<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998
REGISTRATION NO. 33-94210
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 2 (X)
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 4 (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
Gregory E. Miller-Breetz, 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 Boros Cicchetti 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.
75 days after filing pursuant to paragraph (a)(2) of Rule 485.
On _____________, 1995 pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B
(STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION
STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
<TABLE>
<CAPTION>
ITEM OF
- -------
FORM N-4 PROSPECTUS CAPTION
- -------- ------------------
<S> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ GLOSSARY
3. Synopsis............................... HIGHLIGHTS; FEE TABLE;
Performance Measures
4. Condensed Financial Information........ Condensed Financial Information
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; The
Portfolios; Voting Rights
6. Deductions............................. Charges and Deductions;
FEDERAL TAX CONSIDERATIONS;
FEE TABLE
7. General Description of Variable Annuity CONTRACT FEATURES;
Contracts.............................. 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
Providian Marquee Statement of
Additional Information
</TABLE>
<PAGE>
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 DISTRIBUTION OF THE
Offered................................ 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
PROVIDIAN MARQUEE VARIABLE 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 Providian Marquee variable annuity contract (the "Contract"), offered
through First Providian Life and Health Insurance Company (the "Company",
"us", "we" or "our"), provides a vehicle for investing on a tax-deferred basis
in 12 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 $5,000.
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.
You may allocate your Net Purchase Payments for the Contract among 12
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 (which are contained within six open-end, diversified investment
companies):
. Fidelity VIP Money Market Portfolio
. T. Rowe Price Equity Income
Portfolio
. Fidelity VIP Equity-Income Portfolio
. Fidelity VIP Growth Portfolio . T. Rowe Price New America
Growth Portfolio
. Fidelity VIP II Asset Manager Portfolio
. T. Rowe Price International
Stock Portfolio
. Dreyfus Growth and Income Portfolio
. Dreyfus Quality Bond Portfolio
. OCC Accumulation Trust Managed
Portfolio
. OCC Accumulation Trust Small
Cap Portfolio
. OCC Accumulation Trust U.S.
Government Income Portfolio
Your initial Net Purchase Payment(s) will, when your Contract is issued, be
invested immediately in your chosen Portfolios, unless you indicate otherwise.
The Contract's Accumulated Value varies with the investment performance of the
Portfolios 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 at any
time, although in many instances withdrawals made prior to age 59 1/2 are
subject to a 10% penalty tax (and a portion may be subject to ordinary income
taxes) and may be subject to a surrender charge of up to 7%. 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 each Fund.
Please read the Prospectuses carefully and retain them 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 1-800-797-9177. The Table of Contents
of the Statement of Additional Information is included at the end of this
Prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
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 WHERE IT
WOULD BE UNLAWFUL TO MAKE AN OFFERING LIKE THIS. WE HAVE NOT AUTHORIZED ANYONE
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS ABOUT THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY ON ANY OTHER
INFORMATION OR REPRESENTATIONS.
The date of this Prospectus is May 1, 1998. FM-0979 (NY)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GLOSSARY.................. 2
HIGHLIGHTS................ 5
FEE TABLE................. 7
Condensed Financial
Information.............. 10
Financial Statements...... 10
Performance Measures...... 10
Additional Performance
Measures................. 11
Yield and Effective Yield. 11
The Company and the
Separate Account......... 12
Variable Insurance
Products Fund and
Variable Insurance
Products Fund II......... 12
Dreyfus Variable
Investment Fund.......... 13
T. Rowe Price Equity
Series, Inc.............. 13
T. Rowe Price
International Series,
Inc...................... 13
OCC Accumulation Trust.... 13
The Portfolios............ 13
CONTRACT FEATURES......... 15
Contract Application and
Purchase Payments...... 15
Purchasing by Wire...... 16
Right to Cancel Period.. 16
Allocation of Purchase
Payments............... 16
Exchanges Among the
Portfolios............. 16
Dollar Cost Averaging
Option................. 16
Accumulated Value....... 17
Charges and Deductions.. 17
Minimum Balance
Requirement............ 18
DISTRIBUTIONS UNDER THE
CONTRACT................. 19
Full and Partial
Withdrawals............ 19
Lump Sum Payment Option. 19
Systematic Withdrawal
Option................. 19
Annuity Date............ 20
Annuity Payment Options. 20
Death Benefit........... 21
Deferment of Payment.... 23
FEDERAL TAX
CONSIDERATIONS........... 23
GENERAL INFORMATION....... 28
</TABLE>
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
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.
2
<PAGE>
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 20), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page 20), 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 20).
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.
Code--The Internal Revenue Code of 1986, as amended.
Company ("we", "us", "our") - First Providian Life and Health Insurance
Company, a New York stock company.
Contract - The group flexible premium variable annuity contract described in
this Prospectus, participation in which may be evidenced by a certificate
issued to the Contract Owner.
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 application. 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.
Exchange - One Exchange will be deemed to occur with each voluntary transfer
from any Subaccount.
Funds - Each of (i) Variable Insurance Products Fund, (ii) Variable Insurance
Products Fund II, (iii) Dreyfus Variable Investment Fund, (iv) T. Rowe Price
Equity Series, Inc., (v) T. Rowe Price International Series, Inc. and (vi) OCC
Accumulation Trust. The Separate Account invests in the Portfolios contained
within the Funds.
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 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
3
<PAGE>
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 portfolio of the Funds. The Funds currently
offer 12 portfolios in the Providian Marquee variable annuity: the Fidelity
VIP Money Market Portfolio, the Fidelity VIP Equity-Income Portfolio and the
Fidelity VIP Growth Portfolio of Variable Insurance Products Fund; the
Fidelity VIP II Asset Manager Portfolio of Variable Insurance Products Fund
II; the Dreyfus Growth and Income Portfolio ("Dreyfus Growth and Income") and
the Dreyfus Quality Bond Portfolio ("Dreyfus Quality Bond") of Dreyfus
Variable Investment Fund; the T. Rowe Price Equity Income Portfolio ("T. Rowe
Price Equity Income") and the T. Rowe Price New America Growth Portfolio ("T.
Rowe Price New America Growth") of T. Rowe Price Equity Series, Inc.; the T.
Rowe Price International Stock Portfolio ("T. Rowe Price International Stock")
of T. Rowe Price International Series, Inc.; and the OCC Accumulation Trust
Managed Portfolio ("OCC Accumulation Trust Managed"), the OCC Accumulation
Trust Small Cap Portfolio ("OCC Accumulation Trust Small Cap") and the OCC
Accumulation Trust U.S. Government Income Portfolio ("OCC Accumulation Trust
U.S. Government Income") of OCC Accumulation Trust (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 $5,000 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),
408(b), and 408A of 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 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 Funds' 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 12 Portfolios.
Surrender Value - The Accumulated Value, less any applicable contingent
deferred sales load (i.e., surrender charge) and any Premium Taxes incurred
but not yet deducted.
Valuation Period - The relative performance of your Contract is measured by
the Accumulation Unit Value. This value is calculated each Valuation Period. 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 2).
THE PROVIDIAN MARQUEE VARIABLE ANNUITY
The Contract provides a vehicle for investing on a tax-deferred basis in 12
investment company Portfolios. You may subsequently withdraw monies 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 Portfolios. 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 23.)
INVESTMENT CHOICES
Your investment in the Contract may be allocated among 12 Subaccounts of the
Separate Account. The Subaccounts in turn invest exclusively in the following
12 Portfolios offered by the Funds: Fidelity VIP Money Market, Fidelity VIP
Equity-Income, Fidelity VIP Growth, Fidelity VIP II Asset Manager, Dreyfus
Growth and Income, Dreyfus Quality Bond, T. Rowe Price Equity Income, T. Rowe
Price New America Growth, T. Rowe Price International Stock, OCC Accumulation
Trust Managed, OCC Accumulation Trust Small Cap and OCC Accumulation Trust
U.S. Government Income. The assets of each Portfolio are separate, and each
Portfolio has distinct investment objectives and policies as described in the
corresponding Fund or Portfolio Prospectus. .......................Page 13
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.
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, please consult your agent, who will assist you in
completing the Contract application. You will need to select an Annuitant. The
Annuitant may not be older than age 75. The minimum initial Purchase Payment
is $5,000 for Non-Qualified Contracts, and $2,000 (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. ....Page 15
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ALLOCATION OF PURCHASE PAYMENTS
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in your chosen Portfolios 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. ..Page
16
RIGHT TO CANCEL PERIOD
The Contract provides for a Right to Cancel Period of 10 days (20 days for
replacement) plus a 5 day 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 or to the agent from whom you purchased the
Contract. When we receive the Contract, we will return the Accumulated Value
of your Purchase Payment(s) invested in the Portfolios plus any loads, fees
and/or Premium Taxes that may have been subtracted from such amount. ...Page 16
EXCHANGES
You may make unlimited Exchanges among the Portfolios, provided you maintain a
minimum balance of $250, 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. No fee is currently imposed for such
Exchanges; however, we reserve the right to charge a $15 fee for Exchanges in
excess of 12 per Contract Year. Exchanges must not reduce the value of any
Subaccount below $250, 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 17). ............................................Page 16
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 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. ..............................................................Page 21
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 annuity. We provide you with a variety of payment options. 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
underlying Portfolio or Portfolios selected. ......................Page 20
CONTRACT AND POLICYHOLDER INFORMATION
If you have questions about your Contract, please telephone our Administrative
Offices at 1-800-797-9177 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.
6
<PAGE>
CHARGES AND DEDUCTIONS UNDER THE CONTRACT
The Contract has an annual mortality and expense risk charge of 1.25%. The
Contract has no front-end sales load and you may withdraw up to 10% of the
Accumulated Value once per year without a surrender charge. However,
additional withdrawals are subject to a surrender charge of up to 7% during
the first six Contract Years.
The Contract also includes administrative charges and policy fees which pay
for administering the Contract, and management, advisory and other fees, which
reflect the costs of the Funds.....................................Page 17
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% penalty tax (and a portion may be
subject to ordinary income taxes)..................................Page 19
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that
may be assessed) that you would incur as an owner of a Contract (see page 17).
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 Funds. For a complete discussion of Contract costs and expenses, see
"Charges and Deductions," page 17.
<TABLE>
<CAPTION>
CONTRACTOWNER TRANSACTION EXPENSES
<S> <C>
Sales Load Imposed on Purchases......................................... None
Contingent Deferred Sales Load (surrender charge)....................... 7%*
Exchange Fees........................................................... None
ANNUAL CONTRACT FEE..................................................... $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in the
Separate Account)
Mortality and Expense Risk Charge....................................... 1.25%
Administrative Charge................................................... .15%
-----
Total Annual Separate Account Expenses.................................. 1.40%
</TABLE>
*Up to 10% of the Accumulated Value as of the last Contract Anniversary (10%
of the initial Net Purchase Payment during the first Contract Year) can be
withdrawn once per year, or pursuant to a series of systematic withdrawals,
without a surrender charge (the "Penalty Free Amount"). Additional
withdrawals in excess of the Penalty Free Amount in the first Contract Year
are subject to a 7% charge on the portion of such withdrawal that consists
of Net Purchase Payments. The charge decreases one percentage point per year
until after the sixth Contract Year at which time there is no surrender
charge. The total surrender charges assessed will not exceed 8.5% of the
Purchase Payments under the Contract.
7
<PAGE>
PORTFOLIO ANNUAL EXPENSES
Except as indicated, the figures below are based on expenses for fiscal year
1997 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement limitation, if applicable).
<TABLE>
<CAPTION>
MANAGEMENT
AND ADVISORY OTHER TOTAL PORTFOLIO
EXPENSES EXPENSES ANNUAL EXPENSES
------------ -------- ---------------
<S> <C> <C> <C>
Fidelity VIP Money Market*............... 0.21% 0.10% 0.31%
Fidelity VIP Equity-Income*.............. 0.50% 0.08% 0.58%
Fidelity VIP Growth*..................... 0.60% 0.09% 0.69%
Fidelity VIP II Asset Manager*........... 0.55% 0.10% 0.65%
Dreyfus Growth and Income**.............. 0.75% 0.05% 0.80%
Dreyfus Quality Bond**................... 0.65% 0.10% 0.75%
T. Rowe Price Equity Income.............. 0.85% 0.00% 0.85%
T. Rowe Price New America Growth......... 0.85% 0.00% 0.85%
T. Rowe Price International Stock........ 1.05% 0.00% 1.05%
OCC Accumulation Trust Managed***........ 0.80% 0.07% 0.87%
OCC Accumulation Trust Small Cap***...... 0.80% 0.17% 0.97%
OCC Accumulation Trust U.S. Government
Income***............................... 0.47% 0.46% 0.93%
</TABLE>
*A portion of the brokerage commissions that certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances, were used to reduce custodian expenses. Including
these reductions, the Total Portfolio Annual Expenses would have been 0.57%
for Equity-Income Portfolio, 0.67% for Growth Portfolio and 0.64% for Asset
Manager Portfolio.
**From time to time, the Dreyfus Growth and Income and Quality Bond
Portfolios' investment adviser in its sole discretion may waive all or part
of its fees and/or voluntarily assume certain of the Portfolios' expenses.
For a more complete description of the Portfolios' fees and expenses, see
the Dreyfus Variable Investment Fund's Prospectus.
***Total Portfolio Annual Expenses are limited by OpCap Advisors so that each
of the OCC Accumulation Trust Portfolios' annualized operating expenses
(net of any expense offsets) do not exceed 1.00% of average daily net
assets. Without such limitation and without giving effect to any expense
offsets, the Management and Advisory Expenses, Other Expenses, and Total
Annual Portfolio Expenses would have been: 0.80%, 0.07%, and 0.87%,
respectively, for the Managed Portfolio; 0.80%, 0.17%, and 0.97%,
respectively, for the Small Cap Portfolio; and 0.60%, 0.46%, and 1.06%,
respectively, for the U.S. Government Income Portfolio.
8
<PAGE>
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.
<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS YEARS
------ ------- ------- -------
<S> <C> <C> <C> <C>
Fidelity VIP Money Market................. $80.81 $ 99.81 $121.47 $205.85
Fidelity VIP Equity-Income................ 83.53 108.09 135.42 234.48
Fidelity VIP Growth....................... 84.63 111.44 141.06 245.90
Fidelity VIP II Asset Manager............. 84.23 110.23 139.01 241.76
Dreyfus Growth and Income................. 85.73 114.79 146.65 257.20
Dreyfus Quality Bond...................... 85.23 113.27 144.11 252.08
T. Rowe Price Equity Income............... 86.24 116.30 149.19 262.28
T. Rowe Price New America Growth.......... 86.24 116.30 149.19 262.28
T. Rowe Price International Stock......... 88.24 122.34 159.26 282.37
OCC Accumulation Trust Managed............ 86.44 116.91 150.20 264.31
OCC Accumulation Trust Small Cap.......... 87.44 119.93 155.25 274.39
OCC Accumulation Trust U.S. Government
Income................................... 87.04 118.72 153.23 270.37
</TABLE>
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) you do not surrender your Contract or you annuitize at the end
of each period.
<TABLE>
<CAPTION>
3 10
1 YEAR YEARS 5 YEARS YEARS
------ ------ ------- -------
<S> <C> <C> <C> <C>
Fidelity VIP Money Market.................. $17.81 $55.14 $ 94.88 $205.85
Fidelity VIP Equity-Income................. 20.53 63.39 108.80 234.48
Fidelity VIP Growth........................ 21.63 66.74 114.41 245.90
Fidelity VIP II Asset Manager.............. 21.23 65.52 112.38 241.76
Dreyfus Growth and Income.................. 22.73 70.07 120.00 257.20
Dreyfus Quality Bond....................... 22.23 68.55 117.46 252.08
T. Rowe Price Equity Income................ 23.24 71.58 122.53 262.28
T. Rowe Price New America Growth........... 23.24 71.58 122.53 262.28
T. Rowe Price International Stock.......... 25.24 77.60 132.57 282.37
OCC Accumulation Trust Managed............. 23.44 72.18 123.54 264.31
OCC Accumulation Trust Small Cap........... 24.44 75.19 128.57 274.39
OCC Accumulation Trust U.S. Government
Income.................................... 24.04 73.99 126.56 270.37
</TABLE>
The Annual Contract Fee is reflected in these examples as a percentage equal
to the estimated total amount of fees collected during a calendar year divided
by the estimated 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 portions of
the partial year period.) The Annual Contract Fee will be deducted on each
Contract Anniversary and upon surrender, on a pro rata basis, from each
Subaccount. The Company may deduct Premium Taxes, if any, as they are
incurred.
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.
9
<PAGE>
CONDENSED FINANCIAL INFORMATION
(For the period January 1, 1997 through December 31, 1997)
<TABLE>
<CAPTION>
FIDELITY FIDELITY DREYFUS
MONEY FIDELITY ASSET FIDELITY GROWTH AND DREYFUS
MARKET EQUITY-INCOME MANAGER GROWTH INCOME QUALITY BOND
-------- ------------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date*........... 10.000 10.000 10.000 10.000 10.000 10.000
12/31/97.............. 10.271 12.117 11.561 11.964 11.546 10.769
Number of units
outstanding as of:
12/31/97.............. 0 580.740 0 220.094 608.751 147.184
<CAPTION>
OCC OCC OCC
TRP TRP TRP NEW ACCUMULATION ACCUMULATION ACCUMULATION
EQUITY INTERNATIONAL AMERICA TRUST TRUST SMALL TRUST U.S.
INCOME STOCK GROWTH MANAGED CAP GOV'T INCOME
-------- ------------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date*........... 10.000 10.000 10.000 10.000 10.000 10.000
12/31/97.............. 12.084 10.157 12.435 11.537 12.224 10.533
Number of units
outstanding as of:
12/31/97.............. 591.446 1,446.938 171.777 594.827 212.793 149.603
</TABLE>
*Date of commencement of operations for all Portfolios was 5/1/97.
FINANCIAL STATEMENTS
The audited statutory-basis financial statements of the Company and the
financial statements for the Separate Account (as well as the Independent
Auditors' Report thereon) are contained in the Statement of Additional
Information.
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the Fidelity Money Market Subaccount, the yield of the
other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Contract Owners.
On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two
investment funds, the Old Trust and the Quest for Value Accumulation Trust
(now known as the OCC Accumulation Trust) that is included in the Contract
(the "New Trust"), at which time the New Trust commenced operations. The total
net assets for each of the OCC Accumulation Trust Small Cap and OCC
Accumulation Trust Managed Portfolios immediately after the transaction were
$139,812,573 and $682,601,380, respectively, with respect to the Old Trust
and, with respect to the New Trust were $8,129,274 and $51,345,102, for the
OCC Accumulation Trust Small Cap and OCC Accumulation Trust Managed
Portfolios, respectively. For the period prior to September 16, 1994,
performance figures for each of the OCC Accumulation Trust Small Cap and OCC
Accumulation Trust Managed Portfolios reflect the performance of the
corresponding Portfolios of the Old Trust.
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 yield and total return, and a list of the indexes and other
benchmarks used in evaluating a Portfolio'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 (the "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 all applicable sales loads
(including the contingent deferred sales load), the Annual Contract Fee and
all other Portfolio, Separate Account and Contract level charges except
Premium Taxes, if any.
10
<PAGE>
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. The Company may also show actual Average Annual Total Return
(i.e., the average annual change in 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 do not reflect the Annual Contract Fee, any sales loads or Premium
Taxes (if any) which, if included, would reduce the percentages reported.
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, any sales loads 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 Portfolio
inception, if during the relevant year) and ending at the end of such calendar
year. One Year Return figures reflect the historical performance of the
Portfolios as if the Contract were in existence befor its inception date
(which it was not). After the Contract's inception date, the 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, any sales
loads or Premium Taxes (if any), which if included would reduce the percentage
reported by the Company.
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN
The Company may show Non-Standardized Hypothetical Total Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios, and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which
produce the resulting Accumulated Values. They reflect a deduction for the
Separate Account expenses and Portfolio expenses. These returns do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the percentages reported.
