greater than $2,000 (or you may
establish a payment schedule of $50 a month by payroll deduction). To obtain
an application, please call our Administrative Offices at 1-800-250-1828.
The Contract will be issued and the initial Purchase Payment less any Premium
Taxes will be credited within 2 Business Days after receipt of the application
and the initial Purchase Payment in good order. The Company reserves the right
to reject any application or initial Purchase Payment.
If the initial Purchase Payment cannot be credited within 5 Business Days
because the application is incomplete, we will contact the applicant, explain
the reason for the delay and will refund the initial Purchase Payment, unless
the applicant instructs us to retain the initial Purchase Payment and credit
it as soon as the necessary requirements are fulfilled.
Additional Purchase Payments may be made at any time prior to the Annuity
Date, as long as the Annuitant is living. Additional Purchase Payments must be
for at least $500 for Non-Qualified Contracts, or $50 for Qualified Contracts.
Additional Purchase Payments received prior to the close of the New York Stock
Exchange (generally 4:00 P.M. Eastern time) are credited to the Accumulated
Value at the close of business that same day. Additional Purchase Payments
received after the close of the New York Stock Exchange are processed the next
Business Day.
Total Purchase Payments may not exceed $1,000,000 without our prior approval.
PURCHASING BY WIRE
For wiring instructions please contact our Administrative Offices at 1-800-
250-1828.
ALLOCATION OF PURCHASE PAYMENTS
You decide how your Net Purchase Payments will be allocated. You may allocate
each Net Purchase Payment to one of the Portfolios as long as such portions
are whole number percentages provided no Portfolio may contain a balance less
than $1,000, except in cases where Purchase Payments are made by monthly
payroll deduction. You may change allocation instructions for future Net
Purchase Payments by sending us the appropriate Company form or by complying
with other designated Company procedures. If an additional Net Purchase
Payment is not accompanied by allocation instructions, it will be allocated to
the same Portfolio(s) as your prior Net Purchase Payments are invested at that
time, unless otherwise directed by you in writing in advance.
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in your Portfolio(s) immediately upon our receipt thereof, IN WHICH
CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD.
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CHARGES AND DEDUCTIONS
There are no sales charges for the Contracts.
MORTALITY AND EXPENSE RISK CHARGE
We impose a charge as compensation for bearing certain mortality and expense
risks under the Contracts. The annual charge is assessed daily based on the
net asset value of the Separate Account. The annual mortality and expense risk
charge is .55% of the net asset value of the Separate Account.
We guarantee that this annual charge will never increase. If this charge is
insufficient to cover actual costs and assumed risks, the loss will fall on
us. Conversely, if the charge proves more than sufficient, any excess will be
added to the Company surplus and will be used for any lawful purpose,
including any shortfall on the costs of distributing the Contracts.
The mortality risk borne by us under the Contracts, where one of the life
Annuity Payment Options is selected, is to make monthly Annuity Payments
(determined in accordance with the annuity tables and other provisions
contained in the Contract) regardless of how long all Annuitants may live. We
also assume mortality risk as a result of our guarantee of a Death Benefit in
the event the Annuitant dies prior to the Annuity Date.
The expense risk borne by us under the Contracts is the risk that the charges
for administrative expenses which are guaranteed for the life of the Contract
may be insufficient to cover the actual costs of issuing and administering the
Contract.
ADMINISTRATIVE CHARGE AND ANNUAL CONTRACT FEE
An administrative charge equal to .15% annually of the net asset value of the
Separate Account is assessed daily along with the Annual Contract Fee of $30.
The Annual Contract Fee is deducted proportionately from the Subaccounts. For
any Contract with amounts allocated to the Subaccounts, the $30 fee is
assessed per Contract, not per Portfolio chosen. The Annual Contract Fee will
be deducted from each Subaccount on each Contract Anniversary and upon
surrender, on a pro rata basis based on the number of months that have passed
since the last anniversary date. These deductions represent reimbursement for
the costs expected to be incurred over the life of the Contract for issuing
and maintaining each Contract and the Separate Account.
EXCHANGES
Each Contract Year you may make an unlimited number of Exchanges between
Portfolios, provided that after an Exchange no Portfolio may contain a balance
less than $1,000, except in cases where Purchase Payments are made by monthly
payroll deduction. A $15 fee is currently imposed for Exchanges in excess of
12 per Contract Year.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The administrative charges or fees may be reduced for sales of Contracts to a
trustee, employer or similar entity representing a group where the Company
determines that such sales result in savings of administrative expenses. In
addition, directors, officers and bona fide full-time employees (and their
spouses and minor children) of the Company, its ultimate parent company,
Providian Corporation and certain of their affiliates are permitted to
purchase Contracts with substantial reduction of administrative charges or
fees or with a waiver or modification of certain minimum or maximum purchase
and transaction amounts or balance requirements. Contracts so purchased are
for investment purposes only and may not be resold except to the Company.
In no event will reduction or elimination of fees or charges or waiver or
modification of transaction or balance requirements be permitted where such
reduction, elimination, waiver or modification will be unfairly discriminatory
to any person. Additional information about reductions in charges is contained
in the Statement of Additional Information.
TAXES
Under present laws, the Company will not incur New York state or local taxes.
If there is a change in state or local tax laws, charges for such taxes may be
made. The Company does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Contracts. (See "Federal Tax Considerations," page .)
Based upon these expectations, no charge is currently being made to the
Separate Account for corporate federal income taxes that may be attributable
to the Separate Account.
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The Company will periodically review the question of a charge to the Separate
Account for federal income taxes related to the Separate Account. 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 currently believes
it to be, if there are changes made in the federal income tax treatment of
annuities at the corporate level, or if there is a change in the Company's tax
status. In the event that the Company should incur federal income taxes
attributable to investment income or capital gains retained as part of the
reserves under the Contracts, the Accumulated Value of the Contract would be
correspondingly adjusted by any provision or charge for such taxes.
PORTFOLIO EXPENSES
The value of the assets in the Separate Account reflect the fees and expenses
paid by the Portfolios. A complete description of these expenses is found in
the "Fee Table" section of this Prospectus and in the Trust's Prospectus and
Statement of Additional Information.
ACCUMULATED VALUE
At the commencement of the Contract, the Accumulated Value equals the initial
Net Purchase Payment. Thereafter, the Accumulated Value equals the Accumulated
Value from the previous Business Day increased by: (i) any additional Net
Purchase Payments received by the Company and (ii) any increase in the
Accumulated Value due to investment results of the selected Portfolio(s)
during the Valuation Period; and reduced by: (i) any decrease in the
Accumulated Value due to investment results of the selected Portfolio(s), (ii)
a daily charge to cover the mortality and expense risks assumed by the
Company, (iii) any charge to cover the cost of administering the Contract,
(iv) any partial withdrawals, and (v) any charges for any Exchanges made after
the first 12 in any Contract Year.
EXCHANGES AMONG THE PORTFOLIOS
Should your investment goals change, you may exchange Accumulated Value among
the Portfolios. Requests for Exchanges, received by mail or by telephone,
prior to the close of the New York Stock Exchange (generally 4:00 P.M. Eastern
time) are processed at the close of business that same day. Requests received
after the close of the New York Stock Exchange are processed the next Business
Day. If you experience difficulty in making a telephone Exchange your Exchange
request may be made by regular or express mail. It will be processed on the
date received.
To take advantage of the privilege of initiating transactions by telephone,
you must first elect the privilege by completing the appropriate section of
the application or by completing a separate telephone authorization form at a
later date. To take advantage of the privilege of authorizing a third party to
initiate transactions by telephone, you must first complete a third party
authorization form.
The Company will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Prior to the acceptance of any request,
the caller will be asked by a customer service representative for his or her
Contract number and social security number. In addition, telephone
communications from a third party authorized to transact in an account will
undergo reasonable procedures to confirm that instructions are genuine. The
third party caller will be asked for his or her name, company affiliation (if
appropriate), the Contract number to which he or she is referring, and the
social security number of the Contract Owner. All calls will be recorded, and
this information will be verified with the Contract Owner's records prior to
processing a transaction. Furthermore, all transactions performed by a
customer service representative will be verified with the Contract Owner
through a written confirmation statement. The Company, the Adviser, the Trust,
the Portfolios, and Atlanta Capital shall not be liable for any loss, cost or
expense for action on telephone instructions that are believed to be genuine
in accordance with these procedures.
FULL AND PARTIAL WITHDRAWALS
At any time before the Annuity Date and while the Annuitant is living, you may
make a partial or full withdrawal of the Contract to receive all or part of
the Surrender Value by sending a written request to our Administrative
Offices. Full or partial withdrawals may only be made before the Annuity Date
and all partial withdrawal requests must be for at least
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$500. The amount available for full or partial withdrawal is the Surrender
Value at the end of the Valuation Period during which the written request for
withdrawal is received. The Surrender Value is an amount equal to the
Accumulated Value, less any Premium Taxes incurred but not yet deducted. The
withdrawal amount may be paid in a lump sum to you, or if elected, all or any
part may be paid out under an Annuity Payment Option. (See "Annuity Payment
Options," page .)
You can make a withdrawal by sending the appropriate Company form to our
Administrative Offices. Your proceeds will normally be processed and mailed to
you within 2 Business Days after the receipt of the request but in no event
will it be later than 7 calendar days, subject to postponement in certain
circumstances. (See "Deferment of Payment," page .)
Payments under the Contract of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared your bank. If, at the
time the Contract Owner requests a full or partial withdrawal, he has not
provided the Company with a written election not to have federal income taxes
withheld, the Company must by law withhold such taxes from the taxable portion
of any full or partial withdrawal and remit that amount to the federal
government. Moreover, the Code provides that a 10% penalty tax may be imposed
on certain early withdrawals. (See "Federal Tax Considerations," page .)
Since the Contract Owner assumes the investment risk with respect to amounts
allocated to the Separate Account, the total amount paid upon withdrawal of
the Contract (taking into account any prior withdrawals) may be more or less
than the total Net Purchase Payments made.
SYSTEMATIC WITHDRAWAL OPTION
You may choose to have a specified dollar amount provided to you on a regular
basis from the portion of your Contract's Accumulated Value that is allocated
to the Portfolios. By electing the Systematic Withdrawal Option, withdrawals
may be made on a monthly, quarterly, semi-annual or annual basis. The minimum
amount for each withdrawal is $250.
This option may be elected by completing the Systematic Withdrawal Request
Form. This form must be received by us at least 30 days prior to the date
systematic withdrawals will begin. Each withdrawal will be processed on the
day and at the frequency indicated on the Systematic Withdrawal Request Form.
The start date for the systematic withdrawals must be between the first and
twenty-eighth day of the month. You may discontinue the Systematic Withdrawal
Option at any time by notifying us in writing at least 30 days prior to your
next scheduled withdrawal date.
Each systematic withdrawal is subject to federal income taxes on the taxable
portion, and may be subject to a 10% federal tax penalty if you are under age
59 1/2. You may elect to have federal income taxes withheld from each
withdrawal at a 10% rate on the Systematic Withdrawal Request Form. For a
discussion of the tax consequences of withdrawals, see "Federal Tax
Considerations" on page of the Prospectus. You may wish to consult a tax
adviser regarding any tax consequences that might result prior to electing the
Systematic Withdrawal Option.
We reserve the right to discontinue offering the Systematic Withdrawal Option
upon 30 days written notice. We also reserve the right to charge a fee for
such service.
IRS-REQUIRED DISTRIBUTIONS
Prior to the Annuity Date, if you or, if applicable, a Joint Owner dies before
the entire interest in the Contract is distributed, the value of the Contract
must be distributed to the Owner's Designated Beneficiary (unless the Contract
Owner was also the Annuitant--in which case the Annuitant's Beneficiary is
entitled to the Death Benefit) as described in this section so that the
Contract qualifies as an annuity under the Code. If the death occurs on or
after the Annuity Date, the remaining portions of such interest will be
distributed at least as rapidly as under the method of distribution being used
as of the date of death. If the death occurs before the Annuity Date, the
entire interest in the Contract will be distributed within 5 years after date
of death or be paid under an Annuity Payment Option under which payments will
begin within 1 year of the Contract Owner's death and will be made for the
life of the Owner's Designated Beneficiary or for a period not extending
beyond the life expectancy of that beneficiary. The Owner's Designated
Beneficiary is the person to whom ownership of the Contract passes by reason
of death.
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If any portion of the Contract Owner's interest is payable to (or for the
benefit of) the surviving spouse of the Contract Owner, the Contract may be
continued with the surviving spouse as the new Contract Owner.
MINIMUM BALANCE REQUIREMENT
We will transfer the balance in any Portfolio that falls below $1,000, except
in cases where Purchase Payments are made by monthly payroll deduction, due to
a partial withdrawal or Exchange, to the remaining Portfolio(s) held under
that Contract on a pro rata basis. In the event that the entire value of the
Contract falls below $1,000, and if no Purchase Payment has been received
within three years, we reserve the right to liquidate the account. You would
then be allowed 60 days to make an additional investment before the account is
liquidated. Proceeds would be promptly paid to the Contract Owner. The full
proceeds would be taxable as a withdrawal. We will not exercise this right
with respect to Qualified Contracts.
DESIGNATION OF AN ANNUITANT'S BENEFICIARY
The Contract Owner may select one or more Annuitant's Beneficiaries and name
them in the application. Thereafter, while the Annuitant is living, the
Contract Owner may change the Annuitant's Beneficiary by sending us the
appropriate Company form. Such change will take effect on the date such form
is signed by the Contract Owner but will not affect any payment made or other
action taken before the Company acknowledges such form. You may also make the
designation of Annuitant's Beneficiary irrevocable by sending us the
appropriate Company form and obtaining approval from the Company. Changes in
the Annuitant's Beneficiary may then be made only with the consent of the
designated irrevocable Annuitant's Beneficiary.
