FIRST PROVIDIAN LIFE & HEALTH INSUR CO SEPARATE ACCOUNT C, N-4, 1998-10-01

FIRST PROVIDIAN LIFE & HEALTH INSUR CO SEPARATE ACCOUNT C
N-4, 1998-10-01

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1998
REGISTRATION NO. 333-
811-9062
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. ( )

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )

Amendment No. 6 (X)

AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
(Exact Name of Registrant)

AUSA Life Insurance Company, Inc.
(Formerly First Providian Life and Health Insurance Company)
(Name of Depositor)

666 Fifth Avenue
New York, New York 10103
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (212) 246-5234

Gregory E. Miller-Breetz, Esq.
AUSA Life Insurance Company, Inc.
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40232
(Name and Address of Agent for Service)

Copies to:
Michael Berenson, Esquire
James Bernstein, 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):

[ ] 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.

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
shall determine.
<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
FOR THE ADVISOR'S EDGE AND DIMENSIONAL VARIABLE ANNUITY

PART A

ITEM OF
- ------- PROSPECTUS CAPTION
FORM N-4 ------------------
- --------
<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............. AUSA Life Insurance Company,
Inc.; AUSA Life Insurance
Company, Inc. Separate Account
C; The Portfolios; Voting Rights

6. Deductions...................... Charges and Deductions; FEDERAL TAX
CONSIDERATIONS; FEE TABLE
7. General Description of Variable
Annuity Contracts............... CONTRACT FEATURES; Distribution-at-
Death Rules; Voting Rights; Allocation of
Purchase Payments; Exchanges Among
the Portfolios; Additions, Deletions, or
Substitutions of Investments

8. Annuity Period.................. Annuity Payment Options
9. Death Benefit................... Death of Annuitant Prior to Annuity Date
10. Purchases and Contract Value.... Contract Application and Purchase
Payments; Accumulated Value
11. Redemptions..................... Full and Partial Withdrawals; Annuity
Payment Options; Right to Cancel Period
12. Taxes........................... FEDERAL TAX CONSIDERATIONS
13. Legal Proceedings............... Part B: Legal Proceedings

14. Table of Contents of the
Statement of Additional
Information..................... Table of Contents of the Advisor's
Edge and Dimensional Variable Annuity
Statement of Additional Information
</TABLE>

<PAGE>

PART B

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.... AUSA LIFE
18. Services........................... Part A: Auditors; Part B:
SAFEKEEPING OF ACCOUNT
ASSETS; DISTRIBUTION OF THE
CONTRACTS
19. Purchase of Securities Being
Offered............................ DISTRIBUTION OF THE
CONTRACTS; Exchanges

20. Underwriters....................... DISTRIBUTION OF THE
CONTRACTS
21. Calculation of Performance Data.... PERFORMANCE INFORMATION
22. Annuity Payments................... Annuity Income
Payments
23. Financial Statements............... FINANCIAL STATEMENTS
</TABLE>
<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

For the PGA Retirement Annuity
<TABLE>
<CAPTION>
PART A
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........................... Not Applicable
5. General Description of Registrant, Depositor, and
Portfolio Companies....................................... AUSA Life Insurance Company, Inc.
AUSA Life Insurance Company, Inc.
Separate Account C; PB Series Trust;
The Portfolios; Voting Rights
6. Deductions................................................ Charges and Deductions; FEDERAL TAX CONSIDERATIONS;
FEE TABLE
7. General Description of Variable Annuity Contracts......... CONTRACT FEATURES; Distribution-at-Death Rules;
Voting Rights; Allocation of Purchase Payments;
Exchanges Among the Portfolios; Additions,
Deletions, or Substitutions of Investments
8. Annuity Period............................................ Annuity Payment Options
9. Death Benefit............................................. Death of Annuitant Prior to Annuity Date
10. Purchases and Contract Value.............................. Contract Purchase and Purchase Payments;
Accumulated Value
11. Redemptions............................................... Full and Partial Withdrawals; Annuity Payment
Options; Right to Cancel Period
12. Taxes..................................................... FEDERAL TAX CONSIDERATIONS
13. Legal Proceedings......................................... Part B: Legal Proceedings
14. Table of Contents of the Statement of Additional
Information............................................... Table of Contents of the PGA Retirement Annuity
Statement of Additional Information

PART B

Item of Statement of Additional
Form N-4 Information Caption
- -------- -----------------------

15. Cover Page................................................ Cover Page
16. Table of Contents......................................... Table of Contents
17. General Information and History........................... AUSA LIFE
18. Services.................................................. Part A: Auditors; Part B: SAFEKEEPING OF
ACCOUNT ASSETS; DISTRIBUTION OF THE CONTRACTS
19. Purchase of Securities Being Offered...................... DISTRIBUTION OF THE CONTRACTS; Exchanges
20. Underwriters.............................................. DISTRIBUTION OF THE CONTRACTS
21. Calculation of Performance Data........................... PERFORMANCE INFORMATION
22. Annuity Payments.......................................... Computations of Annuity Income Payments
23. Financial Statements...................................... FINANCIAL STATEMENTS
</TABLE>

<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
PROSPECTUS
FOR THE
ADVISOR'S EDGE VARIABLE ANNUITY
OFFERED BY
AUSA LIFE INSURANCE COMPANY, INC.
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
4333 EDGEWOOD ROAD, N.E.
CEDAR RAPIDS, IOWA 52499

The Advisor's Edge variable annuity contract (the "Contract"), offered through
AUSA Life Insurance Company, Inc. ("AUSA Life", "us", "we", or "our"),
provides a vehicle for investing on a tax-deferred basis in 9 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 9
Subaccounts of AUSA Life's Separate Account C. Assets of each Subaccount are
invested in one of the following Portfolios (which are contained within three
open-end, diversified investment companies):

.Federated American Leaders Fund II .Montgomery Growth Portfolio
.Federated Utility Fund II .Montgomery Emerging Markets
.Federated Prime Money Fund II Portfolio
.Federated High Income Bond Fund II .Wanger U.S. Small Cap Advisor
.Wanger International Small Cap
Advisor
.Federated Fund for U.S. Government Securities II

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 offers a number of ways of withdrawing monies at a future time,
including a lump sum payment and several Annuity Payment Options. You may make
full or partial withdrawals of the Contract's Surrender Value at any future
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). 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 1-800-866-6007. 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 October 1, 1998.

ARC0015N8Y 998
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
GLOSSARY................................................................... 2
HIGHLIGHTS................................................................. 5
FEE TABLE.................................................................. 7
Condensed Financial Information............................................ 9
Financial Statements....................................................... 9
Performance Measures....................................................... 9
Additional Performance Measures............................................ 10
Yield and Effective Yield.................................................. 10
AUSA Life and the Separate Account......................................... 11
The Federated Insurance Series............................................. 12
The Montgomery Funds III................................................... 12
Wanger Advisors Trust...................................................... 12
The Portfolios............................................................. 12
CONTRACT FEATURES.......................................................... 14
Contract Application and Purchase Payments............................... 14
Purchasing by Wire....................................................... 14
Right to Cancel Period................................................... 15
Allocation of Purchase Payments.......................................... 15
Exchanges Among the Portfolios........................................... 15
Dollar Cost Averaging Option............................................. 15
Accumulated Value........................................................ 15
Charges and Deductions................................................... 16
Minimum Balance Requirement.............................................. 17
DISTRIBUTIONS UNDER THE CONTRACT........................................... 17
Full and Partial Withdrawals............................................. 17
Lump Sum Payment Option.................................................. 18
Systematic Withdrawal Option............................................. 18
Annuity Date............................................................. 18
Annuity Payment Options.................................................. 18
Death Benefit............................................................ 20
Deferment of Payment..................................................... 21
FEDERAL TAX CONSIDERATIONS................................................. 21
GENERAL INFORMATION........................................................ 26
</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 AUSA Life 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
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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 18), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page 18), 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 18).

Annuity Unit Value - The value of each Annuity Unit which is calculated each
Valuation Period.

AUSA Life ("we", "us", "our") - AUSA Life Insurance Company, Inc., a New York
stock company.

Business Day - A day when the New York Stock Exchange is open for trading.

Code - The Internal Revenue Code of 1986, as amended.

Contract - The group flexible premium variable annuity contract described in
this Prospectus, participation in which will 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
AUSA Life 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) Federated Insurance Series (advised by Federated
Advisers), (ii) The Montgomery Funds III (advised by Montgomery Asset
Management, L.P.), and (iii) Wanger Advisors Trust (advised by Wanger Asset
Management, L.P.).

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.

3
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Owner's Designated Beneficiary - The person to whom ownership of this Contract
passes upon the Contract Owner's death, unless the Contract Owner was also the
Annuitant, in which case the Annuitant's Beneficiary is entitled to the Death
Benefit. (Note: this transfer of ownership to the Owner's Designated
Beneficiary will generally not be subject to probate, but will be subject to
estate and inheritance taxes. Consult with your tax and estate adviser to be
sure which rules will apply to you.)

Payee - The Contract Owner, Annuitant, Annuitant's Beneficiary, or any other
person, estate, or legal entity to whom benefits are to be paid.

Portfolio - A separate investment portfolio of the Funds. The Funds currently
offer 9 Portfolios in the Advisor's Edge Variable Annuity: the Federated
American Leaders Fund II (the "Federated American Leaders Portfolio"), the
Federated Utility Fund II (the "Federated Utility Portfolio"), the Federated
Prime Money Fund II (the "Federated Prime Money Portfolio"), the Federated
Fund for U.S. Government Securities II (the "Federated U.S. Government
Securities Portfolio") and the Federated High Income Bond Fund II (the
"Federated High Income Bond Portfolio") of Federated Insurance Series; the
Montgomery Variable Series: Growth Fund (the "Montgomery Growth Portfolio")
and the Montgomery Variable Series: Emerging Markets Fund (the "Montgomery
Emerging Markets Portfolio") of The Montgomery Funds III; the Wanger U.S.
Small Cap Advisor (the "Wanger U.S. Small Cap Advisor Portfolio"); and the
Wanger International Small Cap Advisor (the "Wanger International Small Cap
Advisor Portfolio") of Wanger Advisors 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 AUSA Life.

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 AUSA Life Insurance Company, Inc. Separate
Account C dedicated to the Contract. The Separate Account consists of assets
that are segregated by AUSA Life Insurance Company, Inc. and, for Contract
Owners, invested in the Portfolios. The Separate Account is independent of the
general assets of AUSA Life.

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 9 Portfolios.

Surrender Value - The Accumulated Value less 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
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HIGHLIGHTS

You can find definitions of important terms in the Glossary (page 2).

THE ADVISOR'S EDGE

The Contract provides a vehicle for investing on a tax-deferred basis in 9
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," at page 21.)

INVESTMENT CHOICES

Your investment in the Contract may be allocated among 9 Subaccounts of the
Separate Account. The Subaccounts in turn invest exclusively in the following
9 Portfolios offered by the Funds: the Federated American Leaders Portfolio,
the Federated Utility Portfolio, the Federated Prime Money Portfolio, the
Federated U.S. Government Securities Portfolio, the Federated High Income Bond
Portfolio, the Montgomery Growth Portfolio, the Montgomery Emerging Markets
Portfolio, the Wanger U.S. Small Cap Advisor Portfolio, and the Wanger
International Small Cap Advisor Portfolio. The assets of each Portfolio are
separate, and each Portfolio has distinct investment objectives and policies
as described in the corresponding Fund Prospectus...................... Page 12

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 advisor, 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 for Qualified Contracts (or
$50 monthly by payroll deduction for Qualified Contracts); subsequent Purchase
Payments must be at least $500 for Non-Qualified Contracts or $50 for
Qualified Contracts. You may make subsequent Purchase Payments at any time
before the Contract's Annuity Date, as long as the Annuitant specified in the
Contract is living..................................................... Page 14

5
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ALLOCATION OF PURCHASE PAYMENTS

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 AUSA Life procedures if you would like to change
how subsequent Net Purchase Payments are allocated..................... Page 15

RIGHT TO CANCEL PERIOD

The Contract provides for a Right to Cancel Period of 10 days (20 days for
replacement) plus a 5-day grace period to allow for mail delivery, during
which you may cancel your investment in the Contract. To cancel your
investment, please return your Contract to us 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 fees and/or Premium Taxes that may have been subtracted from such amount...
Page 15

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 16.)................................................. Page 15

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 20

ANNUITY PAYMENT OPTIONS

In addition to the full and partial withdrawal privileges, you may also choose
to create an income stream by requesting an annuity income from us. As the
Contract Owner, you may elect one of several Annuity Payment Options. By
electing an Annuity Payment Option, you are asking us to systematically
liquidate your Contract. We provide you with a variety of 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 18

CONTRACT AND POLICYHOLDER INFORMATION

If you have questions about your Contract, please telephone our Administrative
Offices at 1-800-866-6007 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 no sales charges and has an annual mortality and expense risk
charge of .50%. Contract Owners may withdraw up to 100% of the Accumulated
Value without incurring a surrender charge. 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 16

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 thereof may
be subject to ordinary income taxes)................................... Page 17

FEE TABLE

The following table illustrates all expenses (except for Premium Taxes that
may be assessed by your state) that you would incur as an owner of a Contract
(see page 16). 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 16.

<TABLE>
<S> <C>
CONTRACTOWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases......................................... None
Contingent Deferred Sales Load (surrender charge)....................... None
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....................................... .50%
Administrative Charge................................................... .15%
----
Total Annual Separate Account Expenses.................................. .65%
</TABLE>

PORTFOLIO ANNUAL EXPENSES

Except as may be indicated, the figures below are based on actual expenses for
fiscal year 1997 (as a percentage of each Portfolio's average net assets after
fee waiver and/or expense reimbursement, if applicable).

<TABLE>
<CAPTION>
TOTAL
MANAGEMENT PORTFOLIO
AND ADVISORY OTHER ANNUAL
EXPENSES EXPENSES EXPENSES
------------ -------- ---------
<S> <C> <C> <C>
Federated American Leaders Portfolio(1)........ 0.66% 0.19% 0.85%
Federated Utility Fund II Portfolio(1)......... 0.48% 0.37% 0.85%
Federated Prime Money Fund II Portfolio(1)..... 0.30% 0.50% 0.80%
Federated Fund for U.S. Government Securities
II Portfolio(1)............................... 0.15% 0.65% 0.80%
Federated High Income Bond Fund II
Portfolio(1).................................. 0.51% 0.29% 0.80%
Montgomery Growth Portfolio(2)................. 0.00% 0.34% 0.34%
Montgomery Emerging Markets Portfolio(2)....... 1.25% 0.50% 1.75%
Wanger U.S. Small Cap Advisor Portfolio(3)..... 0.97% 0.09% 1.06%
Wanger International Small Cap Advisor
Portfolio(3).................................. 1.28% 0.32% 1.60%
</TABLE>
(1) The expense figures shown reflect actual expenses for fiscal year 1997
including voluntary waivers of a portion of the management fees and/or
assumption of expenses. The maximum Management and Advisory Expenses and
Total Portfolio Annual Expenses absent the voluntary waivers would have
been as follows: 0.75% and 0.94%, respectively, for the Federated American
Leaders Portfolio; 0.75% and 1.12%, respectively, for the Federated
Utility Portfolio; 0.50% and 1.00%, respectively, for the Federated Prime
Money Portfolio; 0.60% and 1.26%, respectively, for the Federated U.S.
Government Securities Portfolio; and 0.60 and 0.89%, respectively, for the
Federated High Income Bond Portfolio.