The Non-Standardized Hypothetical Total Return for a Subaccount is the
effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period.
The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.
YIELD AND EFFECTIVE YIELD
The Company may also show yield and effective yield figures for the Subaccount
investing in shares of the Fidelity VIP Money Market Portfolio. "Yield" refers
to the income generated by an investment in Fidelity VIP Money Market over a
seven-day period, which is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in Fidelity VIP Money Market is assumed to be
reinvested. Therefore the effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment. These
figures do not reflect the Annual Contract Fee, any sales loads or Premium
Taxes (if any) which, if included, would reduce the yields reported.
11
<PAGE>
From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than Fidelity VIP
Money Market 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. 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. As of
December 31, 1997, the Company had assets of approximately $396 million. The
Company is a wholly owned subsidiary of AEGON USA, Inc., which conducts
substantially all of its operations through subsidiary companies engaged in
the insurance business or in providing non-insurance financial services. All
of the stock of AEGON USA, Inc. is indirectly owned by AEGON n.v. of the
Netherlands. AEGON n.v., a holding company, conducts its business through
subsidiary companies engaged primarily in the insurance business.
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 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.
The Separate Account has dedicated 12 Subaccounts to the Contract, each of
which invests solely in a corresponding Portfolio of the Funds. 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.
VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II
Variable Insurance Products Fund and Variable Insurance Products Fund II
(each, a "Fidelity Fund" and collectively, the "Fidelity Funds") are
diversified, open-end management investment companies organized by Fidelity
Management & Research Company ("FMR") and registered under the 1940 Act. Each
Fidelity Fund consists of several investment portfolios, including the Money
Market, Equity-Income, Growth and Asset Manager Portfolios available as part
of the Providian Marquee. FMR serves as the Fidelity Funds' investment
adviser. ("VIP" and "VIP II" refer to Variable Insurance Products Fund and
Variable Insurance Products Fund II, respectively.)
12
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end management investment company
organized under the 1940 Act. The Dreyfus Variable Investment Fund consists of
thirteen separate investment portfolios, including the Growth and Income and
Quality Bond Portfolios, which are the only portfolios available as part of
the Providian Marquee. The Dreyfus Corporation serves as this Fund's
investment adviser.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Series Inc. is a Maryland corporation organized in 1994
and is registered with the SEC under the 1940 Act as a diversified, open-end
management investment company, commonly known as a "mutual fund." Currently,
the fund consists of the Equity Income and the New America Growth Portfolios,
each of which represents a separate class of shares having different
objectives and investment policies, and both of which are available as part of
the Providian Marquee. T. Rowe Price Associates, Inc. is responsible for the
selection and management of this Fund's portfolio investments and serves as
the Fund's investment adviser.
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Series, Inc. is a Maryland corporation organized
in 1994 and is registered with the SEC under the 1940 Act as a diversified,
open-end management investment company, commonly known as a "mutual fund." The
corporation is a series fund and has the authority to issue other series in
addition to the International Stock Portfolio currently available as part of
the Providian Marquee. Rowe Price-Fleming International, Inc. is responsible
for selection and management of this Fund's portfolio investments and serves
as the Fund's investment adviser.
OCC ACCUMULATION TRUST
OCC Accumulation Trust is a Massachusetts business trust and is registered
with the SEC under the 1940 Act as a diversified, open-end management
investment company. The Fund receives investment advice with respect to each
of its portfolios from OpCap Advisors, a subsidiary of Oppenheimer Capital, a
registered investment adviser. The Fund currently consists of seven series,
including the Managed, Small Cap and Government Income Portfolios available as
part of the Providian Marquee. The OCC Accumulation Trust was formerly known
as the Quest for Value Accumulation Trust.
THE PORTFOLIOS (SEE ACCOMPANYING PROSPECTUSES)
FOR MORE INFORMATION CONCERNING THE RISKS ASSOCIATED WITH EACH PORTFOLIO'S
INVESTMENTS, PLEASE REFER TO THE APPLICABLE UNDERLYING FUND PROSPECTUS.
FIDELITY VIP MONEY MARKET PORTFOLIO
Fidelity VIP Money Market seeks to obtain as high a level of current income,
while maintaining a stable $1.00 share price, as is consistent with preserving
capital and providing liquidity. It invests only in high-quality U.S. dollar
denominated money market instruments of domestic and foreign issuers.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Fidelity VIP Equity-Income seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities the Portfolio
will also consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of 500 Stocks.
FIDELITY VIP GROWTH PORTFOLIO
Fidelity VIP Growth seeks to achieve capital appreciation normally through the
purchase of common stocks (although the Portfolio's investments are not
restricted to any one type of security). Capital appreciation may also be
found in other types of securities, including bonds and preferred stocks.
13
<PAGE>
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Fidelity VIP II Asset Manager seeks high total return with reduced risk over
the long term by allocating its assets among domestic and foreign stocks,
bonds and short-term and money market instruments.
DREYFUS GROWTH AND INCOME PORTFOLIO ("DREYFUS GROWTH AND INCOME")
Dreyfus Growth and Income is a non-diversified Portfolio, the goal of which is
long-term capital growth, current income and growth of income, consistent with
reasonable investment risk. The Portfolio invests in equity and debt
securities and money market instruments of domestic and foreign issuers.
DREYFUS QUALITY BOND PORTFOLIO ("DREYFUS QUALITY BOND")
Dreyfus Quality Bond is a diversified Portfolio, the goal of which is to
provide the maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Dreyfus Quality
Bond Portfolio invests in debt obligations of corporations, the U.S.
Government and its agencies and instrumentalities, and major U.S. banking
institutions.
T. ROWE PRICE EQUITY INCOME PORTFOLIO ("T. ROWE PRICE EQUITY INCOME")
T. Rowe Price Equity Income seeks to provide substantial dividend income as
well as long-term capital appreciation by investing primarily in dividend-
paying common stocks of established companies. In pursuing its objective, the
Portfolio emphasizes companies with favorable prospects for both increasing
dividend income and capital appreciation.
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO ("T. ROWE PRICE NEW AMERICA
GROWTH")
T. Rowe Price New America Growth seeks long-term growth of capital through
investments primarily in the common stocks of U.S. growth companies which
operate in service industries. In pursuing its objective, this Portfolio
invests primarily in companies deriving a majority of their revenues or
operating earnings from service-related activities and in companies whose
prospects are closely tied to service industries. This Portfolio may also
invest up to 25% of its assets in growth companies outside the service sector.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ("T. ROWE PRICE INTERNATIONAL
STOCK")
T. Rowe Price International Stock seeks long-term growth of capital, through
investments primarily in common stocks of established, non-U.S. companies.
OCC ACCUMULATION TRUST MANAGED PORTFOLIO ("OCC ACCUMULATION TRUST MANAGED")
OCC Accumulation Trust Managed seeks to achieve growth of capital over time
through investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary over time based on the
investment manager's assessments of the relative outlook for such investments.
OCC ACCUMULATION TRUST SMALL CAP PORTFOLIO ("OCC ACCUMULATION TRUST SMALL
CAP")
OCC Accumulation Trust Small Cap seeks capital appreciation through
investments in a diversified portfolio consisting primarily of equity
securities of companies with market capitalizations under $1 billion.
OCC ACCUMULATION TRUST U.S. GOVERNMENT INCOME PORTFOLIO ("OCC ACCUMULATION
TRUST U.S. GOVERNMENT INCOME")
The investment objective of OCC Accumulation Trust U.S. Government Income is
to seek a high level of current income together with the protection of
capital. This Portfolio seeks to achieve its investment objective by investing
exclusively in debt obligations, including mortgage-backed securities, issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
14
<PAGE>
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 corresponding Funds.
THE FUNDS' OR PORTFOLIOS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY
DECISION IS MADE CONCERNING THE ALLOCATION OF NET PURCHASE PAYMENTS TO A
PORTFOLIO.
The Portfolios may 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 Funds 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 Funds if required by law,
to resolve the matter.
CONTRACT FEATURES
The rights and benefits under the Contract are described below; however, the
description of the Contract contained in this Prospectus is qualified in its
entirety by the Contract itself, including any endorsements to it, a copy of
which is available from the Company. 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.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
If you wish to purchase a Contract, you should send your completed application
and your initial Purchase Payment to the address indicated on your
application, or to such other location as the Company may from time to time
designate. If you wish to make personal delivery by hand or courier to the
Company of your completed application and initial Purchase Payment (rather
than through the mail), you must do so at our Administrative Offices, 520
Columbia Drive, Johnson City, NY 13790. Your initial Purchase Payment for a
Non-Qualified Contract must be equal to at least the $5,000 minimum investment
requirement. The initial Purchase Payment for a Qualified Contract must be
equal to at least $2,000 (or you may establish a payment schedule of $50 a
month by payroll deduction).
The Contract will be issued and the initial Purchase Payment less any Premium
Taxes will be credited within two Business Days after acceptance of the
application and the initial Purchase Payment. Acceptance is subject to the
application being received in good order, and the Company reserves the right
to reject any application or initial Purchase Payment.
If the initial Purchase Payment cannot be credited because the application is
incomplete, we will contact the applicant, explain the reason for the delay
and refund the initial Purchase Payment within five Business Days, unless the
applicant instructs us to retain the initial Purchase Payment and credit it as
soon as the necessary requirements are fulfilled.
You may make additional Purchase Payments at any time before the Annuity Date,
as long as the Annuitant is living. Any additional Purchase Payments must be
for at least $500 for Non-Qualified Contracts, or $50 for Qualified Contracts.
If additional Purchase Payments are received prior to the close of the New
York Stock Exchange (generally 4:00 P.M. Eastern time) they will be 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.
The Company reserves the right to refuse to issue this Contract in cases
involving an exchange for another Contract. In cases where a Contract Owner or
former Contract Owner requests the Company to reverse a surrender or
withdrawal transaction, whether full or partial, the Company reserves the
right to refuse such requests or to grant such requests on the condition that
the Contract's Accumulated Value be adjusted to reflect appropriate investment
results, administrative costs, or loss of interest during the relevant period.
15
<PAGE>
PURCHASING BY WIRE
For wiring instructions please contact our Administrative Offices at 1-800-
797-9177.
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.
You may 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 to the agent from whom you purchased the Contract 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 loads, fees and/or Premium Taxes that may
have been subtracted from such amount.
ALLOCATION OF PURCHASE PAYMENTS
You specify in the Contract application how your Net Purchase Payments will be
allocated. You may allocate each Net Purchase Payment to one or more of the
Portfolios as long as such portions are whole number percentages provided that
no Portfolio may contain a balance of less than $250, except in cases where
Purchase Payments are made by monthly payroll deduction. You may choose not to
allocate any monies to a particular Portfolio. 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.
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in your Portfolios 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.
EXCHANGES AMONG THE PORTFOLIOS
Should your investment goals change, you may exchange Accumulated Value among
the Portfolios of the Funds. Requests for Exchanges, received by mail 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.
DOLLAR COST AVERAGING OPTION
If you have at least $5,000 of Accumulated Value in Fidelity VIP Money Market,
you may choose to have a specified dollar amount transferred from this
Portfolio to other Portfolios in the Separate Account on a monthly basis. The
main objective of Dollar Cost Averaging is to shield your investment from
short term price fluctuations. Since the same dollar amount is transferred to
other Portfolios each month, more units are purchased in a Portfolio if the
value per unit is low and less units are purchased if the value per unit is
high. Therefore, a lower average cost per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in
declining markets.
This Dollar Cost Averaging Option may be elected on the application or at a
later date. The minimum amount that may be transferred each month into any
Portfolio is $250. The maximum amount which may be transferred is equal to the
Accumulated Value in Fidelity VIP Money Market when elected, divided by 12.
The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Portfolios in the proportions
you specify on the appropriate Company form, or, if none are specified, in
accordance with your original investment allocation. If, on any transfer date,
the Accumulated Value is equal to or less than the amount you have elected to
have transferred, the entire amount will be transferred and the option will
end. You may change the transfer amount once each Contract Year, or cancel
this option by sending the appropriate Company form to our Administrative
Offices which must be received at least seven days before the next transfer
date.
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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); 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 twelve in any Contract
Year.
CHARGES AND DEDUCTIONS
SURRENDER CHARGE SCHEDULE
No sales load is deducted from Purchase Payments and up to 10% of the
Accumulated Value as of the last Contract Anniversary (10% of the initial Net
Purchase Payment during the first Contract Year), can be withdrawn once per
year, or pursuant to a series of systematic withdrawals, without a surrender
charge (the "Penalty Free Amount"). Additional withdrawals in excess of the
Penalty Free Amount are subject to a surrender charge (i.e., a contingent
deferred sales load) according to the following schedule on the portion of
such withdrawal that consists of Net Purchase Payments:
<TABLE>
<CAPTION>
CURRENT
CONTRACT YEAR CHARGE
------------- -------
<S> <C>
1............................. 7%
2............................. 6%
3............................. 5%
4............................. 4%
5............................. 3%
6............................. 2%
7............................. 0%
</TABLE>
The total surrender charges assessed will not exceed 8.5% of the Purchase
Payments under the Contract. There will be no surrender charge assessed on the
death of the Annuitant or after the sixth Contract Year.
MORTALITY AND EXPENSE RISK CHARGE
We impose a charge as compensation for bearing certain mortality and expense
risks under the Contract. The annual charge is assessed daily based on the net
asset value of the Separate Account. The annual mortality and expense risk
charge is 1.25% 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 Contract.
The mortality risk borne by us under the Contract, 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 Contract 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
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chosen. The Annual Contract Fee will be deducted on each Contract Anniversary
and upon surrender, on a pro rata basis, from each Subaccount. 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.
EXCHANGE FEE
Each Contract Year you may make an unlimited number of free Exchanges between
Portfolios, provided that after an Exchange no Portfolio may contain a balance
less than $250, except in cases where Purchase Payments are made by monthly
payroll deduction. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of 12 per Contract Year.
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 Contract. (See "Federal Tax Considerations," page 23.)
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.
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 reflects 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 each Fund's Prospectus and
Statement of Additional Information.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The contingent deferred sales load or other 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 sales and/or 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, and certain of their
affiliates and certain sales representatives for the Contract are permitted to
purchase Contracts with substantial reduction of the contingent deferred sales
load or other 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 the contingent deferred sales
loads or other 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.
MINIMUM BALANCE REQUIREMENT
We will transfer the balance in any Portfolio that falls below $250, except in
cases where Purchase Payments are made by monthly payroll deduction, due to a
partial withdrawal or Exchange, to the remaining Portfolios 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
be notified
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that the Accumulated Value of your account is below the Contract's minimum
requirement and 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.
DISTRIBUTIONS UNDER THE CONTRACT
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 $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 applicable contingent deferred sales load (i.e., surrender charge)
and 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 20.)
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 two Business Days after the receipt of the request but in no event
will it be later than seven calendar days, subject to postponement in certain
circumstances. (See "Deferment of Payment," page 23.)
Payments under the Contract of any amounts derived from premiums paid by check
may be delayed until 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 10% 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 23.)
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.
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 applicable deferred sales load (i.e., surrender charge) and
any Premium Taxes incurred but not yet deducted.
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, semiannual or annual basis. The minimum
amount for each withdrawal is $100.
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.
A surrender charge will apply when withdrawals in any of the first six
Contract Years exceed 10% of that year's beginning Accumulated Value. (See
"Charges and Deductions," page 17.) Like any other partial withdrawal, each
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Systematic Withdrawal is subject to taxes on earnings. If the Contract Owner
has not provided the Company with a written election not to have federal
income taxes withheld, the Company must by law withhold 10% from the taxable
portion of the Systematic 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 23.) 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.
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 be changed only 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 Annuity Payment Options available for Qualified Contracts may
also be controlled by endorsements, the plan or applicable law.
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 Annual 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.
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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.
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 the 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 1-800-797-9177.
If you choose an Annuity Payment Option and the postal or other delivery
service is unable to deliver checks to the Payee's address of record, no
interest will accrue on amounts represented by uncashed Annuity Payment
checks. It is the Payee's responsibility to keep the Company informed of the
Payee's current address of record.
DEATH BENEFIT
Generally, federal tax law requires that if any Contract Owner is a natural
person and dies before the Annuity Date, then the entire value of the Contract
must be distributed within five years of the date of death of the Contract
Owner. If the Contract Owner is not a natural person, the death of the Primary
Annuitant triggers the same distribution requirement. Special rules may apply
to a surviving spouse.
DEATH OF ANNUITANT BEFORE 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
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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 before age 75 occurs plus any Net Purchase Payments subsequently made,
less any partial withdrawals subsequently taken.
DEATH OF ANNUITANT ON OR AFTER ANNUITY DATE
The Death Benefit, if any, payable if the Annuitant dies on or after the
Annuity Date depends on the Annuity Payment Option selected. Upon the
Annuitant's death, the remaining portion of the value of the Contract will be
distributed to the Annuitant's Beneficiary at least as rapidly as under the
method of distribution being used on the date of the Annuitant's death.
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) Unless otherwise provided, 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. Unless otherwise provided, 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.
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DEATH OF CONTRACT OWNER
DEATH OF CONTRACT OWNER BEFORE ANNUITY DATE. With two exceptions, federal tax
law requires that when either the Contract Owner or the Joint Owner (if any)
dies before the Annuity Date, the entire value of the Contract must be
distributed within five years of the date of death. First exception: If the
entire interest is to be distributed to the Owner's Designated Beneficiary, he
or she may elect to have it paid as an annuity over his or her life or over a
period certain not to exceed his or her life expectancy as long as the
payments begin within one year of the date of death. Second exception: If the
Owner's Designated Beneficiary is the spouse of the Contract Owner (or Joint
Owner), the spouse may elect to continue the Contract in his or her name as
Contract Owner indefinitely and to continue deferring tax on the accrued and
future income under the Contract. ("Owner's Designated Beneficiary" means the
natural person named by the Owner as a beneficiary and who becomes Owner of
the Contract upon the Contract Owner's death.) If the Contract Owner and the
Annuitant are the same person, then upon that person's death the Annuitant's
Beneficiary is entitled to the Death Benefit. In this regard, see "Death of
Annuitant Before Annuity Date," page 21.
DEATH OF CONTRACT OWNER ON OR AFTER ANNUITY DATE. Federal tax law requires
that when either the Contract Owner or the Joint Owner (if any) dies on or
after the Annuity Date, the remaining portions of the value of the Contract
must be distributed at least as rapidly as under the method of distribution
being used on the date of death.
NON-NATURAL PERSON AS CONTRACT OWNER. Where the Contract Owner is not a
natural person, the death of the "primary Annuitant" is treated as the death
of the Contract Owner for purposes of federal tax law. (The Code defines a
primary Annuitant as the individual who is of primary importance in affecting
the timing or the amount of payout under the Contract.) In addition, where the
Contract Owner is not a natural person, a change in the identity of the
primary Annuitant is also treated as the death of the Contract Owner for
purposes of federal tax law.
DEFERMENT OF PAYMENT
Payment of any cash withdrawal or lump sum Death Benefit due from the Separate
Account will occur within seven 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 advisor 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.
TAXATION OF ANNUITIES IN GENERAL
GENERAL RULE OF TAX DEFERRAL
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 "Annuity Contracts Owned by Non-Natural Persons" and
"Diversification Standards," page 25.)
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TAXATION OF FULL OR PARTIAL WITHDRAWALS
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. Partial withdrawals are generally
taken out of earnings first and then investment in the Contract.
TAXATION OF ANNUITY PAYMENTS
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.
Generally, the entire amount distributed from a Qualified Contract is taxable
to the Contract Owner. In the case of Qualified Contracts with after tax
contributions, the Contract Owner is entitled to exclude the portion of each
withdrawal or annuity payment constituting a return of after tax
contributions. Once all of your after tax contributions have been returned to
you on a non-taxable basis, subsequent withdrawals or annuity payments are
fully taxable as ordinary income. Since the Company has no knowledge of the
amount of after tax contributions you have made, you will need to make this
computation in the preparation of your federal income tax return.