If the Annuitant dies prior to the Annuity Date, the following will apply
unless the Contract Owner has made other provisions.
(a) If there is more than one Annuitant's Beneficiary, each will share in
the Death Benefits equally;
(b) If one or two or more Annuitant's Beneficiaries have already died, that
share of the Death Benefit will be paid equally to the survivor(s);
(c) If no Annuitant's Beneficiary is living, the proceeds will be paid to
the Contract Owner;
(d) If an Annuitant's Beneficiary dies at the same time as the Annuitant,
the proceeds will be paid as though the Annuitant's Beneficiary had
died first. If an Annuitant's Beneficiary dies within 15 days after the
Annuitant's death and before the Company receives due proof of the
Annuitant's death, proceeds will be paid as though the Annuitant's
Beneficiary had died first.
If an Annuitant's Beneficiary who is receiving Annuity Payments dies, any
remaining payments certain will be paid to that Annuitant's Beneficiary's
named beneficiary(ies) when due. If no Annuitant's Beneficiary survives the
Annuitant, the right to any amount payable will pass to the Contract Owner. If
the Contract Owner is the Annuitant, this right will pass to his or her
estate. If a Life Annuity with Period Certain option was elected, and if the
Annuitant dies on or after the Annuity Date, any unpaid payments certain will
be paid to the Annuitant's Beneficiary or your designated Payee.
DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the Annuitant dies prior to the Annuity Date, an amount will be paid as
proceeds to the Annuitant's Beneficiary. The Death Benefit is calculated and
is payable upon receipt of due Proof of Death of the Annuitant as well as
proof that the Annuitant died prior to the Annuity Date. Upon receipt of this
proof, the Death Benefit will be paid within seven days, or as soon thereafter
as the Company has sufficient information about the Annuitant's Beneficiary to
make the payment. The Annuitant's Beneficiary may receive the amount payable
in a lump sum cash benefit or under one of the Annuity Payment Options.
The Death Benefit is the greater of:
(1) The Accumulated Value on the date we receive due Proof of Death; or
(2) The Adjusted Death Benefit.
During the first six Contract Years, the Adjusted Death Benefit will be the
sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period, the Adjusted Death Benefit will be the
Death Benefit on the last day of the previous six-year period plus any Net
Purchase Payments made, less any partial withdrawals taken during the current
six-year period. After the Annuitant attains age 75, the Adjusted Death
Benefit will remain equal to the Death Benefit on the last day of the six-year
period ending before age 75 occurs plus any Net Purchase Payments subsequently
made, less any partial withdrawals subsequently taken.
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ANNUITY DATE
You may specify an Annuity Date in the application, which can be no later than
the first day of the month after the Annuitant's 85th birthday, without the
Company's prior approval. The Annuity Date is the date that Annuity Payments
are scheduled to commence under the Contract unless the Contract has been
surrendered or an amount has been paid as proceeds to the designated
Annuitant's Beneficiary prior to that date.
You may advance or defer the Annuity Date. However, the Annuity Date may not be
advanced to a date prior to 30 days after the date of receipt of a written
request or, without the Company's prior approval, deferred to a date beyond the
first day of the month after the Annuitant's 85th birthday. The Annuity Date
may only be changed by written request during the Annuitant's lifetime and must
be made at least 30 days before the then-scheduled Annuity Date. The Annuity
Date and the Annuity Payment options available for Qualified Contracts may also
be controlled by endorsements, the plan or applicable law.
LUMP SUM PAYMENT OPTION
You may surrender the Contract at any time while the Annuitant is living and
before the Annuity Date. The Surrender Value is equal to the Accumulated Value,
less any Premium Taxes incurred but not yet deducted.
ANNUITY PAYMENT OPTIONS
All Annuity Payment Options (except for the Designated Period Annuity Option)
are offered as "Variable Annuity Options." This means that Annuity Payments,
after the initial payment, will reflect the investment experience of the
Portfolio or Portfolios you have chosen. All Annuity Payment Options are also
offered as "Fixed Annuity Options." This means that the amount of each payment
will be set on the Annuity Date and will not change. The following Annuity
Payment Options are available under the Contract:
Life Annuity--Monthly Annuity Payments are paid for the life of an Annuitant,
ceasing with the last Annuity Payment due prior to the Annuitant's death.
Joint and Last Survivor Annuity--Monthly Annuity Payments are paid for the life
of two Annuitants and thereafter for the life of the survivor, ceasing with the
last Annuity Payment due prior to the survivor's death.
Life Annuity with Period Certain--Monthly Annuity Payments are paid for the
life of an Annuitant, with a Period Certain of not less than 120, 180, or 240
months, as elected.
Installment or Unit Refund Life Annuity--Available as either a Fixed
(Installment Refund) or Variable (Unit Refund) Annuity Option. Monthly Annuity
Payments are paid for the life of an Annuitant, with a Period Certain
determined by dividing the Accumulated Value by the first Annuity Payment.
Designated Period Annuity--Only available as a Fixed Annuity Option. Monthly
Annuity Payments are paid for a Period Certain as elected, which may be from 10
to 30 years.
Before the Annuity Date and while the Annuitant is living, you may change the
Annuity Payment Option by written request. The request for change must be made
at least 30 days prior to the Annuity Date and is subject to the approval of
the Company. If an Annuity Payment Option is chosen that depends on the
continuation of the life of the Annuitant, proof of birth date may be required
before Annuity Payments begin. For Annuity Payment Options involving life
income, the actual age of the Annuitant will affect the amount of each payment.
Since payments to older Annuitants are expected to be fewer in number, the
amount of each Annuity Payment will generally be greater.
All or part of the Accumulated Value may be placed under one or more Annuity
Payment Options. If Annuity Payments are to be paid under more than one option,
the Company must be told what part of the Accumulated Value is to be paid under
each option.
If at the time of any Annuity Payment you have not provided the Company with a
written election not to have federal income taxes withheld, the Company must by
law withhold such taxes from the taxable portions of such Annuity Payment and
remit that amount to the federal government.
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In the event that an Annuity Payment Option is not selected, the Company will
make monthly Annuity Payments that will go on for as long as the Annuitant
lives (120 payments guaranteed) in accordance with the Life Annuity with
Period Certain Option and the annuity benefit sections of the Contract. That
portion of the Accumulated Value that has been held in a Portfolio prior to
the Annuity Date will be applied under a Variable Annuity Option based on the
performance of that Portfolio. Subject to approval by the Company, you may
select any other Annuity Payment Option then being offered by the Company. All
Fixed Annuity Payments and the initial Variable Annuity Payment are guaranteed
to be not less than as provided by the Annuity Tables and the Annuity Payment
Option elected by the Contract Owner. The minimum payment, however, is $100.
If the Accumulated Value is less than $2,000, the Company has the right to pay
that amount in a lump sum. From time to time, the Company may require proof
that the Annuitant or Contract Owner is living. Annuity Payment Options are
not available to: (1) an assignee; or (2) any other than a natural person,
except with the consent of the Company.
We may, at the time of election of an Annuity Payment Option, offer more
favorable rates in lieu of the guaranteed rates specified in the Annuity
Tables found in the Contract.
The value of Variable Annuity Payments will reflect the investment experience
of the chosen Portfolio. Only one Variable Annuity Option may be chosen from
among those made available by the Company for each Portfolio. The Annuity
Tables, which are contained in the Contract and are used to calculate the
value of the initial Variable Annuity Payment, are based on an assumed
interest rate of 4%. If the actual net investment experience exactly equals
the assumed interest rate, then the Variable Annuity Payments will remain the
same (equal to the first Annuity Payment). However, if actual investment
experience exceeds the assumed interest rate, the Variable Annuity Payments
will increase; conversely, they will decrease if the actual experience is
lower. The method of computation of Variable Annuity Payments is described in
more detail in the Statement of Additional Information.
The value of all payments, both fixed and variable, will be greater for
shorter guaranteed periods than for longer guaranteed periods, and greater for
life annuities than for joint and survivor annuities, because they are
expected to be made for a shorter period.
After the Annuity Date, you may change the Portfolio funding the Variable
Annuity Payments on the appropriate Company form or by calling our
Administrative Offices at 1-800-250-1828.
DEFERMENT OF PAYMENT
Payment of any cash withdrawal or lump sum Death Benefit due from the Separate
Account will occur within 7 days from the date the election becomes effective
except that the Company may be permitted to defer such payment if: (1) the New
York Stock Exchange is closed for other than usual weekends or holidays, or
trading on the New York Stock Exchange is otherwise restricted; or (2) an
emergency exists as defined by the SEC, or the SEC requires that trading be
restricted; or (3) the SEC permits a delay for the protection of Contract
Owners.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The ultimate effect of federal income taxes on the amounts paid for the
Contract, on the investment return on assets held under a Contract, on Annuity
Payments, and on the economic benefits to the Contract Owner, Annuitant or
Annuitant's Beneficiary, depends on the terms of the Contract, the Company's
tax status and upon the tax status of the individuals concerned. The following
discussion is general in nature and is not intended as tax advice. You should
consult a tax adviser regarding the tax consequences of purchasing a Contract.
No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion is based upon the Company's understanding of the
federal income tax laws as they are currently interpreted. No representation
is made regarding the likelihood of continuation of the federal income tax
laws, the Treasury regulations or the current interpretations by the Internal
Revenue Service. We reserve the right to make uniform changes in the Contract
to the extent necessary to continue to qualify the Contract as an annuity. For
a discussion of federal income taxes as they relate to the Funds, please see
the accompanying Prospectuses for the Funds.
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TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value under a Contract until some form of
withdrawal or distribution is made under it. However, under certain
circumstances, the increase in value may be subject to current federal income
tax. (See "Contracts Owned by Non-Natural Persons," page , and
"Diversification Standards," page .)
Section 72 provides that the proceeds of a full or partial withdrawal from a
Contract prior to the Annuity Date will be treated as taxable income to the
extent the amounts held under the Contract exceed the "investment in the
Contract," as that term is defined in the Code. The "investment in the
Contract" can generally be described as the cost of the Contract, and
generally constitutes all Purchase Payments paid for the Contract less any
amounts received under the Contract that are excluded from the individual's
gross income. The taxable portion is taxed at ordinary income tax rates. For
purposes of this rule, a pledge or assignment of a Contract is treated as a
payment received on account of a partial withdrawal of a Contract.
Upon receipt of a full or partial withdrawal or an Annuity Payment under the
Contract, you will be taxed if the value of the Contract exceeds the
investment in the Contract. Ordinarily, the taxable portion of such payments
will be taxed at ordinary income tax rates.
For Fixed Annuity Payments, in general, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which
establishes the ratio that the investment in the Contract bears to the total
expected amount of Annuity Payments for the term of the Contract. That ratio
is then applied to each payment to determine the non-taxable portion of the
payment. The remaining portion of each payment is taxed at ordinary income tax
rates. For Variable Annuity Payments, in general, the taxable portion is
determined by a formula that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
investment in the Contract by the total number of expected periodic payments.
The remaining portion of each payment is taxed at ordinary income tax rates.
Once the excludible portion of Annuity Payments to date equals the investment
in the Contract, the balance of the Annuity Payments will be fully taxable.
Withholding of federal income taxes on all distributions may be required
unless the recipient elects not to have any amounts withheld and properly
notifies the Company of that election.
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of
amounts withdrawn or distributed. However, the penalty tax will not apply to
withdrawals (i) made on or after the death of the Contract Owner or, where the
Contract Owner is not an individual, the death of the Annuitant, who is
defined as the individual the events in whose life are of primary importance
in affecting the timing and payment under the Contracts; (ii) attributable to
the taxpayer's becoming disabled within the meaning of Code Section 72(m)(7);
(iii) that are part of a series of substantially equal periodic payments made
at least annually for the life (or life expectancy) of the taxpayer, or joint
lives (or joint life expectancies) of the taxpayer and his or her beneficiary;
(iv) from a qualified plan (note, however, other penalties may apply); (v)
under a qualified funding asset (as defined in Code Section 130(d)); (vi)
under an immediate annuity contract as defined in Section 72(u)(4); or (vii)
that are purchased by an employer on termination of certain types of qualified
plans and that are held by the employer until the employee separates from
service. Other tax penalties may apply to certain distributions as well as to
certain contributions and other transactions under Qualified Contracts.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the year
in which the modification occurs will be increased by an amount (as determined
under Treasury Regulations) equal to the tax that would have been imposed but
for item (iii) above, plus interest for the deferral period. The foregoing
rule applies if the modification takes place (a) before the close of the
period that is five years from the date of the first payment and after the
taxpayer attains age 59 1/2, or (b) before the taxpayer reaches age 59 1/2.
THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the Separate Account is not a separate entity from the
Company and its operations form a part of the Company, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the Code.
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Investment income and realized capital gains on the assets of the Separate
Account are reinvested and taken into account in determining the Accumulated
Value. Under existing federal income tax law, the Separate Account's
investment income, including realized net capital gains, is not taxed to the
Company. The Company reserves the right to make a deduction for taxes should
they be imposed with respect to such items in the future.
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract, a Contract must generally
provide the following two distribution rules: (a) if any Contract Owner dies
on or after the Annuity Date and before the entire interest in the Contract
has been distributed, the remaining portion of such interest must be
distributed at least as quickly as the method in effect on the Contract
Owner's death; and (b) if any Contract Owner dies before the Annuity Date, the
entire interest must generally be distributed within five years after the date
of death. To the extent such interest is payable to the Owner's Designated
Beneficiary, however, such interests may be annuitized over the life of that
Owner's Designated Beneficiary or over a period not extending beyond the life
expectancy of that Owner's Designated Beneficiary, so long as distributions
commence within one year after the Contract Owner's death. If the Owner's
Designated Beneficiary is the spouse of the Contract Owner, the Contract
(together with the deferral on tax on the accrued and future income
thereunder) may be continued unchanged in the name of the spouse as Contract
Owner. The term Owner's Designated Beneficiary means the natural person named
by the Contract Owner as a beneficiary and to whom ownership of the Contract
passes by reason of the Contract Owner's death (unless the Contract Owner was
also the Annuitant--in which case the Annuitant's Beneficiary is entitled to
the Death Benefit).