7
<PAGE>

(2) The fee for Management and Advisory Expenses has been reduced to reflect
the adviser's voluntary waiver of a portion of the management fee. The
adviser can terminate this waiver at any time in its sole discretion. The
maximum fee for Management and Advisory Expenses is 0.50%. Without this
voluntary waiver, Total Portfolio Annual Expenses would have been 1.00%.
(3) As required by the Securities and Exchange Commission rules, "Other
Expenses" reflects gross custodian fees. Net of custodian fees paid
indirectly, Other Expenses would have been 0.07% for U.S. Small Cap
Advisor Portfolio and 0.31% for International Small Cap Advisor Portfolio;
Total Portfolio Annual Expenses would have been 1.04% and 1.59%,
respectively.

The following example illustrates the expenses that you would incur on a
$1,000 Purchase Payment over various periods, assuming (1) a 5% annual rate of
return and (2) redemption at the end of each period. As noted in the table
above, the Contract imposes no surrender or withdrawal charges of any kind.
Your expenses are identical whether you continue the Contract or withdraw the
entire value of your Contract at the end of the applicable period as a lump
sum or under one of the Contract's Annuity Payment Options.

<TABLE>
<CAPTION>
3 5 10
1 YEAR YEARS YEARS YEARS
------ ------ ------ -------
<S> <C> <C> <C> <C>
Federated American Leaders Portfolio........ $15.55 $48.27 $83.25 $181.73
Federated Utility Portfolio................. 15.55 48.27 83.25 181.73
Federated Prime Money Portfolio............. 15.05 46.72 80.62 176.21
Federated U.S. Government Securities
Portfolio.................................. 15.05 46.72 80.62 176.21
Federated High Income Bond Portfolio........ 15.05 46.72 80.62 176.21
Montgomery Growth Portfolio................. 10.39 32.39 56.13 124.06
Montgomery Emerging Markets Portfolio....... 24.60 75.69 129.42 276.18
Wanger U.S. Small Cap Advisor Portfolio..... 17.67 54.73 94.21 204.59
Wanger International Small Cap Advisor
Portfolio.................................. 23.10 71.17 121.87 261.06
</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 of the above
periods. (With respect to partial year periods, if any, in the examples, the
Annual Contract Fee is pro-rated to reflect only the applicable portion of the
partial year period.) The Annual Contract Fee will be deducted on each
Contract Anniversary and upon surrender or annuitization of the Contract, on a
pro rata basis, from each Subaccount. AUSA Life may also deduct Premium Taxes,
if any, as incurred by AUSA Life.

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.

CONDENSED FINANCIAL INFORMATION
(FOR THE PERIOD JANUARY 1, 1997 THROUGH DECEMBER 31, 1997)

<TABLE>
<CAPTION>
FEDERATED FEDERATED FEDERATED FEDERATED MONTGOMERY
AMERICAN FEDERATED PRIME US GOV'T HIGH INCOME MONTGOMERY EMERGING
LEADERS UTILITY MONEY SECURITIES BOND GROWTH MARKETS
--------- --------- --------- ---------- ----------- ---------- ----------
<S> <C> <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 10.000
12/31/97.............. 12.304 12.476 10.404 10.751 11.156 12.389 8.827
Number of units
outstanding as of:
12/31/97.............. 6,260.806 6,250.427 291.043 22,834.496 45,383.287 3,048.704 6,209.783
</TABLE>

* Date of commencement of operations for Federated American Leaders was May
1, 1997; for Federated Utility was May 1, 1997; for Federated Prime Money
was January 22, 1997; for Federated U.S. Government Securities was March 7,
1997; for Federated High Income Bond was May 1, 1997; for Montgomery Growth
was May 1, 1997; and for Montgomery Emerging Markets was February 26, 1997.
The information presented above reflects operations of the Subaccounts as
offered through First Providian Life and Health Insurance Company Separate
Account C, which was acquired intact by AUSA Life Insurance Company, Inc.
on October 1, 1998.

8
<PAGE>

<TABLE>
<CAPTION>
WANGER WANGER
U.S. INT'L
SMALL CAP SMALL CAP
--------- ---------
<S> <C> <C>
Accumulation unit value as of:
Start Date:*.............................................. 10.000 10.000
12/31/97.................................................. 13.396 9.569
Number of units outstanding as of:
12/31/97.................................................. 4,702.844 2,280.053
</TABLE>

* Date of commencement of operations for Wanger U.S. Small Cap was May 1,
1997; and for Wanger International Small Cap was May 1, 1997. The
information presented above reflects operations of the Subaccounts as
offered through First Providian Life and Health Insurance Company Separate
Account C, which was acquired intact by AUSA Life Insurance Company, Inc.
on October 1, 1998.

FINANCIAL STATEMENTS

The audited supplemental statutory-basis financial statements of AUSA Life and
of 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 Federated Prime Money Portfolio, 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.

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, AUSA Life will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the Securities and Exchange Commission ("SEC"), is the
effective annual compounded rate of return that would have produced the cash
redemption value over the stated period had the performance remained constant
throughout. The Standardized Average Annual Total Return assumes a single
$1,000 payment made at the beginning of the period and full redemption at the
end of the period. It reflects the deduction of the Annual Contract Fee and
all other Portfolio, Separate Account and Contract level charges except
Premium Taxes, if any.

ADDITIONAL PERFORMANCE MEASURES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN

AUSA Life may show Non-Standardized Cumulative 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. AUSA Life may also show Non-
Standardized 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 Non-Standardized Cumulative Total Return and the Non-Standardized Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized 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 Non-Standardized
Cumulative Total Return and Non-Standardized Average Annual Total Return also
reflect these expenses. These returns, however, do not reflect the Annual
Contract Fee or Premium Taxes (if any), which, if included, would reduce the
percentages reported.

NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE

9
<PAGE>

of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These returns
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 AUSA Life.

NON-STANDARDIZED ONE YEAR RETURN

AUSA Life may show Non-Standardized One Year Return for one or more
Subaccounts with respect to one or more non-standardized base periods
commencing at the beginning of a calendar year (or date of inception, if
during the relevant year) and ending at the end of such calendar year. One
Year Return figures reflect the 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 returns
reflect a deduction for the Separate Account and Portfolios 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 AUSA Life.

NON-STANDARDIZED HYPOTHETICAL CUMULATIVE RETURN AND NON-STANDARDIZED
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURN

AUSA Life may show Non-Standardized Hypothetical Cumulative 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. These returns reflect a deduction
for the Separate Account expenses and Portfolio expenses. These returns do not
include the Annual Contract Fee or Premium Taxes (if any) which, if included,
would reduce the percentages reported.

The Non-Standardized Hypothetical Cumulative 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

AUSA Life may also show yield and effective yield figures for the Subaccount
investing in shares of the Federated Prime Money Portfolio. "Yield" refers to
the income generated by an investment in the Federated Prime Money Portfolio
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 the Federated Prime Money
Portfolio 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 or
Premium Taxes (if any) which, if included, would reduce the yields reported.

From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than the Federated
Prime Money Portfolio for which AUSA Life advertises yield, AUSA Life 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.

10
<PAGE>

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.

AUSA LIFE AND THE SEPARATE ACCOUNT

AUSA LIFE INSURANCE COMPANY, INC.

AUSA Life is a stock life insurance company incorporated under the laws of the
State of New York on October 3, 1947, with administrative offices at 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499. AUSA Life is principally
engaged in the sale of life insurance and annuity contracts, and is licensed
in the District of Columbia and all states except Hawaii. As of December 31,
1997, AUSA Life had assets of approximately $9.9 billion. AUSA Life is a
wholly-owned indirect 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.

On October 1, 1998, First Providian Life and Health Insurance Company ("First
Providian") merged with and into AUSA Life. First Providian was a stock life
insurance company incorporated under the laws of the State of New York on
March 23, 1970. Upon the merger, First Providian's existence ceased and AUSA
Life became the surviving company under the name AUSA Life Insurance Company,
Inc. As a result of the merger, the Separate Account became a separate account
of AUSA Life. All of the Contracts issued by First Providian before the merger
were, at the time of the merger, assumed by AUSA Life. The merger did not
affect any provisions of, or rights or obligations under, those Contracts. In
approving the merger on May 26, 1998, and May 29, 1998, respectively, the
boards of directors of AUSA Life and First Providian determined that the
merger of two financially strong stock life insurance companies would result
in an overall enhanced capital position and reduced expenses, which, together,
would be in the long-term interests of the Contract Owners. On May 26, 1998,
100% of the stockholders of AUSA Life voted to approve the merger, and on May
29, 1998, 100% of the stockholders of First Providian voted to approve the
merger. In addition, the New York Insurance Department has approved the
merger.

AUSA LIFE INSURANCE COMPANY, INC. SEPARATE ACCOUNT C

The Separate Account was established by First Providian Life and Health
Insurance Company, a former affiliate of AUSA Life, as a separate account
under the laws of New York on November 4, 1994. On October 1, 1998, First
Providian Life and Health Insurance Company, together with the Separate
Account, was merged into AUSA Life. The Separate Account survived the merger
intact.

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 now owned by AUSA Life and the
obligations under the Contract are obligations of AUSA Life. These assets are
held separately from the other assets of AUSA Life and are not chargeable with
liabilities incurred in any other business operation of AUSA Life (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 AUSA Life. 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 AUSA Life.

The Separate Account has dedicated 9 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 AUSA Life. The Separate
Account also includes other subaccounts which are not available under the
Contract.

11
<PAGE>

THE FEDERATED INSURANCE SERIES (ADVISED BY FEDERATED ADVISERS)

The Federated Insurance Series is an open-end management investment company
organized as a Massachusetts business trust and registered under the 1940 Act.
The Fund consists of eight investment portfolios, five of which are available
as part of the Advisor's Edge: the Federated American Leaders Portfolio, the
Federated Utility Portfolio, the Federated Prime Money Portfolio, the
Federated U.S. Government Securities Portfolio and the Federated High Income
Bond Portfolio. Federated Advisers serves as this Fund's investment advisor.

THE MONTGOMERY FUNDS III (ADVISED BY MONTGOMERY ASSET MANAGEMENT, LLC)

The Montgomery Funds III, an open-end management investment company, was
organized as a Delaware business trust in 1994 and is registered under the
1940 Act. The Fund consists of three professionally managed investment
portfolios, two of which are available as part of the Advisor's Edge: the
Montgomery Growth Portfolio and the Montgomery Emerging Markets Portfolio.
Montgomery Asset Management, LLC ("MAM") was organized as a Delaware limited
liability company in 1997 and is the investment adviser for the Fund. On July
31, 1997, Montgomery Asset Management, L.P., formed in 1990, completed the
sale of substantially all of its assets to MAM.

WANGER ADVISORS TRUST (ADVISED BY WANGER ASSET MANAGEMENT, L.P.)

Wanger Advisors Trust, an open-end management investment company, was
organized as a Massachusetts business trust in 1994 and is registered under
the 1940 Act. The Fund consists of two series available as part of the
Advisor's Edge: the Wanger U.S. Small Cap Advisor Portfolio and the Wanger
International Small Cap Advisor Portfolio. Wanger Asset Management, L.P., a
limited partnership managed by its general partner, Wanger Asset Management,
Ltd., serves as this Fund's investment advisor.

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.

FEDERATED AMERICAN LEADERS FUND II ("FEDERATED AMERICAN LEADERS PORTFOLIO")

The primary investment objective of the Federated American Leaders Portfolio
is to achieve long-term growth of capital. The Portfolio's secondary objective
is to provide income. The Portfolio pursues its investment objectives by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue-chip" companies. This Portfolio was formerly known as
the Federated Equity Growth and Income Portfolio.

FEDERATED UTILITY FUND II ("FEDERATED UTILITY PORTFOLIO")

The investment objective of the Federated Utility Portfolio is to achieve high
current income and moderate capital appreciation. The Portfolio endeavors to
achieve its objective by investing primarily in a professional managed and
diversified portfolio of equity and debt securities of utility companies.

FEDERATED PRIME MONEY FUND II ("FEDERATED PRIME MONEY FUND PORTFOLIO")

The investment objective of the Federated Prime Money Portfolio is to provide
current income consistent with stability of principal and liquidity. The
Portfolio pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II ("FEDERATED FUND FOR U.S.
GOVERNMENT SECURITIES PORTFOLIO")

The investment objective of the Federated U.S. Government Securities Portfolio
is to provide current income. Under normal circumstances, the Portfolio
pursues its investment objective by investing at least 65% of the value of its
total assets in securities issued or guaranteed as to payment of principal and
interest by the U.S. government, its agencies or instrumentalities. This
Portfolio was formerly known as the Federated U.S. Government Bond Portfolio.

12
<PAGE>

FEDERATED HIGH INCOME BOND FUND II ("FEDERATED HIGH INCOME BOND PORTFOLIO")

The investment objective of the Federated High Income Bond Portfolio is to
seek high current income. The Portfolio endeavors to achieve its investment
objective by investing primarily in a diversified portfolio of professionally
managed fixed income securities. The fixed income securities in which the
Portfolio intends to invest are lower-rated corporate debt obligations, which
are commonly referred to as "junk-bonds." Some of these fixed income
securities may involve equity features. Capital growth will be considered, but
only when consistent with the investment objective of high current income.
This Portfolio was formerly known as the Federated Corporate Bond Portfolio.

MONTGOMERY VARIABLE SERIES: GROWTH FUND ("MONTGOMERY GROWTH PORTFOLIO")

The investment objective of the Montgomery Growth Portfolio is capital
appreciation, which, under normal conditions it seeks by investing at least
65% of its total assets in equity securities of domestic companies. The
Portfolio emphasizes investments in common stocks but also invests in other
types of equity securities. In addition to capital appreciation, the Portfolio
emphasizes value.