TAX WITHHOLDING
Withholding of federal income taxes on all distributions is required unless
the recipient elects not to have any amounts withheld and properly notifies
the Company of that election. In certain situations, taxes will be withheld on
distributions to non-resident aliens at a flat 30% rate unless an exemption
from withholding applies under an applicable tax treaty.
PENALTY TAXES
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); (vii)
allocable to the investment in the Contract prior to August 14, 1982; or
(viii) 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.
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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 penalty 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 tax penalty may also not apply to distributions from Qualified Contracts
issued under Section 408(b) or 408A of the Code used to pay qualified higher
education expenses or the acquisition costs (up to $10,000) involved in the
purchase of a principal residence by a first-time homebuyer.
ANNUITY 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. 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 by an employer on
behalf of an employee upon termination of a qualified plan, and in the case of
an immediate annuity, as defined under Section 72(u)(4) of the Code.
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
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. The aggregation rules do not apply to
immediate annuities as defined under Section 72(u)(4) of the Code.
Accordingly, a Contract Owner should consult a tax adviser before purchasing
more than one Contract or other annuity contracts.
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 income tax (and
possibly the 10% federal penalty 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 former spouses incident to a divorce which are governed by
Code Section 1041(a).
ASSIGNMENTS OF ANNUITY CONTRACTS
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.
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.
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.
DIVERSIFICATION STANDARDS
To comply with certain diversification regulations (the "Regulations") under
Code Section 817(h), after a start up period, each Subaccount of 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 each Subaccount 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
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"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 division
invests. 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
Contract may need to be modified in order to remain in compliance. For these
reasons, the Company reserves the right to modify the Contract, 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 Contract continues
to be treated as annuity contracts for federal income tax purposes.
403(B) CONTRACTS
Contracts will be offered in connection with retirement plans adopted by
public school systems and certain tax-exempt organizations (Code Section
501(c)(3) organizations) for their employees under Section 403(b) of the Code;
except, as discussed below and subject to any conditions in an employer's
plan, a Contract used in connection with a Section 403(b) Plan offers the same
benefits and is subject to the same charges described in this Prospectus.
Under 403(b) Contracts, the Contract Owner and the Annuitant must be the same
person. The Code imposes a maximum limit on annual Purchase Payments which may
be excluded from your gross income. Such limit must be calculated in
accordance with Sections 403(b), 415 and 402(g) of the Code. In addition,
Purchase Payments will be excluded from your gross income only if the 403(b)
Plan meets certain Code non-discrimination requirements.
Under your 403(b) Contract, you may borrow against your Contract's Surrender
Value after the first Contract Year. No additional loans will be extended
until prior loan balances are paid in full. The loan amount must be at least
$1,000 and your Contract must have a minimum vested Accumulated Value of
$2,000. The loan amount may not exceed the lesser of (a) or (b), where (a) is
50% of the Contract's vested Accumulated Value on the date on which the loan
is made, or $10,000, and (b) is $50,000 reduced by the excess, if any, of the
highest outstanding balance of loans during the one-year period ending on the
day before the current loan is made, over the outstanding balance of loans on
the date of the current loan. If you are married, your spouse must consent in
writing to a loan request. This consent must be given within the 90-day period
before the loan is to be made.
The loan interest rate is variable, is determined monthly, and is based on the
Moody's Corporate Bond Yield Averages-Monthly Average Corporates (the
"Average"), which is published by Moody's Investors Service, Inc. We will
notify you of the initial loan interest rate at the time the loan is made. The
initial interest rate may be increased or reduced by us during the life of the
loan based on changes of the Average. If a change in the Average would cause
the initial loan interest rate (or a subsequent rate that has been previously
increased or reduced by us) to be reduced by 0.50% per annum or more, we must
reduce the loan interest rate. If a change in the Average would cause the
initial loan interest rate (or a subsequent rate that has been previously
increased or reduced by us) to be increased by 0.50% per annum, we may
increase the loan interest rate at our discretion. In no event will the loan
interest rate be greater than the maximum allowed by the insurance regulations
of the State of New York.
On the first Business Day of each calendar month, the Company will determine a
loan interest rate. The loan interest rate for the calendar month in which the
loan is effective will apply for one year from the loan effective date.
Annually on the anniversary of the loan effective date, the rate will be
adjusted to equal the loan interest rate determined for the month in which the
loan anniversary occurs.
Principal and interest on loans must be repaid in substantially level
payments, not less frequently than quarterly, over a five year term except for
certain loans for the purchase of a principal residence. If the loan interest
rate is adjusted, future payments will be adjusted so that the outstanding
loan balance is amortized in equal quarterly installments over the remaining
term. The remainder of each repayment will be credited to the individual
account.
If a loan payment is not made when due, interest will continue to accrue. The
defaulted payment plus accrued interest will be deducted from any future
distributions under the Contract and paid to us. Any loan payment which is not
made when due, plus interest, will be treated as a distribution, as permitted
by law. The loan payment may be taxable to the borrower, and may be subject to
the early withdrawal tax penalty. When a loan is made, unless you instruct us
to the contrary, the number of Accumulation Units equal to the loan amount
will be withdrawn from the individual account
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and placed in the Collateral Fixed Account. Accumulation Units taken from the
individual account to provide a loan do not participate in the investment
experience of the related Portfolios. Unless instructed to the contrary by
you, the loan amount will be withdrawn on a pro rata basis from the Portfolios
to which Accumulated Value has been allocated. Until the loan is repaid in
full, that portion of the Collateral Fixed Account shall be credited with
interest at a rate of 2% less than the loan interest rate applicable to the
loan. However, the interest rate credited to the Collateral Fixed Account will
never be less than the guaranteed rate of 3%.
A bill in the amount of the quarterly principal and interest will be mailed
directly to you in advance of the payment due date. The initial quarterly
repayment will be due three months from the loan date. The loan date will be
the date that the Company receives the loan request form in good order.
Payment is due within 30 calendar days after the due date. Subsequent
quarterly installments are based on the first due date.
When repayment of principal is made, Accumulation Units will be reallocated on
a current value basis among the same investment Portfolios and in the same
proportion as when the loan was initially made, unless you specify otherwise.
If a repayment in excess of a billed amount is received, the excess will be
applied towards the principal portion of the outstanding loan. Payments
received which are less than the billed amount will not be accepted and will
be returned to you.
If a partial surrender is taken from your individual account due to nonpayment
of a billed quarterly installment, the date of the surrender will be the first
Business Day following the 30 calendar day period in which the repayment was
due.
Prepayment of the entire loan is allowed. At the time of prepayment, the
Company will bill you for any accrued interest. The Company will consider the
loan paid when the loan balance and accrued interest are paid.
If the individual account is surrendered or if the Contract Owner dies with an
outstanding loan balance, the outstanding loan balance and accrued interest
will be deducted from the Surrender Value or the Death Benefit, respectively.
If an Annuity Payment Option is elected while there is an outstanding loan
balance, the outstanding loan balance and accrued interest will be deducted
from the Accumulated Value.
The Company may require that any outstanding loan be paid if the individual
account value falls below an amount equal to 25% of total loans outstanding.
The Code requires the aggregation of all loans made to an individual employee
under a single employer-sponsored 403(b) Plan. However, since the Company has
no information concerning the outstanding loans that you may have with other
companies, it will only use the information available under Contracts issued
by the Company.
The Code imposes restrictions on full or partial surrenders from 403(b)
individual accounts attributable to Purchase Payments under a salary reduction
agreement and to any earnings on the entire 403(b) individual account credited
on and after January 1, 1989. Surrenders of these amounts are allowed only if
the Contract Owner (a) has died, (b) has become disabled, as defined in the
Code, (c) has attained age 59 1/2, or (d) has separated from service.
Surrenders are also allowed if the Contract Owner can show "hardship," as
defined by the Internal Revenue Service, but the surrender is limited to the
lesser of Purchase Payments made on or after January 1, 1989 or the amount
necessary to relieve the hardship. Even if a surrender is permitted under
these provisions, a 10% federal tax penalty may be assessed on the withdrawn
amount if it does not otherwise meet the exceptions to the penalty tax
provisions. (See "Taxation of Annuities in General," page 23.)
Under the Code, you may request a full or partial surrender of an amount equal
to the individual account cash value as of December 31, 1988 (the
"grandfathered" amount), subject to the terms of the 403(b) Plan. Although the
Code surrender restrictions do not apply to this amount, a 10% federal penalty
tax may be assessed on the withdrawn amount if it does not otherwise meet the
exceptions to the penalty tax provisions (See "Taxation of Annuities in
General," page 23.)
The Company believes that the Code surrender restrictions do not apply to tax-
free transfers pursuant to Revenue Ruling 90-24. The Company further believes
that the surrender restrictions will not apply to any "grandfathered" amount
transferred pursuant to Revenue Ruling 90-24 into another 403(b) Contract.
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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 of the Funds, 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
Portfolio 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 Contract, 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.
VOTING RIGHTS
The Funds do not hold regular meetings of shareholders. The Directors/Trustees
of each Fund 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 each Fund in accordance with instructions received
from persons having voting interests in the corresponding Portfolio. Fund
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
Fund. Voting instructions will be solicited by written communication prior to
such meeting in accordance with procedures established by such Fund.
YEAR 2000 MATTERS
In March 1997, the Company adopted and currently has in place a Year 2000
Assessment and Planning Project (the "Plan") to review and analyze existing
hardware and software systems, as well as voice and data communications
systems, to determine if they are Year 2000 compatible. The Plan provides for
a management process that ensures that when a particular system, or software
application, is determined to be "non-compliant" the proper steps are in place
to either remedy the "non-compliance" or cease using the particular system or
software. The Plan also provides
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that the Chief Information Officer report to the Board of Directors as to the
status of the efforts under the Plan on a regular and routine basis. The
Company has engaged the services of a third-party provider that is specialized
in Year 2000 issues to work on the project.
The Plan has four specific objectives: (1) to develop an inventory of all
applications; (2) to evaluate all applications in the inventory to determine
the most prudent manner to move them to Year 2000 compliance, if required; (3)
to estimate budgets, resources and schedules for the migration of the
"affected" applications to Year 2000 compliance; and (4) to define testing and
deployment requirements to successfully manage validation and re-deployment of
any changed code. It is anticipated that all compliance issues will be
resolved by December 1998.
As of the date of this Prospectus, the Company has identified and made
available what it believes are the appropriate resources of hardware, people,
and dollars, including the engagement of outside third parties, to ensure that
the Plan will be completed.
The Year 2000 computer problem, and its resolution, is complex and
multifaceted, and the success of a response plan cannot be conclusively known
until the Year 2000 is reached (or an earlier date to the extent that the
systems or equipment addresses Year 2000 data prior to the Year 2000). Even
with appropriate and diligent pursuit of a well conceived response plan,
including testing procedures, there is no certainty that any company will
achieve complete success. Further, notwithstanding its efforts or results, the
Company's ability to function unaffected to and through the Year 2000 may be
adversely affected by actions (or failures to act) of third parties beyond its
knowledge or control.
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 Boros Cicchetti 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 Gregory E. Miller-Breetz, Esquire, on behalf of the
Company.
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TABLE OF CONTENTS FOR THE PROVIDIAN MARQUEE 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.............................................................. 3
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 4
PERFORMANCE INFORMATION................................................... 4
Money Market Subaccount Yields.......................................... 4
30-Day Yield for Non-Money Market Subaccounts........................... 5
Standardized Average Annual Total Return for Subaccounts................ 5
ADDITIONAL PERFORMANCE MEASURES........................................... 6
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return.................................................... 6
Non-Standardized Total Return Year-to-Date.............................. 6
Non-Standardized One Year Return........................................ 6
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 6
Individualized Computer Generated Illustrations......................... 11
PERFORMANCE COMPARISONS................................................... 12
SAFEKEEPING OF ACCOUNT ASSETS............................................. 13
THE COMPANY............................................................... 14
STATE REGULATION.......................................................... 14
RECORDS AND REPORTS....................................................... 14
DISTRIBUTION OF THE CONTRACTS............................................. 14
LEGAL PROCEEDINGS......................................................... 14
OTHER INFORMATION......................................................... 15
FINANCIAL STATEMENTS...................................................... 15
Audited Financial Statements............................................ 15
</TABLE>
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FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
PROVIDIAN MARQUEE VARIABLE 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 Providian Marquee variable annuity contracts (the
"Contracts" and each a "Contract," respectively) offered by First Providian Life
and Health Insurance Company (the "Company"). You may obtain a copy of the
Prospectus dated May 1, 1998, by calling 1-800-797-9177 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.
May 1, 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS 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............................................................... 3
Annuity Data............................................................. 4
Annual Statement......................................................... 4
Incontestability......................................................... 4
Ownership................................................................ 4
PERFORMANCE INFORMATION.................................................... 4
Money Market Subaccount Yields........................................... 4
30-Day Yield for Non-Money Market Subaccounts............................ 5
Standardized Average Annual Total Return for Subaccounts................. 5
ADDITIONAL PERFORMANCE MEASURES............................................ 6
Non-Standardized Actual Total Return and Non-Standardized
Actual Average Annual Total Return....................................... 6
Non-Standardized Total Return Year-to-Date............................... 6
Non-Standardized One Year Return......................................... 6
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 6
Individualized Computer Generated Illustrations.......................... 11
PERFORMANCE COMPARISONS.................................................... 12
SAFEKEEPING OF ACCOUNT ASSETS.............................................. 13
THE COMPANY................................................................ 14
STATE REGULATION........................................................... 14
RECORDS AND REPORTS........................................................ 14
DISTRIBUTION OF THE CONTRACTS.............................................. 14
LEGAL PROCEEDINGS.......................................................... 14
OTHER INFORMATION.......................................................... 15
FINANCIAL STATEMENTS....................................................... 15
Audited Financial Statements............................................. 15
</TABLE>
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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;
(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 for the mortality and expense risks assumed
by the Company corresponding to an annual rate of 1.25%;
(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.
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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. An 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. We reserve the right to charge a $15 fee in the future 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 any applicable sales loads and 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 sales of Contracts. This is possible because sales
costs do not increase in proportion to the dollar amount of the Contracts sold.
For example, the per-dollar transaction cost for a sale of a Contract equal to
$5,000 is generally much higher than the per-dollar cost for a sale of Contract
equal to $1,000,000. As a result, any applicable sales charge declines as a
percentage of the dollar amount of Contracts sold as the dollar amount
increases.
The Company may also reduce any applicable sales loads and 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, and certain of their affiliates and certain sales
representatives for the Contract. The Company may also grant waivers or
modifications of certain minimum or maximum purchase and transaction amounts or
balance requirements in these circumstances.
Notwithstanding the above, any variations in the sales loads, 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.
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
-3-
<PAGE>
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.
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 effective
yield of the Fidelity Money Market Subaccount, the yield of the remaining
Subaccounts, 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 estimated total amount of fees
collected during a calendar year divided by the estimated 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, the Annual Contract Fee is pro-rated to reflect only the
applicable portion of the partial year period.)
Where applicable, the following subaccount inception dates are used in the
calculation of performance figures: 5/1/97 for the Fidelity Money Market
Portfolio; 5/1/97 for the Fidelity Equity-Income Portfolio; 5/1/97 for the
Fidelity Growth Portfolio; 5/1/97 for the Fidelity Asset Manager Portfolio;
5/1/97 for the Dreyfus Growth and Income Portfolio; 5/1/97 for the Dreyfus
Quality Bond Portfolio; 5/1/97 for the T. Rowe Price Equity Income Portfolio;
5/1/97 for the T. Rowe Price New America Growth Portfolio; 5/1/97 for the T.
Rowe Price International Stock Portfolio; 5/1/97 for the OCC Accumulation Trust
Managed Portfolio; 5/1/97 for the OCC Accumulation Trust Small Cap Portfolio;
and 5/1/97 for the OCC Accumulation Trust Government Income Portfolio.
MONEY MARKET SUBACCOUNT YIELDS
Current yield for the Fidelity Money Market Subaccount will be based on the
change in the value of a hypothetical investment (exclusive of capital changes)
over a particular 7-day period, less a pro-rata share of Subaccount expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
-4-
<PAGE>
Effective Yield = [((Base Period Return)+1)/365/7/]-1
30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS
Quotations of yield for the remaining 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:
YIELD = 2[(a-b+1)/6/-1]
---
cd
Where:
[a] equals the net investment income earned during the period by the
Portfolio attributable to shares owned by a Subaccount
[b] equals the expenses accrued for the period (net of reimbursement)
[c] equals the average daily number of Units outstanding during the
period
[d] equals the maximum offering price per Accumulation Unit on the
last day of the period
Yield on a 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 all applicable sales loads (including the
contingent deferred sales load), 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:
(1) [P] equals a hypothetical initial Purchase Payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000
Purchase Payment made at the beginning of the period (or fractional
portion thereof)
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING DECEMBER 31, 1997
<TABLE>
<CAPTION>
Subaccount 1 Year Since Inception
---------- ------ ---------------
<S> <C> <C>
Fidelity Money Market Portfolio N/A -4.74
Fidelity Equity-Income Portfolio N/A 12.03
Fidelity Growth Portfolio N/A 10.63
Fidelity Asset Manager Portfolio N/A 7.59
Dreyfus Growth and Income Portfolio N/A 7.88
Dreyfus Quality Bond Portfolio N/A -0.14
T. Rowe Price Equity Income Portfolio N/A 12.75
T. Rowe Price New America Growth Portfolio N/A 16.03
T. Rowe Price International Stock Portfolio N/A -5.03
OCC Accumulation Trust Managed Portfolio N/A 6.93
OCC Accumulation Trust Small Cap Portfolio N/A 13.50
OCC Accumulation Trust Government Income Portfolio N/A -1.49
</TABLE>
<PAGE>
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, any sales loads or Premium Taxes (if any), which if included would
reduce the percentages reported by the Company.
NON-STANDARDIZED ACTUAL TOTAL RETURN FOR PERIOD ENDING DECEMBER 31, 1997
<TABLE>
<CAPTION>
Since
-----
Subaccount 1 Year* Portfolio Inception
---------- ------- -------------------
<S> <C> <C>
Fidelity Money Market Portfolio N/A 2.72%
Fidelity Equity-Income Portfolio N/A 21.17%
Fidelity Growth Portfolio N/A 19.64%
Fidelity Asset Manager Portfolio N/A 15.63%
Dreyfus Growth and Income Portfolio N/A 15.46%
Dreyfus Quality Bond Portfolio N/A 7.07%
T. Rowe Price Equity Income Portfolio N/A 20.84%
T. Rowe Price New America Growth Portfolio N/A 24.35%
T. Rowe Price International Stock Portfolio N/A 1.57%
OCC Accumulation Trust Managed Portfolio N/A 15.37%
OCC Accumulation Trust Small Cap Portfolio N/A 22.24%
OCC Accumulation Trust Government Income Portfolio N/A 5.33%
</TABLE>
*Returns shown are for the period from each Portfolio's inception date. As of
12/31/97, the Portfolios had not been in operation for an entire year.
NON-STANDARDIZED ACTUAL AVERAGE TOTAL RETURN FOR PERIOD ENDING DECEMBER 31, 1997
<TABLE>
<CAPTION>
Since
-----
Subaccount 1 Year* Portfolio Inception
---------- ------- -------------------
<S> <C> <C>
Fidelity Money Market Portfolio N/A 2.72%
Fidelity Equity-Income Portfolio N/A 21.17%
Fidelity Growth Portfolio N/A 19.64%
Fidelity Asset Manager Portfolio N/A 15.63%
Dreyfus Growth and Income Portfolio N/A 15.46%
Dreyfus Quality Bond Portfolio N/A 7.07%
T. Rowe Price Equity Income Portfolio N/A 20.84%
T. Rowe Price New America Growth Portfolio N/A 24.35%
T. Rowe Price International Stock Portfolio N/A 1.57%
OCC Accumulation Trust Managed Portfolio N/A 15.37%
OCC Accumulation Trust Small Cap Portfolio N/A 22.24%
OCC Accumulation Trust Government Income Portfolio N/A 5.33%
</TABLE>
*Returns shown are for the period from each Portfolio's inception date. As of
12/31/97, the Portfolios had not been in operation for an entire year.