If the Contract Owner is not an individual, the "primary Annuitant" (as
defined under the Code) is considered the Contract Owner. The primary
Annuitant is the individual who is of primary importance in affecting the
timing or the amount of payout under a Contract. In addition, when the
Contract Owner is not an individual, a change in the primary Annuitant is
treated as the death of the Contract Owner. Finally, in the case of joint
Contract Owners, the distribution will be required at the death of the first
of the Contract Owners.
TRANSFERS OF ANNUITY CONTRACTS
Any transfer of a Non-Qualified Contract prior to the Annuity Date for less
than full and adequate consideration will generally trigger tax on the gain in
the Contract to the Contract Owner at the time of such transfer. The
investment in the Contract of the transferee will be increased by any amount
included in the Contract Owner's income. This provision, however, does not
apply to those transfers between spouses or incident to a divorce which are
governed by Code Section 1041(a).
CONTRACTS OWNED BY NON-NATURAL PERSONS
Where the Contract is held by a non-natural person (for example, a
corporation), the Contract is generally not treated as an annuity contract for
federal income tax purposes, and the income on that Contract (generally the
increase in the net Accumulated Value less the payments) is includible in
taxable income each year. The rule does not apply where the non-natural person
is only a nominal owner such as a trust or other entity acting as an agent for
a natural person. If an employer is the nominal owner of a Contract, and the
beneficial owners are employees, then the Contract is not treated as being
held by a non-natural person. The rule also does not apply where the Contract
is acquired by the estate of a decedent, where the Contract is a qualified
funding asset for structured settlements, where the Contract is purchased on
behalf of an employee upon termination of a qualified plan, and in the case of
an immediate annuity.
ASSIGNMENTS
A transfer of ownership of a Contract, a collateral assignment or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant or
beneficiary that are not discussed herein. A Contract Owner contemplating such
a transfer or assignment of a Contract should contact a tax adviser with
respect to the potential tax effects of such a transaction.
MULTIPLE CONTRACTS RULE
All non-qualified annuity contracts issued by the same company (or affiliate)
to the same Contract Owner during any calendar year are to be aggregated and
treated as one contract for purposes of determining the amount includible in
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the taxpayer's gross income. Thus, any amount received under any Contract
prior to the Contract's Annuity Date, such as a partial withdrawal, will be
taxable (and possibly subject to the 10% federal penalty tax) to the extent of
the combined income in all such contracts. The Treasury Department has
specific authority to issue regulations that prevent the avoidance of Code
Section 72(e) through the serial purchase of annuity contracts or otherwise.
In addition, there may be other situations in which the Treasury Department
may conclude that it would be appropriate to aggregate two or more Contracts
purchased by the same Contract Owner. Accordingly, a Contract Owner should
consult a tax adviser before purchasing more than one Contract or other
annuity contracts.
DIVERSIFICATION STANDARDS
To comply with certain diversification regulations (the "Regulations") under
Code Section 817(h), one year after the start up period, the Separate Account
will be required to diversify its investments. The Regulations generally
require that on the last day of each quarter of a calendar year, no more than
55% of the value of the Separate Account is represented by any one investment,
no more than 70% is represented by any two investments, no more than 80% is
represented by any three investments, and no more than 90% is represented by
any four investments. A "look-through" rule applies that suggests that each
Subaccount of the Separate Account will be tested for compliance with the
percentage limitations by looking through to the assets of the Portfolios in
which each such Subaccount invests. The Company believes that under this rule,
the Separate Account must be tested for compliance with the percentage
limitations by "looking through" both the shares in Portfolios that are held
by the Separate Account and the shares in the Underlying Funds that are held
by the Portfolios to the investment assets held by the Underlying Funds. All
securities of the same issuer are treated as a single investment. Each
government agency or instrumentality will be treated as a separate issuer for
purposes of those limitations.
In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance concerning the extent to which Contract Owners may direct their
investments to particular divisions of a separate account. It is possible that
regulations or revenue rulings may be issued in this area at some time in the
future. It is not clear, at this time, what these regulations or rulings would
provide. It is possible that when the regulations or ruling are issued, the
Contracts may need to be modified in order to remain in compliance. For these
reasons, the Company reserves the right to modify the Contracts, as necessary,
to prevent the Contract Owner from being considered the owner of assets of the
Separate Account.
We intend to comply with the Regulations to assure that the Contracts continue
to be treated as annuity contracts for federal income tax purposes.
GENERAL INFORMATION
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make certain
changes. The Company reserves the right to eliminate the shares of any of the
Portfolios and to substitute shares of another Portfolio, or of another
registered, open-end management investment company, if the shares of the
Portfolios are no longer available for investment, or, if in the Company's
judgment, investment in any Portfolio would be inappropriate in view of the
purposes of the Separate Account. To the extent required by the 1940 Act,
substitutions of shares attributable to a Contract Owner's interest in a
Portfolio will not be made until SEC approval has been obtained and the
Contract Owner has been notified of the change.
New portfolios may be established at the discretion of the Company. Any new
portfolios will be made available to existing Contract Owners on a basis to be
determined by the Company. The Company may also eliminate one or more
Portfolios if marketing, tax, investment or other conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contracts as may be
necessary or appropriate to reflect such substitution or change. Furthermore,
if deemed to be in the best interests of persons having voting rights under
the Contracts, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be deregistered
under the 1940 Act in the event such registration is no longer required, or
may be combined with one or more other separate accounts.
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VOTING RIGHTS
The Trust does not hold regular meetings of shareholders. The Trustees of the
Trust may call special meetings of shareholders as may be required by the 1940
Act or other applicable law. To the extent required by law, the Portfolio
shares held in the Separate Account will be voted by the Company at
shareholder meetings of the Trust in accordance with instructions received
from persons having voting interests in the corresponding Portfolio. Trust
shares as to which no timely instructions are received or shares held by the
Company as to which Contract Owners have no beneficial interest will be voted
in proportion to the voting instructions that are received with respect to all
Contracts participating in that Portfolio. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
The number of votes that are available to a Contract Owner will be calculated
separately for each Portfolio. That number will be determined by applying his
or her percentage interest, if any, in a particular Portfolio to the total
number of votes attributable to the Portfolio.
Prior to the Annuity Date, a Contract Owner holds a voting interest in each
Portfolio to which the Accumulated Value is allocated. The number of votes
which are available to a Contract Owner will be determined by dividing the
Accumulated Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Date, the person receiving
Annuity Payments has the voting interest. The number of votes after the
Annuity Date will be determined by dividing the reserve for such Contract
allocated to the Portfolio by the net asset value per share of the
corresponding Portfolio. After the Annuity Date, the votes attributable to a
Contract decrease as the reserves allocated to the Portfolio decrease. In
determining the number of votes, fractional shares will be recognized.
The number of votes of the Portfolio that are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the corresponding
Portfolio. Voting instructions will be solicited by written communication
prior to such meeting in accordance with procedures established by the Trust.
AUDITORS
Ernst & Young LLP serves as independent auditors for the Separate Account and
the Company and will audit their financial statements annually.
LEGAL MATTERS
Jorden Burt Berenson & Johnson LLP of Washington, D.C. has provided legal
advice relating to the federal securities laws applicable to the issue and
sale of the Contracts. All matters of New York law pertaining to the validity
of the Contract and the Company's right to issue such Contracts have been
passed upon by Kimberly A. Scouller, Esquire, on behalf of the Company.
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TABLE OF CONTENTS FOR THE PGA RETIREMENT ANNUITY
VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CONTRACT.............................................................. 2
Computation of Variable Annuity Income Payments......................... 2
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 3
GENERAL MATTERS........................................................... 3
Non-Participating....................................................... 3
Misstatement of Age or Sex.............................................. 3
Assignment.............................................................. 4
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 4
PERFORMANCE INFORMATION................................................... 5
30-Day Yield for Subaccounts............................................ 5
Standardized Average Annual Total Return for Subaccounts................ 5
ADDITIONAL PERFORMANCE MEASURES........................................... 7
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return.................................................... 7
Non-Standardized Total Return Year-to-Date.............................. 8
Non-Standardized One Year Return........................................ 9
PERFORMANCE COMPARISONS................................................... 10
SAFEKEEPING OF ACCOUNT ASSETS............................................. 12
THE COMPANY............................................................... 12
STATE REGULATION.......................................................... 12
RECORDS AND REPORTS....................................................... 13
DISTRIBUTION OF THE CONTRACTS............................................. 13
LEGAL PROCEEDINGS......................................................... 13
OTHER INFORMATION......................................................... 13
FINANCIAL STATEMENTS...................................................... 13
</TABLE>
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FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
FOR THE PGA RETIREMENT ANNUITY
OFFERED BY
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
520 COLUMBIA DRIVE
JOHNSON CITY, NEW YORK 13790
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the PGA Retirement Annuity contract (the "Contract")
offered by First Providian Life and Health Insurance Company (the "Company").
You may obtain a copy of the Prospectus dated __________, 1997, by calling 1-
800-250-1828 or by writing to our Administrative Offices, 520 Columbia Drive,
Johnson City, New York 13790. Terms used in the current Prospectus for the
Contract are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
____________, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
THE CONTRACT
Computation of Variable Annuity Income Payments
Exchanges
Exceptions to Charges and to Transaction or Balance Requirements
GENERAL MATTERS
Non-Participating
Misstatement of Age or Sex
Assignment
Annuity Data
Annual Statement
Incontestability
Ownership
PERFORMANCE INFORMATION
30-Day Yield for Subaccounts
Standardized Average Annual Total Return for Subaccounts
ADDITIONAL PERFORMANCE MEASURES
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return
Non-Standardized Total Return Year-to-Date
Non-Standardized One Year Return
PERFORMANCE COMPARISONS
SAFEKEEPING OF ACCOUNT ASSETS
THE COMPANY
STATE REGULATION
RECORDS AND REPORTS
DISTRIBUTION OF THE CONTRACT
LEGAL PROCEEDINGS
OTHER INFORMATION
FINANCIAL STATEMENTS
<PAGE>
THE CONTRACT
In order to supplement the description in the Prospectus, the following provides
additional information about the Contract which may be of interest to Contract
Owners.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
The amounts shown in the Annuity Tables contained in your Contract represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
Variable annuity income payments are computed as follows. First, the Accumulated
Value (or the portion of the Accumulated Value used to provide variable
payments) is applied under the Annuity Tables contained in your Contract
corresponding to the Annuity Payment Option elected by the Contract Owner and
based on an assumed interest rate of 4%. This will produce a dollar amount which
is the first monthly payment. The Company may, at the time annuity income
payments are computed, offer more favorable rates in lieu of the guaranteed
rates specified in the Annuity Tables.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set forth
below) is made. After the first Annuity Payment, the dollar amount of each
subsequent Annuity Payment is equal to the number of Annuity Units multiplied by
the Annuity Unit Value for the Subaccount ten Business Days before the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date money was first deposited in that Subaccount. The Annuity Unit Value
for any subsequent Business Day is equal to (a) times (b) times (c), where
(a) = the Annuity Unit Value for the immediately preceding Business Day;
(b) = the Net Investment Factor for the day; and
(c) = the investment result adjustment factor (.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in
determining the Annuity Payment amounts.
The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:
(a) = any increase or decrease in the value of the Subaccount due to
investment results;
(b) = a daily charge assessed at an annual rate of .55% for the mortality
and expense risks assumed by the Company; and
<PAGE>
(c) = a daily charge for the cost of administering the Contract
corresponding to an annual charge of .15% of the value of the
Subaccount, plus the Annual Contract Fee.
The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year.
EXCHANGES
After the Annuity Date you may, by making a written request, exchange the
current value of an existing Subaccount to Annuity Units of any other
Subaccount(s) then available. The written request for an Exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the Exchange is to take effect. This Exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of Exchange (the
"Exchange Date"). Each year you may make an unlimited number of free Exchanges
between Subaccounts. A $15 fee is currently imposed for Exchanges in excess of
twelve per Contract Year.
Exchanges will be made using the Annuity Unit Value for the Subaccounts on the
date the written request for Exchange is received. On the Exchange Date, the
Company will establish a value for the current Subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing Subaccounts
and compute the number of Annuity Units for the new Subaccounts by dividing the
Annuity Unit Value of the new Subaccounts into the value previously calculated
for the existing Subaccounts.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The Company may reduce administrative charges or other deductions from Purchase
Payments in certain situations where the Company expects to realize significant
economies of scale or other economic benefits with respect to the sale of
Contracts. The Company may reduce administrative charges and fees on sales to
directors, officers and bona fide full-time employees (and their spouses and
minor children) of the Company, its ultimate parent company, Providian
Corporation, and their affiliates and certain sales representatives for the
Contract. The Company may also grant waivers or modifications of certain
minimum or maximum purchase or transaction amounts or balance requirements in
these circumstances.
Notwithstanding the above, any variations in administrative charges or other
deductions from Purchase Payments or in the minimum or maximum transaction or
balance requirements shall reflect differences in costs or services and shall
not be unfairly discriminatory against any person.
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GENERAL MATTERS
NON-PARTICIPATING
The Contracts are non-participating. No dividends are payable and the Contracts
will not share in the profits or surplus earnings of the Company.
MISSTATEMENT OF AGE OR SEX
The Company may require proof of age and sex before making Annuity Payments. If
the Annuitant's stated age, sex or both in the Contract are incorrect, the
Company will change the annuity benefits payable to those benefits which the
Purchase Payments would have purchased for the correct age and sex. In the case
of correction of the stated age and/or sex after payments have commenced, the
Company will (1) in the case of underpayment, pay the full amount due with the
next payment; (2) in the case of overpayment, deduct the amount due from one or
more future payments.