MONTGOMERY VARIABLE SERIES: EMERGING MARKETS FUND ("MONTGOMERY EMERGING
MARKETS PORTFOLIO")

The investment objective of the Montgomery Emerging Markets Portfolio is
capital appreciation, which, under normal conditions it seeks by investing at
least 65% of its total assets in equity securities of companies in countries
having emerging markets. For these purposes, the Portfolio defines an emerging
market country as having an economy that is or would be considered by the
World Bank or the United Nations to be emerging or developing. The Portfolio
invests primarily in common stock but may also invest in other types of equity
securities, and in certain types of debt securities issued by the governments
of emerging market countries that are or may be eligible for conversion into
investments in emerging market companies under debt conversion programs
sponsored by such governments.

WANGER U.S. SMALL CAP ADVISOR ("WANGER U.S. SMALL CAP ADVISOR PORTFOLIO")

The investment objective of the Wanger U.S. Small Cap Advisor Portfolio is to
seek long-term growth of capital. The Portfolio pursues its investment
objective by investing primarily in stocks of United States companies with a
total common stock market capitalization of less than $1 billion. The Fund is
not required to sell a security that grows to a larger market capitalization.
The Portfolio may also invest in debt securities, including lower-rated debt
securities, which may be regarded as having speculative characteristics and
are commonly referred to as "junk bonds."

WANGER INTERNATIONAL SMALL CAP ADVISOR ("WANGER INTERNATIONAL SMALL CAP
ADVISOR PORTFOLIO")

The investment objective of the Wanger International Small Cap Advisor
Portfolio is to seek long-term growth of capital. The Portfolio pursues its
investment objective by investing primarily in the stocks of foreign companies
with a total common stock market capitalization of less than $1 billion. The
Fund is not required to sell a security that grows to a larger market
capitalization. The Portfolio may also invest in debt securities, including
lower-rated debt securities, which may be regarded as having speculative
characteristics and are commonly referred to as "junk bonds."

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' 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 AUSA Life 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.

13
<PAGE>

CONTRACT FEATURES

The rights and benefits under the Contract are as 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 AUSA Life. AUSA Life 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 an applicant wishes to purchase a Contract, the applicant should send his
or her completed application and initial Purchase Payment to the address
indicated on the application, or to such other location as AUSA Life may from
time to time designate. If the applicant wishes to make personal delivery by
hand or courier to AUSA Life of the completed application and initial Purchase
Payment (rather than through the mail), he or she must do so at our
Administrative Offices at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
The 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 AUSA Life 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. Additional Purchase Payments must be for
at least $500 for Non-Qualified Contracts, or $50 for Qualified Contracts.
Additional Purchase Payments received prior to the close of the New York Stock
Exchange (generally 4:00 P.M. Eastern time) are credited to the Accumulated
Value at the close of business that same day. Additional Purchase Payments
received after the close of the New York Stock Exchange are processed the next
Business Day.

Total Purchase Payments may not exceed $1,000,000 without our prior approval.

AUSA Life 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 AUSA Life to reverse a surrender or withdrawal
transaction, whether full or partial, AUSA Life 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.

PURCHASING BY WIRE

For wiring instructions please contact our Administrative Offices at 1-800-
866-6007.

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, 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499, or to the agent from whom you purchased the Contract or
mailing it to us at P.O. Box 3183, Cedar Rapids, Iowa 52406-3183. Upon
cancellation, the Contract is treated as void from the Contract Date and when
we receive the Contract, we will return the Accumulated Value of your Purchase
Payment(s) invested in the Portfolios plus any fees and/or Premium Taxes that
may have been subtracted from such amount.

14
<PAGE>

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 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
AUSA Life form or by complying with other designated AUSA Life procedures.

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 the Federated Prime Money
Portfolio, 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 the Federated Prime Money Portfolio 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 AUSA Life 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 AUSA Life form to our Administrative
Offices which must be received at least seven days before the next transfer
date.

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 AUSA Life 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 AUSA Life (iii) any charge to cover the
cost of administering the Contract, (iv) any partial withdrawals, and, if
exercised by AUSA Life, (v) any charges for any Exchanges made after the first
12 in any Contract Year.

CHARGES AND DEDUCTIONS

There are no sales charges for the Contracts.

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MORTALITY AND EXPENSE RISK CHARGE

We impose a charge as compensation for bearing certain mortality and expense
risks under the Contracts. The annual charge is assessed daily based on the
net asset value of the Separate Account. The annual mortality and expense risk
charge is .50% 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 AUSA Life surplus and will be used for any lawful purpose, including
any shortfall on the costs of distributing the Contracts.

The mortality risk borne by us under the Contracts, where one of the life
Annuity Payment Options is selected, is to make monthly Annuity Payments
(determined in accordance with the annuity tables and other provisions
contained in the Contract) regardless of how long all Annuitants may live. We
also assume mortality risk as a result of our guarantee of a Death Benefit in
the event the Annuitant dies prior to the Annuity Date.

The expense risk borne by us under the Contracts is the risk that the charges
for administrative expenses which are guaranteed for the life of the Contract
may be insufficient to cover the actual costs of issuing and administering the
Contract.

ADMINISTRATIVE CHARGE AND ANNUAL CONTRACT FEE

An administrative charge equal to .15% annually of the net asset value of the
Separate Account is assessed daily along with the Annual Contract Fee of $30.
The Annual Contract Fee is deducted proportionately from the Subaccounts. For
any Contract with amounts allocated to the Subaccounts, the $30 fee is
assessed per Contract, not per Portfolio chosen. The Annual Contract Fee will
be deducted 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 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. 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.

TAXES

Under present laws, AUSA Life 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. AUSA Life does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Contracts. (See "Federal Tax Considerations," page 21.)
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.

AUSA Life 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
AUSA Life. This might become necessary if the tax treatment of AUSA Life is
ultimately determined to be other than what AUSA Life 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 AUSA Life tax status. In
the event that AUSA Life 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.

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EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS

The administrative charges or fees may be reduced for sales of Contracts to a
trustee, employer or similar entity representing a group where AUSA Life
determines that such sales result in savings of administrative expenses. In
addition, directors, officers and bona fide full-time employees (and their
spouses and minor children) of AUSA Life, its ultimate parent company, and
certain of their affiliates are permitted to purchase Contracts with
substantial reduction of administrative charges or fees or with a waiver or
modification of certain minimum or maximum purchase and transaction amounts or
balance requirements. Contracts so purchased are for investment purposes only
and may not be resold except to AUSA Life.

In no event will reduction or elimination of fees or charges or waiver or
modification of transaction or balance requirements be permitted where such
reduction, elimination, waiver or modification will be unfairly discriminatory
to any person. Additional information about reductions in charges is contained
in the Statement of Additional Information.

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 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 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 18.)

You can make a withdrawal by sending the appropriate AUSA Life 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 21.)

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 AUSA
Life with a written election not to have federal income taxes withheld, AUSA
Life 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 21.)

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 Premium Taxes incurred but not yet deducted.

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SYSTEMATIC WITHDRAWAL OPTION

You may choose to have a specified dollar amount provided to you on a regular
basis from the portion of your Contract's Accumulated Value that is allocated
to the Portfolios. By electing the Systematic Withdrawal Option, withdrawals
may be made on a monthly, quarterly, semi-annual or annual basis. The minimum
amount for each withdrawal is $100.

Like any other partial withdrawal, each Systematic Withdrawal is subject to
taxes on earnings. If the Contract Owner has not provided AUSA Life with a
written election not to have federal income taxes withheld, AUSA Life 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 21.) You may wish to consult a tax advisor 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 AUSA
Life'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 AUSA Life's prior approval, deferred to a date beyond the
first day of the month after the Annuitant's 85th birthday. The Annuity Date
may only be changed by written request during the Annuitant's lifetime and
must be made at least 30 days before the then-scheduled Annuity Date. The
Annuity Date and the Annuity Payment options available for Qualified Contracts
may also be controlled by endorsements, the plan or applicable law.

ANNUITY PAYMENT OPTIONS

All Annuity Payment Options (except for the Designated Period Annuity Option)
are offered as "Variable Annuity Options." This means that Annuity Payments,
after the initial payment, will reflect the investment experience of the
Portfolio or Portfolios you have chosen. All Annuity Payment Options are also
offered as "Fixed Annuity Options." This means that the amount of each payment
will be set on the Annuity Date and will not change. The following Annuity
Payment Options are available under the Contract:

LIFE ANNUITY--Monthly Annuity Payments are paid for the life of an Annuitant,
ceasing with the last Annuity Payment due prior to the Annuitant's death.

JOINT AND LAST SURVIVOR ANNUITY--Monthly Annuity Payments are paid for the
life of two Annuitants and thereafter for the life of the survivor, ceasing
with the last Annuity Payment due prior to the survivor's death.

LIFE ANNUITY WITH PERIOD CERTAIN--Monthly Annuity Payments are paid for the
life of an Annuitant, with a Period Certain of not less than 120, 180, or 240
months, as elected.

INSTALLMENT OR UNIT REFUND LIFE ANNUITY--Available as either a Fixed
(Installment Refund) or Variable (Unit Refund) Annuity Option. Monthly Annuity
Payments are paid for the life of an Annuitant, with a Period Certain
determined by dividing the Accumulated Value by the first Annuity Payment.

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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
AUSA Life. If an Annuity Payment Option is chosen that depends on the
continuation of the life of the Annuitant, proof of birth date may be required
before Annuity Payments begin. For Annuity Payment Options involving life
income, the actual age of the Annuitant will affect the amount of each
payment. Since payments to older Annuitants are expected to be fewer in
number, the amount of each Annuity Payment will generally be greater.

All or part of the Accumulated Value may be placed under one or more Annuity
Payment Options. If Annuity Payments are to be paid under more than one
option, AUSA Life 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 AUSA Life with a
written election not to have federal income taxes withheld, AUSA Life 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, AUSA Life will
make monthly Annuity Payments that will go on for as long as the Annuitant
lives (120 payments guaranteed) in accordance with the Life Annuity with
Period Certain Option and the annuity benefit sections of the Contract. That
portion of the Accumulated Value that has been held in a Portfolio prior to
the Annuity Date will be applied under a Variable Annuity Option based on the
performance of that Portfolio. Subject to approval by AUSA Life you may select
any other Annuity Payment Option then being offered by AUSA Life. 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, AUSA Life has the right to pay that
amount in a lump sum. From time to time, AUSA Life 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 AUSA Life.

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 AUSA Life 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 AUSA Life form or by calling our
Administrative Offices at 1-800-866-6007.

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 AUSA Life 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.

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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 days, or as soon thereafter
as AUSA Life 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 AUSA Life 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 AUSA Life acknowledges such form. You may also make the
designation of Annuitant's Beneficiary irrevocable by sending us the
appropriate AUSA Life form and obtaining approval from AUSA Life. 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);

(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 AUSA Life 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 20.

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 a 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 AUSA Life 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, AUSA Life'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 AUSA Life'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," page 23, and
"Diversification Standards," page 24.)

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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 AUSA Life 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
AUSA Life 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 primary 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.

22
<PAGE>

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 advisor 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 advisor with
respect to the potential tax effects of such a transaction.

AUSA LIFE'S TAX STATUS

AUSA Life 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 AUSA Life
and its operations form a part of AUSA Life, the Separate Account 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 AUSA Life. AUSA Life reserves the right to make a deduction for taxes
should they be imposed with respect to such items in the future.

23
<PAGE>

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 of the Separate Account is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. A "look-through" rule
applies that suggests that each Subaccount of the Separate Account will be
tested for compliance with the percentage limitations by looking through to
the assets of the Portfolios in which each such Subaccount invests. All
securities of the same issuer are treated as a single investment. Each
government agency or instrumentality will be treated as a separate issuer for
purposes of those limitations.

In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance concerning the extent to which Contract Owners may direct their
investments to particular divisions of a separate account. It is possible that
regulations or revenue rulings may be issued in this area at some time in the
future. It is not clear, at this time, what these regulations or rulings would
provide. It is possible that when the regulations or ruling are issued, the
Contracts may need to be modified in order to remain in compliance. For these
reasons, AUSA Life reserves the right to modify the Contracts, as necessary,
to prevent the Contract Owner from being considered the owner of assets of the
Separate Account.

We intend to comply with the Regulations to assure that the Contracts continue
to be treated as annuity contracts for federal income tax purposes.

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, AUSA Life 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.

24
<PAGE>

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 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 AUSA Life 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, AUSA Life
will bill you for any accrued interest. AUSA Life 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.

AUSA Life 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 AUSA Life 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 AUSA Life.

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 21.)

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<PAGE>

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 21.)

AUSA Life believes that the Code surrender restrictions do not apply to tax-
free transfers pursuant to Revenue Ruling 90-24. AUSA Life 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.

GENERAL INFORMATION

ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS

AUSA Life retains the right, subject to any applicable law, to make certain
changes. AUSA Life 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 AUSA Life'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 AUSA Life. Any new
Portfolio will be made available to existing Contract Owners on a basis to be
determined by AUSA Life. AUSA Life 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, AUSA Life may, by appropriate
endorsement, make such changes in the Contracts as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to
be in the best interests of persons having voting rights under the Contracts,
the Separate Account may be operated as a management company under the 1940
Act or any other form permitted by law, may be deregistered under the 1940 Act
in the event such registration is no longer required, or may be combined with
one or more other separate accounts.

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 AUSA Life 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 AUSA
Life 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.

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<PAGE>

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 October, 1996, AUSA Life 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 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. AUSA Life 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 validations 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, AUSA Life 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,
AUSA Life'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
AUSA Life 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 AUSA Life's right to issue such Contracts
have been passed upon by Gregory E. Miller-Breetz, Esquire, on behalf of AUSA
Life.