<PAGE>
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, any sales loads or Premium Taxes (if any),
which if included would reduce the percentages reported by the Company.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
<TABLE>
<CAPTION>
Total Return YTD
Subaccount as of 12/31/97*
---------- ----------------
<S> <C>
Fidelity Money Market Portfolio 2.72%
Fidelity Equity-Income Portfolio 21.17%
Fidelity Growth Portfolio 19.64%
Fidelity Asset Manager Portfolio 15.63%
Dreyfus Growth and Income Portfolio 15.46%
Dreyfus Quality Bond Portfolio 7.07%
T. Rowe Price Equity Income Portfolio 20.84%
T. Rowe Price New America Growth Portfolio 24.35%
T. Rowe Price International Stock Portfolio 1.57%
OCC Accumulation Trust Managed Portfolio 15.37%
OCC Accumulation Trust Small Cap Portfolio 22.24%
OCC Accumulation Trust Government Income Portfolio 5.33%
</TABLE>
*Returns shown are for the period from each Portfolio's inception date. As of
12/31/97, the Portfolios had not been in operation for an entire year.
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 Portfolio inception, if during
the relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the historical performance of the Portfolios as if the Contract
were in existence before its inception date (which it was not). After the
Contract's inception date, the 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, any sales loads or Premium Taxes (if any), which if
included would reduce the percentages reported by the Company.
NON-STANDARDIZED ONE YEAR RETURN
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Fidelity Money Market Portfolio 4.02% 3.94% 4.42% 2.79% 1.78% 2.45% 4.60%
Fidelity Equity-Income Portfolio 26.33% 12.68% 33.22% 5.57% 16.61% 15.25% 29.60%
Fidelity Growth Portfolio 21.76% 13.10% 33.49% -1.42% 17.70% 7.79% 43.47%
Fidelity Asset Manager Portfolio 18.97% 13.00% 15.33% -7.40% 19.53% 10.15% 20.84%
Dreyfus Growth and Income Portfolio 14.60% 19.06% 59.65% N/A N/A N/A N/A
Dreyfus Quality Bond Portfolio 7.27% 1.68% 18.75% -5.93% 13.72% 10.52% 12.52%
T. Rowe Price Equity Income Portfolio 27.06% 21.05% 32.89% N/A N/A N/A N/A
T. Rowe Price New America Growth Portfolio 19.43% 17.06% 48.99% N/A N/A N/A N/A
T. Rowe Price International Stock Portfolio 1.66% 13.09% 9.64% N/A N/A N/A N/A
OCC Accumulation Trust Managed Portfolio 20.59% 21.05% 43.53% N/A N/A N/A N/A
OCC Accumulation Trust Small Cap Portfolio 20.54% 17.06% 13.63% N/A N/A N/A N/A
OCC Accumulation Trust U.S. Gov't Income Portfolio 5.59% 1.59% 10.07% N/A N/A N/A N/A
</TABLE>
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN*
The Company may show Non-Standardized Hypothetical Total Return and
Non-Standardized Hypothetical Average Annual Total Return, calculated on the
basis of the historical performance of the Portfolios (calculated beginning from
the end of the year of inception for each Portfolio) and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which produce
the resulting Accumulated Values. They reflect a deduction for the Separate
Account expenses and Portfolio expenses. However, they do not include the Annual
Contract Fee, any sales loads or Premium Taxes (if any), which if included would
reduce the percentages reported.
The Non-Standardized Hypothetical Total Return for a Subaccount is the effective
annual rate of return that would have produced the ending Accumulated Value of
the stated one-year period.
The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.
-6-
<PAGE>
<TABLE>
<CAPTION>
HYPOTHETICAL TOTAL RETURNS FOR PERIODS ENDING 12/31/97
(BASED ON SINGLE INITIAL PURCHASE)
Total Since
Fund Inception
1 Year 3 Year 5 Year Year-End
------ ------- ------- --------------
<S> <C> <C> <C> <C>
Fidelity Money Market Portfolio 4.02% 12.89% 18.14% 128.28%
Fidelity Equity-Income Portfolio 26.33% 89.63% 133.76% 297.17%
Fidelity Growth Portfolio 21.76% 83.83% 113.41% 338.02%
Fidelity Asset Manager Portfolio 18.97% 55.05% 71.72% 135.20%
Dreyfus Growth and Income Portfolio 14.60% 117.82% N/A 115.25%
Dreyfus Quality Bond Portfolio 7.27% 29.52% 38.49% 75.38%
TRP Equity Income Portfolio 27.06% 99.06% N/A 111.20%
TRP New America Growth Portfolio 19.43% N/A N/A 110.75%
TRP International Stock Portfolio 1.66% 26.05% N/A 27.02%
OCC Accumulation Trust Managed Portfolio 20.59% 109.34% 130.82% 409.79%
OCC Accumulation Trust Small Cap Portfolio 20.54% 60.33% 84.49% 243.80%
OCC Accumulation Trust Government Income Portfolio 5.59% 15.08 N/A 19.54%
</TABLE>
<TABLE>
<CAPTION>
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/97
(Based on Single Initial Purchase)
Since Fund
Inception
1 Year 3 Year 5 Year Year-End
------ ------ ------ ----------
<S> <C> <C> <C> <C>
Fidelity Money Market Portfolio 4.02% 4.13% 3.39% 5.38%
Fidelity Equity-Income Portfolio 26.33% 23.78% 18.51% 13.07%
Fidelity Growth Portfolio 21.76% 22.50% 16.37% 14.06%
Fidelity Asset Manager Portfolio 18.97% 15.74% 11.42% 10.84%
Dreyfus Growth and Income Portfolio 14.60% 29.63% N/A 23.26%
Dreyfus Quality Bond Portfolio 7.27% 9.00% 6.73% 7.16%
TRP Equity Income Portfolio 27.06% 25.79% N/A 22.04%
TRP New America Growth Portfolio 19.43% 28.20% N/A 21.47%
TRP International Stock Portfolio 1.66% 8.02% N/A 6.58%
OCC Accumulation Trust Managed Portfolio 20.59% 27.96% 18.21% 18.88%
OCC Accumulation Trust Small Cap Portfolio 20.54% 17.04% 13.03% 14.01%
OCC Accumulation Trust Government Income Portfolio 5.59% N/A N/A 5.89%
</TABLE>
Note: Advertisments and other sales literature for the Portfolio may quote
total returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in the
Portfolios based on monthly reinvestment of dividends over a specific period of
time.
* On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two investment
funds, the Old Trust and the Quest For Value Accumulation Trust (now known as
the OCC Accumulation Trust) that is included in the Contract (the "New Trust"),
at which time the New Trust commenced operations. The total net assets for each
of the OCC Accumulation Trust Small Cap and OCC Accumulation Trust Managed
Portfolios immediately after the transaction were $139,812,573 and $682,601,380,
respectively, with respect to the Old Trust and, with respect to the New Trust
were $8,129,274 and $51,345,102, for the OCC Accumulation Trust Small Cap and
OCC Accumulation Trust Managed Growth Portfolios, respectively. For the period
prior to September 16, 1994, the performance figures above for each of the OCC
Accumulation Trust Small Cap and OCC Accumulation Trust Managed Portfolios
reflect the performance of the corresponding Portfolios of the Old Trust.
-7-
<PAGE>
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an investment
in the Portfolios based on monthly reinvestment of dividends over a specific
period of time.
HYPOTHETICAL ILLUSTRATIONS
<TABLE>
<CAPTION>
FIDELITY EQUITY INCOME PORTFOLIO FIDELITY EQUITY INCOME PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1986
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
------------------------ ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A 0.00
12/31/87 $ 4,000 $ 1,950 -2.51% -2.51% 12/31/87 $50,000 $ 48,743 -2.51% -2.51% -2.51
12/31/88 $ 6,000 $ 4,779 20.99% 12.46% 12/31/88 $50,000 $ 58,975 20.99% 8.60% 17.95
12/31/89 $ 8,000 $ 7,843 15.70% 14.00% 12/31/89 $50,000 $ 68,233 15.70% 10.92% 36.47
12/31/90 $10,000 $ 8,221 -16.48% 1.09% 12/31/90 $50,000 $ 56,991 -16.48% 3.33% 13.98
12/31/91 $12,000 $13,247 29.60% 9.52% 12/31/91 $50,000 $ 73,860 29.60% 8.12% 47.72
12/31/92 $14,000 $17,572 15.25% 11.01% 12/31/92 $50,000 $ 85,126 15.25% 9.27% 70.25
12/31/93 $16,000 $22,828 16.63% 12.25% 12/31/93 $50,000 $ 99,286 16.63% 10.30% 98.57
12/31/94 $18,000 $26,211 5.57% 10.90% 12/31/94 $50,000 $104,817 5.57% 9.69% 109.63
12/31/95 $20,000 $37,583 33.22% 14.48% 12/31/95 $50,000 $139,637 33.22% 12.09% 179.27
12/31/96 $22,000 $44,602 12.68% 14.20% 12/31/96 $50,000 $157,345 12.68% 12.15% 214.69
12/31/97 $24,000 $58,872 26.33% 15.78% 12/31/97 $50,000 $198,769 26.33% 13.37% 297.54
</TABLE>
<TABLE>
<CAPTION>
FIDELITY GROWTH PORTFOLIO FIDELITY GROWTH PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1986
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A 0.00
12/31/87 $ 4,000 $ 2,044 2.21% 2.21% 12/31/87 $50,000 $ 51,104 2.21% 2.21% 2.21
12/31/88 $ 6,000 $ 4,609 13.96% 9.83% 12/31/88 $50,000 $ 58,240 13.96% 7.93% 16.48
12/31/89 $ 8,000 $ 8,570 29.67% 18.92% 12/31/89 $50,000 $ 75,519 29.67% 14.73% 51.04
12/31/90 $10,000 $ 9,199 -12.97% 5.67% 12/31/90 $50,000 $ 65,727 -12.97% 7.08% 31.45
12/31/91 $12,000 $16,068 43.47% 16.25% 12/31/91 $50,000 $ 94,300 43.47% 13.53% 88.60
12/31/92 $14,000 $19,475 7.79% 14.02% 12/31/92 $50,000 $101,646 7.79% 12.55% 103.29
12/31/93 $16,000 $25,276 17.70% 14.82% 12/31/93 $50,000 $119,636 17.70% 13.27% 139.27
12/31/94 $18,000 $26,889 -1.42% 11.46% 12/31/94 $50,000 $117,937 -1.42% 11.32% 135.87
12/31/95 $20,000 $38,563 33.49% 14.98% 12/31/95 $50,000 $157,433 33.49% 13.59% 214.87
12/31/96 $22,000 $45,876 13.10% 14.69% 12/31/96 $50,000 $178,051 13.10% 13.54% 256.10
12/31/97 $24,000 $58,295 21.76% 15.63% 12/31/97 $50,000 $216,803 21.76% 14.27% 333.61
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
FIDELITY ASSET MANAGER PORTFOLIO FIDELITY ASSET MANAGER PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1989
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A 12/31/89 $50,000 N/A N/A N/A 0.00%
12/31/90 $ 4,000 $ 2,105 5.23% 5.23% 12/31/90 $50,000 $52,613 5.23% 5.23% 5.23%
12/31/91 $ 6,000 $ 4,960 20.84% 15.23% 12/31/91 $50,000 $63,580 20.84% 12.76% 27.16%
12/31/92 $ 8,000 $ 7,666 10.15% 12.76% 12/31/92 $50,000 $70,031 10.15% 11.89% 40.06%
12/31/93 $10,000 $11,554 19.53% 15.26% 12/31/93 $50,000 $83,709 19.53% 13.75% 67.42%
12/31/94 $12,000 $12,551 -7.40% 7.67% 12/31/94 $50,000 $77,511 -7.40% 9.16% 55.02%
12/31/95 $14,000 $16,782 15.33% 9.67% 12/31/95 $50,000 $89,396 15.33% 10.17% 78.79%
12/31/96 $16,000 $21,223 13.00% 10.42% 12/31/96 $50,000 $101,016 13.00% 10.57% 102.03%
12/31/97 $18,000 $27,629 18.97% 12.06% 12/31/97 $50,000 $120,182 18.97% 11.59% 140.36%
</TABLE>
<TABLE>
<CAPTION>
FIDELITY MONEY MARKET PORTFOLIO FIDELITY MONEY MARKET PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1983 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1983
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 $ 2,000 N/A N/A N/A 12/31/83 $50,000 N/A N/A N/A N/A
12/31/84 $ 4,000 $ 2,178 8.88% 8.88% 12/31/84 $50,000 $54,442 8.88% 8.88% 8.88%
12/31/85 $ 6,000 $ 4,453 6.60% 7.37% 12/31/85 $50,000 $58,033 6.60% 7.73% 16.07%
12/31/86 $ 8,000 $ 6,789 5.21% 6.31% 12/31/86 $50,000 $61,055 5.21% 6.88% 22.11%
12/31/87 $10,000 $ 9,224 4.95% 5.78% 12/31/87 $50,000 $64,077 4.95% 6.40% 28.15%
12/31/88 $12,000 $11,885 5.89% 5.81% 12/31/88 $50,000 $67,849 5.89% 6.30% 35.70%
12/31/89 $14,000 $14,939 7.59% 6.29% 12/31/89 $50,000 $73,000 7.59% 6.51% 46.00%
12/31/90 $16,000 $18,045 6.53% 6.35% 12/31/90 $50,000 $77,765 6.53% 6.51% 55.53%
12/31/91 $18,000 $20,968 4.60% 5.98% 12/31/91 $50,000 $81,346 4.60% 6.27% 62.69%
12/31/92 $20,000 $23,530 2.45% 5.32% 12/31/92 $50,000 $83,335 2.45% 5.84% 66.67%
12/31/93 $22,000 $25,985 1.79% 4.71% 12/31/93 $50,000 $84,822 1.78% 5.43% 69.64%
12/31/94 $24,000 $28,766 2.79% 4.41% 12/31/94 $50,000 $87,189 2.79% 5.19% 74.38%
12/31/95 $26,000 $32,125 4.42% 4.41% 12/31/95 $50,000 $91,039 4.42% 5.12% 82.08%
12/31/96 $28,000 $35,469 3.94% 4.35% 12/31/96 $50,000 $94,625 3.94% 5.03% 89.25%
12/31/97 $30,000 $38,000 4.02% 4.31% 12/31/97 $50,000 $98,432 4.02% 4.96% 96.86%
</TABLE>
<TABLE>
<CAPTION>
DREYFUS QUALITY BOND PORTFOLIO DREYFUS QUALITY BOND PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1989
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A 12/31/89 $50,000 N/A N/A N/A 0.00%
12/31/90 $ 4,000 $ 2,019 0.97% 0.97% 12/31/90 $50,000 $50,483 0.97% 0.97% 0.97%
12/31/91 $ 6,000 $ 4,523 12.52% 8.47% 12/31/91 $50,000 $56,805 12.52% 6.59% 13.61%
12/31/92 $ 8,000 $ 7,209 10.52% 9.46% 12/31/92 $50,000 $62,781 10.52% 7.88% 25.56%
12/31/93 $10,000 $10,472 13.72% 11.07% 12/31/93 $50,000 $71,392 13.72% 9.31% 42.78%
12/31/94 $12,000 $11,733 -5.93% 5.38% 12/31/94 $50,000 $67,161 -5.93% 6.08% 34.32%
12/31/95 $14,000 $16,308 18.75% 8.83% 12/31/95 $50,000 $79,755 18.75% 8.09% 59.51%
12/31/96 $16,000 $18,615 1.68% 7.13% 12/31/96 $50,000 $81,000 1.68% 7.15% 62.18%
12/31/97 $18,000 $22,113 7.27% 7.16% 12/31/97 $50,000 $86,987 7.27% 7.17% 73.97%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DREYFUS GROWTH AND INCOME PORTFOLIO DREYFUS GROWTH AND INCOME PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $4,000 $3,193 59.65% 59.65% 12/31/95 $50,000 $79,825 59.65% 59.65% 59.65%
12/31/96 $6,000 $6,183 19.06% 32.80% 12/31/96 $50,000 $95,039 19.06% 37.87% 90.08%
12/31/97 $8,000 $9,377 14.60% 24.05% 12/31/97 $50,000 $108,910 14.60% 29.63% 117.82%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE EQUITY INCOME PORTFOLIO T. ROWE PRICE EQUITY INCOME
PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $ 2,658 32.89% 32.89% 12/31/95 $50,000 $66,446 32.89% 32.89% 32.89%
12/31/96 $ 6,000 $ 5,491 17.88% 23.07% 12/31/96 $50,000 $78,330 17.88% 25.16% 56.66%
12/31/97 $ 8,000 $ 9,518 27.06% 24.92% 12/31/97 $50,000 $99,529 27.06% 25.79% 99.06%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE INTERNATIONAL PORTFOLIO T. ROWE PRICE INTERNATIONAL
PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $ 2,193 9.64% 9.64% 12/31/95 $50,000 $54,818 9.64% 9.64% 9.64%
12/31/96 $ 6,000 $ 4,742 13.09% 11.89% 12/31/96 $50,000 $61,995 13.09% 11.35% 23.99%
12/31/97 $ 8,000 $ 6,853 1.66% 6.80% 12/31/97 $50,000 $63,023 1.66% 8.02% 26.05%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW AMERICAN GROWTH FUND T. ROWE PRICE NEW AMERICAN
PORTFOLIO GROWTH FUND PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $ 2,980 48.99% 48.99% 12/31/95 $50,000 $ 74,495 48.99% 48.99% 48.99%
12/31/96 $ 6,000 $ 5,954 19.13% 29.63% 12/31/96 $50,000 $ 89,227 19.13% 33.62% 76.42%
12/31/97 $ 8,000 $ 9,431 19.43% 24.39% 12/31/97 $50,000 $105,351 19.43% 28.20% 110.70%
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
OCC ACCUMULATION TRUST MANAGED PORTFOLIO OCC ACCUMULATION TRUST MANAGED PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1988 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1988
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A 0.00
12/31/89 $ 4,000 $ 2,504 25.19% 25.19% 12/31/89 $50,000 $62,595 25.19% 25.19% 25.19
12/31/90 $ 6,000 $ 3,229 -28.32% -13.46% 12/31/90 $50,000 $44,868 -28.32% -5.27% -10.26
12/31/91 $ 8,000 $ 7,809 49.36% 13.77% 12/31/91 $50,000 $67,015 49.36% 10.26% 34.03
12/31/92 $10,000 $ 7,861 -19.86% -0.70% 12/31/92 $50,000 $53,706 -19.86% 1.80% 7.41
12/31/93 $12,000 $ 9,046 -8.26% -3.32% 12/31/93 $50,000 $49,270 -8.26% -0.29% -1.46
12/31/94 $14,000 $10,124 -8.35% -4.84% 12/31/94 $50,000 $45,156 -8.35% -1.68% -9.69
12/31/95 $16,000 $17,402 43.53% -0.25% 12/31/95 $50,000 $64,814 43.53% 3.78% 29.63
12/31/96 $18,000 $23,487 21.05% 8.49% 12/31/96 $50,000 $78,459 21.05% 5.79% 56.92
12/31/97 $20,000 $30,736 20.59% 10.56% 12/31/97 $50,000 $94,618 20.59% 7.34% 89.24
</TABLE>
<TABLE>
<CAPTION>
OCC ACCUMULATION TRUST US GOVERNMENT INCOME PORTFOLIO OCC ACCUMULATION TRUST US GOVERNMENT INCOME PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE PAYMENT
1994 AND YEARLY DECEMBER 31ST THEREAFTER MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------- ------ ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A N/A
12/31/95 $ 4,000 $ 2,201 10.07% 10.07% 12/31/95 $50,000 $55,035 10.07% 10.07% 10.07
12/31/96 $ 6,000 $ 4,294 2.21% 4.83% 12/31/96 $50,000 $56,250 2.21% 6.07% 11.82
12/31/97 $ 8,000 $ 6,619 5.59% 4.99% 12/31/97 $50,000 $59,036 5.59% 5.69% 18.07
</TABLE>
<TABLE>
<CAPTION>
OCC ACCUMULATION TRUST SMALL CAPITAL PORTFOLIO OCC ACCUMULATION TRUST SMALL CAPITAL PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE PAYMENT
1988 AND YEARLY DECEMBER 31ST THEREAFTER MADE DECEMBER 31, 1988
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual Cumulative
Cumulative Accumulated Total Total Cumulative Accumulated Total Total Fund Total
Date Payment Value Return Return Date Payment Value Return Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A 0.00
12/31/89 $ 4,000 $ 2,290 14.52% 14.52% 12/31/89 $50,000 $57,259 14.52% 14.52% 14.52
12/31/90 $ 6,000 $ 3,225 -24.82% -13.52% 12/31/90 $50,000 $43,047 -24.82% -7.21% -13.90
12/31/91 $ 8,000 $ 8,457 61.85% 18.17% 12/31/91 $50,000 $69,670 61.85% 11.69% 39.35
12/31/92 $10,000 $ 8,457 -19.13% 2.24% 12/31/92 $50,000 $56,345 -19.13% 3.03% 12.69
12/31/93 $12,000 $10,143 -3.01% 0.47% 12/31/93 $50,000 $54,650 -3.01% 1.79% 9.30
12/31/94 $14,000 $ 9,917 -18.33% -5.42% 12/31/94 $50,000 $44,634 -18.33% -1.87% -10.74
12/31/95 $16,000 $13,541 13.63% -0.42% 12/31/95 $50,000 $50,715 13.63% 0.20% 1.43
12/31/96 $18,000 $18,192 17.06% 2.85% 12/31/96 $50,000 $59,365 17.06% 2.17% 18.73
12/31/97 $20,000 $24,339 20.54% 5.98% 12/31/97 $50,000 $71,560 20.54% 4.06% 43.12
</TABLE>
Individualized Computer Generated Illustrations
The Company may from time to time use computer-based software available through
Morningstar, CDA/Wiesnberger and/or other firms to provide registered
representatives and existing and/or potential owners of Contracts with
individualized hypothetical performance illustrations for some or all of the
Portfolios. Such illustrations may include, without limitation, graphs, bar
charts and other types of formats presenting the following information: (i) the
historical results of a hypothetical investment in a single Portfolio; (ii) the
historical fluctuation of the value of a single Portfolio (actual and
hypothetical); (iii) the historical results of a hypothetical investment in more
than one Portfolios; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Portfolios; (v) the
historical performance of two or more market indices in comparison to a single
Portfolio or a group of Portfolios; (vi) a market risk/reward scatter chart
showing the historical risk/reward relationship of one or more mutual funds or
-11-
<PAGE>
Portfolios to one or more indices and a broad category of similar anonymous
variable annuity subaccounts; and (vii) Portfolio data sheets showing various
information about one or more Portfolios (such as information concerning total
return for various periods, fees and expenses, standard deviation, alpha and
beta, investment objective, inception date and net assets).