ASSIGNMENT
Any Non-Qualified Contract may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. The Company is not responsible for the validity
of any assignment. No assignment will be recognized until the Company receives
the appropriate Company form notifying the Company of such assignment. The
interest of any beneficiary which the assignor has the right to change shall be
subordinate to the interest of an assignee. Any amount paid to the assignee
shall be paid in one sum notwithstanding any settlement agreement in effect at
the time assignment was executed. The Company shall not be liable as to any
payment or other settlement made by the Company before receipt of the
appropriate Company form.
ANNUITY DATA
The Company will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to the Company.
ANNUAL STATEMENT
Once each Contract Year, the Company will send you an annual statement of the
current Accumulated Value allocated to each Subaccount and any Purchase
Payments, charges, Exchanges or withdrawals during the year. This report will
also give you any other information required by law or regulation. You may ask
for an annual statement like this at any time. We will also send you quarterly
statements. However, we reserve the right to discontinue quarterly statements at
any time.
3
<PAGE>
INCONTESTABILITY
This Contract is incontestable from the Contract Date, subject to the
"Misstatement of Age or Sex" provision.
OWNERSHIP
The Contract Owner on the Contract Date is the Annuitant, unless otherwise
specified in the application. The Contract Owner may specify a new Contract
Owner by sending us the appropriate Company form at any time thereafter. The
term Contract Owner also includes any person named as a Joint Owner. A Joint
Owner shares ownership in all respects with the Contract Owner. During the
Annuitant's lifetime, all rights and privileges under this Contract may be
exercised solely by the Contract Owner. Upon the death of the Contract Owner,
ownership is retained by the surviving Joint Owner or passes to the Owner's
Designated Beneficiary, if one has been designated by the Contract Owner. If no
Owner's Designated Beneficiary has been selected or if no Owner's Designated
Beneficiary is living, then the Owner's Designated Beneficiary is the Contract
Owner's estate. From time to time the Company may require proof that the
Contract Owner is still living.
PERFORMANCE INFORMATION
Performance information for the Subaccounts, including the yield and the total
return of all Subaccounts, may appear in reports or promotional literature to
current or prospective Contract Owners.
Where applicable in calculating performance information, the Annual Contract Fee
is reflected as a percentage equal to the total amount of fees collected during
a calendar year divided by the total average net assets of the Portfolios during
the same calendar year. The fee is assumed to remain the same in each year of
the applicable period. (With respect to partial year periods, if any, in the
examples, the Annual Contract Fee is pro-rated to reflect only the applicable
portion of the partial year period.)
30-DAY YIELD FOR SUBACCOUNTS
Quotations of yield for the Subaccounts will be based on all investment income
per Unit earned during a particular 30-day period, less expenses accrued during
the period ("net investment income"), and will be computed by dividing net
investment income by the value of a Unit on the last day of the period,
according to the following formula:
a - b
YIELD = 2[(----- + 1)/6/ - 1]
cd
4
<PAGE>
Where:
[a] = the net investment income earned during the period by the Portfolio
attributable to shares owned by a Subaccount;
[b] = the expenses accrued for the period (net of reimbursement);
[c] = the average daily number of Units outstanding during the period;
and
[d] = the maximum offering price per Accumulation Unit on the last day of
the period.
Yield on the Subaccount is earned from the increase in net asset value of shares
of the Portfolio in which the Subaccount invests and from dividends declared and
paid by the Portfolio, which are automatically reinvested in shares of the
Portfolio.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS
When advertising performance of the Subaccounts, the Company will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes, if
any.
Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a Contract over a period of one, five and ten years (or, if less,
up to the life of the Subaccount), calculated pursuant to the formula:
P(1 + T)/n/ = ERV
Where:
[P] = a hypothetical initial Purchase Payment of $1,000;
[T] = an average annual total return;
[n] = the number of years; and
5
<PAGE>
[ERV] = the ending redeemable value of a hypothetical $1,000 Purchase
Payment made at the beginning of the period (or fractional
portion thereof).
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE ANNUAL
TOTAL RETURN
The Company may show Non-Standardized Actual Total Return (i.e., the percentage
change in the value of an Accumulation Unit) for one or more Subaccounts with
respect to one or more periods. The Company may also show Non-Standardized
Actual Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Value) with respect to one or more periods. For one year, the
Non-Standardized Actual Total Return and the Non-Standardized Actual Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized Actual Average Annual Total
Return is the effective annual compounded rate of return for the periods stated.
Because the value of an Accumulation Unit reflects the Separate Account and
Portfolio expenses (See Fee Table in the Prospectus), the Non-Standardized
Actual Total Return and Non-Standardized Actual Average Annual Total Return also
reflect these expenses. However, these percentages do not reflect the Annual
Contract Fee or Premium Taxes (if any), which if included would reduce the
percentages reported by the Company.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more Subaccounts with
respect to one or more non-standardized base periods commencing at the beginning
of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These percentages
reflect a deduction for the Separate Account and Portfolio expenses, but do not
include the Annual Contract Fee or Premium Taxes (if any), which if included
would reduce the percentages reported by the Company.
NON-STANDARDIZED ONE YEAR RETURN
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods commencing
at the beginning of a calendar year (or date of inception, if during the
relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the percentage change in actual Accumulation Unit Values during
the relevant period. These percentages reflect a deduction for the Separate
Account and Portfolio expenses, but do not include the Annual Contract Fee or
Premium Taxes (if any), which if included would reduce the percentages reported
by the Company.
6
<PAGE>
PERFORMANCE COMPARISONS
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Accumulation Value is allocated to a
Subaccount during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Portfolio in which
the Subaccount invests, and the market conditions during the given period, and
should not be considered as a representation of what may be achieved in the
future.
Reports and marketing materials may, from time to time, include information
concerning the rating of First Providian Life and Health Insurance Company as
determined by one or more of the ratings services listed below, or other
recognized rating services. Reports and promotional literature may also contain
other information including (i) the ranking of any Subaccount derived from
rankings of variable annuity separate accounts or other investment products
tracked by Lipper Analytical Services or by other rating services, companies,
publications, or other person who rank separate accounts or other investment
products on overall performance or other criteria, and (ii) the effect of tax-
deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by graphs, charts, or otherwise, and which may
include a comparison, at various points in time, of the return from an
investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a taxable basis.
Each Subaccount's performance depends on, among other things, the performance of
the underlying Portfolio which, in turn, depends upon such variables as:
. quality of underlying investments;
. average maturity of underlying investments;
. type of instruments in which the Portfolio is invested;
. changes in interest rates and market value of underlying investments;
. changes in Portfolio expenses; and
. the relative amount of the Portfolio's cash flow.
From time to time, we may advertise the performance of the Subaccounts and the
underlying Portfolios as compared to similar funds or portfolios using certain
indexes, reporting services and financial publications, and we may advertise
rankings or ratings issued by certain services and/or other institutions. These
may include, but are not limited to, the following:
. DOW JONES INDUSTRIAL AVERAGE ("DJIA"), an unmanaged index representing
share prices of major industrial corporations, public utilities, and
7
<PAGE>
transportation companies. Produced by Dow Jones & Company, it is cited as a
principal indicator of market conditions.
. STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, which can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assumes reinvestments of
all dividends paid by stocks listed on its index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees calculated
into the Standard & Poor's figures.
. LIPPER ANALYTICAL SERVICES, INC., a reporting service that ranks funds
in various fund categories by making comparative calculations using total
return. Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, we may quote the
Portfolios' Lipper rankings in various fund categories in advertising and
sales literature.
. BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, a financial
reporting service which publishes weekly average rates of 50 leading bank
and thrift institution money market deposit accounts. The rates published
in the index are an average of the personal account rates offered on the
Wednesday prior to the date of publication by ten of the largest banks and
thrifts in each of the five largest Standard Metropolitan Statistical
Areas. Account minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the lowest rate
is used. Rates are subject to change at any time specified by the
institution.
. SHEARSON LEHMAN GOVERNMENT/CORPORATE (TOTAL) INDEX, an index comprised
of approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi-federal corporations; and publicly issued,
fixed-rate, non-convertible domestic bonds of companies in industry, public
utilities and finance. The average maturity of these bonds approximates
nine years. Tracked by Shearson Lehman, Inc., the index calculates total
returns for one month, three month, twelve month, and ten year periods and
year-to-date.
. SHEARSON LEHMAN GOVERNMENT/CORPORATE (LONG-TERM) INDEX, an index composed
of the same types of issues as defined above. However, the average
maturity of the bonds included in this index approximates 22 years.
8
<PAGE>
. SHEARSON LEHMAN GOVERNMENT INDEX, an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or
any agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with a minimum
outstanding principal of $1 million and a minimum maturity of one year are
included.
. MORNINGSTAR, INC., an independent rating service that publishes the bi-
weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000 NASDAQ-
listed mutual funds of all types, according to their risk-adjusted returns.
The maximum rating is five stars, and ratings are effective for two weeks.
. MONEY, a monthly magazine that regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Fund will quote its Money ranking
in advertising and sales literature.
. STANDARD & POOR'S UTILITY INDEX, an unmanaged index of common stocks from
forty different utilities. This index indicates daily changes in the price
of the stocks. The index also provides figures for changes in price from
the beginning of the year to date, and for a twelve month period.
. DOW JONES UTILITY INDEX, an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The
index also provides the highs and lows for each of the past five years.
. THE CONSUMER PRICE INDEX, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such
comparisons. Unmanaged indexes may assume the reinvestment of dividends but
generally do not reflect deductions for administrative and management costs and
expenses.
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
9
<PAGE>
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Company. The Assets are
kept physically segregated and held separate and apart from the Company's
General Account assets. The General Account contains all of the assets of the
Company. Records are maintained of all purchases and redemptions of eligible
Portfolio shares held by each of the Subaccounts and the General Account.
THE COMPANY
All the stock of the Company is owned by Veterans Life Insurance Company, which
is a subsidiary of Providian Life and Health Insurance Company, a Missouri
insurance company ("PLH"). Providian Corporation owns a 4% interest,
Commonwealth Life Insurance Company owns a 61% interest, Peoples Security Life
Insurance Company owns a 15% interest, and Capital Liberty, L.P. owns a 20%
interest in PLH. A 5% interest in Capital Liberty, L.P. is owned by Providian
Corporation, which is the general partner, and 76% and 19% interests,
respectively, are held by two limited partners, Commonwealth Life Insurance
Company and Peoples Security Life Insurance Company, which are both wholly-owned
by Providian Corporation.
STATE REGULATION
The Company is a stock life insurance company organized under the laws of the
State of New York, and is subject to regulation by the New York State Department
of Insurance. An annual statement is filed with the New York Superintendent of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of the Company as of December 31 of the
preceding calendar year. Periodically, the New York Superintendent of Insurance
examines the financial condition of the Company, including the liabilities and
reserves of the Separate Account.
The availability of certain contract rights and provisions depends on state
approval and/or filing and review processes. Where required by state law or
regulation, the Contracts will be modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained by
the Company or by its Administrator. As presently required by the Investment
Company Act of 1940 and regulations promulgated thereunder, the Company will
mail to all Contract Owners at their last known address of record, at least
semi-annually, reports containing such information as may be required under that
Act or by any other applicable law or regulation.
10
<PAGE>
DISTRIBUTION OF THE CONTRACTS
Providian Securities Corporation ("PSC"), the principal underwriter of the
Contracts, is ultimately a wholly owned subsidiary of Providian Corporation. PSC
is registered with the SEC under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc.
The Contracts are offered to members and employees of the Professional Golfers
Association of America and to certain key employees of golf courses through
persons or entities licensed under the federal securities laws and New York
State insurance laws that have generally entered into agreements with PSC. The
offering of the Contracts is continuous and PSC does not anticipate
discontinuing the offering of the Contracts. However, PSC does reserve the right
to discontinue the offering of the Contracts.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate 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 Separate Account.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The Subaccounts described in the Contract Prospectus have not yet commenced
operations, and consequently have no assets or liabilities. Accordingly, no
financial statements are included for the Separate Account in this Statement of
Additional Information. The audited statutory-basis financial statements of the
Company for the periods ended December 31, 1995 and 1994, respectively,
including the Reports of Independent Auditors thereon, which are included in
this Statement of Additional Information, should be considered only as bearing
on the ability of the Company to meet its obligations under the Contracts. They
should not be considered as bearing on the investment performance of the assets
to be held in the Separate Account.
11
<PAGE>
Statutory-Basis Financial Statements
First Providian Life and Health
Insurance Company
Years ended December 31, 1995, 1994 and 1993
with Report of Independent Auditors
<PAGE>
First Providian Life and Health Insurance Company
Statutory-Basis Financial Statements
Years ended December 31, 1995, 1994 and 1993
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors................................... 1
Audited Financial Statements
Balance Sheets (Statutory-Basis)................................. 3
Statements of Operations (Statutory-Basis)....................... 4
Statements of Changes in Capital and Surplus (Statutory-Basis)... 5
Statements of Cash Flows (Statutory-Basis)....................... 6
Notes to Financial Statements.................................... 7
</TABLE>
<PAGE>
Report of Independent Auditors
Board of Directors
First Providian Life and Health Insurance Company
We have audited the accompanying statutory-basis balance sheets of First
Providian Life and Health Insurance Company (formerly National Home Life
Assurance Company of New York) as of December 31, 1995 and 1994, and the related
statutory-basis statements of operations, changes in capital and surplus, and
cash flows for each of the three years in the period ended December 31, 1995.