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<PAGE>

TABLE OF CONTENTS FOR THE ADVISOR'S EDGE VARIABLE ANNUITY
AND FOR THE DIMENSIONAL VARIABLE ANNUITY

STATEMENT OF ADDITIONAL INFORMATION

PAGE
<S> <C>
THE CONTRACT.............................................................. 2
Computation of Variable Annuity Income Payments......................... 3
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 4
GENERAL MATTERS........................................................... 4
Non-Participating....................................................... 4
Misstatement of Age or Sex.............................................. 4
Assignment.............................................................. 4
Annuity Data............................................................ 5
Annual Statement........................................................ 5
Incontestability........................................................ 5
Ownership............................................................... 5
PERFORMANCE INFORMATION................................................... 5
Federated Prime Money Portfolio Subaccount Yields....................... 6
30-Day Yield for Non-Money Market Subaccounts........................... 6
Standardized Average Annual Total Return for Subaccounts................ 6
ADDITIONAL PERFORMANCE MEASURES........................................... 7
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 7
Non-Standardized Total Return Year-to-Date.............................. 8
Non-Standardized One Year Return........................................ 9
Non-Standardized Hypothetical Cumulative Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 9
Individual Computer Generated Illustrations............................. 10
PERFORMANCE COMPARISONS................................................... 10
SAFEKEEPING OF ACCOUNT ASSETS............................................. 12
AUSA LIFE................................................................. 12
STATE REGULATION OF AUSA LIFE............................................. 12
RECORDS AND REPORTS....................................................... 13
DISTRIBUTION OF THE CONTRACTS............................................. 13
LEGAL PROCEEDINGS......................................................... 13
OTHER INFORMATION......................................................... 13
FINANCIAL STATEMENTS...................................................... 13
Audited Financial Statements............................................ 13

</TABLE>

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AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
PROSPECTUS
FOR THE
DIMENSIONAL VARIABLE ANNUITY
OFFERED BY
AUSA LIFE INSURANCE COMPANY, INC.
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
4333 EDGEWOOD ROAD, N.E.
CEDAR RAPIDS, IOWA 52499

The Dimensional Variable Annuity contract (the "Contract"), offered through
AUSA Life Insurance Company, Inc. ("AUSA Life", "us", "we", or "our"),
provides a vehicle for investing on a tax-deferred basis in 7 investment
company Portfolios. The Contract is a group variable annuity contract and is
intended for retirement savings or other long-term investment purposes.

You may allocate your Net Purchase Payments for the Contract among 7
Subaccounts of AUSA Life's Separate C. Assets of each Subaccount are invested
in one of the following Portfolios (which are contained within two open-end,
diversified investment companies):

.DFA Small Value Portfolio .DFA Short-Term Fixed Portfolio
.DFA Large Value Portfolio .DFA Global Bond Portfolio
.DFA International Value Portfolio .Federated Prime Money Fund II
.DFA International Small Portfolio

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 time,
including a lump sum payment and several Annuity Payment Options. Full or
partial withdrawals of the Contract's Surrender Value may be made at any
future 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). 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.

The Contract is available only in the State of New York.

The date of this Prospectus is October 1, 1998.

ARC0014N8Y 998
<PAGE>

TABLE OF CONTENTS

PAGE
<S> <C>
GLOSSARY................................................................... 3
HIGHLIGHTS................................................................. 5
FEE TABLE.................................................................. 7
Condensed Financial Information............................................ 8
Financial Statements....................................................... 8
Performance Measures....................................................... 8
Additional Performance Measures............................................ 9
Yield and Effective Yield.................................................. 10
AUSA Life and the Separate Account......................................... 11
DFA Investment Dimensions Group Inc........................................ 11
The Federated Insurance Series............................................. 12
The Portfolios............................................................. 12
CONTRACT FEATURES.......................................................... 14
Contract Application and Purchase Payments............................... 14
Purchasing by Wire....................................................... 15
Right to Cancel Period................................................... 15
Allocation of Purchase Payments.......................................... 15
Exchanges Among the Portfolios........................................... 15
Dollar Cost Averaging Option............................................. 15
Accumulated Value........................................................ 15
Charges and Deductions................................................... 16
Minimum Balance Requirement.............................................. 17
DISTRIBUTIONS UNDER THE CONTRACT........................................... 17
Full and Partial Withdrawals............................................. 17
Lump Sum Payment Option.................................................. 18
Systematic Withdrawal Option............................................. 18
Annuity Date............................................................. 18
Annuity Payment Options.................................................. 18
Death Benefit............................................................ 20
Deferment of Payment..................................................... 21
FEDERAL TAX CONSIDERATIONS................................................. 21
GENERAL INFORMATION........................................................ 26
</TABLE>
<PAGE>

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 AUSA Life to cover the
cost of administering each Contract. The Annual Contract Fee will be deducted
on each Contract Anniversary and upon surrender, on a pro rata basis, from
each Subaccount.

Annuitant -- The person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.

Annuitant's Beneficiary -- The person(s) to whom any benefits are due upon the
Annuitant's death prior to the Annuity Date.

Annuity Date -- The date on which Annuity Payments begin. The Annuity Date is
always the first day of the month you specify.

Annuity Payment -- One of a series of payments made under an Annuity Payment
Option.

Annuity Payment Option -- One of several ways in which withdrawals from the
Contract may be made. Under a Fixed Annuity Option (see "Annuity Payment
Options," page 18), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page 18), 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 18).

Annuity Unit Value -- The value of each Annuity Unit which is calculated each
Valuation Period.

AUSA Life ("we", "us", "our") -- AUSA Life Insurance Company, Inc., a New York
stock company.

Business Day -- A day when the New York Stock Exchange is open for trading.

Code -- The Internal Revenue Code of 1986, as amended.

Contract -- The group flexible premium variable annuity contract described in
this Prospectus, participation in which will 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.

3
<PAGE>

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
AUSA Life 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) DFA Investment Dimensions Group Inc., and (ii) Federated
Insurance Series (advised by Federated Advisers).

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 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 7 Portfolios in the Dimensional Variable Annuity: the VA Small Value
Portfolio (the "DFA Small Value Portfolio"), the VA Large Value Portfolio (the
"DFA Large Value Portfolio"), the VA International Value Portfolio (the "DFA
International Value Portfolio"), the VA International Small Portfolio (the
"DFA International Small Portfolio"), the VA Short-Term Fixed Portfolio (the
"DFA Short-Term Fixed Portfolio") and the VA Global Bond Portfolio (the "DFA
Global Bond Portfolio") of DFA Investment Dimensions Group Inc.; and the
Federated Prime Money Fund II (the "Federated Prime Money Portfolio") of
Federated Insurance Series (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 AUSA Life.

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 AUSA Life Insurance Company, Inc. Separate
Account C dedicated to the Contract. The Separate Account consists of assets
that are segregated by AUSA Life Insurance Company, Inc. and, for Contract
Owners, invested in the Portfolios. The Separate Account is independent of the
general assets of AUSA Life.

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 7 Portfolios.

Surrender Value -- The Accumulated Value less 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 3).

DIMENSIONAL VARIABLE ANNUITY

The Contract provides a vehicle for investing on a tax-deferred basis in 7
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

INVESTMENT CHOICES

Your investment in the Contract may be allocated among 7 Subaccounts of the
Separate Account. The Subaccounts in turn invest exclusively in the following
7 Portfolios offered by the Funds: the DFA Small Value Portfolio, the DFA
Large Value Portfolio, the DFA International Value Portfolio, the DFA
International Small Portfolio, the DFA Short-Term Fixed Portfolio, the DFA
Global Bond Portfolio and the Federated Prime Money Portfolio. The assets of
each Portfolio are separate, and each Portfolio has distinct investment
objectives and policies as described in the corresponding Fund Prospectus......
Page 12

CONTRACT OWNER

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 advisor, 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 for Qualified Contracts (or
$50 monthly by payroll deduction for Qualified Contracts); subsequent Purchase
Payments must be at least $500 for Non-Qualified Contracts or $50 for
Qualified Contracts. You may make subsequent Purchase Payments at any time
before the Contract's Annuity Date, as long as the Annuitant specified in the
Contract is living. ................................................... Page 14

5
<PAGE>

ALLOCATION OF PURCHASE PAYMENTS

RIGHT TO CANCEL PERIOD

The Contract provides for a Right to Cancel Period of 10 days (20 days for
replacement) plus a 5 day grace period to allow for mail delivery, during
which you may cancel your investment in the Contract. To cancel your
investment, please return your Contract to us 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 fees and/or Premium Taxes that may have been subtracted from such amount.
....................................................................... Page 15

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 15.) ................................................ Page 15

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 20

ANNUITY PAYMENT OPTIONS

CONTRACT AND POLICYHOLDER INFORMATION

6
<PAGE>

CHARGES AND DEDUCTIONS UNDER THE CONTRACT

The Contract has no sales charges and has an annual mortality and expense risk
charge of .50%. Contract Owners may withdraw up to 100% of the Accumulated
Value without incurring a surrender charge. 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 16

FULL AND PARTIAL WITHDRAWALS

FEE TABLE

<TABLE>
<S> <C>
CONTRACTOWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases........................................ None
Contingent Deferred Sales Load (surrender charge)...................... None
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...................................... .50%
Administrative Charge.................................................. .15%
----
Total Annual Separate Account Expenses................................. .65%
</TABLE>

PORTFOLIO ANNUAL EXPENSES

<TABLE>
<CAPTION>
MANAGEMENT TOTAL
AND PORTFOLIO
ADVISORY OTHER ANNUAL
EXPENSES EXPENSES EXPENSES
---------- -------- ---------
<S> <C> <C> <C>
DFA Small Value Portfolio......................... 0.50% 0.21% 0.71%
DFA Large Value Portfolio......................... 0.25% 0.23% 0.48%
DFA International Value Portfolio................. 0.40% 0.36% 0.76%
DFA International Small Portfolio................. 0.50% 0.49% 0.99%
DFA Short-Term Fixed Portfolio.................... 0.25% 0.18% 0.43%
DFA Global Bond Portfolio......................... 0.25% 0.40% 0.65%
Federated Prime Money Portfolio*.................. 0.30% 0.50% 0.80%
</TABLE>
* The fee for Management and Advisory Expenses has been reduced to reflect
the adviser's voluntary waiver of a portion of the management fee. The
adviser can terminate this waiver at any time in its sole discretion. The
maximum fee for Management and Advisory Expenses is 0.50%. Without this
voluntary waiver, Total Portfolio Annual Expenses would have been 1.00%.

7
<PAGE>

continue the Contract or withdraw the entire value of your Contract at the end
of the applicable period as a lump sum or under one of the Contract's Annuity
Payment Options.

<TABLE>
<CAPTION>
3 5 10
1 YEAR YEARS YEARS YEARS
------ ------ ------ -------
<S> <C> <C> <C> <C>
DFA Small Value Portfolio................... $14.14 $43.93 $75.87 $166.21
DFA Large Value Portfolio................... 11.81 36.77 63.65 140.20
DFA International Value Portfolio........... 14.64 45.48 78.51 171.78
DFA International Small Portfolio........... 16.97 52.58 90.57 197.03
DFA Short-Term Fixed Portfolio.............. 11.30 35.21 60.97 134.46
DFA Global Bond Portfolio................... 13.53 42.07 72.70 159.48
Federated Prime Money Portfolio............. 15.05 46.72 80.62 176.21
</TABLE>

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.

CONDENSED FINANCIAL INFORMATION

(FOR THE PERIOD JANUARY 1, 1997 THROUGH DECEMBER 31, 1997)

<TABLE>
<CAPTION>
DFA FEDERATED
DFA SMALL DFA LARGE DFA INT'L DFA INT'L DFA SHORT GLOBAL PRIME
VALUE VALUE VALUE SMALL TERM FIXED BOND MONEY
---------- ---------- ---------- ---------- ---------- ------- ---------
<S> <C> <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 10.000
12/31/97.............. 12.645 12.242 9.995 7.661 10.426 10.640 10.403
Number of units
outstanding as of:
12/31/97.............. 1,573.785 2,756.600 3,320.401 3,273.454 1,916.472 0 0
</TABLE>

** Date of commencement of operations for DFA Small Value was January 23,
1997; for DFA Large Value was January 23, 1997; for DFA International Value
was January 23, 1997; for DFA International Small was January 23, 1997; for
DFA Short-Term Fixed was February 21, 1997; for DFA Global Bond was January
23, 1997; for Federated Prime Money was January 22, 1997. The information
presented above reflects operations of the Subaccounts as offered through
the First Providian Life and Health Insurance Company Separate Account C,
which was acquired intact by the AUSA Life Insurance Company, Inc. on
October 1, 1998.

FINANCIAL STATEMENTS

PERFORMANCE MEASURES

8
<PAGE>

Certain total return and performance information for operations of the DFA
Small Value Portfolio, DFA Large Value Portfolio, DFA International Value
Portfolio, DFA International Small Portfolio, DFA Short-Term Fixed Portfolio,
and DFA Global Bond Portfolio (collectively, the "DFA Subaccounts") for the
period from the inception of the DFA Subaccounts to March 30, 1997 reflect
operations of the DFA Subaccounts in the Advisor's Edge Variable Annuity.

Until October 1995, the DFA Large Value Portfolio (formerly DFA Global Value
Portfolio) invested its assets in both U.S. and international securities.
Depending on the period presented, total return and performance information
presented for the DFA Large Value Portfolio may reflect the performance of the
Portfolio when it invested in the stocks of both U.S. and international
companies. Total return and performance information for the DFA Large Value
Portfolio which include the period prior to October 1995 should not be
considered indicative of the Portfolio's future performance. (See also "VA
Large Value Portfolio," page 12.)

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN

ADDITIONAL PERFORMANCE MEASURES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN

NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE

AUSA Life 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
returns 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 AUSA
Life.

NON-STANDARDIZED ONE YEAR RETURN

9
<PAGE>

inception date, the figures reflect the percentage change in actual
Accumulation Unit Values during the relevant period. These returns reflect a
deduction for the Separate Account and Portfolios 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 AUSA Life.

NON-STANDARDIZED HYPOTHETICAL CUMULATIVE RETURN AND NON-STANDARDIZED
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURN

AUSA Life may show Non-Standardized Hypothetical Cumulative 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. They do not include the
Annual Contract Fee or Premium Taxes (if any) which, if included, would reduce
the percentages reported.

The Non-Standardized Hypothetical Cumulative 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.

YIELD AND EFFECTIVE YIELD

10
<PAGE>

AUSA LIFE AND THE SEPARATE ACCOUNT

AUSA LIFE INSURANCE COMPANY, INC.

AUSA LIFE INSURANCE COMPANY, INC. SEPARATE ACCOUNT C

The Separate Account has dedicated 7 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 AUSA Life. The Separate
Account also includes other subaccounts which are not available under the
Contract.

DFA INVESTMENT DIMENSIONS GROUP INC. (ADVISED BY DIMENSIONAL FUND ADVISORS
INC.)

DFA Investment Dimensions Group Inc. is an open-end management investment
company organized under Maryland law in 1981, and is registered under the 1940
Act. The Fund issues 28 series of shares, including the DFA Small Value
Portfolio, the DFA Large Value Portfolio (formerly, the DFA Global Value
Portfolio), the DFA International Value

11
<PAGE>

Portfolio, the DFA International Small Portfolio, the DFA Short-Term Fixed
Portfolio, and the DFA Global Bond Portfolio, which are the only portfolios
available as part of the Dimensional Variable Annuity. Dimensional Fund
Advisors Inc. serves as this Fund's investment advisor.

THE FEDERATED INSURANCE SERIES (ADVISED BY FEDERATED ADVISERS)

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.