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 transportation
companies. Produced by the 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
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<PAGE>
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.
. 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 companies.
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.
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
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<PAGE>
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 of the stock of the Company is owned by Veterans Life Insurance Company,
which is a wholly owned subsidiary of Providian Life and Health Insurance
Company ("PLH"). Commonwealth General Corporation owns a 3.7% interest in PLH
and 61%, 15.3%, and 20% interests, respectively, are held by Commonwealth Life
Insurance Company, Peoples Security Life Insurance Company, and Capital Liberty,
L.P. Commonwealth Life Insurance Company and Peoples Security Life Insurance
Company are each wholly owned by Capital General Development Corporation, which
in turn is wholly owned by Commonwealth General Corporation. A 1% interest in
Capital Liberty, L.P. is owned by Commonwealth General Corporation, which is the
general partner, and 79.2% and 19.8% interests, respectively, are held by two
limited partners, Commonwealth Life Insurance Company and Peoples Security Life
Insurance Company.
Commonwealth General Corporation is wholly owned by AEGON USA, Inc., which in
turn is wholly owned by AEGON U.S. Holding Corporation, a wholly owned
subsidiary of AEGON International n.v. AEGON International n.v. is a wholly
owned subsidiary of AEGON n.v. Vereniging AEGON (a Netherlands membership
association) has a 53.63% interest in AEGON n.v.
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 1st of each year covering the operations and
reporting on the financial condition of the Company as of December 31st 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.
In addition, the Company is subject to the insurance laws and regulations of all
the states where it is licensed to operate. 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.
DISTRIBUTION OF THE CONTRACTS
AFSG Securities Corporation ("AFSG"), formerly Providian Securities Corporation,
the principal underwriter of the Contract, is ultimately a wholly owned
subsidiary of AEGON n.v. AFSG 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. Commissions and expense allowance
payments not to exceed, in the aggregate, 6.75% of Purchase Payments may be paid
to entities which sell the Contract. Additional payments may be made for other
services not directly related to the sale of the Contract.
The Contract is offered to the public through brokers licensed under the
federal securities laws and New York State insurance laws that have entered into
agreements with AFSG. The offering of the Contract is continuous and AFSG does
not anticipate discontinuing the offering of the Contract. However, AFSG does
reserve the right to discontinue the offering of the Contract.
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.
-14-
<PAGE>
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
Contract 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 Contract 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 audited financial statements of the Separate Account for the year ended
December 31, 1997, including the Report of Independent Auditors thereon, are
included in this Statement of Additional Information. The Subaccounts described
in the Contract Prospectus had not commenced operations as of the year ended
December 31, 1996, and consequently had no assets or liabilities. Accordingly,
no financial statements are included for the Separate Account for the year ended
December 31, 1996.
The audited statutory-basis financial statements of the Company for the years
ended December 31, 1997 and 1996, including the Reports of Independent Auditors'
thereon, are included in this Statement of Additional Information. They should
be distinguished from the financial statements of the Separate Account and
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 held in the Separate Account.
-15-
<PAGE>
STATUTORY-BASIS FINANCIAL STATEMENTS
FIRST PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY
YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
STATUTORY-BASIS FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................................. 1
Audited Financial Statements
Balance Sheets (Statutory-Basis)............................................ 2
Statements of Operations (Statutory-Basis).................................. 3
Statements of Changes in Capital and Surplus (Statutory-Basis).............. 4
Statements of Cash Flows (Statutory-Basis).................................. 5
Notes to Financial Statements............................................... 6
</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 as of December 31, 1997 and 1996,
and the related statutory-basis statements of operations, changes in capital
and surplus, and cash flows for the years then ended. These financial state-
ments 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 in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting 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 pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the New York Department of Insurance, which practices differ from
generally accepted accounting principles. The variances between such practices
and generally accepted accounting principles are also described in Note 1. The
effects on the financial statements of these variances are not reasonably de-
terminable but are presumed to be material.
In our opinion, because of the effects of the matter described in the pre-
ceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the fi-
nancial position of First Providian Life and Health Insurance Company at De-
cember 31, 1997 and 1996, or the results of its operations or its cash flows
for the years then ended.
However, in our opinion, the 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, 1997 and 1996, and the re-
sults of its operations and its cash flows for the years then ended, in con-
formity with accounting practices prescribed or permitted by the New York De-
partment of Insurance.
/s/ Ernst & Young LLP
- -------------------------------
Louisville, Kentucky
April 24, 1998
1
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
BALANCE SHEETS (STATUTORY-BASIS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1997 1996
------------ ------------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Bonds............................................... $193,126,619 $202,816,142
Preferred stocks.................................... 1,791,722 1,820,130
Policy loans........................................ 2,306,676 2,161,098
Cash and short-term investments..................... 14,623,166 2,722,574
Other invested assets............................... 104,681 61,009
------------ ------------
Total cash and invested assets................... 211,952,864 209,580,953
Deferred and uncollected premiums.................... 2,973,976 3,088,869
Accrued investment income............................ 3,011,366 3,548,020
Amounts due from affiliates.......................... 794,077 360,620
Other admitted assets................................ 224,524 158,590
Separate account assets.............................. 177,885,176 107,317,797
------------ ------------
Total admitted assets................................ $396,841,983 $324,054,849
============ ============
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate policy reserves........................... $107,256,124 $115,759,093
Policy and contract claims.......................... 3,343,556 2,666,897
Premiums received in advance........................ 313,916 295,034
Accrued commissions, general expenses, and taxes.... 484,969 378,021
Amounts due to affiliates........................... 62,246 35,309
Asset valuation reserve............................. 2,266,096 2,029,494
Interest maintenance reserve........................ 9,766,842 8,822,157
Other liabilities................................... 1,276,064 1,824,673
Separate account liabilities........................ 177,885,176 107,317,797
------------ ------------
Total liabilities................................ 302,654,989 239,128,475
Capital and surplus:
Capital stock, $2 par value; 1,000,000 shares
authorized, issued and outstanding................. 2,000,000 2,000,000
Paid-in surplus..................................... 10,485,844 10,485,844
Special surplus fund................................ 1,607,352 1,473,034
Unassigned surplus.................................. 80,093,798 70,967,496
------------ ------------
Total capital and surplus........................ 94,186,994 84,926,374
------------ ------------
Total liabilities and capital and surplus............ $396,841,983 $324,054,849
============ ============
</TABLE>
See accompanying notes.
2
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
STATEMENTS OF OPERATIONS (STATUTORY-BASIS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Premiums earned:
Life and annuity................................ $12,155,417 $12,170,934
Accident and health............................. 5,152,989 5,135,923
Annuity deposit funds............................. 52,147,732 30,982,346
Net investment income............................. 16,359,415 15,632,095
Commissions and expense allowances on reinsurance
ceded............................................ 185,461 394,923
Amortization of interest maintenance reserve...... 450,566 423,319
Reinsurance recapture gain........................ 2,202,882 --
Other income...................................... -- 21
----------- -----------
88,654,462 64,739,561
Benefits and expenses:
Accident and health, life and other benefits...... 31,707,697 24,544,627
Decrease in aggregate policy reserves............. (8,502,969) (5,411,122)
Interest on reinsurance reserves.................. 93,070 191,948
Commissions....................................... 128,037 77,336
General insurance expenses........................ 4,875,881 4,546,942
Insurance taxes, licenses, and fees............... 844,767 692,100
Net transfers to separate accounts................ 44,794,451 27,869,760
----------- -----------
73,940,934 52,511,591
----------- -----------
Net gain from operations before federal income
taxes.............................................. 14,713,528 12,227,970
Federal income tax expense.......................... 5,219,000 4,414,000
----------- -----------
Net gain from operations............................ 9,494,528 7,813,970
Net realized capital gains (losses), net of income
taxes (benefits) (1997--$747,000; 1996--($174,000))
and excluding gains (losses) transferred to the
interest maintenance reserve (1997--$1,395,248;
1996--($341,664)).................................. 4,286 (9,975)
----------- -----------
Net income.......................................... $ 9,498,814 $ 7,803,995
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS (STATUTORY-BASIS)
<TABLE>
<CAPTION>
CAPITAL PAID-IN SPECIAL UNASSIGNED
STOCK STOCK SURPLUS FUND SURPLUS
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balances, January 1, 1996..... $2,000,000 $10,485,844 $1,357,319 $63,100,573
Net income.................... -- -- -- 7,803,995
Change in net unrealized gains
on investments............... -- -- -- 26,057
Prior year federal income tax
adjustment................... -- -- -- 446,132
(Increase) decrease in
nonadmitted assets and
related items................ -- -- 115,715 (82,809)
Increase in asset valuation
reserve...................... -- -- -- (326,452)
---------- ----------- ---------- -----------
Balances, December 31, 1996... 2,000,000 10,485,844 1,473,034 70,967,496
Net income.................... -- -- -- 9,498,814
Change in net unrealized
losses on investments........ -- -- -- (80,708)
Prior year federal income tax
adjustment................... -- -- -- 58,000
(Increase) decrease in
nonadmitted assets and
related items................ -- -- 134,318 (113,202)
Increase in asset valuation
reserve...................... -- -- -- (236,602)
---------- ----------- ---------- -----------
Balances, December 31, 1997... $2,000,000 $10,485,844 $1,607,352 $80,093,798
========== =========== ========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
STATEMENTS OF CASH FLOWS (STATUTORY-BASIS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
Cash and short-term investments provided:
Operations:
Premiums and annuity fund deposits................ $ 69,554,536 $48,426,473
Net investment income received.................... 16,880,518 15,205,072
Allowances on reinsurance ceded and other income
received......................................... 185,461 394,944
------------ -----------
86,620,515 64,026,489
Benefits paid..................................... 31,036,565 24,265,630
Commissions, expenses, and taxes paid............. 10,900,700 9,106,408
Net increase in policy loans...................... 145,578 153,466
Net transfers to separate accounts................ 44,775,696 27,910,962
------------ -----------
86,858,539 61,436,466
------------ -----------
Total cash provided (applied) by operations..... (238,024) 2,590,023
Investments sold, matured or repaid................ 159,445,896 73,171,482
Other cash provided:
Net cash received on reinsurance recaptured....... 2,202,882 --
Investment payables............................... -- 402,490
Other items....................................... 134,062 829,867
------------ -----------
Total other cash provided....................... 2,336,944 1,232,357
------------ -----------
Total cash and short-term investments provided.. 161,544,816 76,993,862
Cash and short-term investments applied:
Investments acquired............................... 147,684,481 85,301,194
Other cash applied:
Payable to affiliates............................. 406,521 548,108
Investment payables............................... 402,491 --
Other items....................................... 1,150,731 295,431
------------ -----------
Total other cash applied........................... 1,959,743 843,539
------------ -----------
Total cash and short-term investments applied... 149,644,224 86,144,733
------------ -----------
Increase (decrease) in cash and short-term
investments.................................... 11,900,592 (9,150,871)
Cash and short-term investments:
Beginning of year.................................. 2,722,574 11,873,445
------------ -----------
End of year........................................ $ 14,623,166 $ 2,722,574
============ ===========
</TABLE>
See accompanying notes.
5
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES
Organization
First Providian Life and Health Insurance Company (FPLH) is domiciled in New
York. Prior to June 10, 1997, FPLH was an indirect, wholly owned subsidiary of
Providian Corporation (Providian). On June 10, 1997, Providian's insurance op-
erations, including the operations of FPLH, were merged with an indirect,
wholly owned subsidiary of AEGON N.V., an international insurance organization
headquartered in The Hague, The Netherlands. Providian was the surviving corpo-
ration in the merger. Effective October 15, 1997, Providian's name was changed
to Commonwealth General Corporation (Commonwealth). Effective December 31,
1997, ownership of Commonwealth was transferred to AEGON USA, Inc., an indi-
rect, wholly owned subsidiary of AEGON N.V.
FPLH is a wholly owned subsidiary of Veterans Life Insurance Company (VLIC),
a wholly owned subsidiary of Providian Life and Health Insurance Company (PLH).
PLH is owned by Commonwealth Life Insurance Company (CLICO) 61%, Capital Liber-
ty, L.P. (CLLP) 20%, Peoples Security Life Insurance Company (PSI) 15%, and
Commonwealth 4%. Commonwealth is the ultimate parent of CLICO, CLLP, and PSI.
FPLH expects to merge with AUSA Life Insurance Company, an affiliate, in
1998. Upon approval and completion of the merger, AUSA Life Insurance Company
will be the surviving company.
Nature of Operations
FPLH sells and services life and accident and health insurance products, pri-
marily 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 plan-
ners, stock brokerage firms and a mutual fund.
Management's Estimates
The preparation of financial statements of insurance companies requires man-
agement to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could im-
pact the amounts reported and disclosed herein.
Basis of Presentation
The accompanying financial statements of FPLH have been prepared in accor-
dance with the accounting practices prescribed or permitted by the New York De-
partment 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 invest-
ments are reported at amortized cost, and the remaining fixed maturity in-
vestments are reported at fair value with unrealized holding gains and
losses reported in operations for those designated as trading and as a sep-
arate component of shareholders' equity for those designated as available-
for-sale.
6
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
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 in-
ternally 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, quoted fair values
provided by outside broker confirmations or internally calculated esti-
mates. Changes between cost and admitted asset investment amounts are cred-
ited or charged directly to unassigned surplus rather than to a separate
surplus account.
Under a formula prescribed by the NAIC, FPLH defers the portion of real-
ized capital gains and losses attributable to changes in the general level
of interest rates on sales of certain liabilities and fixed income invest-
ments, principally bonds, and amortizes such deferrals into income on a
straight-line basis over the remaining period to maturity based on group-
ings of individual liabilities or investments sold. The net accumulated un-
amortized balance of such deferrals is reported as an "interest maintenance
reserve" (IMR) in the accompanying balance sheets. Realized capital gains
and losses are reported in income net of federal income 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 valua-
tion 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 sur-
plus. Under GAAP, realized capital gains and losses are reported in the in-
come 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 valua-
tion 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. Un-
der 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 benefit reserves. For uni-
versal life insurance and investment-type contracts, to the extent recover-
able from future gross profits, deferred policy acquisition costs are amor-
tized generally in proportion to the present value of expected gross prof-
its 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 accompanying
balance sheets and are charged directly to unassigned surplus.
Premiums
Revenues for universal life policies and investment-type contracts con-
sist of the entire premium received and benefits incurred represent the to-
tal of death benefits paid, surrenders and the change in policy reserves.
Under GAAP, premiums received in excess of policy charges are not recog-
nized as premium revenue and benefits represent the excess of benefits paid
over the policy account value and interest credited to the account values.
7
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
Benefit Reserves
Certain policy reserves are calculated using prescribed interest and mor-
tality assumptions rather than on estimated expected experience and actual
account balances as would be required under GAAP.
Reinsurance
Policy and contract liabilities ceded to reinsurers have been reported as
reductions of the related reserves rather than as assets as would be re-
quired under GAAP.
Commissions allowed by reinsurers on business ceded are reported as in-
come when received rather than being deferred and amortized with deferred
policy acquisition costs.
Federal Income Taxes
Deferred federal income taxes are not provided for differences between
the financial statement amounts and the tax bases of assets and liabili-
ties.
Statements of Cash Flow
Cash and short-term investments in the statements of cash flow represent
cash balances and investments with initial maturities of one year or less.
Under GAAP, the corresponding captions of cash and cash equivalents include
cash balances and investments with initial maturities of three months or
less.
The effects of the foregoing variances from GAAP on the accompanying statuto-
ry-basis financial statements have not been determined, but are presumed to be
material.
Other significant accounting policies followed in preparing the accompanying
statutory-basis financial statements are as follows:
Investments
Bonds, preferred stocks, policy loans 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
constant effective yield method.
Loan-backed bonds and structured securities are valued at amortized
cost using the constant effective yield 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.
Preferred stocks are carried at cost. In the prior year, such stocks
were reported at fair value as determined by the SVO of the NAIC.
Policy loans are carried at the aggregate unpaid principal balance.
Short-term investments include investments with maturities of less
than one year at the date of acquisition. Short-term investments are
carried at amortized cost.
8
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
Bond and other loan interest is credited to income as it accrues. For se-
curities, FPLH follows the guidelines of the NAIC for each security on an
individual basis in determining the admitted or nonadmitted status of ac-
crued income amounts. There was no interest on securities excluded from in-
vestment income at December 31, 1997 and 1996.
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.
Separate Accounts
Separate account assets and liabilities reported in the accompanying
statutory-basis 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 con-
tract holders have no claim against the assets of the general account of
FPLH. Separate account assets and liabilities are reported at estimated
fair value. The operations of the separate accounts are not included in the
accompanying statutory-basis financial statements. Fees charged on separate
account policyholder deposits are included in net transfers to separate ac-
counts in the accompanying statements of operations.