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 the accompanying statutory-basis financial statements
in accordance with generally accepted auditing standards; however, as discussed
in the following paragraph, we were not engaged to determine or audit the
effects of the variances between statutory accounting practices and generally
accepted accounting principles. Generally accepted auditing standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion on the accompanying statutory-
basis financial statements.
The Company presents its financial statements in conformity with accounting
practices prescribed or permitted by the New York Department of Insurance. When
statutory-basis financial statements are presented for purposes other than for
filing with a regulatory agency, generally accepted auditing standards require
that the auditors' report on such statements indicate whether they are presented
in conformity with generally accepted accounting principles. The accounting
practices used by the Company vary from generally accepted accounting principles
as explained in Note 1, and the Company has not determined the effects of those
variances. Accordingly, we were not engaged to audit, and we did not audit, the
effects of those variances. Since the accompanying financial statements do not
purport to be a presentation in conformity with generally accepted accounting
principles, we are not in a position to express, and we do not express, an
1
<PAGE>
opinion on the financial statements referred to above as to fair presentation of
financial position, results of operations, or cash flows in conformity with
generally accepted accounting principles.
In our opinion, the statutory-basis financial statements referred to above
present fairly, in all material respects, the financial position of First
Providian Life and Health Insurance Company at December 31, 1995 and 1994, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1995, in conformity with accounting practices
prescribed or permitted by the New York Department of Insurance.
/s/ Ernst & Young
Louisville, Kentucky
April 23, 1996
2
<PAGE>
First Providian Life and Health Insurance Company
Balance Sheets (Statutory-Basis)
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
--------------------------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Bonds $191,710,780 $200,852,923
Preferred stocks 1,599,164 -
Policy loans 2,007,632 1,897,720
Cash and short-term investments 11,873,445 8,262,655
--------------------------------
Total cash and invested assets 207,191,021 211,013,298
Deferred and uncollected premiums 3,225,228 3,314,149
Accrued investment income 2,873,293 3,107,400
Federal income taxes recoverable from - 146,954
parent
Other admitted assets 1,211,288 216,696
Separate account assets 66,759,108 40,598,773
--------------------------------
Total admitted assets $281,259,938 $258,397,270
================================
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate policy reserves $121,170,215 $133,208,340
Policy and contract claims 2,388,452 2,658,872
Premiums received in advance 342,612 392,849
Accrued commissions, general expenses 358,355 285,416
and taxes
Amounts due to affiliates 1,215,793 175,977
Asset valuation reserve 1,703,042 1,464,704
Interest maintenance reserve 9,587,138 10,020,226
Other liabilities 791,487 582,178
Separate account liabilities 66,759,108 40,598,773
--------------------------------
Total liabilities 204,316,202 189,387,335
Capital and surplus:
Capital stock, $2 par value, 1,000,000
shares authorized, issued and 2,000,000 2,000,000
outstanding
Paid-in surplus 10,485,844 10,485,844
Special surplus fund 1,357,319 1,285,200
Unassigned surplus 63,100,573 55,238,891
--------------------------------
Total capital and surplus 76,943,736 69,009,935
--------------------------------
Total liabilities and capital and $281,259,938 $258,397,270
surplus
================================
</TABLE>
See accompanying notes.
3
<PAGE>
First Providian Life and Health Insurance Company
Statements of Operations (Statutory-Basis)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums earned:
Life and annuity $ 12,372,922 $13,110,578 $13,949,278
Accident and health 5,924,086 6,348,666 7,059,153
Annuity deposit funds 17,120,829 19,334,798 33,606,698
Net investment income 15,717,675 15,676,926 15,930,141
Commissions and expense allowances on
reinsurance ceded 377,609 547,557 452,194
Amortization of interest maintenance
reserve 416,590 502,734 450,975
-----------------------------------------------
51,929,711 55,521,259 71,448,439
Benefits and expenses:
Accident and health, life and other 32,303,968 33,654,860 27,966,653
benefits
(Decrease) increase in aggregate
policy reserves (11,814,714) (8,465,615) 3,165,928
Interest on reinsurance reserves 141,441 230,614 236,752
Commissions 44,486 139,262 566,706
General insurance expenses 3,746,966 3,813,137 6,380,732
Insurance taxes, licenses, and fees 888,802 1,197,074 772,206
Net transfers to separate accounts 14,167,774 13,061,338 23,773,315
-----------------------------------------------
39,478,723 43,630,670 62,862,292
Net gain from operations before federal
income taxes 12,450,988 11,890,589 8,586,147
Federal income tax expense 4,559,235 4,371,167 3,014,636
-----------------------------------------------
Net gain from operations 7,891,753 7,519,422 5,571,511
Net realized capital gains (losses),
net of income taxes (1995-($95,973),
1994-($3,452), 1993-$3,142,526) and
excluding gains (losses) transferred
to the interest maintenance reserve
(1995-($16,497), 1994-($433), 87,090 (3,687) 93,776
1993-$5,819,228)
-----------------------------------------------
Net income $ 7,978,843 $ 7,515,735 $ 5,665,287
===============================================
</TABLE>
See accompanying notes.
4
<PAGE>
First Providian Life and Health Insurance Company
Statements of Changes in Capital and Surplus (Statutory-Basis)
<TABLE>
<CAPTION>
SPECIAL
CAPITAL PAID-IN SURPLUS SURPLUS UNASSIGNED
STOCK FUND SURPLUS
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, January 1, 1993 $2,000,000 $10,485,844 $1,121,903 $42,499,818
Net income - - - 5,665,287
(Increase) decrease in nonadmitted
assets and related items - - 81,770 (57,398)
Increase in asset valuation reserve - - - (85,312)
Prior year federal income
tax adjustment - - - (106,397)
-------------------------------------------------------------
Balances, December 31, 1993 2,000,000 10,485,844 1,203,673 47,915,998
Net income - - - 7,515,735
(Increase) decrease in nonadmitted
assets and related items - - 81,527 (87,772)
Increase in asset valuation reserve - - - (105,070)
-------------------------------------------------------------
Balances, December 31, 1994 2,000,000 10,485,844 1,285,200 55,238,891
Net income - - - 7,978,843
Change in net unrealized
gains on investments - - - 54,651
Change in reserves due to change in
valuation basis - - - 131,831
(Increase) decrease in nonadmitted
assets and related items - - 72,119 (65,305)
Increase in asset valuation reserve - - - (238,338)
-------------------------------------------------------------
Balances, December 31, 1995 $2,000,000 $10,485,844 $1,357,319 $63,100,573
=============================================================
</TABLE>
See accompanying notes.
5
<PAGE>
First Providian Life and Health Insurance Company
Statements of Cash Flows (Statutory-Basis)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
Cash and short-term investments
provided:
Operations:
Premiums and annuity fund deposits $ 35,413,986 $38,753,531 $ 54,325,820
Investment income received 16,280,847 15,429,377 16,015,532
Allowances on reinsurance ceded and
other income received 377,609 547,701 452,194
-----------------------------------------------
52,072,442 54,730,609 70,793,546
Benefits paid 32,574,937 34,391,688 28,314,886
Commissions, expenses and taxes paid 9,075,459 9,973,432 10,424,728
Net increase in policy loans 109,912 150,203 254,072
Net transfers to separate accounts 14,174,868 13,065,404 23,783,146
-----------------------------------------------
55,935,176 57,580,727 62,776,832
-----------------------------------------------
Total cash (applied) provided by (3,862,734) (2,850,118) 8,016,714
operations
Investments sold, matured, or repaid 116,523,787 28,805,309 258,856,203
Other cash provided:
Receivable from affiliates 46,820 - 693,242
Investment receivables - 10,558,989 -
Other items 257,157 392,463 94,983
-----------------------------------------------
Total other cash provided 303,977 10,951,452 788,225
-----------------------------------------------
Total cash and short-term investments 112,965,030 36,906,643 267,661,142
provided
Cash and short-term investments applied:
Investments acquired 109,277,115 29,329,333 258,543,702
Other cash applied:
Payable to affiliates - 2,056,604 -
Drafts outstanding - 569,667 -
Investment receivables - - 10,558,989
Other items 77,125 23,790 275,731
-----------------------------------------------
Total other cash applied 77,125 2,650,061 10,834,720
-----------------------------------------------
Total cash and short-term investments 109,354,240 31,979,394 269,378,422
applied
-----------------------------------------------
Increase (decrease) in cash and
short-term investments 3,610,790 4,927,249 (1,717,280)
Cash and short-term investments:
Beginning of year 8,262,655 3,335,406 5,052,686
-----------------------------------------------
End of year $ 11,873,445 $ 8,262,655 $ 3,335,406
===============================================
</TABLE>
See accompanying notes.
6
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES
NATURE OF OPERATIONS
First Providian Life and Health Insurance Company (FPLH), formerly National Home
Life Assurance Company of New York, is domiciled in New York and is a wholly
owned subsidiary of Veterans Life Insurance Company (VLIC), a wholly owned
subsidiary of Providian Life and Health Insurance Company (PLH), formerly
National Home Life Assurance Company. PLH is wholly-owned by a limited
partnership consisting of Providian Corporation (PVN) and two of its insurance
subsidiaries. FPLH sells and services life and accident and health insurance
products, primarily utilizing direct response methods, such as television,
telephone and mail to reach low to middle-income households nationwide. FPLH
also sells and services individual accumulation products, primarily utilizing
financial planners and stock brokerage firms.
MANAGEMENT'S ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Significant estimates are utilized in the calculation of
benefit reserves. It is reasonably possible that these estimates may change in
the near term, thereby possibly having a material effect on the financial
statements.
BASIS OF PRESENTATION
The accompanying financial statements of FPLH have been prepared in accordance
with the accounting practices prescribed or permitted by the New York Department
of Insurance. Such practices vary from generally accepted accounting principles
(GAAP). The more significant variances from GAAP are as follows:
INVESTMENTS
Investments in bonds are reported at amortized cost or fair value based on
their National Association of Insurance Commissioners (NAIC) rating; for GAAP,
such fixed maturity investments are designated at purchase as held-to-maturity,
trading or available-for-sale. Held-to-maturity fixed investments are reported
at amortized cost,
7
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
and the remaining fixed maturity investments are reported at fair value with
unrealized holding gains and losses reported in operations for those designated
as trading and as a separate component of shareholders' equity for those
designated as available-for-sale.
Fair values of investments in bonds and preferred stocks are generally based on
values specified by the Securities Valuation Office (SVO) of the NAIC, rather
than on values provided by outside broker confirmations or internally
calculated estimates. However, for certain investments, the NAIC does not
provide a value and FPLH uses either admitted asset investment amounts (i.e.,
statement values) as allowed by the NAIC, fair values provided by outside
broker confirmations or internally calculated estimates. Changes between cost
and admitted asset investment amounts are credited and charged directly to
unassigned surplus rather than to a separate surplus account.
Under a formula prescribed by the NAIC, FPLH defers the portion of realized
capital gains and losses attributable to changes in the general level of
interest rates on sales of certain liabilities and fixed income investments,
principally bonds, and amortizes such deferrals into income on a straight-line
basis over the remaining period to maturity based on groupings of individual
liabilities or investments sold. The net accumulated unamortized balance of
such deferrals is reported as an interest maintenance reserve (IMR) in the
accompanying balance sheet. Realized gains and losses are reported in income
net of tax and transfers to the IMR. The asset valuation reserve (AVR) is also
determined by a NAIC prescribed formula and is reported as a liability rather
than a valuation allowance. The AVR represents a provision for possible
fluctuations in the value of bonds and other invested assets. Changes to the
AVR are charged or credited directly to unassigned surplus. Under GAAP,
realized gains and losses are reported in the income statement on a pretax
basis in the period that the asset giving rise to the gain or loss is sold and
direct write-downs are recorded (or valuation allowances are provided, where
appropriate under GAAP) when there has been a decline in value deemed to be
other than temporary, in which case, write-downs (or provisions) for such
declines are charged to income.
POLICY ACQUISITION COSTS
Costs of acquiring and renewing business are expensed when incurred. Under
GAAP, acquisition costs related to traditional life insurance, to the extent
recoverable from future policy revenues, are deferred and amortized over the
premium-paying period of the related policies using assumptions consistent
with those used in computing policy
8
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
benefit reserves. For universal life insurance and investment-type contracts,
to the extent recoverable from future gross profits, deferred policy
acquisition costs are amortized generally in proportion to the present value of
expected gross profits from surrender charges and investment, mortality and
expense margins.
NONADMITTED ASSETS
Certain assets designated as "nonadmitted," principally agents' debit balances
and furniture and equipment, are excluded from the balance sheets and are
charged directly to unassigned surplus.
PREMIUMS
Revenues for universal life policies and investment-type contracts consist of
the entire premium received and benefits represent the death benefits paid and
the change in policy reserves. Under GAAP, premiums received in excess of
policy charges are not recognized as premium revenue and benefits represent the
excess of benefits paid over the policy account value and interest credited to
the account values.
BENEFIT RESERVES
Certain policy reserves are calculated using prescribed interest and mortality
assumptions rather than on estimated expected experience and actual account
balances as is required under GAAP.
INCOME TAXES
Deferred income taxes are not provided for differences between the financial
statement and the tax bases of assets and liabilities.
The effects of the foregoing variances from GAAP on the accompanying
statutory-basis financial statements have not been determined.
9
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
Other significant accounting policies followed in preparing the accompanying
statutory-basis financial statements are as follows:
INVESTMENTS
Bonds, preferred stocks and short-term investments are stated at values
prescribed by the NAIC, as follows:
Bonds not backed by other loans are stated at amortized cost using the
interest method.
Loan-backed bonds and structured securities are valued at amortized cost
using the interest method. Anticipated prepayments are considered when
determining the amortization of related discounts or premiums. Prepayment
assumptions are obtained from dealer survey values or internal estimates and
are consistent with the current interest rate and economic environment. The
retrospective adjustment method is used to value such securities.