The median market capitalization referred to in the description of the VA
Small Value and VA Large Value Portfolios set forth below is determined based
on size ranges on the appropriate securities markets. Size ranges are created
by ranking companies listed on the appropriate securities market by market
capitalization. Once the ranking is done, companies are divided into ten
groups (deciles) with each group containing an equal number of companies. The
first decile contains the 10% largest companies and the tenth decile contains
the 10% smallest companies. The median is determined by averaging the market
capitalization of the last company in the fifth decile and the market
capitalization of the first company in the sixth decile.

VA SMALL VALUE PORTFOLIO ("DFA SMALL VALUE PORTFOLIO")

The investment objective of the DFA Small Value Portfolio is to achieve long-
term capital appreciation. This Portfolio seeks to achieve its investment
objective by investing in common stocks of U.S. companies (a) that are value
stocks, primarily because they have a high book value in relation to their
market value (a "book to market ratio"), and (b) whose market capitalizations
are smaller than that of the company having the median market capitalization
of companies whose shares are listed on the NYSE. Book to market distributions
are created by ranking the NYSE by book to market ratios, forming 10 groups
(deciles) with each group containing an equal number of companies. A company's
shares will be considered to have a high book to market ratio if the ratio
equals or exceeds the ratios of any of the 30% of companies with the highest
positive book to market ratios whose shares are listed on the NYSE.

VA LARGE VALUE PORTFOLIO ("DFA LARGE VALUE PORTFOLIO")

The investment objective of the DFA Large Value Portfolio is to achieve long-
term capital appreciation. This Portfolio seeks to achieve its investment
objective by investing in common stocks of U.S. companies (a) that are value
stocks, primarily because they have a high book to market ratio and (b) whose
market capitalizations equal or exceed that of the company having the median
market capitalization of companies whose shares are listed on the NYSE.
Pursuant to a special meeting of this Portfolio's shareholders held on
September 15, 1995, the DFA Large Value Portfolio's investment policy was
changed to permit the Portfolio to achieve its investment objective by
investing substantially all of its assets in the stock of U.S. companies and
the sale of the Portfolio's non-U.S. securities to another series of shares of
DFA Investment Dimensions Group Inc.

VA INTERNATIONAL VALUE PORTFOLIO ("DFA INTERNATIONAL VALUE PORTFOLIO")

The investment objective of the DFA International Portfolio is to achieve
long-term capital appreciation. This Portfolio seeks to achieve its investment
objective by investing in value stocks of large non-U.S. companies. Securities
are considered value stocks primarily because a company's shares at the time
of purchase have a book to market ratio that equals or exceeds the ratios of
any of the 30% of companies in that country with the highest positive book to
market ratios.

VA INTERNATIONAL SMALL PORTFOLIO ("DFA INTERNATIONAL SMALL PORTFOLIO")

The investment objective of the DFA International Small Portfolio is to
achieve long-term capital appreciation. This Portfolio provides investors with
access to securities portfolios consisting of small Japanese, United Kingdom,
Continental and Pacific Rim companies. The Portfolio seeks to achieve its
investment objective by investing its assets

12
<PAGE>

in a broad and diverse group of marketable stocks of (1) Japanese small
companies which are traded in the Japanese securities markets; (2) United
Kingdom small companies which are traded principally on the International
Stock Exchange of the United Kingdom and the Republic of Ireland ("ISE"); (3)
small companies organized under the laws of certain European countries; and
(4) small companies located in Australia, New Zealand and Asian countries
whose shares are traded principally on the securities markets located in those
countries. A "Japanese small company" means a company located in Japan whose
market capitalization is not larger than the largest of those in the smaller
one-half (deciles 6 through 10) of companies whose securities are listed on
the First Section of the Tokyo Stock Exchange. A "United Kingdom small
company" means a company organized in the United Kingdom, with shares listed
on the ISE whose market capitalization is not larger than the largest of those
in the smaller one-half (deciles 6 through 10) of companies included in the
Financial Times-Actuaries All Share Index. With respect to small companies
organized under the laws of certain European countries, company size will be
determined by the investment advisor in a manner that will compare the market
capitalizations for companies in all countries of this segment in which the
Portfolio invests (i.e., on a European basis). The size of companies located
in Australia, New Zealand and Asian countries will be determined by the
investment advisor in a manner that will compare the market capitalizations of
the companies in all countries of this segment in which the Portfolio invest
(i.e., on a Pacific Rim basis).

VA SHORT-TERM FIXED PORTFOLIO ("DFA SHORT-TERM FIXED PORTFOLIO")

The investment objective of the DFA Short-Term Fixed Portfolio is to achieve a
stable real value (i.e., a return in excess of the rate of inflation) of
invested capital with a minimum of risk. This Portfolio seeks to achieve its
investment objective by investing in U.S. government obligations, U.S.
government agency obligations, dollar denominated obligations of foreign
issuers issued in the U.S., bank obligations, including U.S. subsidiaries and
branches of foreign banks, corporate obligations, commercial paper, repurchase
agreements and obligations of supranational organizations. Generally, this
Portfolio will acquire obligations which mature within one year from the date
of settlement, but substantial investments may be made in obligations maturing
within two years from the date of settlement when greater returns are
available.

VA GLOBAL BOND PORTFOLIO ("DFA GLOBAL BOND PORTFOLIO")

The DFA Global Bond Portfolio seeks to provide a market rate of return for a
global fixed income portfolio with low relative volatility of returns. This
Portfolio will invest primarily in obligations issued or guaranteed by the
U.S. and foreign governments, their agencies and instrumentalities,
obligations of other foreign issuers rated AA or better and supranational
organizations, such as the World Bank, the European Investment Bank, European
Economic Community, and European Coal and Steel Community and corporate debt
obligations.

FEDERATED PRIME MONEY FUND II ("FEDERATED PRIME MONEY PORTFOLIO")

OTHER PORTFOLIO INFORMATION

There is no assurance that a Portfolio will achieve its stated investment
objective.

13
<PAGE>

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 AUSA Life. AUSA Life 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

Acceptance is subject to the application being received in good order, and
AUSA Life reserves the right to reject any application or initial Purchase
Payment.

Total Purchase Payments may not exceed $1,000,000 without our prior approval.

PURCHASING BY WIRE

For wiring instructions please contact our Administrative Offices at 1-800-
866-6007.

14
<PAGE>

RIGHT TO CANCEL PERIOD

ALLOCATION OF PURCHASE PAYMENTS

EXCHANGES AMONG THE PORTFOLIOS

DOLLAR COST AVERAGING OPTION

ACCUMULATED VALUE

15
<PAGE>

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 AUSA Life,
(iii) any charge to cover the cost of administering the Contract, (iv) any
partial withdrawals, and, if exercised by AUSA Life, (vi) any charges for any
Exchanges made after the first 12 in any Contract Year.

CHARGES AND DEDUCTIONS

There are no sales charges for the Contracts.

MORTALITY AND EXPENSE RISK CHARGE

ADMINISTRATIVE CHARGE AND ANNUAL CONTRACT FEE

EXCHANGE FEE

TAXES

16
<PAGE>

AUSA Life 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 AUSA Life's tax status. In the event that AUSA Life 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

EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS

MINIMUM BALANCE REQUIREMENT

DISTRIBUTIONS UNDER THE CONTRACT

FULL AND PARTIAL WITHDRAWALS

17
<PAGE>

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 AUSA
Life with a written election not to have federal income taxes withheld, AUSA
Life must by law withhold such taxes from the taxable portion of any full or
partial withdrawal and remit that amount to the federal government. Moreover,
the Code provides that a 10% penalty tax may be imposed on certain early
withdrawals. (See "Federal Tax Considerations," page 21.)

LUMP SUM PAYMENT OPTION

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 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 AUSA Life's prior approval, deferred to a date beyond the
first day of the month after the Annuitant's 85th birthday. The Annuity Date
may only be changed by written request during the Annuitant's lifetime and
must be made at least 30 days before the then-scheduled Annuity Date. The
Annuity Date and Annuity Payment options available for Qualified Contracts may
also be controlled by endorsements, the plan or applicable law.

ANNUITY PAYMENT OPTIONS

18
<PAGE>

LIFE ANNUITY--Monthly Annuity Payments are paid for the life of an Annuitant,
ceasing with the last Annuity Payment due prior to the Annuitant's death.

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.

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.

In the event that an Annuity Payment Option is not selected, AUSA Life will
make monthly Annuity Payments that will go on for as long as the Annuitant
lives (120 payments guaranteed) in accordance with the Life Annuity with
Period Certain Option and the annuity benefit sections of the Contract. That
portion of the Accumulated Value that has been held in a Portfolio prior to
the Annuity Date will be applied under a Variable Annuity Option based on the
performance of that Portfolio. Subject to approval by AUSA Life, you may
select any other Annuity Payment Option then being offered by AUSA Life. 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, AUSA Life has the right to pay
that amount in a lump sum. From time to time, AUSA Life 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 AUSA Life.

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.

After the Annuity Date, you may change the Portfolio funding the Variable
Annuity Payments on the appropriate AUSA Life form or by calling our
Administrative Offices at 1-800-866-6007.

19
<PAGE>

DEATH BENEFIT

DEATH OF ANNUITANT BEFORE ANNUITY DATE

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.

DEATH OF ANNUITANT ON OR AFTER ANNUITY DATE

DESIGNATION OF AN 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);

20
<PAGE>

DEATH OF CONTRACT OWNER

DEFERMENT OF PAYMENT

FEDERAL TAX CONSIDERATIONS

INTRODUCTION

TAXATION OF ANNUITIES IN GENERAL

GENERAL RULE OF TAX DEFERRAL

21
<PAGE>

TAXATION OF FULL OR PARTIAL WITHDRAWALS

TAXATION OF ANNUITY PAYMENTS

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
AUSA Life of that election. In certain situations, taxes will be withheld on
distributions to non-resident aliens at a 30% flat rate unless an exemption
from withholding applies under an applicable tax treaty.

PENALTY TAXES

22
<PAGE>

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

MULTIPLE-CONTRACTS RULE

TRANSFERS OF ANNUITY CONTRACTS

ASSIGNMENTS OF ANNUITY CONTRACTS

AUSA LIFE'S TAX STATUS

23
<PAGE>

Accumulated Value. Under existing federal income tax law, the Separate
Account's investment income, including realized net capital gains, is not
taxed to AUSA Life. AUSA Life reserves the right to make a deduction for taxes
should they be imposed with respect to such items in the future.

DIVERSIFICATION STANDARDS

We intend to comply with the Regulations to assure that the Contracts continue
to be treated as annuity contracts for federal income tax purposes.

403(B) CONTRACTS

24
<PAGE>

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.

AUSA Life may require that any outstanding loan be paid if the individual
account value falls below an amount equal to 25% of total loans outstanding.

25
<PAGE>

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 21.)

GENERAL INFORMATION

ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS

VOTING RIGHTS

26
<PAGE>

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.

YEAR 2000 MATTERS

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.

AUDITORS

Ernst & Young LLP serves as independent auditors for the Separate Account and
AUSA Life and will audit their financial statements annually.

LEGAL MATTERS

27
<PAGE>

TABLE OF CONTENTS FOR THE ADVISOR'S EDGE VARIABLE ANNUITY AND FOR THE
DIMENSIONAL VARIABLE ANNUITY

STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CONTRACTS............................................................. 2
Computation of Variable Annuity Income Payments......................... 3
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 4
GENERAL MATTERS........................................................... 4
Non-Participating....................................................... 4
Misstatement of Age or Sex.............................................. 4
Assignment.............................................................. 4
Annuity Data............................................................ 5
Annual Statement........................................................ 5
Incontestability........................................................ 5
Ownership............................................................... 5
PERFORMANCE INFORMATION................................................... 5
Federated Prime Money Portfolio Subaccount Yields....................... 6
30-Day Yield for Non-Money Market Subaccounts........................... 6
Standardized Average Annual Total Return for Subaccounts................ 6
ADDITIONAL PERFORMANCE MEASURES........................................... 7
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 7
Non-Standardized Total Return Year-to-Date.............................. 8
Non-Standardized One Year Return........................................ 9
Non-Standardized Hypothetical Cumulative Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 9
Individual Computer Generated Illustrations............................. 10
PERFORMANCE COMPARISONS................................................... 10
SAFEKEEPING OF ACCOUNT ASSETS............................................. 12
AUSA LIFE................................................................. 12
STATE REGULATION OF AUSA LIFE............................................. 12
RECORDS AND REPORTS....................................................... 13
DISTRIBUTION OF THE CONTRACTS............................................. 13
LEGAL PROCEEDINGS......................................................... 13
OTHER INFORMATION......................................................... 13
FINANCIAL STATEMENTS...................................................... 13
Audited Financial Statements............................................ 13
</TABLE>

28
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
PROSPECTUS
FOR THE
PGA RETIREMENT ANNUITY
OFFERED BY
AUSA LIFE INSURANCE COMPANY, INC.
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
4333 EDGEWOOD ROAD, N.E.
CEDAR RAPIDS, IOWA 52499

The PGA Retirement Annuity contract (the "Contract"), offered through AUSA
Life Insurance Company, Inc. ("AUSA Life", "us", "we", or "our"), provides a
vehicle for investing on a tax-deferred basis in 5 investment company
Portfolios. The Contract is a group variable annuity contract and is intended
for retirement savings or other long-term investment purposes.

The minimum initial Purchase Payment for Non-Qualified Contracts is $250. (A
minimum of $3,000 in Purchase Payments less any withdrawals must be attained
by the first day of the third Contract Year.) 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 5
Subaccounts of AUSA Life's Separate Account C. Assets of each Subaccount are
invested in one of the following Portfolios:

.Capital Preservation Portfolio .Capital Growth Portfolio
.Income Oriented Portfolio .Maximum Appreciation Portfolio
.Growth and Income Portfolio

Your initial Net Purchase Payment(s), when your Contract is issued, will be
invested immediately in your chosen Portfolio(s), unless you indicate
otherwise.

The Contract's Accumulated Value varies with the investment performance of the
Portfolio(s) you select. You bear all investment risk associated with the
Portfolios. Investment results for your Contract are not guaranteed.

The Contract offers a number of ways of withdrawing monies at a future time,
including a lump sum payment and several Annuity Payment Options. You may make
full or partial withdrawals of the Contract's Surrender Value at any future
time, although in many instances withdrawals made prior to age 59 1/2 are
subject to a 10% federal tax penalty (and a portion may be subject to ordinary
income taxes). If you elect an Annuity Payment Option, Annuity Payments may be
received on a fixed and/or variable basis. You also have significant
flexibility in choosing the Annuity Date on which Annuity Payments begin.