Policy Reserves
Unearned premiums represent the portion of premiums written which are ap-
plicable 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 re-
serves.
FPLH waives deduction of deferred fractional premiums upon death of
insureds. FPLH's policy is to return any portion of the final premium be-
yond the date of death. Surrender values are not promised in excess of the
legally computed reserves. Additional premiums are charged for policies is-
sued 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 cal-
culation of policy reserves. The tabular less actual reserve released and
the tabular cost have been determined by formula as described in the NAIC
instructions.
Liabilities for Policy and Contract Claims
Liabilities for policy and contract claims, principally related to acci-
dent and health policies, include amounts determined in accordance with
standard actuarial practice and statutory regulation. These estimates are
subject to the effects of trends in claim severity and frequency. Although
considerable variability is inherent in such estimates, management believes
that the liabilities for policy and contract claims are adequate. The meth-
ods of making such estimates and establishing the resulting liabilities are
continually reviewed and updated, and any adjustments resulting therefrom
are reflected in current earnings.
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 an-
nuities, 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
9
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. ORGANIZATION, NATURE OF OPERATIONS AND ACCOUNTING POLICIES (CONTINUED)
a pro rata basis over the coverage period for which the premiums were col-
lected 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 aggre-
gate 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 Depart-
ment of Insurance. Currently, "prescribed" statutory accounting practices
include state insurance laws, regulations, and general administrative
rules, as well as a variety of publications of the NAIC, including the
NAIC's Accounting Practices and Procedures Manual. "Permitted" statutory
accounting practices encompass all accounting practices that are not pre-
scribed; 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 is in the process of codifying statutory accounting practices
(Codification). Codification 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 state-
ments. Codification, which is expected to be approved by the NAIC in 1998,
will require adoption by the various states before it becomes the pre-
scribed statutory basis of accounting for insurance companies domesticated
within those states. Accordingly, before Codification becomes effective for
FPLH, New York must adopt Codification as the prescribed basis of account-
ing on which domestic insurers must report their statutory-basis results to
the Department of Insurance. At this time it is unclear whether New York
will adopt Codification. However, based on current draft guidance, manage-
ment believes that the impact of codification will not be material to
FPLH's statutory-basis financial statements.
Reclassifications
Certain reclassifications have been made to the prior year financial state-
ments 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>
AMORTIZED GROSS GROSS FAIR
COST UNREALIZED GAINS UNREALIZED LOSSES VALUE
--------- ---------------- ----------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. government
obligations............. $ 8,979 $ 444 $ 3 $ 9,420
States and political
subdivisions............ 5,091 -- -- 5,091
Corporate and other...... 121,094 8,626 523 129,197
Foreign corporate*....... 22,363 474 557 22,280
Asset-backed............. 11,495 29 -- 11,524
Mortgage-backed.......... 24,105 1,565 -- 25,670
-------- ------- ------ --------
$193,127 $11,138 $1,083 $203,182
======== ======= ====== ========
</TABLE>
10
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED GROSS GROSS FAIR
COST UNREALIZED GAINS UNREALIZED LOSSES VALUE
--------- ---------------- ----------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
U.S. government
obligations............. $ 30,055 $ 66 $ 26 $ 30,095
States and political
subdivisions............ 5,094 406 -- 5,500
Corporate and other...... 125,377 4,446 959 128,864
Foreign corporate*....... 5,556 -- -- 5,556
Asset-backed............. 2,825 -- -- 2,825
Mortgage-backed.......... 33,909 -- -- 33,909
-------- ------ ---- --------
$202,816 $4,918 $985 $206,749
======== ====== ==== ========
</TABLE>
- --------
*Substantially all are U.S. dollar denominated.
The amortized cost and fair value of bonds at December 31, 1997, by contrac-
tual maturity, are shown below. Actual maturities may differ from contractual
maturities because certain borrowers may have the right to call or prepay ob-
ligations, sometimes without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less............................... $ 2,003 $ 2,003
Due after one year through five years................. 16,799 16,906
Due after five years through ten years................ 49,120 49,742
Due after ten years................................... 89,605 97,337
-------- --------
157,527 165,988
Asset-backed securities............................... 11,495 11,524
Mortgage-backed securities............................ 24,105 25,670
-------- --------
$193,127 $203,182
======== ========
</TABLE>
Proceeds during 1997 and 1996 from sales, maturities and calls of bonds were
$159,446,000 and $73,171,000, respectively. Gross gains of $2,651,000 and
$170,000 and gross losses of $505,000 and $696,000 in 1997 and 1996, respec-
tively, were realized on those sales.
The cost of preferred stocks of unaffiliated companies was $1,792,000 and
$1,739,000 at December 31, 1997 and 1996, respectively, and the related fair
value was $1,891,000 and $1,820,000 at December 31, 1997 and 1996, respective-
ly. There was no difference between cost and statement value of preferred
stocks at December 31, 1997. The difference between cost and statement value
of $81,000 at December 31, 1996 was credited directly to unassigned surplus as
of that date and did not affect net income.
Included in investments are securities having statement values of $1,620,000
at December 31, 1997 which were on deposit with various state insurance de-
partments to satisfy regulatory requirements.
Concentrations of Credit Risk
FPLH limits credit risk by diversifying its investment portfolio among pub-
lic 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 underwrit-
ing standards and purchasing
11
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. INVESTMENTS (CONTINUED)
insurance protection in certain cases. In addition, FPLH establishes credit ap-
proval processes, credit limits and monitoring procedures on an individual
counterparty basis. As a result, management believes that significant concen-
trations of credit risk do not exist.
3. FEDERAL INCOME TAXES
FPLH is included in the life-nonlife consolidated federal income tax return
filed by PLH. Under a written agreement, PLH and its affiliates (including
FPLH) allocate the federal income tax liability among the members of the con-
solidated return group in the ratio that each member's separate return tax lia-
bility, or benefit from a net operating loss, for the year bears to the consol-
idated tax liability. The final settlement under this agreement is made after
the annual filing of the consolidated U.S. Corporate Income Tax Return.
Reported income tax expense differs from income tax expense that would result
from applying statutory rates to pretax income primarily due to differences in
the statutory and tax treatment of certain investments and deferred policy ac-
quisition costs.
Included in the statements of changes in capital and surplus are certain ad-
justments increasing surplus by $58,000 and $446,000 at December 31, 1997 and
1996, respectively, relating to tax accrual adjustments applicable to the prior
tax years.
At December 31, 1997, accumulated earnings of FPLH for federal income tax
purposes included a "Policyholders' Surplus" account balance of $1,631,000; a
special memorandum tax account. This is a special memorandum account balance
which 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 Policy-
holders' Surplus account. The "Shareholders' Surplus" account is also a special
memorandum tax account, and generally represents an accumulation of taxable in-
come (net of tax thereon) plus the dividends-received deduction, tax-exempt in-
terest, and certain other special deductions as provided by the Act. At Decem-
ber 31, 1997, the balance in the Shareholders' Surplus account amounted to ap-
proximately $92,131,000. There is no present intention to make distributions in
excess of the Shareholders' Surplus account.
4. RELATED PARTY TRANSACTIONS
Reinsurance Ceded to Affiliates
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. Reinsur-
ance ceded to VLIC has reduced net gain from operations before federal income
taxes by $285,000 and $600,000 in 1997 and 1996, respectively. On July 1, 1997,
the reinsurance agreement was amended whereby FPLH recaptured the accident and
health policies from VLIC. The recapture resulted in FPLH receiving cash from
VLIC in the amount of $2,202,882, which has been recorded as a net gain as of
December 31, 1997.
Other Agreements and Transactions with Related Parties
FPLH entered into an agreement, effective January 1, 1992, with PLH for the
performance of administrative services, management support services and market-
ing 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 $3,700,000 in 1997 and $2,200,000 in 1996.
FPLH entered into a revolving credit note with Commonwealth on September 3,
1996, whereby FPLH can borrow from Commonwealth up to $1,000,000. Interest is
computed monthly at a rate designated in the note. At
12
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
December 31, 1997 and 1996, there was no outstanding balance. During 1997,
FPLH paid $1,500 in interest expense. No interest expense was incurred or paid
during 1996.
FPLH participates in various benefit plans sponsored by Commonwealth and the
related costs allocated to FPLH are not significant.
Commonwealth provides general management, advisory, legal and other general
services to FPLH. Diversified Financial Products, Inc., (DFP), formerly
Providian Capital Management, Inc., an affiliate, provides investment manage-
ment services to FPLH along with marketing and administrative services for
FPLH's accumulation business.
5. REINSURANCE
Certain premiums and benefits are ceded to nonaffiliated insurance companies
under various reinsurance agreements. The ceded reinsurance agreements provide
FPLH with increased capacity to write larger risks and maintain its exposure
to loss within its capital resources.
FPLH's ceded reinsurance agreements with affiliated and nonaffiliated insur-
ance companies reduced (increased) certain items in the accompanying financial
statements by the following amounts:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Benefits paid or
provided............... $ 364 $ 804
Commission and expense
allowances on
reinsurance ceded...... (185) (395)
Interest on reinsurance
reserves............... (93) (192)
Policy and contract
claims*................ 44 44
Unearned premium
reserves*.............. 1 1
Aggregate policy
reserves*.............. 13 13
Premiums received in
advance*............... 1 1
</TABLE>
- --------
*At year end
For long-duration contracts, the effect of reinsurance on life and annuity
premiums earned in 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
PREMIUMS PREMIUMS
EARNED EARNED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Direct................................................. $12,179 $12,194
Ceded.................................................. (24) (23)
------- -------
Net.................................................... $12,155 $12,171
======= =======
</TABLE>
For short-duration contracts, the effect of reinsurance on accident and
health premiums written and earned in 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1997 PREMIUMS 1996 PREMIUMS
--------------- ----------------
WRITTEN EARNED WRITTEN EARNED
------- ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Direct.................................. $5,851 $5,851 $ 6,671 $ 6,671
Ceded................................... (698) (698) (1,535) (1,535)
------ ------ ------- -------
Net..................................... $5,153 $5,153 $ 5,136 $ 5,136
====== ====== ======= =======
</TABLE>
13
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. REINSURANCE (CONTINUED)
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,
1997, FPLH reinsurance recoverables are not material and no individual rein-
surer 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, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Subject to discretionary withdrawal at market value........ $177,844 72.4%
Subject to discretionary withdrawal at book value less
surrender charge.......................................... 13,347 5.4%
Subject to discretionary withdrawal (without adjustment) at
book value with minimal or no charge or adjustment........ 51,306 20.9%
Not subject to discretionary withdrawal.................... 3,281 1.3%
-------- ------
Total annuity reserves before reinsurance.................. 245,778 100.0%
======
Less reinsurance........................................... --
--------
Net annuity reserves*...................................... $245,778
========
</TABLE>
- --------
* Includes $177,844,000 of annuities reported in FPLH's separate account li-
abilities. See first caption above. The remaining balance, $67,934,000, is
included in aggregate policy reserves in the accompanying balance sheet.
7. SEPARATE ACCOUNTS
Separate accounts held by FPLH represent funds held for individual policy-
holders. The separate accounts do not have any minimum guarantees and the in-
vestment risks associated with market value changes are borne entirely by the
policyholder. The assets in the separate accounts, carried at estimated fair
value, consist solely of common stocks. Information regarding the separate ac-
counts of FPLH as of and for the year ended December 31, 1997 is as follows (in
thousands):
<TABLE>
<S> <C>
Premiums, deposits and other considerations..................... $ 51,475
========
Separate account liabilities*................................... $177,844
========
</TABLE>
- --------
* Separate account liabilities are exclusive of $41,000 which represents
amounts due to the general account as of December 31, 1997.
A reconciliation of the amounts transferred to and from FPLH's separate ac-
counts for the year ended December 31, 1997 is presented below (in thousands):
<TABLE>
<S> <C>
Transfers as reported in the Summary of Operations of FPLH's
Separate Accounts Annual Statements:
Transfers to separate accounts................................... $51,475
Transfers from separate accounts................................. (6,801)
-------
Net transfers to separate accounts................................. 44,674
Reconciling adjustments:
Fees paid to external fund manager............................... 120
-------
Transfers as reported in the Summary of Operations of FPLH's Life,
Accident & Health Annual Statement................................ $44,794
=======
</TABLE>
14
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. DEFERRED AND UNCOLLECTED PREMIUMS
Deferred and uncollected life insurance premiums and annuity considerations
as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
TYPE GROSS LOADING NET OF LOADING
---- ------ ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Ordinary new................................... $ 431 $ 315 $ 116
Ordinary renewal............................... 3,162 1,032 2,130
------ ------ ------
Total ordinary................................. 3,593 1,347 2,246
Group new...................................... 6 6 --
Group renewal.................................. 1,136 408 728
------ ------ ------
Total group.................................... 1,142 414 728
------ ------ ------
Total.......................................... $4,735 $1,761 $2,974
====== ====== ======
</TABLE>
9. CAPITAL AND SURPLUS AND STATUTORY RESTRICTIONS ON DIVIDENDS
Life/Health insurance companies are subject to certain Risk-Based Capital
(RBC) requirements as specified by the NAIC. Under those requirements, the
amount of capital and surplus maintained by a life/health insurance company is
to be determined based on the various risk factors related to it. At December
31, 1997, FPLH meets the RBC requirements.
FPLH is restricted from distributing any dividends to shareholders without
prior approval from the New York Department of Insurance.
Included in FPLH's capital and surplus is a special surplus fund which con-
sists of a group life contingency reserve and annuitant mortality fluctuation
reserve at December 31, 1997 of $1,480,387 and $126,965, respectively
($1,422,181 and $50,853, respectively, at December 31, 1996).
10. CONTINGENCIES
In the ordinary course of business, FPLH is a defendant in litigation prin-
cipally involving insurance policy claims for damages, including compensatory
and punitive damages. In the opinion of management, the outcome of such liti-
gation will not result in a loss which would be material to FPLH's financial
position or results of operations.
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by FPLH in estimating fair
value disclosures for financial instruments in the accompanying financial
statements and notes thereto:
Bonds and Preferred Stocks
The fair values of bonds and preferred stocks are generally based on pub-
lished quotations of the SVO of the NAIC. However, for certain investments,
the SVO does not provide a value and FPLH uses either admitted asset in-
vestment amounts (i.e., statement values) as allowed by the NAIC, values
provided by outside broker confirmations or internally calculated esti-
mates. The fair values of FPLH's investment in 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.
15
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
11. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Cash, Short-Term Investments and Deferred and Uncollected Premiums
The carrying values of cash, short-term investments, and deferred and
uncollected premiums reported in the accompanying balance sheets approxi-
mate 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 are
equal to their carrying values.
The carrying values and fair values of FPLH's liabilities for investment-
type contracts at December 31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
FAIR
CARRYING VALUE VALUE
-------------- --------
(IN THOUSANDS)
<S> <C> <C>
DECEMBER 31, 1997
Fixed annuity contracts.......................... $ 67,934 $ 64,416
Variable annuity contracts*...................... 177,844 177,844
-------- --------
$245,778 $242,260
======== ========
DECEMBER 31, 1996
Fixed annuity contracts.......................... $ 76,881 $ 72,900
Variable annuity contracts*...................... 107,285 107,285
-------- --------
$184,166 $180,185
======== ========
</TABLE>
- --------
*Included in FPLH's separate account liabilities.
The fair values for FPLH's insurance contracts other than investment con-
tracts are not required to be disclosed. However, the fair values of liabili-
ties under all insurance contracts are taken into consideration in FPLH's over-
all management of interest rate risk, such that FPLH's exposure to changing in-
terest rates is minimized through the matching of investment maturities with
amounts due under insurance contracts.
12. YEAR 2000 (UNAUDITED)
Commonwealth's parent has adopted and has in place a Year 2000 Assessment and
Planning Project (the Project) to review and analyze its information technology
and systems to determine if they are Year 2000 compatible. Commonwealth and
FPLH have begun to convert or modify, where necessary, critical data processing
systems. It is contemplated that the Project will be substantially completed by
early 1999. Commonwealth and FPLH do not expect this Project to have a signifi-
cant effect on operations. However, to mitigate the effect of outside influ-
ences upon the success of the Project, Commonwealth and FPLH have undertaken
communications with their significant customers, suppliers and other third par-
ties to determine their Year 2000 compatibility and readiness. Management be-
lieves that the issues associated with the Year 2000 will be resolved with no
material financial impact on Commonwealth and FPLH.
Since the Year 2000 computer problem, and its resolution, is complex and
multifaceted, the success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that systems or
equipment addresses Year 2000 date data prior to the Year 2000). Even with ap-
propriate and diligent pursuit of a well-conceived project, including testing
procedures, there is no certainty that any company will achieve complete suc-
cess. Notwithstanding the efforts or results of Commonwealth and FPLH, their
ability to function unaffected to and through the Year 2000 may be adversely
affected by actions (or failure to act) of third parties beyond their knowledge
or control.
16
<PAGE>
Financial Statements
First Providian Life and Health Insurance Company
Separate Account C - Marquee
For the Period Since Inception through December 31, 1997
with Report of Independent Auditors
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Financial Statements
For the Period Since Inception through December 31, 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................... 1
Audited Financial Statements
Statement of Assets and Liabilities...................................... 2
Statement of Operations.................................................. 4
Statement of Changes in Net Assets....................................... 5
Notes to Financial Statements............................................ 6
</TABLE>
<PAGE>
Report of Independent Auditors
Contract Owners
First Providian Life and Health Insurance Company Separate Account C - Marquee
We have audited the accompanying statement of assets and liabilities of First
Providian Life and Health Insurance Company Separate Account C - Marquee
(comprising the Fidelity VIP Equity-Income, Fidelity VIP Growth, Dreyfus Growth
and Income, Dreyfus Quality Bond, T. Rowe Price Equity Income, T. Rowe Price New
America Growth, T. Rowe Price International Stock, OCC Accumulation Trust
Managed, OCC Accumulation Trust Small Cap and OCC Accumulation Trust U.S.
Government Income Subaccounts) as of December 31, 1997, and the related
statements of operations and changes in net assets for the period then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting the First Providian Life and Health Insurance Company
Separate Account C - Marquee at December 31, 1997, and the results of their
operations and changes in their net assets for the period then ended in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Louisville, Kentucky
April 24, 1998
1
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31
1997
-----------
<S> <C>
ASSETS
Investments:
Fidelity VIP Equity-Income Portfolio (cost: $6,726) $ 7,037
Fidelity VIP Growth Portfolio (cost: $2,573) 2,633
Dreyfus Growth and Income Portfolio (cost: $7,163) 7,029
Dreyfus Quality Bond Portfolio (cost: $1,580) 1,585
T. Rowe Price Equity Income Portfolio (cost: $6,975) 7,147
T. Rowe Price New America Growth Portfolio (cost: $2,068) 2,136
T. Rowe Price International Stock Portfolio (cost: $14,733) 14,696
OCC Accumulation Trust Managed Portfolio (cost: $6,675) 6,863
OCC Accumulation Trust Small Cap Portfolio (cost: $2,595) 2,601
OCC Accumulation Trust U.S. Government Income Portfolio (cost: $1,571) 1,576
---------
TOTAL INVESTMENTS AND TOTAL ASSETS 53,303
LIABILITIES -
---------
NET ASSETS $ 53,303
=========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1997
---------------------
<S> <C>
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS
Fidelity VIP Equity-Income Subaccount $ 7,037
Fidelity VIP Growth Subaccount 2,633
Dreyfus Growth and Income Subaccount 7,029
Dreyfus Quality Bond Subaccount 1,585
T. Rowe Price Equity Income Subaccount 7,147
T. Rowe Price New America Growth Subaccount 2,136
T. Rowe Price International Stock Subaccount 14,696
OCC Accumulation Trust Managed Subaccount 6,863
OCC Accumulation Trust Small Cap Subaccount 2,601
OCC Accumulation Trust U.S. Government Income Subaccount 1,576
----------------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS $ 53,303
================
</TABLE>
See accompanying notes.