Short-term investments include investments with maturities of less than one
year at the date of acquisition. Short-term investments and cash are carried
at cost.
Preferred stocks are reported at fair value as determined by the SVO of the
NAIC.
Bond and other loan interest is credited to income as it accrues. For
securities, FPLH follows the guidelines of the NAIC for each security on an
individual basis in determining the admitted or nonadmitted status of accrued
income amounts.
Net income includes realized gains and losses on investments sold, net of tax
and transfers to the IMR. The cost of investments sold is determined on a
first-in, first-out basis.
10
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
Separate account assets and liabilities reported in the accompanying financial
statements represent funds that are separately administered, principally for
annuity contracts, and for which the contract holder, rather than FPLH, bears
the investment risk. Separate account contract holders have no claim against
the assets of the general account of FPLH. Separate account assets are reported
at fair value. The operations of the separate accounts are not included in the
accompanying financial statements. Fees charged on separate account
policyholder deposits are included in net transfers to separate accounts in the
accompanying statements of operations.
POLICY RESERVES
Unearned premiums represent the portion of premiums written which are
applicable to the unexpired terms of accident and health policies in force,
calculated principally by the application of monthly pro rata fractions.
Liabilities for unearned premiums are included in aggregate policy reserves.
FPLH waives deduction of deferred fractional premiums upon death of insureds.
FPLH's policy is not to return any portion of the final premium beyond the date
of death. Surrender values are not promised in excess of the legally computed
reserves. Additional premiums are charged for policies issued on substandard
lives according to underwriting classification. Mean reserves are determined by
computing the regular mean reserve for the plan at the issued age and holding
in addition one-half of the extra premium charged for the year.
The tabular interest has been determined from the basic data for the
calculation of policy reserves. The tabular less actual reserve released and
the tabular cost have been determined by formula as described in the NAIC
instructions.
POLICY AND CONTRACT CLAIMS
Policy and contract claims, principally related to accident and health
policies, include amounts determined on an individual case basis for reported
losses and estimates of incurred but not reported losses developed on the basis
of experience. These estimates are subject to the effects of trends in claim
severity and frequency. Although
11
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
considerable variability is inherent in such estimates, management believes
that the reserves for claims and claim expenses are adequate. The methods of
making such estimates and establishing the resulting reserves are continually
reviewed and updated, and any adjustments resulting therefrom are reflected in
earnings currently.
PREMIUMS, BENEFITS AND EXPENSES
For individual and most group life policies, premiums are reported as earned on
the policy/certificate anniversary. For individual and group annuities,
premiums and annuity fund deposits are recorded as earned when collected. For
individual and group accident and health policies, premiums are recorded as
earned on a pro rata basis over the coverage period for which the premiums were
collected or due. Benefit claims (including an estimated provision for claims
incurred but not reported), policy reserve changes and expenses are charged to
income as incurred.
REINSURANCE
Reinsurance premiums, benefits and expenses are accounted for in a manner
consistent with that used in accounting for original policies issued and the
terms of reinsurance contracts. Premiums, benefits, expenses and aggregate
policy reserves are recorded net of reinsured amounts.
PERMITTED STATUTORY ACCOUNTING PRACTICES
FPLH's statutory-basis financial statements are prepared in accordance with
accounting practices prescribed or permitted by the New York Department of
Insurance. "Prescribed" statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the NAIC. "Permitted" statutory accounting practices encompass
all accounting practices that are not prescribed; such practices may differ
from state to state, may differ from company to company within a state, and may
change in the future. The NAIC currently is in the process of recodifying
statutory accounting practices, the result of which is expected to
12
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
constitute the only source of "prescribed" statutory accounting practices.
Accordingly, that project, which is expected to be completed in 1997, will
likely change, to some extent, prescribed statutory accounting practices, and
may result in changes to the accounting practices that FPLH uses to prepare its
statutory-basis financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statements
to conform with the current year presentation.
2. INVESTMENTS
The tables below contain amortized cost (carrying value or statement value) and
fair value information on bonds.
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED UNREALIZED FAIR
GAINS LOSSES VALUE
-------------------------------------------------------
<S> <C> <C> <C> <C>
(In Thousands)
DECEMBER 31, 1995
U.S. government obligations $ 39,767 $ 2,109 $ - $ 41,876
States and political subdivisions 5,393 603 - 5,996
Corporate and other 109,735 8,718 209 118,244
Mortgage-backed 36,816 - - 36,816
-------------------------------------------------------
$191,711 $11,430 $ 209 $202,932
=======================================================
DECEMBER 31, 1994
U.S. government obligations $ 20,364 $ 4 $ 1,151 $ 19,217
States and political subdivisions 5,396 19 149 5,266
Corporate and other 102,000 794 4,973 97,821
Mortgage-backed 73,093 173 5,045 68,221
-------------------------------------------------------
$200,853 $ 990 $11,318 $190,525
=======================================================
</TABLE>
13
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The amortized cost and fair value of bonds at December 31, 1995, by contractual
maturity, are shown below. Actual maturities may differ from contractual
maturities because certain borrowers may have the right to call or prepay
obligations, sometimes without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------------------
<S> <C> <C>
(In Thousands)
Due in one year or less $ 499 $ 505
Due after one year through five years 26,159 26,227
Due after five years through ten years 57,426 59,211
Due after ten years 70,811 80,173
------------------------
154,895 166,116
Mortgage-backed securities 36,816 36,816
------------------------
$191,711 $202,932
========================
</TABLE>
Proceeds during 1995 and 1994 from sales, maturities and calls of bonds were
$116,526,000 and $30,121,000, respectively. Gross gains of $1,127,000 and
$582,000 and gross losses of $1,150,000 and $583,000 in 1995 and 1994,
respectively, were realized on those sales.
The cost and related fair value of preferred stocks of unaffiliated companies
were $1,545,000 and $1,599,000 at December 31, 1995. The difference between cost
and statement value of $55,000 at December 31, 1995 was credited directly to
unassigned surplus as of that date and does not affect net income. FPLH did not
own any preferred stock at December 31, 1994.
Included in investments are securities having admitted asset values of
$1,564,000 at December 31, 1995 which were on deposit with various state
insurance departments to satisfy regulatory requirements.
14
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENTS (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
FPLH limits credit risk by diversifying its investment portfolio among public
and private placement bonds and preferred stocks. It further diversifies these
portfolios between and within industry sectors, by geography and by property
type. Credit risk is also limited by maintaining stringent underwriting
standards and purchasing insurance protection in certain cases. In addition,
FPLH establishes credit approval processes, limits and monitoring procedures on
an individual counterparty basis. As a result, management believes that
significant concentrations of credit risk do not exist.
3. FEDERAL INCOME TAXES
FPLH and its affiliates (PLH and VLIC) file a consolidated federal income tax
return. Under a written agreement, FPLH and its affiliates allocate the federal
income tax liability among the members of the consolidated return group in the
ratio that each member's separate return tax liability for the year bears to the
sum of the separate return tax liabilities of all members with current credits
for net operating losses. The final settlement under this agreement is made
after the annual filing of the consolidated U.S. Corporate Income Tax Return
with the Internal Revenue Service.
Income before income taxes differs from taxable income principally due to
differences in the statutory and tax treatment of certain investment items and
deferred acquisition costs.
At December 31, 1995, accumulated earnings of FPLH for federal income tax
purposes included approximately $1,631,000 of "Policyholders' Surplus," a
special memorandum tax account. This memorandum account balance has not been
currently taxed, but income taxes computed at current rates will become payable
if this surplus is distributed. Provisions of the Deficit Reduction Act of 1984
(the "Act") do not permit further additions to the Policyholders' Surplus
account. "Shareholders' Surplus" is also a special memorandum tax account, and
generally represents an accumulation of taxable income (net of tax thereon) plus
the dividends-received deduction, tax-exempt interest, and certain other special
deductions as provided by the Act. At December 31, 1995, the balance in the
Shareholders' Surplus account amounted to approximately $73,196,000. There is no
present intention to make distributions in excess of Shareholders' Surplus.
15
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS
FPLH entered into an agreement effective January 1, 1992 with PLH for the
performance of administrative services, management support services and
marketing services for FPLH. PLH, as compensation, receives an amount equal to
the actual cost of providing these services. Amounts paid to PLH for these
services were $2,800,000 in 1995, $2,400,000 in 1994 and $4,900,000 in 1993.
On November 1, 1995, FPLH executed a Revolving Credit Note with PLH allowing for
FPLH to borrow from PLH up to $5,000,000. The note is a demand note expiring
November 1, 1996 with interest payable at the prime rate. At December 31, 1995,
there was no outstanding balance and no borrowings were made during the year.
FPLH participates in a short-term investment agreement with PVN and other
affiliates which provides for the centralization of short-term investment
operations. FPLH retains the right to participate in or withdraw its funds on a
daily basis. FPLH had invested $800,000 and $1,200,000 in this short-term
agreement as of December 31, 1995 and 1994, respectively.
FPLH participates in various benefit plans sponsored by PVN and the related
costs allocated to FPLH are not significant.
FPLH is a party to a reinsurance agreement with VLIC whereby FPLH cedes a pro
rata portion of accident and health policies according to issue dates.
Reinsurance ceded to VLIC has reduced net gain from operations before federal
income taxes by $600,000 in 1995, $700,000 in 1994 and $500,000 in 1993.
16
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE
Certain premiums and benefits are ceded to other nonaffiliated insurance
companies under various reinsurance agreements. The ceded reinsurance agreements
provide FPLH with increased capacity to write larger risks.
FPLH's ceded reinsurance agreements with affiliated and nonaffiliated insurance
companies have reduced (increased) certain items in the accompanying financial
statements by the following amounts:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------
<S> <C> <C> <C>
(In Thousands)
Benefits paid or provided $ 884 $ 895 $1,378
Commission and expense allowances
on reinsurance ceded (378) (548) (452)
Interest on reinsurance reserves (141) (231) (237)
Policy and contract claims* 45 45 46
Unearned premium reserves* 2 2 2
Aggregate policy reserves* 13 13 13
Premiums received in advance* 1 1 3
</TABLE>
*At year end
For long-duration contracts, the effect of reinsurance on life and annuity
premiums earned in 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
PREMIUMS PREMIUMS PREMIUMS
EARNED EARNED EARNED
-----------------------------------
<S> <C> <C> <C>
(In Thousands)
Direct $12,398 $13,132 $13,974
Ceded (25) (21) (5)
-----------------------------------
Net $12,373 $13,111 $13,949
===================================
</TABLE>
17
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REINSURANCE (CONTINUED)
For short-duration contracts, the effect of reinsurance on accident and health
premiums written and earned in 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
PREMIUMS PREMIUMS PREMIUMS
WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(In Thousands)
Direct $ 7,523 $ 7,662 $ 8,150 $ 8,241 $ 8,992 $ 9,186
Ceded (1,738) (1,738) (1,892) (1,892) (2,127) (2,127)
------------------------------------------------------------------
Net $ 5,785 $ 5,924 $ 6,258 $ 6,349 $ 6,865 $ 7,059
==================================================================
</TABLE>
Amounts payable or recoverable for reinsurance on paid or unpaid life and health
claims are not subject to periodic or maximum limits. At December 31, 1995, FPLH
reinsurance recoverables are not material and no individual reinsurer owed FPLH
an amount equal to or greater than 3% of FPLH"s surplus.
FPLH remains obligated for amounts ceded in the event that the reinsurers do not
meet their obligations.
6. ANNUITY RESERVES
The withdrawal provisions of FPLH's annuity reserves at December 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
-----------------------
(In Thousands)
<S> <C> <C>
Subject to discretionary withdrawal at $ 66,727 44.6%
market value
Subject to discretionary withdrawal
(without
adjustment) at book value with 79,169 52.9%
minimal or no
charge or adjustment
Not subject to discretionary withdrawal 3,666 2.5%
-------------------
Total annuity reserves and before 149,562 100.0%
reinsurance
=========
Less reinsurance -
--------
Net annuity reserves $149,562*
========
</TABLE>
* Includes $66,727,000 of annuities reported in FPLHs separate account
liability.
18
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. SEPARATE ACCOUNTS
Separate accounts held by FPLH primarily represent funds held for individual
policyholders. The separate accounts do not have any minimum guarantees and the
investment risks associated with market value changes are borne entirely by the
policyholder. Information regarding the separate accounts of FPLH as of and for
the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
NONGUARANTEED
----------------
(In Thousands)
<S> <C>
Premiums, deposits and other $16,982
considerations
================
Reserves for separate accounts* $66,727
================
</TABLE>
*Reserves for separate accounts are exclusive of $32,000 which represents
transfers due the general account as of December 31, 1995.
FPLH's nonguaranteed separate account liabilities ($66,727,000) are subject to
discretionary withdrawal at market value.
A reconciliation of the amounts transferred to and from FPLH's separate accounts
for the year ended December 31, 1995 is presented below:
<TABLE>
<CAPTION>
1995
----------------
(In Thousands)
<S> <C>
Transfers as reported in the Summary of
Operations of
FPLHs Separate Accounts Annual
Statements:
Transfers to separate accounts $16,982
Transfers from separate accounts (2,858)
----------------
Net transfers to separate accounts 14,124
Reconciling adjustments:
Fees paid to external fund manager 44
Transfers as reported in the Summary
of Operations $14,168
of FPLH's Life, Accident &
Health Annual Statement
================
</TABLE>
19
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. PREMIUMS AND ANNUITY CONSIDERATIONS DEFERRED AND UNCOLLECTED
Deferred and uncollected life insurance premiums and annuity considerations as
of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
NET OF
TYPE GROSS LOADING LOADING
- -------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Ordinary new $ 323 $ 218 $ 105
Ordinary renewal 3,233 991 2,242
------------------------------
Total ordinary 3,556 1,209 2,347
Group new 6 6 -
Group renewal 1,407 529 878
------------------------------
Total group $1,413 $ 535 $ 878
------------------------------
Total $4,969 $1,744 $3,225
==============================
</TABLE>
9. STATUTORY RESTRICTIONS ON DIVIDENDS
FPLH is restricted from distributing any dividends to shareholders without prior
approval from the New York Department of Insurance.