This Prospectus sets forth the information you should know before investing in
the Contract. It must be accompanied by a current Prospectus for the
Portfolios. Please read the Prospectus carefully and retain it for future
reference. A Statement of Additional Information for the Contract Prospectus,
which has the same date as this Prospectus, has also been filed with the
Securities and Exchange Commission, is incorporated herein by reference and is
available free by calling our Administrative Offices at 1-800-866-0005. The
Table of Contents of the Statement of Additional Information is included at
the end of this Prospectus.

The Contract is available only in the State of New York.

The date of this Prospectus is October 1, 1998.
ARC0017N8Y 998
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
GLOSSARY................................................................... 2
HIGHLIGHTS................................................................. 5
FEE TABLE.................................................................. 7
Condensed Financial Information............................................ 9
Financial Statements....................................................... 9
Performance Measures....................................................... 9
Additional Performance Measures............................................ 9
Yield and Effective Yield.................................................. 10
AUSA Life and the Separate Account......................................... 10
PB Series Trust............................................................ 11
The Portfolios............................................................. 11
CONTRACT FEATURES.......................................................... 12
Contract Application and Purchase Payments............................... 12
Purchasing by Wire....................................................... 12
Right to Cancel Period................................................... 12
Allocation of Purchase Payments.......................................... 13
Exchanges Among the Portfolios........................................... 13
Accumulated Value........................................................ 13
Charges and Deductions................................................... 13
Minimum Balance Requirement.............................................. 14
DISTRIBUTIONS UNDER THE CONTRACT........................................... 15
Full and Partial Withdrawals............................................. 15
Lump Sum Payment Option.................................................. 15
Systematic Withdrawal Option............................................. 15
Annuity Date............................................................. 16
Annuity Payment Options.................................................. 16
Death Benefit............................................................ 17
Deferment of Payment..................................................... 19
FEDERAL TAX CONSIDERATIONS................................................. 19
GENERAL INFORMATION........................................................ 22
</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
ending before age 75 occurs plus any Net Purchase Payments subsequently made,
less any partial withdrawals subsequently taken.

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.

2
<PAGE>

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 16), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page 16), 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 16).

Annuity Unit Value - The value of each Annuity Unit which is calculated each
Valuation Period.

AUSA Life ("we", "us", "our") - AUSA Life Insurance Company, Inc., a New York
stock company.

Business Day - A day when the New York Stock Exchange is open for trading.

Code - The Internal Revenue Code of 1986, as amended.

Contract Anniversary - Any anniversary of the Contract Date.

Contract Date - The date of issue of this Contract.

Contract Owner ("you," "your") - The person or persons designated as the
Contract Owner in the Contract. The term shall also include any person named
as Joint Owner. A Joint Owner shares ownership in all respects with the
Contract Owner. Prior to the Annuity Date, the Contract Owner has the right to
assign ownership, designate beneficiaries, make permitted withdrawals and
Exchanges among Subaccounts.

Contract Year - A period of 12 months starting with the Contract Date or any
Contract Anniversary.

Death Benefit - The greater of the Contract's Accumulated Value on the date
AUSA Life 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.

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.

Payee - The Contract Owner, Annuitant, Annuitant's Beneficiary, or any other
person, estate, or legal entity to whom benefits are to be paid.

Portfolio - A separate investment series of the Trust. The Trust currently
offers 5 series in the PGA Retirement Annuity: the Capital Preservation
Portfolio, the Income Oriented Portfolio, the Growth and Income Portfolio, the
Capital Growth Portfolio, and the Maximum Appreciation Portfolio (each a
"Portfolio" and, collectively, the "Portfolios"). In this Prospectus,
Portfolio will also be used to refer to the Subaccount that invests in the
corresponding Portfolio.

3
<PAGE>

Purchase Payment - Any premium payment. The minimum initial Purchase Payment
is $250 for Non-Qualified Contracts (although a minimum of $3,000 in Purchase
Payments less any withdrawals must be attained by the first day of the third
Contract Year) and $2,000 for Qualified Contracts (or $50 monthly by payroll
deduction for Qualified Contracts); each additional Purchase Payment must be
at least $125 for Non-Qualified Contracts or $50 for Qualified Contracts. AUSA
Life reserves the right to impose a $500 minimum on additional Purchase
Payments for Non-Qualified Contracts at any time in the future on its sole
discretion. 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 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.

Subaccount - That portion of the Separate Account that invests in shares of
the Portfolios. Each Subaccount will only invest in a single Portfolio. The
investment performance of each Subaccount is linked directly to the investment
performance of one of the 5 Portfolios.

Surrender Value - The Accumulated Value less any Premium Taxes incurred but
not yet deducted.

Trust - The PB Series Trust, formerly Providian Series Trust.

Underlying Funds - Four series of the Trust in which the Portfolios invest.
The four series are the High Quality Stock Fund, Fixed Income Fund,
International Active Fund, and Money Market Fund.

Valuation Period - The performance of your Contract is measured by using the
Accumulation Unit Value. This value is calculated at the close of each
Business Day. A Valuation Period is defined as the period of time between the
close of business on one Business Day and the close of business on the
following Business Day.

4
<PAGE>

HIGHLIGHTS

You can find definitions of important terms in the Glossary (Page 3).

PGA RETIREMENT ANNUITY

The Contract provides a vehicle for investing on a tax-deferred basis in 5
investment company Portfolios. Monies may be subsequently withdrawn from the
Contract either as a lump sum or as annuity income as permitted under the
Contract. Accumulated Values and Annuity Payments depend on the investment
experience of the selected Portfolio(s). The investment performance of the
Portfolios is not guaranteed. Thus, you bear all investment risk for monies
invested under the Contract.

WHO SHOULD INVEST

The Contract is designed for investors seeking long term, tax-deferred
accumulation of funds, generally for retirement but also for other long-term
investment purposes. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state marginal income tax
brackets. The Contract is offered as both a Qualified Contract and a Non-
Qualified Contract. Both Qualified and Non-Qualified Contracts offer tax-
deferral on increases in the Contract's value prior to withdrawal or
distribution; however, Purchase Payments made by Contract Owners of Qualified
Contracts may be excludible or deductible from gross income in the year such
payments are made, subject to certain statutory restrictions and limitations.
(See "Federal Tax Considerations," page 19.)

INVESTMENT CHOICES

Your investment in the Contract may be allocated among 5 Subaccounts of the
Separate Account. The Subaccounts in turn invest exclusively in the following
5 Portfolios offered by the Trust: the Capital Preservation Portfolio, the
Income Oriented Portfolio, the Growth and Income Portfolio, the Capital Growth
Portfolio, and the Maximum Appreciation Portfolio. The assets of each
Portfolio are separate. Each Portfolio has distinct investment objectives and
policies as described in the prospectus for the Portfolios. (See page 12.)

CONTRACT OWNER

ANNUITANT

The Annuitant is a person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid. The Annuitant may not be older than age 75.

ANNUITANT'S BENEFICIARY

The Contract Owner may designate any person to receive benefits under the
Contract which are payable upon the death of the Annuitant prior to the
Annuity Date.

HOW TO INVEST

To invest in the Contract, you will need to provide the necessary information
to us in the Contract application. You will need to select an Annuitant. The
Annuitant may not be older than age 75 at the time the Contract is issued. For
Non-Qualified Contracts, the minimum initial Purchase Payment is $250. (A
minimum of $3,000 in Purchase Payments less any withdrawals must be attained
by the first day of the third Contract Year.) The minimum initial Purchase
Payment is $2,000 for Qualified Contracts (or $50 monthly by payroll deduction
for Qualified Contracts). Subsequent Purchase Payments must be at least $125
for Non-Qualified Contracts or $50 for Qualified Contracts. AUSA Life reserves
the right to impose a $500 minimum on additional Purchase Payments for Non-
Qualified Contracts at any time in the future

5
<PAGE>

in its sole discretion. 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.

ALLOCATION OF PURCHASE PAYMENTS

Payment(s) will, unless you indicate otherwise, be invested in the
Portfolio(s) you selected immediately upon our receipt thereof, IN WHICH CASE
YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE PORTFOLIOS
DURING THE RIGHT TO CANCEL PERIOD. You must fill out and send us the
appropriate form or comply with other designated AUSA Life procedures if you
would like to change how subsequent Net Purchase Payments are allocated. (See
page 13.)

RIGHT TO CANCEL PERIOD

The Contract provides for a Right to Cancel Period of 10 days (20 days for
replacement) plus a 5 day grace period to allow for mail delivery, during
which you may cancel your investment in the Contract. To cancel your
investment, please return your Contract to us. When we receive the Contract,
we will return the Accumulated Value of your Purchase Payment(s) invested in
the Portfolios plus any fees and/or Premium Taxes that may have been
subtracted from such amount. (See page 12.)

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
allocation to 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 13.)

DEATH BENEFIT

If the Annuitant specified in your Contract dies prior to the Annuity Date,
your named Annuitant's Beneficiary will receive the Death Benefit under the
Contract. The Death Benefit is the greater of your Accumulated Value or the
Adjusted Death Benefit on the date we receive due proof of the Annuitant's
death. During the first six Contract Years, the Adjusted Death Benefit will be
the sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period, the Adjusted Death Benefit will be the
Death Benefit on the last day of the previous six-year period plus any Net
Purchase Payments made, less any partial withdrawals taken during the current
six-year period. After the Annuitant attains age 75, the Adjusted Death
Benefit will remain equal to the Death Benefit on the last day of the six-year
period ending before age 75 occurs plus any Net Purchase Payments subsequently
made, less any partial withdrawals subsequently taken. The Annuitant's
Beneficiary may elect to receive these proceeds as a lump sum or as Annuity
Payments. If the Annuitant dies on or after the Annuity Date, any unpaid
payments certain will be paid, generally to the Annuitant's Beneficiary, in
accordance with the Contract. (See page 17.)

ANNUITY PAYMENT OPTIONS

CONTRACT AND POLICYHOLDER INFORMATION

6
<PAGE>

CHARGES AND DEDUCTIONS UNDER THE CONTRACT

The Contract has no sales charges and has an annual mortality and expense risk
charge of .55%. Contract Owners may withdraw up to 100% of the Accumulated
Value without incurring a surrender charge. The Contract also includes
administrative charges and policy fees, which pay for administering the
Contract, as well as portions of the management, advisory and other fees,
which reflect the costs of operating the Portfolios. (See page 13.)

FULL AND PARTIAL WITHDRAWALS

You may withdraw all or part of the Surrender Value of the Contract before the
earlier of the Annuity Date or the Annuitant's death. Withdrawals made prior
to age 59 1/2 may be subject to a 10% federal tax penalty (and a portion
thereof may be subject to ordinary income taxes). (See page 15.)

FEE TABLE

The following table illustrates all expenses (except for Premium Taxes that
may be assessed by your state) that you would incur as an owner of a Contract
(see page 13). The purpose of this table is to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as a
purchaser of the Contract. The fee table reflects all expenses for both the
Separate Account and the Portfolios. For a complete discussion of Contract
costs and expenses, see "Charges and Deductions," page 13.

<TABLE>
<S> <C>
CONTRACTOWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases........................................ None
Contingent Deferred Sales Load (surrender charge)...................... None
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...................................... .55%
Administrative Charge.................................................. .15%
----
Total Annual Separate Account Expenses................................. .70%
</TABLE>

7
<PAGE>

PORTFOLIO ANNUAL EXPENSES

The Portfolios will operate at a zero expense level during the first three
years of operations. However, while those Portfolios are expected to operate
without expenses, including management fees, Contract Owners in those
Portfolios bear indirectly the expenses of the Underlying Funds in which those
Portfolios invest. The following chart illustrates the indirect expense ratio
that each Portfolio incurred based on certain allocations among the Underlying
Funds. Except as may be indicated, the figures below are based on expenses for
the 1997 fiscal year of operation (as a percentage of each such Portfolio's
average net assets after fee waiver and/or expense reimbursement).

<TABLE>
<CAPTION>
TOTAL PORTFOLIO
ANNUAL
EXPENSES
---------------
<S> <C>
Capital Preservation Portfolio............................ 0.78%*
Income Oriented Portfolio................................. 0.88%*
Growth and Income Portfolio............................... 0.90%*
Capital Growth Portfolio.................................. 0.94%*
Maximum Appreciation Portfolio............................ 0.95%*
</TABLE>
* These numbers are based on an agreement by PB Investment Advisors, Inc.,
formerly Providian Investment Advisors, Inc. (the "Adviser"), to limit the
Other Expenses of each Underlying Fund so that the ratio of expenses
(excluding advisory fees) to net assets on an annual basis does not exceed
0.25%. Expenses in excess of such amounts will be assumed by the Adviser
until the earlier of (a) the end of three years after commencement of
operations or (b) the termination by the Trust's Trustees or the
Portfolios' shareholders, but not the Adviser, of the Trust's Advisory
Agreement with the Adviser. For fiscal year 1997, the actual expenses of
the Portfolios, absent the Adviser's agreement to assume the Portfolio's
expenses and certain of the Underlying Funds' expenses, were adversely
affected by the small size of the Portfolios and would have been: Capital
Preservation Portfolio 161.07%; Income Oriented Portfolio 1978.36%; Growth
and Income Portfolio 30.27%; Capital Growth Portfolio 20.00%; and Maximum
Appreciation Portfolio 24.50%. For more information concerning the actual
expenses of the Portfolios, please see the Trust's Annual Report, which is
available by calling 1-800-866-0005.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------- -------
<S> <C> <C>
Capital Preservation Portfolio.......................... $24.99 $76.11
Income Oriented Portfolio............................... $25.99 $79.15
Growth and Income Portfolio............................. $26.19 $79.76
Capital Growth Portfolio................................ $26.59 $80.97
Maximum Appreciation Portfolio.......................... $26.69 $81.28
</TABLE>

The Annual Contract Fee in these examples is estimated and reflects a
percentage equal to the total amount of fees collected during a calendar year
divided by the total average net assets of the Portfolios during the same
calendar year. During the first year of operations, we have assumed an average
Contract size of $3,000. The fee is assumed to remain the same in each year of
the above periods. (With respect to partial year periods, if any, in the
examples, the Annual Contract Fee is pro-rated to reflect only the applicable
portion of the partial year period.) The Annual Contract Fee will be deducted
on each Contract Anniversary and upon surrender or annuitization of the
Contract, on a pro rata basis, from each Subaccount. AUSA Life may also deduct
Premium Taxes, if any, as incurred by AUSA Life.

8
<PAGE>

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.