3
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Statement of Operations
For the Period Since Inception through December 31, 1997
<TABLE>
<CAPTION>
DREYFUS DREYFUS T. ROWE T. ROWE PRICE
FIDELITY VIP FIDELITY VIP GROWTH AND QUALITY PRICE EQUITY NEW AMERICA
EQUITY-INCOME GROWTH INCOME BOND INCOME GROWTH
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ - $ - $ 446 $ 22 $ 234 $ 5
Expenses:
Mortality and expense risk and
administrative charges 14 5 13 3 13 4
---------------------------------------------------------------------------------------
Net investment income (expense) (14) (5) 433 19 221 1
Realized and unrealized gain
(loss) on investments:
Net realized gain (loss) from
investment transactions:
Proceeds from sales 14 5 14 3 14 4
Cost of investments sold 13 5 14 3 14 5
---------------------------------------------------------------------------------------
1 - - - - (1)
Net unrealized appreciation
(depreciation) on investments:
At end of year 311 60 (134) 5 172 68
---------------------------------------------------------------------------------------
Net gain (loss) on investments 312 60 (134) 5 172 67
---------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $ 298 $ 55 $ 299 $ 24 $ 393 $ 68
=======================================================================================
<CAPTION>
OCC OCC ACCUMULATION
T. ROWE PRICE ACCUMULATION ACCUMULATION TRUST U.S.
INTERNATIONAL TRUST TRUST SMALL GOVERNMENT
STOCK MANAGED CAP INCOME TOTAL
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends $ 328 $ - $ - $ 13 $ 1,048
Expenses:
Mortality and expense risk and
administrative charges 28 13 5 3 101
----------------------------------------------------------------------------------
Net investment income (expense) 300 (13) (5) 10 947
Realized and unrealized gain
(loss) on investments:
Net realized gain (loss) from
investment transactions:
Proceeds from sales 28 13 5 3 103
Cost of investments sold 28 13 5 3 103
----------------------------------------------------------------------------------
- - - - -
Net unrealized appreciation
(depreciation) on investments:
At end of year (37) 188 6 5 644
----------------------------------------------------------------------------------
Net gain (loss) on investments (37) 188 6 5 644
----------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $ 263 $ 175 $ 1 $ 15 $ 1,591
==================================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Statement of Changes in Net Assets
For the Period Since Inception through December 31, 1997
<TABLE>
<CAPTION>
DREYFUS DREYFUS T. ROWE T. ROWE PRICE
FIDELITY VIP FIDELITY VIP GROWTH AND QUALITY PRICE EQUITY NEW AMERICA
EQUITY-INCOME GROWTH INCOME BOND INCOME GROWTH
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (expense) (14) (5) 433 19 221 1
Net realized gain (loss) on
investments 1 - - - - (1)
Net unrealized appreciation
(depriciation) on investments 311 60 (134) 5 172 68
--------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 298 55 299 24 393 68
Changes from variable annuity
contract transactions:
Transfers of net premiums 6,739 2,578 6,730 1,561 6,754 2,068
--------------------------------------------------------------------------------------
Net increase in net assets derived
from variable annuity contract
transactions 6,739 2,578 6,730 1,561 6,754 2,068
--------------------------------------------------------------------------------------
Net increase in net assets 7,037 2,633 7,029 1,585 7,147 2,136
--------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 7,037 $ 2,633 $ 7,029 $ 1,585 $ 7,147 $ 2,136
======================================================================================
<CAPTION>
OCC
OCC OCC ACCUMLATION
T. ROWE PRICE ACCUMULATION ACCUMULATION TRUST U.S.
INTERNATIONAL TRUST TRUST SMALL GOVERNMENT
STOCK MANAGED CAP INCOME TOTAL
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (expense) 300 (13) (5) 10 947
Net realized gain (loss) on
investments - - - - -
Net unrealized appreciation
(depriciation) on investments (37) 188 6 5 644
-------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 263 175 1 15 1,591
Changes from variable annuity
contract transactions:
Transfers of net premiums 14,433 6,688 2,600 1,561 51,712
------------------------------------------------------------------------------------
Net increase in net assets derived
from variable annuity contract
transactions 14,433 6,688 2,600 1,561 51,712
------------------------------------------------------------------------------------
Net increase in net assets 14,696 6,863 2,601 1,576 53,303
------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 14,696 $ 6,863 $ 2,601 $ 1,576 $ 53,303
====================================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements
December 31, 1997
1. ACCOUNTING POLICIES
ORGANIZATION OF THE ACCOUNT
First Providian Life and Health Insurance Company Separate Account C - Marquee
(the "Separate Account") is a separate account of First Providian Life and
Health Insurance Company ("FPLH"), and is registered as a unit investment trust
under the Investment Company Act of 1940, as amended. The Separate Account was
established for the purpose of funding variable annuity contracts issued by
FPLH. The Separate Account had no activity until the first contract application
was processed in November 1997.
Prior to June 10, 1997, FPLH was an indirect, wholly owned subsidiary of
Providian Corporation ("Providian"). On June 10, 1997, Providian's insurance
operations, including the operations of FPLH, were merged with an indirect,
wholly owned subsidiary of AEGON N.V., an international insurance organization
headquartered in The Hague, The Netherlands. Providian was the surviving
corporation in the merger. Effective October 15, 1997, Providian's name was
changed to Commonwealth General Corporation ("CGC"). Effective December 31,
1997, ownership of CGC was transferred to AEGON USA, Inc., an indirect, wholly
owned subsidiary of AEGON N.V.
FPLH expects to merge with AUSA Life Insurance Company, an affiliate, in 1998.
Upon approval and completion of the merger, AUSA Life Insurance Company will be
the surviving company.
The Separate Account has twelve subaccounts, ten of which had activity in 1997.
The subaccounts invest exclusively in shares of the corresponding portfolios of
Variable Insurance Products Fund and Variable Insurance Products Fund II (both
advised by Fidelity Management & Research Company), Dreyfus Variable Investment
Fund (advised by Dreyfus Corporation), T. Rowe Price Equity Series, Inc.
(advised by T. Rowe Price Associates, Inc.), T. Rowe Price International Series,
Inc. (advised by Rowe Price-Fleming International, Inc.), and OCC Accumulation
Trust (advised by OCC Accumulation Trust) (each, a "Fund" and collectively, the
"Funds"). Each Fund is an open-end management investment company.
6
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
The portfolios available in each Fund as of December 31, 1997 are as follows:
VARIABLE INSURANCE PRODUCTS FUND I AND VARIABLE INSURANCE PRODUCTS FUND II
Fidelity VIP Money Market Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP II Asset Manager Portfolio
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Growth and Income Portfolio
Dreyfus Quality Bond Portfolio
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
OCC ACCUMULATION TRUST
OCC Accumulation Trust Managed Portfolio
OCC Accumulation Trust Small Cap Portfolio
OCC Accumulation Trust U.S. Government Income Portfolio
Each portfolio has different investment objectives and policies as outlined in
the prospectus of the Separate Account. There is no assurance that a portfolio
will achieve its stated investment objective.
No sales load is deducted from premium contributions and up to 10% of the
accumulated value can be withdrawn once per year without a surrender charge.
Additional withdrawals are subject to surrender charges of up to 7% during the
first six contract years and the total surrender charges assessed will not
exceed 8.5% of the premium contributions under the contract. No surrender
charges are assessed on the death of the annuitant or after the sixth contract
year.
7
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
The contract owner may allocate the initial premium to one or more of the
subaccounts of the Separate Account and it is invested immediately in the
portfolios upon receipt. The contract owner may cancel the contract during the
right to cancel period (initially ten days or, for replacement, 20 days) and a
five day grace period but bears full investment risk for any amounts allocated
to the portfolios during that time.
INVESTMENTS
The Separate Account purchases shares of the portfolios at net asset value in
connection with premium payments allocated to the subaccounts in accordance with
contract owners' directions and redeems shares of the portfolios to process
transfers and to meet policy contract obligations. Gains and losses resulting
from the redemption of shares are computed on the basis of average cost.
Investment transactions are recorded on the trade dates.
All dividends and capital gains earned on the portfolios are reinvested in the
portfolios and are reflected in the unit values of the subaccounts of the
Separate Account.
Investments in the portfolios are valued at market which is calculated daily on
each day the New York Stock Exchange is open for trading. Income and both
realized and unrealized gains or losses from assets of each subaccount will be
credited to or charged against that subaccount without regard to income, gains
or losses from any other subaccount of the Separate Account or arising out of
any other business FPLH may conduct.
The contract's accumulated value varies with the investment performance of the
corresponding portfolios. Investment results are not guaranteed by the Separate
Account or FPLH.
Although the assets in the Separate Account are the property of FPLH, the assets
in the Separate Account attributable to the contracts cannot be used to
discharge the liabilities arising out of any other business which FPLH may
conduct. The assets of the Separate Account are available to cover the general
liabilities of FPLH only to the extent that the Separate Account's assets exceed
its liabilities under the contracts.
8
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
2. INVESTMENTS
The following is a summary of shares and amounts outstanding for each of the
respective portfolios as of December 31, 1997:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE FAIR
PORTFOLIO SHARES VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP Equity-Income 289.827 $24.28 $ 7,037
Fidelity VIP Growth 70.970 37.10 2,633
Dreyfus Growth and Income 338.259 20.78 7,029
Dreyfus Quality Bond 135.124 11.73 1,585
T. Rowe Price Equity Income 384.454 18.59 7,147
T. Rowe Price New America Growth 100.047 21.35 2,136
T. Rowe Price International Stock 1,153.532 12.74 14,696
OCC Accumulation Trust Managed 161.940 42.38 6,863
OCC Accumulation Trust Small Cap 98.635 26.37 2,601
OCC Accumulation Trust U.S. Government
Income 149.952 10.51 1,576
-------------
$53,303
=============
</TABLE>
The aggregate cost of shares purchased during the period since inception through
December 31, 1997 for each of the respective portfolios is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AGGREGATE
COST OF SHARES
PORTFOLIO PURCHASED
- -----------------------------------------------------------------------------------------------
<S> <C>
Fidelity VIP Equity-Income $ 6,739
Fidelity VIP Growth 2,578
Dreyfus Growth and Income 7,177
Dreyfus Quality Bond 1,583
T. Rowe Price Equity Income 6,989
T. Rowe Price New America Growth 2,073
T. Rowe Price International Stock 14,761
OCC Accumulation Trust Managed 6,688
OCC Accumulation Trust Small Cap 2,600
OCC Accumulation Trust U.S. Government Income 1,574
---------------
$52,762
===============
</TABLE>
9
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
3. FEDERAL INCOME TAXES
Operations of the Separate Account are included in the federal income tax return
of FPLH, which is taxed as a life insurance company under the Internal Revenue
Code. The Separate Account will not be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code. Under current federal income
tax law, no federal income taxes are payable with respect to the Separate
Account.
4. ADVISORY AND SERVICE FEES
The Funds and their advisors furnish corporate management, administrative,
marketing and distribution services. Additionally, the Funds' advisors furnish
investment advisory services to the Funds' portfolios under the terms of
advisory contracts. The net asset value of the portfolios is net of the advisory
and service fees.
5. EXPENSES
An annual charge is deducted from the unit values of the subaccounts of the
Separate Account for FPLH's assumption of certain mortality and expense risks
incurred in connection with the contract. The charge is assessed daily based on
the net asset value of the Separate Account. For the period since inception
through December 31, 1997, the effective annual rate for this charge was 1.25%.
An administrative charge equal to .15% annually is deducted from the unit values
of the subaccounts of the Separate Account. This charge is assessed daily by
FPLH, along with an annual policy fee of $30 per contract. The annual policy fee
is deducted proportionately from the subaccounts' accumulated value. 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.
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
6. CONTRACT OWNER TRANSACTIONS
Transactions with contract owners during the period since inception through
December 31, 1997 and end of period values for each of the respective
subaccounts were as follows:
<TABLE>
<CAPTION>
1997
---------------------
FIDELITY VIP EQUITY-INCOME
<S> <C>
Issuance of units 580.740
Redemption of units -
---------------------
Outstanding units at end of period 580.740
=====================
End of period:
Unit value $ 12.117415
=====================
Subaccount value $ 7,037
=====================
FIDELITY VIP GROWTH
Issuance of units 220.094
Redemption of units -
---------------------
Outstanding units at end of period 220.094
=====================
End of period:
Unit value $ 11.963939
=====================
Subaccount value $ 2,633
=====================
DREYFUS GROWTH AND INCOME
Issuance of units 608.751
Redemption of units -
---------------------
Outstanding units at end of period 608.751
=====================
End of period:
Unit value $ 11.546258
=====================
Subaccount value $ 7,029
=====================
</TABLE>
11
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
6. CONTRACT OWNER TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1997
---------------------
DREYFUS QUALITY BOND
<S> <C>
Issuance of units 147.184
Redemption of units -
---------------------
Outstanding units at end of period 147.184
=====================
End of period:
Unit value $ 10.768802
=====================
Subaccount value $ 1,585
=====================
T. ROWE PRICE EQUITY INCOME
Issuance of units 591.446
Redemption of units -
---------------------
Outstanding units at end of period 591.446
=====================
End of period:
Unit value $ 12.084498
=====================
Subaccount value $ 7,147
=====================
T. ROWE PRICE NEW AMERICA GROWTH
Issuance of units 171.777
Redemption of units -
---------------------
Outstanding units at end of period 171.777
=====================
End of period:
Unit value $ 12.434974
=====================
Subaccount value $ 2,136
=====================
</TABLE>
12
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
6. CONTRACT OWNER TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1997
---------------------
T. ROWE PRICE INTERNATIONAL STOCK
<S> <C>
Issuance of units 1,446.938
Redemption of units -
---------------------
Outstanding units at end of period 1,446.938
=====================
End of period:
Unit value $ 10.156554
=====================
Subaccount value $ 14,696
=====================
OCC ACCUMULATION TRUST MANAGED
Issuance of units 594.827
Redemption of units -
---------------------
Outstanding units at end of period 594.827
=====================
End of period:
Unit value $ 11.537140
=====================
Subaccount value $ 6,863
=====================
OCC ACCUMULATION TRUST SMALL CAP
Issuance of units 212.793
Redemption of units -
---------------------
Outstanding units at end of period 212.793
=====================
End of period:
Unit value $ 12.224404
=====================
Subaccount value $ 2,601
=====================
</TABLE>
13
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
6. CONTRACT OWNER TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1997
---------------------
OCC ACCUMULATION TRUST U.S. GOVERNMENT INCOME
<S> <C>
Issuance of units 149.603
Redemption of units -
---------------------
Outstanding units at end of period 149.603
=====================
End of period:
Unit value $ 10.533052
=====================
Subaccount value $ 1,576
=====================
</TABLE>
14
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
7. Net Assets
Net assets at December 31, 1997 for each of the respective subaccounts are as
summarized in the following tables:
<TABLE>
<CAPTION>
DREYFUS
FIDELITY VIP FIDELITY VIP GROWTH AND DREYFUS QUALITY
EQUITY-INCOME GROWTH INCOME BOND
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contract owner transactions $ 6,739 $ 2,578 $ 6,730 $ 1,561
Accumulated net investment
income (expense) (14) (5) 433 19
Accumulated net realized gain
on investments 1 - - -
Net unrealized appreciation
(depreciation) on investments 311 60 (134) 5
------------------------------------------------------------------
$ 7,037 $ 2,633 $ 7,029 $ 1,585
==================================================================
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE T. ROWE PRICE OCC
T. ROWE PRICE NEW AMERICA INTERNATIONAL ACCUMULATION
EQUITY INCOME GROWTH STOCK TRUST MANAGED
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contract owner transactions $ 6,754 $ 2,068 $ 14,433 $ 6,688
Accumulated net investment
income (expense) 221 1 300 (13)
Accumulated net realized gain
(loss) on investments - (1) - -
Net unrealized appreciation
(depreciation) on investments 172 68 (37) 188
--------------------------------------------------------------------------
$ 7,147 $ 2,136 $ 14,696 $ 6,863
==========================================================================
</TABLE>
15
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
7. NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
OCC
OCC ACCUMULATION
ACCUMULATION TRUST U.S.
TRUST SMALL GOVERNMENT
CAP INCOME TOTAL
-----------------------------------------------
<S> <C> <C> <C>
Contract owner transactions $ 2,600 $ 1,561 $ 51,712
Accumulated net investment
income (expense) (5) 10 947
Accumulated net realized gain
on investments - - -
Net unrealized appreciation on
investments 6 5 644
-----------------------------------------------
$ 2,601 $ 1,576 $ 53,303
===============================================
</TABLE>
16
<PAGE>
First Providian Life and Health Insurance Company
Separate Account C - Marquee
Notes to Financial Statements (continued)
8. YEAR 2000 (UNAUDITED)
CGC's parent has adopted and has in place a Year 2000 Assessment and Planning
Project (the "Project") to review and analyze its information technology and
systems to determine if they are Year 2000 compatible. CGC and FPLH have begun
to convert or modify, where necessary, critical data processing systems. It is
contemplated that the Project will be substantially completed by early 1999.
CGC and FPLH do not expect this Project to have a significant effect on
operations. However, to mitigate the effect of outside influences upon the
success of the Project, CGC and FPLH have undertaken communications with their
significant customers, suppliers and other third parties to determine their Year
2000 compatibility and readiness. Management believes that the issues
associated with the Year 2000 will be resolved with no material financial impact
on CGC and FPLH.
Since the Year 2000 computer problem, and its resolution, is complex and
multifaceted, the success of a response plan cannot be conclusively known until
the Year 2000 is reached (or an earlier date to the extent that systems or
equipment addresses Year 2000 date data prior to the Year 2000). Even with
appropriate and diligent pursuit of a well-conceived project, including testing
procedures, there is no certainty that any company will achieve complete
success. Notwithstanding the efforts or results of CGC and FPLH, their ability
to function unaffected to and through the Year 2000 may be adversely affected by
actions (or failure to act) of third parties beyond their knowledge or control.
17
<PAGE>
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Part A. None
Part B. Audited Financial Statements
First Providian Life and Health Insurance Company Separate
Account C Year ended December 31, 1997 with Report of
Independent Auditors/1/
Audited Financial Statements-Statutory Basis
First Providian Life and Health Insurance Company
Years ended December 31, 1997 and December 31, 1996 with
Report of Independent Auditors/1/
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) Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributor's Corporation and
First Providian Life and Health Insurance Company
dated November 15, 1996./3/
(b) Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributor's Corporation
and First Providian dated November 15, 1996./3/
(c) Participation Agreement among T. Rowe Price
International Series, Inc.; T. Rowe Price Equity
Series, Inc.; T. Rowe Price Investment Services, Inc.
and First Providian dated November 15, 1996./3/
(d) Participation Agreement between Dreyfus Variable
Investment Fund and First Providian dated November 15,
1996./3/
(e) Participation Agreement by and among OCC Accumulation
Trust, First Providian and OCC Distributors dated
November 1, 1996./3/
(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) Performance Computation./2/
(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. 33-94210.
/3/Incorporated by reference from Post-Effective Amendment No. 1 to the
Registration Statement of First Providian Life and Health Insurance Company,
File No. 33-94210.
<PAGE>
Item 25. Directors and Officers of the Depositor
Positions and Offices with Depositor Name and Principal Business Address*
- ------------------------------------ ------------------------------------
President David G. Rekoski
Senior Vice President Edward A. Biemer
Senior Vice President Thomas P. Bowie
Executive Vice President William L. Busler
Treasurer Martha A. McConnell
Vice President Brian Alford
Vice President Nathan C. Anguiano
Vice President Frank A. Camp
Vice President Jane A. Coyne
Vice President Carolyn M. Johnson
Vice President, Secretary and Assoc. Gen. Counsel Susan E. Martin
Vice President & Assistant Treasurer John A. Mazzuca
Vice President Daniel C. Mohwinkel
Vice President Maureen E. Nielsen
Vice President Thomas B. Nesspor
Vice President Larry N. Norman
Vice President G. Eric O'Brien
Vice President Daniel H. Odum
Vice President and Actuary John C. Prestwood, Jr.