10. CONTINGENCIES
In the ordinary course of business, FPLH is a defendant in litigation
principally involving insurance policy claims for damages, including
compensatory and punitive damages. In the opinion of management, the outcome of
such litigation will not result in a loss which would be material to FPLH's
financial position at December 31, 1995.
20
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used in estimating fair value
disclosures for the following financial instruments:
BONDS AND PREFERRED STOCKS
The fair values of bonds and preferred stocks are generally based on published
quotations of the SVO of the NAIC. However, for certain investments, the SVO
does not provide a value and FPLH uses either admitted asset investment amounts
(i.e., statement values) as allowed by the NAIC, values provided by outside
broker confirmations or internally calculated estimates. The fair values of
FPLH's bonds and preferred stocks are disclosed in Note 2.
POLICY LOANS
The carrying values of policy loans reported in the accompanying balance sheets
approximate their fair values.
CASH AND SHORT-TERM INVESTMENTS
The carrying values of cash and short-term investments reported in the
accompanying balance sheets approximate their fair values.
INVESTMENT CONTRACTS
The fair values of investment-type fixed annuity contracts are estimated using
discounted cash flow calculations, based on current interest rates for similar
contracts. The fair values of variable annuity contracts approximate their
carrying values.
21
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and fair values of FPLH's liabilities for investment-type
contracts at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------------------------
<S> <C> <C>
(In Thousands)
DECEMBER 31, 1995
Fixed annuity contracts $ 82,835 $ 85,511
Variable annuity contracts 66,727* 66,727
-------------------------
$149,562 $152,238
=========================
DECEMBER 31, 1994
Fixed annuity contracts $ 95,909 $ 95,513
Variable annuity contracts 40,557* 40,557
-------------------------
$136,466 $136,070
=========================
</TABLE>
*Included in FPLH's separate account liabilities.
The fair values for FPLH's insurance contracts other than investment contracts
are not required to be disclosed. However, the fair values of liabilities under
all insurance contracts are taken into consideration in FPLH's overall
management of interest rate risk, such that FPLH's exposure to changing interest
rates is minimized through the matching of investment maturities with amounts
due under insurance contracts.
22
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Part A. None
Part B. All financial statements required to be filed are included in
Part B.
Part C. None
(b) Exhibits.
(1) Resolution of the Board of Directors of First Providian Life
and Health Insurance Company ("First Providian") authorizing
establishment of the Separate Account./2/
(2) Not Applicable.
(3) Distribution Agreement.
(a) Form of Selling Agreement./2/
(4) (a) Form of variable annuity contract./2/
(5) (a) Form of Application./2/
(6) (a) Amended and Restated Charter of First Providian/2/
(b) By-Laws of First Providian as amended February 28,
1995./2/
(7) Not Applicable.
(8) (a) Form of Participating Agreement for the Funds./2/
(b) Form of Marketing Agreement./2/
(9) (a) Opinion and Consent of Counsel./1/
(b) Consent of Counsel./1/
(10) Consent of Independent Auditors./1/
(11) No Financial Statements are omitted from Item 23.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
- -------------------------------------
/1/Filed herewith.
/2/Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement of First Providian Life and Health Insurance Company,
File No. 33-94204.
<PAGE>
Item 25. Directors and Officers of the Depositor
Principal business address is 520 Columbia Drive, Johnson City, New York
13790.
Chairman of the Board & President David J. Miller
Senior Vice President/Human Resources
and Corporate Communications John H. Rogers
Senior Vice President David B. Smith
Senior Vice President Martin Renninger
Vice President & Qualified Actuary Brian Alford
Vice President Edward A. Biemer
Vice President Thomas P. Bowie
Vice President, Treasurer &
Senior Financial Officer Dennis E. Brady
Vice President Gregory J. Garvin
Vice President Carolyn M. Kerstein
Vice President/Underwriting William J. Kline
Vice President Jeffrey P. Lammers
Vice President & Secretary Susan E. Martin
Vice President Kevin P. McGlynn
Vice President Douglas E. Menges
Vice President Thomas B. Nesspor
Vice President G. Eric O'Brien
Vice President Daniel H. Odum
Vice President and Actuary John C. Prestwood, Jr.
Vice President Nancy B. Schuckert
Vice President Joseph D. Strenk
Vice President William C. Tomilin
Assistant Vice President Geralyn Barbato
Assistant Vice President &
Qualified Actuary Michael A. Cioffi
Assistant Vice President Mary Ellen Fahringer
Assistant Vice President Joan G. Chandler
Assistant Vice President &
Assistant Treasurer John A. Mazzuca
Assistant Vice President and
Consumer Services Officer Rosalie M. Smith
Assistant Controller Joseph C. Noone
Second Vice President Cindy L. Chanley
Second Vice President George E. Claiborne, Jr.
Second Vice President Michele Coan
Second Vice President Karen H. Fleming
Second Vice President Michael F. Lane
Second Vice President Michael K. Mingus
Second Vice President Robin Morgan
Second Vice President Frank J. Rosa
Second Vice President William W. Strickland
Second Vice President Janice L. Weaver
Second Vice President/Investments Terri L. Allen
Second Vice President/Investments Tom Bauer
Second Vice President/Investments Kirk W. Buese
Second Vice President/Investments Curt M. Burns
Second Vice President/Investments Joel L. Coleman
Second Vice President/Investments William S. Cook
Second Vice President/Investments Deborah A. Dias
Second Vice President/Investments Eric B. Goodman
Second Vice President/Investments James Grant
Second Vice President/Investments Theodore M. Haag
Second Vice President/Investments Frederick B. Howard
<PAGE>
Second Vice President/Investments Diane J. Hulls
Second Vice President/Investments William H. Jenkins
Second Vice President/Investments Frederick C. Kessell
Second Vice President/Investments Tim Kuussalo
Second Vice President/Investments Mark E. Lamb
Second Vice President/Investments Monika Machon
Second Vice President/Investments James D. MacKinnon
Second Vice President/Investments Jack McCabe
Second Vice President/Investments Jeffrey T. McGlaun
Second Vice President/Investments Wayne R. Nelis
Second Vice President/Investments James G. Nickerson
Second Vice President/Investments Douglas H. Owen, Jr.
Second Vice President/Investments Debra K. Pellman
Second Vice President/Investments Jon L. Skaggs
Second Vice President/Investments James A. Skufca
Second Vice President/Investments Robert A. Smedley
Second Vice President/Investments Bradley L. Stofferahn
Second Vice President/Investments Randall K. Waddell
Second Vice President and Assistant
Secretary Edward P. Reiter
Assistant Secretary L. Jude Clark
Assistant Secretary Colleen S. Lyons
Assistant Secretary Mary Ann Malinyak
Assistant Secretary John F. Reesor
Assistant Secretary Kimberly A. Scouller
Assistant Secretary R. Michael Slaven
Product Compliance Officer James T. Bradley
DIRECTORS:
Dennis E. Brady David J. Miller
I. Donald Britton Thomas B. Nesspor
Patricia A. Collins Brian H. Perry
Jack M. Dann Martin Renninger
Jeffrey H. Goldberger Rosalie M. Smith
Susan E. Martin Paul Yakulis
Kevin McGlynn John C. Prestwood, Jr.
Item 26. Persons controlled by or Under Common Control with the Depositor or
Registrant.
The Depositor, First Providian Life and Health Insurance Company ("First
Providian"), is directly and indirectly wholly owned by Providian Corporation.
The Registrant is a segregated asset account of First Providian.
The following chart indicates the persons controlled by or under common
control with First Providian:
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation Percent of Voting Securities Owned
- -------------------------------- --------------- ----------------------------------
<S> <C> <C> <C>
Providian Corporation Delaware 100% Publicly Owned
Providian Agency Group, Inc. Kentucky 100% Providian Corp.
Benefit Plans, Inc. Delaware 100% Providian Corp.
DurCo Agency, Inc. Virginia 100% Benefit Plans, Inc.
Providian Assignment Corporation Kentucky 100% Providian Corp.
Providian Financial Services, Inc. Pennsylvania 100% Providian Corp.
Providian Securities Corporation Pennsylvania 100% Providian Financial Srvs, Inc.
Wannalancit Corp. Massachusetts 100% Providian Corp.
Providian Investment Delaware 100% Providian Corp.
Advisors, Inc.
Providian Capital Management, Inc. Delaware 100% Providian Corp.
Providian Capital Mgmt. Delaware 100% Providian Capital Management, Inc.
Real Estate Services, Inc.
Capital Real Estate Development Corp. Delaware 100% Providian Corp.
KB Currency Advisors, Inc. Delaware 33 1/3% Capital Real Estate Dev. Corp.
33 1/3% Jonathan M. Berg
33 1/3% Andrew J. Krieger
Capital General Development Corp. Delaware 100% Providian Corp.
Commonwealth Life Insurance Co. Kentucky 100% Capital General Development Corp.
Agency Holding I, Inc. Delaware 100% Commonwealth Life Ins. Co.*
Agency Investments I, Inc. Delaware 100% Agency Holding I, Inc.
Commonwealth Agency, Inc. Kentucky 100% Commonwealth Life Insurance Co.
Peoples Security Life North Carolina 100% Capital General Development Corp.
Insurance Company
Ammest Realty Corporation Texas 100% Peoples Security Life Insurance Co.
Agency Holding II, Inc. Delaware 100% Peoples Security Life Insurance Co.
Agency Investments II, Inc. Delaware 100% Agency Holding II, Inc.
Agency Holding III, Inc. Delaware 100% Peoples Security Life Insurance Co.
Ramada Inn Coliseum Operating
Company Mississippi 100% Peoples Security Life Insurance Co.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Agency Investments III, Inc. Delaware 100% Agency Holding III, Inc.
Capital 200 Block Corporation Delaware 100% Providian Corp.
Capital Broadway Corporation Kentucky 100% Providian Corp.
Capital Security Life Ins. Co. North Carolina 100% Providian Corp.
Independence Automobile Florida 100% Capital Security Life Insurance Co.
Association, Inc.
Independence Automobile Club Georgia 100% Capital Security Life Insurance Co.
Southlife, Inc . Tennessee 100% Providian Corp.
Providian Bancorp, Inc. Delaware 100% Providian Corp.
First Deposit Service Corporation California 100% Providian Bancorp, Inc.
First Deposit Life Insurance Co. Arkansas 100% Providian Bancorp, Inc.
First Deposit National Bank United States 100% Providian Bancorp, Inc.
Winnisquam Community New Hampshire 96% First Deposit National Bank
Development Corp. 4% First New Hampshire Bank
Providian Credit Corporation Delaware 100% Providian Bancorp, Inc.
Providian National Bank United States 100% Providian Bancorp, Inc.
Providian National Bancorp California 100% Providian Bancorp, Inc.
Commonwealth Premium Finance California 100% Providian National Bancorp
Providian Credit Services, Inc. Utah 100% Providian Bancorp, Inc.
Providian Insurance Agency, Inc. Pennsylvania 100% Providian Corp.
National Home Life Corporation Pennsylvania 100% Providian Insurance Agency, Inc.
Compass Rose Development Corp. Pennsylvania 100% Providian Insurance Agency, Inc.
Association Consultants, Inc. Illinois 100% Providian Insurance Agency, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Valley Forge Associates, Inc. Pennsylvania 100% Providian Insurance Agency, Inc.
Veterans Benefits Plans, Inc. Pennsylvania 100% Providian Insurance Agency, Inc.
Veterans Insurance Services, Inc. Delaware 100% Providian Insurance Agency, Inc.
Financial Planning Services, Inc. Washington, DC 100% Providian Insurance Agency, Inc.
Providian Auto and Home Missouri 100% Providian Corp.
Insurance Company
Academy Insurance Group, Inc. Delaware 100% Providian Auto and Home
Insurance Co.
Academy Life Insurance Company Missouri 100% Academy Insurance Group, Inc.
Pension Life Insurance Company New Jersey 100% Academy Insurance Group, Inc.
of America
Academy Services, Inc. Delaware 100% Academy Insurance Group, Inc.
Ammest Development Corporation, Inc. Kansas 100% Academy Insurance Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance Group, Inc.
Ammest Massachusetts Ins. Massachusetts 100% Academy Insurance Group, Inc.
Agency, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
AMPAC, Inc. Texas 100% Academy Insurance Group, Inc.
AMPAC Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
Data/Mark Services, Inc. Delaware 100% Academy Insurance Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Financial Group, Inc.
Military Associates Inc. Pennsylvania 100% Academy Insurance Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Group, Inc.
Unicom Administrative Services, Inc. Pennsylvania 100% Academy Insurance Group, Inc.
Unicom Administrative Services, Germany 100% Unicom Admin. Services, Inc.
GmbH
Providian Property and Casualty Kentucky 100% Providian Auto and Home
Insurance Company Insurance Co.
Providian Mauritius Ltd. Mauritius 100% Providian Corporation
Providian LLC. British West
Indies 100% Providian Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Providian Fire Insurance Company Kentucky 100% Providian Property and Casualty
Insurance Co.
Capital Liberty L.P. Delaware 5% Providian Corp. (General Partnership
(Limited Partnership) Interest)
76% Commonwealth Life Insurance
Company (Limited Partnership Interest)
19% Peoples Security Life Insurance Co.
(Limited Partnership Interest)
Providian Life and Health Missouri 4% Providian Corp.;
Insurance Company 61% Commonwealth Life Ins. Company;
15% Peoples Security Life Insurance. Co.;
20% Capital Liberty, L.P.