CONDENSED FINANCIAL INFORMATION
(FOR THE PERIOD JANUARY 1, 1997 THROUGH DECEMBER 31, 1997)

<TABLE>
<CAPTION>
GROWTH
CAPITAL INCOME AND CAPITAL MAXIMUM
PRESERVATION ORIENTED INCOME GROWTH APPRECIATION
------------ -------- ------ ------- ------------
<S> <C> <C> <C> <C> <C>
Accumulation unit value as
of:
12/31/97.................. N/A N/A N/A N/A N/A
Number of units outstanding
as of:
12/31/97.................. N/A N/A N/A N/A N/A
</TABLE>

FINANCIAL STATEMENTS

The audited supplemental statutory-basis financial statements of AUSA Life (as
well as the Independent Auditors' Report thereon) are contained in the Statement
of Additional Information. No financial statements are included for the Separate
Account because, as of the end of the most recent fiscal year, the Subaccounts
of the Separate Account offered by the PGA Retirement Annuity had not commenced
operations, and consequently had no assets or liabilities.

PERFORMANCE MEASURES

Performance for the Subaccounts of the Separate Account, including the yield
and the total return of all Subaccounts, may appear in reports and promotional
literature to current or prospective Contract Owners.

Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's and Subaccount's yield and total return, and a list of the indexes
and other benchmarks used in evaluating a Portfolio's and Subaccount's
performance.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN

ADDITIONAL PERFORMANCE MEASURES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN

AUSA Life may show Non-Standardized Cumulative Total Return (i.e., the
percentage change in the value of an Accumulation Unit) for one or more
Subaccounts with respect to one or more periods, including Total Return Year-
to-Date with respect to certain periods. AUSA Life may also show Non-
Standardized 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 Non-Standardized Cumulative Total Return and the Non-Standardized Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized 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 Non-Standardized
Cumulative Total Return and Non-Standardized Average Annual Total Return also
reflect these expenses. These returns, however, do not reflect the Annual
Contract Fee or Premium Taxes (if any), which, if included, would reduce the
percentages reported.

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YIELD AND EFFECTIVE YIELD

From time to time a Portfolio may advertise its yield and total return
investment performance. For each Subaccount for which AUSA Life advertises
yield, AUSA Life 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.

Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service which ranks mutual funds and other investment companies by
overall performance, investment objectives and assets. Performance may also be
tracked by other ratings services, companies, publications or persons who rank
separate accounts or other investment products on overall performance or other
criteria, including Morningstar, Inc. Performance figures will be calculated
in accordance with standardized methods established by each reporting service.

AUSA LIFE AND THE SEPARATE ACCOUNT

AUSA LIFE INSURANCE COMPANY, INC.

AUSA LIFE INSURANCE COMPANY, INC. SEPARATE ACCOUNT C

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The Separate Account has dedicated 5 Subaccounts to the Contract, each of
which invests solely in a corresponding Portfolio of the Trust. Additional
subaccounts may be established at the discretion of AUSA Life. The Separate
Account also includes other subaccounts which are not available under the
Contract.

PB SERIES TRUST

The Trust is a diversified investment company presently consisting of 9
separate series each having different investment objectives and policies. This
Contract offers 5 series of shares, each a professionally managed investment
Portfolio. Each Portfolio seeks to achieve its objective by investing in a
number of other series offered by the Trust. The Adviser has retained Atlanta
Capital Management Company, L.L.C. ("Atlanta Capital") to serve as sub-adviser
for the Portfolios. Subject to the supervision and direction of the Board of
Trustees of the Trust, Atlanta Capital determines how each of its Portfolios'
assets will be invested in the Underlying Funds. Atlanta Capital receives a
fee, which is paid by the Adviser and is a percentage of the annual net asset
value of the Underlying Funds for which Atlanta Capital serves as sub-adviser
and in which the Portfolios invest. The advisory fee is deducted automatically
from the assets of the Underlying Funds, and is therefore paid indirectly by
the Portfolios.

THE PORTFOLIOS (SEE ACCOMPANYING PROSPECTUS)

FOR MORE INFORMATION CONCERNING THE RISKS ASSOCIATED WITH EACH PORTFOLIO'S
INVESTMENTS, PLEASE REFER TO THE PROSPECTUS FOR THE PORTFOLIOS.

THE CAPITAL PRESERVATION PORTFOLIO--seeks high current income with low
volatility of principal.

THE INCOME ORIENTED PORTFOLIO--seeks income and, secondarily, long term growth
of capital.

THE GROWTH AND INCOME PORTFOLIO--seeks growth of capital and income.

THE CAPITAL GROWTH PORTFOLIO--seeks long term growth of capital and,
secondarily, current income.

THE MAXIMUM APPRECIATION PORTFOLIO--seeks capital appreciation.

OTHER PORTFOLIO INFORMATION

There is no assurance that a Portfolio will achieve its stated investment
objective.

Additional information concerning the investment objectives and policies of
the Portfolios and the investment advisory services, total expenses and
charges can be found in the current prospectuses for the Portfolios. THE
PORTFOLIOS' PROSPECTUS SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF NET PURCHASE PAYMENTS TO A PORTFOLIO.

The Portfolios may, in the future, be made available to registered separate
accounts offering variable annuity and variable life products of AUSA Life as
well as other insurance companies or to a person or plan, including a pension
or retirement plan receiving favorable tax treatment under the Code, that
qualifies to purchase shares of the Portfolios under Section 817(h) of the
Code. Although we believe it is unlikely, a material conflict could arise
among the interests of the Separate Account and one or more of the other
participating separate accounts and other qualified persons or plans. In the
event of a material conflict, the affected insurance companies agree to take
any necessary steps, including removing their separate accounts from the
Portfolios if required by law, to resolve the matter.

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CONTRACT FEATURES

CONTRACT APPLICATION AND PURCHASE PAYMENTS

If you wish to purchase a Contract, you should complete the application and
forward it and the initial Purchase Payment to the address indicated on the
application, or to such address as AUSA Life may from time to time designate.
If you wish to make personal delivery by hand or courier to AUSA Life of the
completed application form and the initial Purchase Payment (rather than
through the mail), you must do so at our Administrative Offices at 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499. For a Non-Qualified Contract,
the initial Purchase Payment must be equal to at least $250. If at any time
after the second Contract Anniversary the sum of all Purchase Payments made
less any withdrawals taken is not at least $3,000, we reserve the right to
terminate the Contract, in which case we will pay you the Accumulated Value.
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). To obtain an application, please call our Administrative
Offices at 1-800-866-0005.

The Contract will be issued and the initial Purchase Payment less any Premium
Taxes will be credited within 2 Business Days after receipt of the application
and the initial Purchase Payment in good order. AUSA Life reserves the right
to reject any application or initial Purchase Payment.

If the initial Purchase Payment cannot be credited within 5 Business Days
because the application is incomplete, we will contact the applicant, explain
the reason for the delay and refund the initial Purchase Payment, unless the
applicant instructs us to retain the initial Purchase Payment and credit it as
soon as the necessary requirements are fulfilled.

You may make additional Purchase Payments at any time before the Annuity Date,
as long as the Annuitant is living. For Non-Qualified Contracts, additional
Purchase Payments must be for at least $125, although we reserve the right to
impose a $500 minimum on additional Purchase Payments at any time in the
future in our sole discretion. Additional Purchase Payments must be for at
least $50 for Qualified Contracts. Additional Purchase Payments received prior
to the close of the New York Stock Exchange (generally 4:00 P.M. Eastern time)
are credited to the Accumulated Value at the close of business that same day.
Additional Purchase Payments received after the close of the New York Stock
Exchange are processed the next Business Day.

Total Purchase Payments may not exceed $1,000,000 without our prior approval.

AUSA Life 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 AUSA Life to reverse a surrender or withdrawal
transaction, whether full or partial, AUSA Life reserves the right to refuse
such requests or grant such requests on condition that the Contract's
Accumulated Value be adjusted to reflect appropriate investment results,
administration costs or loss of interest during the relevant period.

PURCHASING BY WIRE

For wiring instructions please contact our Administrative Offices at 1-800-
866-0005.

RIGHT TO CANCEL PERIOD

A Right to Cancel Period exists for 10 days after you receive the Contract (20
days for replacement) plus a 5 day grace period to allow for mail delivery.
The Contract permits you to cancel the Contract during the Right to Cancel
Period by returning the Contract to our Administrative Offices, 4333 Edgewood
Road, N.E., Cedar Rapids, Iowa 52499, or mailing it to us at P.O. Box 3183,
Cedar Rapids, Iowa 52406-3183. Upon cancellation, the Contract is treated as
void from the Contract Date and when we receive the Contract, we will return
the Accumulated Value of your Purchase Payment(s) invested in the Portfolios
plus any fees and/or Premium Taxes that may have been subtracted from such
amount.

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ALLOCATION OF PURCHASE PAYMENTS

You decide how your Net Purchase Payments will be allocated. You may allocate
each Net Purchase Payment to one of the Portfolios as long as such portions
are whole number percentages provided no Portfolio may contain a balance of
less than $250, except in cases where Purchase Payments are made by monthly
payroll deduction. You may change allocation instructions for future Net
Purchase Payments by sending us the appropriate AUSA Life form or by complying
with other designated AUSA Life procedures. If an additional Net Purchase
Payment is not accompanied by allocation instructions, it will be allocated to
the same Portfolio(s) as your prior Net Purchase Payments are invested at that
time, unless otherwise directed by you in writing in advance.

Payment(s) will, unless you indicate otherwise, be invested in your
Portfolio(s) immediately upon our receipt thereof, IN WHICH CASE YOU WILL BEAR
FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE PORTFOLIOS DURING THE
RIGHT TO CANCEL PERIOD.

EXCHANGES AMONG THE PORTFOLIOS

Should your investment goals change, you may exchange Accumulated Value among
the Portfolios. 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.

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 AUSA Life and (ii) any increase in the
Accumulated Value due to investment results of the selected Portfolio(s)
during the Valuation Period; and reduced by: (i) any decrease in the
Accumulated Value due to investment results of the selected Portfolio(s), (ii)
a daily charge to cover the mortality and expense risks assumed by AUSA Life,
(iii) any charge to cover the cost of administering the Contract, (iv) any
partial withdrawals, and (v) any charges for any Exchanges made after the
first 12 in any Contract Year.

CHARGES AND DEDUCTIONS

There are no sales charges for the Contracts.

MORTALITY AND EXPENSE RISK CHARGE

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ADMINISTRATIVE CHARGE AND ANNUAL CONTRACT FEE

An administrative charge equal to .15% annually of the net asset value of the
Separate Account is assessed daily along with the Annual Contract Fee of $30.
The Annual Contract Fee is deducted proportionately from the Subaccounts. For
any Contract with amounts allocated to the Subaccounts, the $30 fee is
assessed per Contract, not per Portfolio chosen. The Annual Contract Fee will
be deducted from each Subaccount on each Contract Anniversary and upon
surrender, on a pro rata basis based on the number of months that have passed
since the last anniversary date. These deductions represent reimbursement for
the costs expected to be incurred over the life of the Contract for issuing
and maintaining each Contract and the Separate Account.

EXCHANGE FEE

Each Contract Year you may make an unlimited number of Exchanges between
Portfolios, provided that after an Exchange no Portfolio may contain a balance
of less than $250, except in cases where Purchase Payments are made by monthly
payroll deduction. 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.

TAXES

Under present laws, AUSA Life 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. AUSA Life does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Contracts. (See "Federal Tax Considerations," page 19.)
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.

AUSA Life 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
AUSA Life. This might become necessary if the tax treatment of AUSA Life is
ultimately determined to be other than what AUSA Life 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 AUSA Life's tax status. In
the event that AUSA Life 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 the Trust's Prospectus and
Statement of Additional Information.

EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS

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 Portfolio(s) held under that
Contract on a pro rata basis. If at any time after the second Contract
Anniversary the sum of Purchase Payments made less any withdrawals taken is
not at least $3,000, we reserve the right to terminate the Contract, in which
case we will pay you the Accumulated Value. The full proceeds would be taxable
as a withdrawal. We will not exercise this right with respect to Qualified
Contracts.

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DISTRIBUTIONS UNDER THE CONTRACT

FULL AND PARTIAL WITHDRAWALS

You can make a withdrawal by sending the appropriate AUSA Life form to our
Administrative Offices. Your proceeds will normally be processed and mailed to
you within 2 Business Days after the receipt of the request but in no event
will it be later than 7 calendar days, subject to postponement in certain
circumstances. (See "Deferment of Payment," page 19.)

LUMP SUM PAYMENT OPTION

SYSTEMATIC WITHDRAWAL OPTION

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. Like any other partial withdrawal, each
Systematic Withdrawal is subject to taxes on earnings. If the owner has not
provided AUSA Life with a written election not to have federal income taxes
withheld, AUSA Life 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 19.) 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.

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ANNUITY DATE

ANNUITY PAYMENT OPTIONS

LIFE ANNUITY--Monthly Annuity Payments are paid for the life of an Annuitant,
ceasing with the last Annuity Payment due prior to the Annuitant's death.

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.

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.

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of that Portfolio. Subject to approval by AUSA Life, you may select any other
Annuity Payment Option then being offered by AUSA Life. 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, AUSA Life has the right to pay that
amount in a lump sum. From time to time, AUSA Life 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 AUSA Life.

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.

After the Annuity Date, you may change the Portfolio funding the Variable
Annuity Payments on the appropriate AUSA Life form or by calling our
Administrative Offices at 1-800-866-6007.

DEATH BENEFIT

DEATH OF ANNUITANT BEFORE ANNUITY DATE

The Death Benefit is the greater of:

(1) The Accumulated Value on the date we receive due Proof of Death; or

(2) The Adjusted Death Benefit.

During the first six Contract Years, the Adjusted Death Benefit will be the
sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period, the Adjusted Death Benefit will be the
Death Benefit on the last day of the previous six-year period plus any Net
Purchase Payments made, less any partial withdrawals taken during the current
six-year period. After the Annuitant attains age 75, the Adjusted Death
Benefit will remain equal to the Death Benefit on the last day of the six-year
period ending before age 75 occurs plus any Net Purchase Payments subsequently
made, less any partial withdrawals subsequently taken.

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DEATH OF ANNUITANT ON OR AFTER ANNUITY DATE

DESIGNATION OF AN 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);

(d) If an Annuitant's Beneficiary dies at the same time as the Annuitant,
the proceeds will be paid as though the Annuitant's Beneficiary had
died first. If an Annuitant's Beneficiary dies within 15 days after the
Annuitant's death and before AUSA Life receives due proof of the
Annuitant's death, proceeds will be paid as though the Annuitant's
Beneficiary had died first.