Vice President Gary H. Scott
Vice President Douglas A. Sarcia
Vice President Brian A. Smith
Vice President and Consumer Services Officer Rosalie M. Smith
Vice President Colleen M. Tobiason
Vice President William A. Waldie, Jr.
Vice President Michael A. Wapp
Vice President & Actuary Ronald L. Ziegler
Assistant Vice President & Qualified Actuary Michael A. Cioffi
Assistant Vice President Kimberly A. Cushing
Assistant Vice President Mary Ellen Fahringer
Assistant Vice President JoAnn Herndon
Assistant Vice President - Information Technology Walt Kristik
Assistant Vice President Patricia A. Lukacs
Assistant Vice President William R. Maurer
Assistant Vice President Robert E. Payne
Assistant Vice President Teresa Stolba
Assistant Treasurer Brenda Clancy
Assistant Treasurer William C. White, IV
Assistant Controller Paul J. Lukacs
Assistant Controller Joseph C. Noone
Second Vice President Amy E. Anders
Second Vice President Cindy L. Chanley
Second Vice President George E. Claiborne, Jr.
Second Vice President Michele M. Coan
Second Vice President Karen H. Fleming
Second Vice President Michael F. Lane
Second Vice President Frank J. Rosa
Second Vice President/Investments David L. Blankenship
Second Vice President/Investments C. Ray Brewer
Second Vice President/Investments Kirk W. Buese
Second Vice President/Investments William S. Cook
Second Vice President/Investments Deborah A. Dias
Second Vice President/Investments Lee W. Eastland
Second Vice President/Investments Donald E. Flynn
Second Vice President/Investments Eric B. Goodman
Second Vice President/Investments James Grant
Second Vice President/Investments David R. Halfpap
Second Vice President/Investments Robert L. Hansen
Second Vice President/Investments Donna L. Heitzman
Second Vice President/Investments David W. Hopewell
Second Vice President/Investments Frederick B. Howard
Second Vice President/Investments Claudia E. Jackson
Second Vice President/Investments Jon D. Kettering
Second Vice President/Investments Tim Kuussalo
Second Vice President/Investments David J. Ludke
Second Vice President/Investments James D. MacKinnon
Second Vice President/Investments Jeffrey T. McGlaun
Second Vice President/Investments Paul D. Meir
Second Vice President/Investments Thomas L. Nordstrom
Second Vice President/Investments Ralph M. O'Brien
Second Vice President/Investments Douglas H. Owen, Jr.
Second Vice President/Investments Dennis Roland
Second Vice President/Investments James D. Ross
Second Vice President/Investments J. Alan Schork
Second Vice President/Investments Lindsay Schumacher
Second Vice President/Investments Michael B. Shaffer
Second Vice President/Investments Clifford Sheets
Second Vice President/Investments Michael B. Simpson
Second Vice President/Investments Jon L. Skaggs
Second Vice President/Investments Elizabeth A. Smedley
Second Vice President/Investments Michael S. Smith
Second Vice President/Investments Bradley L. Stofferahn
Second Vice President/Investments Randall K. Waddell
Second Vice President/Investments Marcia E. Weiland
Second Vice President/Investments Tammy C. Wetterer
Second Vice President & 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 Mary L. Schaefer
Assistant Secretary Kimberly A. Scouller
Assistant Secretary R. Michael Slaven
Product Compliance Officer James T. Bradley
DIRECTORS:
- ---------
I. Donald Britton Brian H. Perry
Patricia A. Collins John C. Prestwood, Jr.
Jeffrey H. Goldberger David G. Rekoski
Susan E. Martin Rosalie M. Smith
Thomas B. Nesspor Craig D. Vermie
*The business address of each director and officer of First Providian Life and
Health Insurance Company is 520 Columbia Drive, Johnson City, New York 13790; 20
Moores Road, Frazer, Pennsylvania 19355; 400 West Market Street, Louisville,
Kentucky 40202 or 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499.
<PAGE>
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 AEGON USA, INC.
which is indirectly wholly owned by AEGON n.v. 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 Percent of Voting
Name Incorporation Securities Owned Business
- ---- ---------------- ---------------- --------
<S> <C> <C> <C>
AEGON N.V. Netherlands 53.63% of Vereniging Holding company
Corporation AEGON Netherlands
Membership Association
Groninger Financieringen B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation
AEGON Netherland N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation Netherlands Corporation
AEGON Nevak Holding B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation Netherlands Corporation
AEGON International N.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation Netherlands Corporation
Voting Trust Delaware Voting Trust
Trustees:
K.J. Storm
Donald J. Shepard
H.B. Van Wijk
Dennis Hersch
AEGON U.S. Holding Delaware 100% of Voting Trust Holding company
Corporation
Short Hills Management New Jersey 100% of AEGON U.S. Holding company
Company Holding Corporation
CORPA Reinsurance New York 100% of AEGON U.S. Holding company
Company Holding Corporation
AEGON Management Indiana 100% of AEGON U.S. Holding company
Company Holding Corporation
RCC North America Inc. Delaware 100% of AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.
Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Sale/admin. of travel
Insurance Group, Inc. Insurance
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- --------------- ----------------- --------
<S> <C> <C> <C>
USP Real Estate Investment Trust Iowa 21.89% First AUSA Life Ins. Co. Real estate investment trust
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.
Cedar Income Fund, Ltd. Iowa 16.73% PFL Life Ins. Co. Real estate investment trust
3.77% Bankers United Life
Assurance Company
3.38% Life Investors Co. of America
1.97% AEGON USA Realty Advisors, Inc.
.18% First AUSA Life Ins. Co.
RCC Properties Limited Partnership Iowa AEGON USA Realty Advisors, Limited Partnership
Inc. is General Partner and 5%
owner.
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Endeavor Investment Advisors California 49.9% AUSA Financial General Partnership
Markets, Inc.
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator
Investors Warranty of America, Inc. Iowa 100% AUSA Holding Co. Provider of automobile
extended maintenance
contracts
Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
AEGON Asset Management Services, Inc. Delaware 100% AUSA Holding Co. Registered investment advisor
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
ISI Insurance Agency, Inc. California 100% Intersecurities, Inc. Insurance agency
ISI Insurance Agency of Ohio, Inc. Ohio 100% ISI Insurance Agency, Inc. Insurance agency
ISI Insurance Agency of Texas, Inc. Texas 100% ISI Insurance Agency, Inc. Insurance agency
ISI Insurance Agency of Massachusetts 100% ISI Insurance Agency Inc. Insurance Agency
Massachusetts, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- --------------- ----------------- --------
<S> <C> <C> <C>
USP Real Estate Investment Trust Iowa 21.89% First AUSA Life Ins. Co. Real estate investment trust
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.
Cedar Income Fund, Ltd. Iowa 16.73% PFL Life Ins. Co. Real estate investment trust
3.77% Bankers United Life
Assurance Company
3.38% Life Investors Co. of
America
1.97% AEGON USA Realty Advisors,
Inc.
.18% First AUSA Life Ins. Co.
RCC Properties Limited Partnership Iowa AEGON USA Realty Advisors, Limited Partnership
Inc. is General Partner and 5%
owner.
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Endeavor Investment Advisors California 49.9% AUSA Financial General Partnership
Markets, Inc.
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator
Investors Warranty of America, Inc. Iowa 100% AUSA Holding Co. Provider of automobile
extended maintenance
contracts
Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
AEGON Asset Management Services, Inc. Delaware 100% AUSA Holding Co. Registered investment advisor
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
ISI Insurance Agency, Inc. California 100% Intersecurities, Inc. Insurance agency
ISI Insurance Agency of Ohio, Inc. Ohio 100% ISI Insurance Agency, Inc. Insurance agency
ISI Insurance Agency of Texas, Inc. Texas 100% ISI Insurance Agency, Inc. Insurance agency
ISI Insurance Agency of Massachusetts 100% ISI Insurance Agency Inc. Insurance Agency
Massachusetts, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- --------------- ----------------- --------
<S> <C> <C> <C>
Associated Mariner Financial Group, Inc. Michigan 100% Intersecurities, Inc. Holding co./management services
Mariner Financial Services, Inc. Michigan 100% Associated Mariner Broker/Dealer
Financial Group, Inc.
Mariner Planning Corporation Michigan 100% Mariner Financial Financial planning
Services, Inc.
Associated Mariner Agency, Inc. Michigan 100% Associated Mariner Insurance agency
Financial Group, Inc.
Associated Mariner Agency Hawaii 100% Associated Mariner Insurance agency
of Hawaii, Inc. Agency, Inc.
Associated Mariner Ins. Agency Massachusetts 100% Associated Mariner Insurance agency
of Massachusetts, Inc. Agency, Inc.
Associated Mariner Agency Ohio, Inc. Ohio 100% Associated Mariner Insurance agency
Agency, Inc.
Associated Mariner Agency Texas, Inc. Texas 100% Associated Mariner Insurance agency
Agency, Inc.
Associated Mariner Agency New Mexico 100% Associated Mariner Insurance agency
New Mexico, Inc. Agency, Inc.
Mariner Mortgage Corp. Michigan 100% Associated Mariner Mortgage origination
Financial Group, Inc.
Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services
Idex Management, Inc. Delaware 50% AUSA Holding Co. Investment advisor
50% Janus Capital Corp.
IDEX II Series Fund Massachusetts Various Mutual fund
IDEX Fund Massachusetts Various Mutual fund
IDEX Fund 3 Massachusetts Various Mutual fund
First AUSA Life Insurance Company Maryland 100% AEGON USA, Inc. Insurance holding company
AUSA Life Insurance Company, Inc. New York 100% First AUSA Life Insurance
Insurance Company
Life Investors Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance
of America
Bankers United Life Assurance Company Iowa 100% Life Investors Ins. Insurance
Company of America
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- --------------- ----------------- --------
<S> <C> <C> <C>
Life Investors Agency Group, Inc. Iowa 100% Life Investors Ins. Marketing
Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance
AEGON Financial Services Group, Inc. Minnesota 100% PFL Life Insurance Co. Marketing
AEGON Assignment Corporation Kentucky 100% AEGON Financial Services Administrator of structured
Group, Inc. settlements
Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Western Reserve Life Assurance Co. Ohio 100% First AUSA Life Ins. Co. Insurance
of Ohio
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration for
Assurance Co. of Ohio affiliated mutual fund
WRL Investment Management, Inc. Florida 100% Western Reserve Life Registered investment advisor
Assurance Co. of Ohio
Monumental Life Insurance Co. Maryland 100% First AUSA Life Ins. Co. Insurance
AEGON Special Markets Group, Inc. Maryland 100% Monumental Life Ins. Co. Marketing
Monumental General Casualty Co. Maryland 100% First AUSA Life Ins. Co. Insurance
United Financial Services, Inc. Maryland 100% First AUSA Life Ins. Co. General agency
Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance
The Whitestone Corporation Maryland 100% First AUSA Life Ins. Co. Insurance agency
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Commonwealth General Corporation Delaware 100% AEGON USA, Inc. Holding company
("CGC")
PB Series Trust Massachusetts N/A Mutual fund
Monumental Agency Group, Inc. Kentucky 100% CGC Provider of srvcs. to ins. cos.
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security Life
Insurance Company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- --------------- ----------------- --------
<S> <C> <C> <C>
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Commonwealth General Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements
Providian Financial Services, Inc. Pennsylvania 100% CGC Financial services
AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer
PB Investment Advisors, Inc. Delaware 100% CGC Registered investment advisor
Diversified Financial Products Inc. Delaware 100% CGC Provider of investment,
marketing and admin.
services to ins. cos.
AEGON USA Real Estate Delaware 100% Diversified Financial Real estate and mortgage
Services, Inc. Products Inc. holding company
Capital Real Estate Delaware 100% CGC Furniture and equipment lessor
Development Corporation
Capital General Development Delaware 100% CGC Holding company
Corporation
Commonwealth Life Kentucky 100% Capital General Insurance company
Insurance Company Development Corporation
Agency Holding I, Inc. Delaware 100% Commonwealth Life Investment subsidiary
Insurance Company
Agency Investments I, Inc. Delaware 100% Agency Holding I, Inc. Investment subsidiary
Peoples Security Life North Carolina 100% Capital General Insurance company
Insurance Company Development Corporation
Ammest Realty Corporation Texas 100% Peoples Security Life Special purpose subsidiary
Insurance Company
Agency Holding II, Inc. Delaware 100% Peoples Security Life Investment subsidiary
Insurance Company
Agency Investments II, Inc. Delaware 100% Agency Holding II, Inc. Investment subsidiary
Agency Holding III, Inc. Delaware 100% Peoples Security Life Investment subsidiary
Insurance Company
Agency Investments III, Inc. Delaware 100% Agency Holding III, Inc. Investment subsidiary
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- --------------- ----------------- --------
<S> <C> <C> <C>
JMH Operating Company, Inc. Mississippi 100% Peoples Security Life Real estate holdings
Insurance Company
Capital Security Life Ins. Co. North Carolina 100% Capital General Insurance company
Development Corporation
Independence Automobile Florida 100% Capital Security Automobile Club
Association, Inc. Life Insurance Company
Independence Automobile Georgia 100% Capital Security Automobile Club
Club, Inc. Life Insurance Company
Capital 200 Block Corporation Delaware 100% CGC Real estate holdings
Capital Broadway Corporation Kentucky 100% CGC Real estate holdings
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of management
(EIN 23-1720755) support services
National Home Life Corporation Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Association Consultants, Inc. Illinois 100% Ampac Insurance TPA license-holder
Agency, Inc.
Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Furniture & equipment lessor
Agency, Inc.
Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Administrator of group
Agency, Inc. insurance programs
Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Financial Planning Services, Inc. Dist. Columbia 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Providian Auto and Home Missouri 100% CGC Insurance company
Insurance Company
Academy Insurance Group, Inc. Delaware 100% CGC Holding company
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ---------------- ----------------- --------
<S> <C> <C> <C>
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Insurance Insurance company
Company of America Group, Inc.
Academy Services, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Inc. Kansas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance General agent
Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ampac, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
Ampac Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
(EIN 23-2364438) Group, Inc.
Data/Mark Services, Inc. Delaware 100% Academy Insurance Provider of mgmt. services
Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin. services
Services, Inc. Group, Inc.
Unicom Administrative Germany 100% Unicom Administrative Provider of admin. services
Services, GmbH Services, Inc.
</TABLE>
<PAGE>
<TABLE>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ---------------- ----------------- --------
<S> <C> <C> <C>
Providian Property and Casualty Kentucky 100% Providian Auto and Insurance company
Insurance Company Home Insurance Company
Providian Fire Insurance Co. Kentucky 100% Providian Property Insurance company
and Casualty Insurance Co.
Capital Liberty, L.P. Delaware 79.2% Commonwealth Life Holding Company
Insurance Company
19.8% Peoples Security Life
Insurance Company
1% CGC
Commonwealth General LLC Turks & 100% CGC Special-purpose subsidiary
Caicos Islands
Providian Life and Health Missouri 3.7% CGC Insurance company
Insurance Company 15.3% Peoples Security Life
Insurance Company
20% Capital Liberty, L.P.
61% Commonwealth Life
Insurance Company
Veterans Life Insurance Co. Illinois 100% Providian Life and Insurance company
Health Insurance Company
Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
First Providian Life and New York 100% Veterans Life Ins. Co. Insurance Company
Health Insurance Company
</TABLE>
<PAGE>
Item 27. Number of Contract Owners
As of February 28, 1998, there were three Contract Owners of the
Providian Marquee Variable Annuity.
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. 33-94210.
<PAGE>
Item 29. Principal Underwriters
(a) AFSG Securities Corporation ("AFSG"), 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 and variable annuity contracts funded by Separate
Account II and Separate Account V of Providian Life and Health Insurance
Company. In addition, AFSG serves as principal underwriter for variable annuity
contracts funded by PFL Life Variable Annuity Account A, PFL Endeavor VA
Separate Account, PFL Wright Variable Annuity Account and PFL Retirement Builder
Variable Annuity Account of PFL Life Insurance Company of AUSA Endeavor Variable
Annuity Account of AUSA Life Insurance Company, Inc.
(b) Directors and Officers
Positions and Officers
Name with Underwriter
---- ----------------------
Lorri E. Mehaffy President and Director
Harvey E. Willis Vice President and Secretary
Kimberly A. Schouller Vice President and Chief
Compliance Officer
Michael F. Lane Vice President
Debra C. Cubero Vice President
Larry N. Norman Vice President and Director
Anne M. Spaes Vice President
<PAGE>
Sarah J. Strange Vice President and Director
Michael G. Ayers Controller and Treasurer
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 32. Undertakings
(a) 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 requirements of Securities Act Rule
485(b) for effectiveness of this amended Registration Statement and has caused
this amended Registration Statement to be signed on its behalf in the County of
Jefferson Commonwealth of Kentucky on the 30th day of April, 1998.
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY SEPARATE ACCOUNT C (REGISTRANT)
By: First Providian Life and Health Insurance
Company
By: /s/ David G. Rekoski*
-------------------------------------
David G. Rekoski
President
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY (DEPOSITOR)
By: /s/ David G. Rekoski*
-------------------------------------
President
*By: /s/ R. Michael Slaven
-------------------------------------
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 G. Rekoski* Director and President April 30, 1998
- ----------------------
David G. Rekoski
Martha A. McConnell* Treasurer (Chief Accounting April 30, 1998
- ---------------------- Officer)
Martha A. McConnell
Susan E. Martin* Director, Vice President, April 30, 1998
- ---------------------- Secretary and
Susan E. Martin Assoc. General Counsel
I. Donald Britton* Director April 30, 1998
- ----------------------
I. Donald Britton
Patricia A. Collins* Director April 30, 1998
- ----------------------
Patricia A. Collins
Jeffrey H. Goldberger* Director April 30, 1998
- ----------------------
Jeffrey H. Goldberger
Brian H. Perry* Director April 30, 1998
- ----------------------
Brian H. Perry
Craig D. Vermie* Director April 30, 1998
- ----------------------
Craig D. Vermie
Rosalie M. Smith* Director, Vice President and April 30, 1998
- ---------------------- Consumer Services Officer
Rosalie M. Smith
Thomas B. Nesspor* Director and Vice President April 30, 1998
- ----------------------
Thomas B. Nesspor
John C. Prestwood Jr.* Director, Vice President April 30, 1998
- ---------------------- and Actuary
John C. Prestwood Jr.
</TABLE>
* By: /s/ R. Michael Slaven
----------------------
R. Michael Slaven
Attorney-in-Fact
<PAGE>
SEPARATE ACCOUNT C
PROVIDIAN MARQUEE VARIABLE ANNUITY
EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL
EXHIBIT 9(b) CONSENT OF COUNSEL
EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS
<PAGE>
EXHIBIT 9(a)
April 30, 1997
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. 2 (the "Amendment") to the Registration Statement
on Form N-4, File No. 33-94210 (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/ Gregory E. Miller-Breetz
- ----------------------------
Gregory E. Miller-Breetz
Attorney
<PAGE>
Exhibit 9(b)
April 30, 1998
First Providian Life and Health
Insurance Company
20 Moores Road
Frazer, Pennsylvania 19355
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. 2 to the
Registration Statement (File No. 33-94210) filed on the date hereof 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.
Very truly yours,
JORDEN BURT BOROS CICCHETTI BERENSON
& JOHNSON LLP
By: /s/ Jorden Burt Boros Cicchetti
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 24, 1998, with respect to the financial statements
of First Providian Life and Health Insurance Company Separate Account C -
Marquee and the statutory-basis financial statements of First Providian life and
Health Insurance Company in Post-Effective Amendment No. 2 to the Registration
Statement (Form N-4 No. 33-94210) and related Prospectus of First Providian Life
and Health Insurance Company Separate Account C - Marquee Variable Annuity.
/s/Ernst & Young LLP
Louisville, Kentucky
April 24, 1998