Veterans Life Insurance Company Illinois 100% Providian Life and Health Ins. Co.
Providian Services, Inc. Pennsylvania 100% Veterans Life Insurance Co.
First Providian Life and Health New York 100% Veterans Life Insurance Co.
Insurance Company
</TABLE>
Item 27. Number of Contract Owners
As of December 10, 1996, there were no Advisor's Edge Contract Owners
and as of this date there are no PGA Retirement Annuity Contract
Owners.
Item 28. Indemnification.
Item 28 is incorporated by reference from Pre-Effective Amendment No.1 to
the Registration Statement of First Providian Life and Health Insurance Company,
File No. 33-94212.
<PAGE>
Item 29. Principal Underwriters
(a) Providian Securities Corporation, which serves as the principal
underwriter for the variable annuity contracts funded by Separate
Account C, also serves as the principal underwriter for variable
life insurance policies funded by Separate Account I, Separate
Account II and Separate Account V of Providian Life and Health
Insurance Company (formerly National Home Life Assurance Company).
(b) Directors and Officers
Positions and Officers
Name with Underwriter
---- ----------------
Jeffrey P. Lammers President, Assistant Secretary and Director
Harvey E. Willis Vice President and Secretary
Kimberly A. Scouller Vice President and Chief Compliance
Officer
John P. Fendig Vice President and Assistant Compliance
Officer
Mark Nerderman Vice President
Michael F. Lane Vice President
<PAGE>
Sarah J. Strange Vice President
Elaine J. Robinson Treasurer
Michael G. Ayers Controller
Frederick C. Kessell Director
Robert. L. Walker Director
Item 30. Location of Accounts and Records
The books, accounts and other documents required by Section 31(a) under
the Investment Company Act and the rules promulgated thereunder will be
maintained in the physical possession of First Providian Life and Health
Insurance Company at its administrative offices at 520 Columbia Drive, Johnson
City, New York 13790.
Item 31. Management Services
All management contracts are discussed in Part A or Part B.
Item 31. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as payments under the variable annuity contracts may
be accepted;
(b) The Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
prospectus that the applicant can remove to sent for a Statement of Additional
Information;
(c) The Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to be made
available under this Form promptly upon written or oral request.
(d) First Providian Life and Health Insurance Company represents that the
fees and charges deducted under the contract described in this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed by First
Providian Life and Health Insurance Company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, First Providian Life and Health Insurance Company Separate
Account C, certifies that it meets the requirement of Securities Act Rule
485(b) for effectiveness of this Amended Registration Statement to be signed on
its behalf in the County of Jefferson Commonwealth of Kentucky on the 30th day
of December 1996.
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY SEPARATE ACCOUNT C (REGISTRANT)
By: First Providian Life and Health Insurance Company
By: David J. Miller*
------------------------------------------------
David J. Miller
Chairman of the Board and President
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY (DEPOSITOR)
By: David J. Miller*
------------------------------------------------
David J. Miller
Chairman of the Board and President
/s/ R. Michael Slaven
*By: ------------------------------------------------
R. Michael Slaven
Attorney-in-Fact
<PAGE>
As required by the Securities Act of 1933, this amended Registration Statement
has been duly signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
David J. Miller* Director, Chairman of the Board December 30, 1996
- --------------------------- and President
David J. Miller
Dennis E. Brady* Director, Vice President, December 30, 1996
- --------------------------- Treasurer and Senior Financial
Dennis E. Brady Officer
(Chief Accounting Officer)
Susan E. Martin* Director, Vice President and December 30, 1996
- --------------------------- Secretary
Susan E. Martin
I. Donald Britton* Director December 30, 1996
- ---------------------------
I. Donald Britton
Patricia A. Collins* Director December 30, 1996
- ---------------------------
Patricia A. Collins
Jack M. Dann* Director December 30, 1996
- ---------------------------
Jack M. Dann
Jeffrey H. Goldberger* Director December 30, 1996
- ---------------------------
Jeffrey H. Goldberger
Brian H. Perry* Director December 30, 1996
- ---------------------------
Brian H. Perry
Martin Renninger* Director and Senior Vice December 30, 1996
- --------------------------- President
Martin Renninger
Paul Yakulis* Director December 30, 1996
- ---------------------------
Paul Yakulis
Rosalie M. Smith* Director December 30, 1996
- ---------------------------
Rosalie M. Smith
Thomas B. Nesspor* Director and Vice President December 30, 1996
- ---------------------------
Thomas B. Nesspor
Kevin P. McGlynn* Director and Vice President December 30, 1996
- ---------------------------
Kevin P. McGlynn
John C. Prestwood Jr.* Director, Vice President December 30, 1996
- --------------------------- and Actuary
John C. Prestwood Jr.
</TABLE>
* By: /s/ R. Michael Slaven
----------------------------
R. Michael Slaven
Attorney-in-Fact
<PAGE>
SEPARATE ACCOUNT C
PGA RETIREMENT VARIABLE ANNUITY
INDEX TO EXHIBITS
EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL
EXHIBIT 9(b) CONSENT OF COUNSEL
EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS
<PAGE>
EXHIBIT 9(a)
[LETTERHEAD FOR PROVIDIAN]
December 30, 1996
First Providian Life and Health Insurance Company
Administrative Offices
520 Columbia Drive
Johnson City, New York 13790
RE: First Providian Life and Health Insurance Company Separate Account C--
Opinion and Consent
To Whom It May Concern:
This opinion and consent is furnished in connection with the filing of
Post-Effective Amendment No. 1 (the "Amendment") to the Registration Statement
on Form N-4, File No. 33-94204 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), of First Providian Life and
Health Insurance Company Separate Account C ("Separate Account C"). Separate
Account C receives and invests premiums allocated to it under a flexible premium
multi-funded annuity contract (the "Annuity Contract"). The Annuity Contract is
offered in the manner described in the prospectus contained in the Registration
Statement (the "Prospectus").
In my capacity as legal adviser to First Providian Life and Health
Insurance Company, I hereby confirm the establishment of Separate Account C
pursuant to a resolution adopted by the Board of Directors of First Providian
Life and Health Insurance Company for a separate account for assets applicable
to the Annuity Contract, pursuant to the provisions of Section 46 of the New
York Insurance Statutes. In addition, I have made such examination of the law in
addition to consultation with outside counsel and have examined such corporate
records and such other documents as I consider appropriate as a basis for the
opinion hereinafter expressed. On the basis of such examination, it is my
professional opinion that:
1. First Providian Life and Health Insurance Company is a corporation duly
organized and validly existing under the laws of the State of New York.
2. Separate Account C is an account established and maintained by First
Providian Life and Health Insurance Company pursuant to the laws of the
State of New York, under which income, capital gains and capital losses
incurred on the assets of Separate Account C are credited to or charged
against the assets of Separate Account C, without regard to the income,
capital gains or capital losses arising out of any other business which
First Providian Life and Health Insurance Company may conduct.
<PAGE>
3. Assets allocated to Separate Account C will be owned by First Providian
Life and Health Insurance Company. The assets in Separate Account C
attributable to the Annuity Contract generally are not chargeable with
liabilities arising out of any other business which First Providian Life
and Health Insurance Company may conduct. The assets of Separate Account C
are available to cover the general liabilities of First Providian Life and
Health Insurance Company only to the extent that the assets of Separate
Account C exceed the liabilities arising under the Annuity Contracts.
4. The Annuity Contracts have been duly authorized by First Providian Life and
Health Insurance Company and, when sold in jurisdictions authorizing such
sales, in accordance with the Registration Statement, will constitute
validly issued and binding obligations of First Providian Life and Health
Insurance Company in accordance with their terms.
5. Owners of the Annuity Contracts as such, will not be subject to any
deductions, charges or assessments imposed by First Providian Life and
Health Insurance Company other than those provided in the Annuity Contract.
I hereby consent to the use of this opinion as an exhibit to the Amendment
and to the reference to my name under the heading "Legal Matters" in the
Prospectus.
Very truly yours,
/s/ Kimberly A. Scouller
Kimberly A. Scouller
Assistant General Counsel
<PAGE>
Exhibit 9(b)
December 30, 1996
First Providian Life and Health
Insurance Company
520 Columbia Drive
Johnson City, New York 13790
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (File No. 33-94204) filed by First Providian
Life and Health Insurance Company and First Providian Life and Health Insurance
Company Separate Account C with the Securities and Exchange Commission under the
Securities act of 1933 and the Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Berenson & Johnson LLP
--------------------------------------
JORDEN BURT BERENSON & JOHNSON LLP
<PAGE>
Exhibit No. (10)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Auditors" and to the
use of our report dated April 23, 1996, with respect to the statutory-basis
financial statements of First Providian Life and Health Insurance Company in
the Registration Statement (Form N-4) and related Prospectus of First
Providian Life and Health Insurance Company Separate Account C for the PGA
Retirement Annuity.
/s/Ernst & Young LLP
Louisville, Kentucky
December 30, 1996
<PAGE>
POWER OF ATTORNEY
-----------------
We, as officers and directors of First Providian Life and Health Insurance
Company, hereby severally constitute and appoint James V. Elliot, Kimberly A.
Scouller, and R. Michael Slaven, and each of them singly, our true and lawful
attorney and full power to them and each of them to sign for us, in our names
in the capacities indicated below, any and all registration statements to be
filed with the Securities and Exchange Commission, and any and all amendments
thereto (including specifically, without limitation, post-effective amendments),
for the purposes of registering variable annuity and/or life variable insurance
contacts of First Providian Life and Health Insurance Company for sale pursuant
to the Securities Act of 1933.
Witness our hands on the date set forth below.
Signature Title Date
/s/ Kevin P. McGlynn Vice President and Director 11/11/96
- -------------------------- --------
Kevin P. McGlynn
/s/ John C. Prestwood, Jr. Vice President, Actuary and 11/11/96
- -------------------------- Director --------
John C. Prestwood, Jr.
<PAGE>
POWER OF ATTORNEY
-----------------
We, the undersigned officers and directors of First Providian Life and
Health Insurance Company, hereby severally constitute and appoint James V.
Elliott, Kimberly A. Scouller, and R. Michael Slaven, and each of them
singly, our true and lawful attorney with full power to them and each of them to
sign for us, and in our names in the capacities indicated below, any and all
registration statements to be filed with the Securities and Exchange Commission,
and any and all amendments thereto (including specifically, without limitation,
post-effective amendments), for the purposes of registering variable annuity
and/or life variable insurance contracts of First Providian Life and Health
Insurance Company for sale pursuant to the Securities Act of 1933.
Witness our hands on the date set forth below.
Signature Title Date
--------- ----- ----
/s/ D. J. Miller Director, Chairman of the Board and May 24, 1996
- ------------------------- President
David J. Miller
/s/ Dennis E. Brady Director, Vice President, Treasurer
- ------------------------- and Senior Financial Officer May 31, 1996
Dennis E. Brady
/s/ Susan E. Martin Director and Vice President May 24, 1996
- -------------------------
Susan E. Martin
/s/ I. Donald Britton Director May 24, 1996
- -------------------------
I. Donald Britton
/s/ Patricia A. Collins Director May 24, 1996
- -------------------------
Patricia A. Collins
Director May __, 1996
- -------------------------
Jack M. Dann
/s/ Jeffrey H. Goldberger Director May 24, 1996
- -------------------------
Jeffrey H. Goldberger
/s/ Brian H. Perry Director May 24, 1996
- -------------------------
Brian H. Perry
/s/ Martin Renninger Director and Senior Vice President May 24, 1996
- -------------------------
Martin Renninger
/s/ Paul Yakulis
- ------------------------- Director May 24, 1996
Paul Yakulis
/s/ Rosalie M. Smith Director May 24, 1996
- -------------------------
Rosalie M. Smith
/s/ Thomas B. Nesspor Director and Vice President May 24, 1996
- -------------------------
Thomas B. Nesspor
<PAGE>
POWER OF ATTORNEY
-----------------
We, the undersigned officers and directors of First Providian Life and
Health Insurance Company, hereby severally constitute and appoint James V.
Elliot, Kimberly A. Scouller, and R. Michael Slaven, and each of them singly,
our true and lawful attorney with full power to them and each of them to sign
for us, and in our names in the capacities indicated below, any and all
registration statements to be filed with the Securities and Exchange Commission,
and any and all amendments thereto (including specifically, without limitation,
post-effective amendments), for the purposes of registering variable annuity
and/or life variable insurance contracts of First Providian Life and Health
Insurance Company for sale pursuant to the Securities Act of 1933.
Witness our hands on the date set forth below.
Signature Title Date
--------- ----- ----
/s/ D. J. Miller Director, Chairman of the Board and May 24, 1996
- ------------------------- President
David J. Miller
/s/ Dennis E. Brady Director, Vice President, Treasurer May 31, 1996
- ------------------------- and Senior Financial Officer
Dennis E. Brady
/s/ Susan E. Martin Director and Vice President May 24, 1996
- -------------------------
Susan E. Martin
/s/ I. Donald Britton Director May 24, 1996
- -------------------------
I. Donald Britton
/s/ Patricia A. Collins Director May 24, 1996
- -------------------------
Patricia A. Collins
/s/ Jack M. Dann Director May 24, 1996
- -------------------------
Jack M. Dann
/s/ Jeffrey H. Goldberger Director May 24, 1996
- -------------------------
Jeffrey H. Goldberger
/s/ Brian H. Perry Director May 24, 1996
- -------------------------
Brian H. Perry
/s/ Martin Renninger Director and Senior Vice President May 24, 1996
- -------------------------
Martin Renninger
/s/ Paul Yakulis Director May 24, 1996
- -------------------------
Paul Yakulis
/s/ Rosalie M. Smith Director May 24, 1996
- -------------------------
Rosalie M. Smith
/s/ Thomas B. Nesspor Director and Vice President May 24, 1996
- -------------------------
Thomas B. Nesspor