DEATH OF CONTRACT OWNER

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DEFERMENT OF PAYMENT

Payment of any cash withdrawal or lump sum Death Benefit due from the Separate
Account will occur within 7 days from the date the election becomes effective
except that AUSA Life 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, AUSA Life's tax
status and upon the tax status of the individuals concerned. The following
discussion is general in nature and is not intended as tax advice. You should
consult a tax adviser regarding the tax consequences of purchasing a Contract.
No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion is based upon AUSA Life'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

TAXATION OF FULL OR PARTIAL WITHDRAWALS

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. Generally, 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

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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.

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
AUSA Life of that election. In certain situations, taxes will be withheld on
distributions to nonresident aliens at a 30% flat rate unless an exemption
from withholding applies under the 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.

ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS

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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

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.

AUSA LIFE'S TAX STATUS

DIVERSIFICATION STANDARDS

To comply with certain diversification regulations (the "Regulations") under
Code Section 817(h), one year after the 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 of the
Separate Account is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any
three investments, and no more than 90% is represented by any four
investments. A "look-through" rule applies that suggests that each Subaccount
of the Separate Account will be tested for compliance with the percentage
limitations by looking through to the assets of the Portfolios in which each
such Subaccount invests. AUSA Life believes that under this rule, the Separate
Account must be tested for compliance with the percentage limitations by
"looking through" both the shares in Portfolios that are held by the Separate
Account and the shares in the Underlying Funds that are held by the Portfolios
to the investment assets held by the Underlying Funds. All securities of the
same issuer are treated as a single investment. Each government agency or
instrumentality will be treated as a separate issuer for purposes of those
limitations.

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issued in this area at some time in the future. It is not clear, at this time,
what these regulations or rulings would provide. It is possible that when the
regulations or ruling are issued, the Contracts may need to be modified in
order to remain in compliance. For these reasons, AUSA Life reserves the right
to modify the Contracts, as necessary, to prevent the Contract Owner from
being considered the owner of assets of the Separate Account.

We intend to comply with the Regulations to assure that the Contracts continue
to be treated as annuity contracts for federal income tax purposes.

GENERAL INFORMATION

ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS

AUSA Life retains the right, subject to any applicable law, to make certain
changes. AUSA Life reserves the right to eliminate the shares of any of the
Portfolios and to substitute shares of another Portfolio, or of another
registered, open-end management investment company, if the shares of the
Portfolios are no longer available for investment, or, if in AUSA Life'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 AUSA Life. Any new
portfolios will be made available to existing Contract Owners on a basis to be
determined by AUSA Life. AUSA Life may also eliminate one or more Portfolios
if marketing, tax, investment or other conditions so warrant.

VOTING RIGHTS

The Trust does not hold regular meetings of shareholders. The Trustees of the
Trust may call special meetings of shareholders as may be required by the 1940
Act or other applicable law. To the extent required by law, the Portfolio
shares held in the Separate Account will be voted by AUSA Life at shareholder
meetings of the Trust in accordance with instructions received from persons
having voting interests in the corresponding Portfolio. Trust shares as to
which no timely instructions are received or shares held by AUSA Life 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 of the Portfolio that are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the corresponding
Portfolio. Voting instructions will be solicited by written communication
prior to such meeting in accordance with procedures established by the Trust.

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YEAR 2000 MATTERS

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.

AUDITORS

Ernst & Young LLP serves as independent auditors for the Separate Account and
AUSA Life and will audit their financial statements annually.

LEGAL MATTERS

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TABLE OF CONTENTS FOR THE PGA RETIREMENT ANNUITY

STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CONTRACT.............................................................. 3
Computation of Variable Annuity Income Payments......................... 3
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 4
GENERAL MATTERS........................................................... 4
Non-Participating....................................................... 4
Misstatement of Age or Sex.............................................. 4
Assignment.............................................................. 4
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 5
PERFORMANCE INFORMATION................................................... 5
30-Day Yield for Subaccounts............................................ 5
Standardized Average Annual Total Return for Subaccounts................ 5
ADDITIONAL PERFORMANCE MEASURES........................................... 6
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 6
Non-Standardized Total Return Year-to-Date.............................. 7
Non-Standardized One Year Return........................................ 7
PERFORMANCE COMPARISONS................................................... 8
SAFEKEEPING OF ACCOUNT ASSETS............................................. 9
AUSA LIFE................................................................. 9
STATE REGULATION OF AUSA LIFE............................................. 10
RECORDS AND REPORTS....................................................... 10
DISTRIBUTION OF THE CONTRACTS............................................. 10
LEGAL PROCEEDINGS......................................................... 10
OTHER INFORMATION......................................................... 11
FINANCIAL STATEMENTS...................................................... 11
Audited Financial Statements............................................ 11
</TABLE>

24
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
ADVISOR'S EDGE VARIABLE ANNUITY
AND FOR THE
DIMENSIONAL VARIABLE ANNUITY
OFFERED BY
AUSA LIFE INSURANCE COMPANY, INC.
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
4333 EDGEWOOD ROAD, N.E.
CEDAR RAPIDS, IOWA 52499

This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Advisor's Edge and the Dimensional Variable
Annuity variable annuity contracts (the "Contracts" and each a "Contract,"
respectively) offered by AUSA Life Insurance Company, Inc. ("AUSA Life"). You
may obtain a copy of either or both Prospectuses dated October 1, 1998, by
calling 1-800-866-6007 or by writing to our Administrative Offices, at 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499. Terms used in the current
Prospectuses for the respective Contracts are incorporated in this Statement
of Additional Information.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE APPLICABLE PROSPECTUS FOR EACH CONTRACT.

October 1, 1998
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CONTRACTS............................................................. 2
Computation of Variable Annuity Income Payments......................... 3
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 4
GENERAL MATTERS........................................................... 4
Non-Participating....................................................... 4
Misstatement of Age or Sex.............................................. 4
Assignment.............................................................. 4
Annuity Data............................................................ 5
Annual Statement........................................................ 5
Incontestability........................................................ 5
Ownership............................................................... 5
PERFORMANCE INFORMATION................................................... 5
Federated Prime Money Portfolio Subaccount Yield........................ 6
30-Day Yield for Non-Money Market Subaccounts........................... 6
Standardized Average Annual Total Return for Subaccounts................ 6
ADDITIONAL PERFORMANCE MEASURES........................................... 7
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 7
Non-Standardized Total Return Year-to-Date.............................. 8
Non-Standardized One Year Return........................................ 9
Non-Standardized Hypothetical Cumulative Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 9
Individualized Computer Generated Illustrations......................... 10
PERFORMANCE COMPARISONS................................................... 10
SAFEKEEPING OF ACCOUNT ASSETS............................................. 12
AUSA LIFE................................................................. 12
STATE REGULATION OF AUSA LIFE............................................. 12
RECORDS AND REPORTS....................................................... 13
DISTRIBUTION OF THE CONTRACTS............................................. 13
LEGAL PROCEEDINGS......................................................... 13
OTHER INFORMATION......................................................... 13
FINANCIAL STATEMENTS...................................................... 13
Audited Financial Statements............................................ 13
</TABLE>

THE CONTRACTS

In order to supplement the description in the applicable Prospectus, the
following provides additional information about the Contracts which may be of
interest to Contract Owners.

PLEASE NOTE THE FOLLOWING INFORMATION IN CONNECTION WITH THIS STATEMENT OF
ADDITIONAL INFORMATION AND THE CONTRACT PROSPECTUSES.

On and after March 31, 1997, the following portfolios are available through
the Dimensional Variable Annuity contract (and no longer offered through the
Advisor's Edge variable annuity contract):

DFA Small Value Portfolio DFA International Small Portfolio
DFA Large Value Portfolio DFA Short-Term Fixed Portfolio
DFA International Value Portfolio DFA Global Bond Portfolio

2
<PAGE>

On and after the same date, the following portfolios are available through the
Advisor's Edge variable annuity contract:

Federated American Leaders Portfolio
Montgomery Growth Portfolio
Federated Utility Portfolio Montgomery Emerging Markets Portfolio
Federated High Income Bond Wanger U.S. Small Cap Advisor Portfolio
Federated U.S. Government Wanger International Small Cap Advisor
Securities Portfolio Portfolio

On and after such date the following portfolio is available through both the
Advisor's Edge and Dimensional Variable Annuity contracts:

Federated Prime Money Portfolio

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. AUSA Life may, at the time annuity
income payments are computed, offer more favorable rates in lieu of the
guaranteed rates specified in the Annuity Tables.

The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set
forth below) is made. After the first Annuity Payment, the dollar amount of
each subsequent Annuity Payment is equal to the number of Annuity Units
multiplied by the Annuity Unit Value for the Subaccount ten Business Days
before the due date of the Annuity Payment.

The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date money was first deposited in that Subaccount. The Annuity Unit
Value for any subsequent Business Day is equal to (a) times (b) times (c),
where

(a)= the Annuity Unit Value for the immediately preceding Business Day;

(b)= the Net Investment Factor for the day; and

(c)= the investment result adjustment factor (.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in determining
the Annuity Payment amounts.

The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:

(a)= any increase or decrease in the value of the Subaccount due to
investment results;

(b)= a daily charge assessed at an annual rate of .50% for the mortality
and expense risks assumed by AUSA Life; and

(c)= a daily charge for the cost of administering the Contract
corresponding to an annual charge of .15% of the value of the
Subaccount, plus the Annual Contract Fee.

The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year.

EXCHANGES

3
<PAGE>

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. AUSA Life reserves the
right to impose a $15 fee 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, AUSA
Life 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

AUSA Life may reduce administrative charges or other deductions from Purchase
Payments in certain situations where AUSA Life expects to realize significant
economies of scale or other economic benefits with respect to the sale 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 a 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.

AUSA Life 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 AUSA Life, its ultimate
parent company, and their affiliates and certain sales representatives for the
Contract. AUSA Life may also grant waivers or modifications of certain minimum
or maximum purchase or transaction amounts or balance requirements in these
circumstances.

Notwithstanding the above, any variations in 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 AUSA Life.

MISSTATEMENT OF AGE OR SEX

AUSA Life 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, AUSA
Life 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,
AUSA Life will: (1) in the case of underpayment, pay the full amount due with
the next payment; and (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. AUSA Life is not responsible for the
validity of any assignment. No assignment will be recognized until AUSA Life
receives the appropriate AUSA Life form notifying AUSA Life of such
assignment. The interest of any beneficiary which the assignor has the right
to change shall be subordinate to the interest of an assignee. Any amount paid
to the assignee shall be paid in one sum notwithstanding any settlement
agreement in effect at the time assignment was executed. AUSA Life shall not
be liable as to any payment or other settlement made by AUSA Life before
receipt of the appropriate AUSA Life form.

4
<PAGE>

ANNUITY DATA

AUSA Life will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to AUSA Life.

ANNUAL STATEMENT

Once each Contract Year, AUSA Life 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 AUSA Life 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 AUSA Life 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 Federated Prime Money 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.)

Certain total return and performance information for operations of the DFA
Small Value Portfolio, DFA Large Value Portfolio, DFA International Value
Portfolio, DFA International Small Portfolio, DFA Short-Term Fixed Portfolio
and DFA Global Bond Portfolio for periods prior to 3/31/97 reflect operations
of these Subaccounts in the Advisor's Edge Variable Annuity.

Until October 1995, the DFA Large Value Portfolio (formerly DFA Global Value
Portfolio) invested its assets in both U.S. and international securities.
Depending on the period presented, total return and performance information
presented for the DFA Large Value Portfolio may reflect the performance of the
Portfolio when it invested in the stocks of both U.S. and international
companies. Total return and performance information for the DFA Large Value
Portfolio which includes the period prior to October 1995 should not be
considered indicative of the Portfolio's future performance.

Where applicable, the following Subaccount inception dates are used in the
calculation of performance figures: 1/23/97 for DFA Global Bond Portfolio;
1/23/97 for DFA International Small Portfolio; 1/23/97 for DFA International
Value Portfolio; 1/23/97 for DFA Large Value Portfolio; 2/21/97 for DFA Short-
Term Fixed Portfolio; 1/23/97 for DFA Small

5
<PAGE>

Value Portfolio; 1/22/97 for Federated Prime Money Portfolio; 5/1/97 for
Federated American Leaders Portfolio; 5/1/97 for Federated Utility Portfolio;
3/7/97 for Federated U.S. Government Securities Portfolio; 5/1/97 for
Federated High Income Bond Portfolio; 5/1/97 for Montgomery Growth Portfolio;
2/26/97 for Montgomery Emerging Markets Portfolio; 5/1/97 for Wanger U.S.
Small Cap Advisor Portfolio; and 5/1/97 for Wanger International Small Cap
Advisor Portfolio.

Where applicable, the following Fund inception dates are used in the
calculation of performance figures: 1/18/95 for DFA Global Bond Portfolio;
10/6/95 for DFA International Small Portfolio; 10/3/95 for DFA International
Value Portfolio; 1/18/95 for DFA Large Value Portfolio; 10/9/95 for DFA Short-
Term Fixed Portfolio; 10/6/95 for DFA Small Value Portfolio; 11/21/94 for
Federated Prime Money Portfolio; 2/10/94 for Federated American Leaders
Portfolio; 2/10/94 for Federated Utility Portfolio; 3/28/94 for Federated U.S.
Government Securities Portfolio; 2/2/94 for Federated High Income Bond
Portfolio; 2/12/96 for Montgomery Growth Portfolio; 2/5/96 for Montgomery
Emerging Markets Portfolio; 5/3/95 for Wanger U.S. Small Cap Advisor
Portfolio; and 5/3/95 for Wanger International Small Cap Advisor Portfolio.

FEDERATED PRIME MONEY PORTFOLIO SUBACCOUNT YIELDS

Current yield for the Federated Prime Money 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:

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;
and

[d]equals the maximum offering price per Accumulation Unit on the last day
of the period.

Yield on the Subaccount is earned from the increase in net asset value of
shares of the Portfolio in which the Subaccount invests and from dividends
declared and paid by the Portfolio, which are automatically reinvested in
shares of the Portfolio.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS

When advertising performance of the Subaccounts, AUSA Life 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 any
contingent deferred sales load), the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes,
if any.

6
<PAGE>

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; and

(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).

The following table shows the Standardized Average Annual Total Return for the
Subaccounts for the period beginning at the inception of each Subaccount and
ending on December 31, 1997.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING 12/31/97

<TABLE>
<CAPTION>
SINCE
SUBACCOUNT ONE YEAR* SUBACCOUNT INCEPTION
---------- --------- --------------------
<S> <C> <C>
Federated Prime Money............................ N/A 4.01%
Federated American Leaders....................... N/A 23.02%
Federated U.S. Gov't Securities.................. N/A 7.48%
Federated Utility................................ N/A 24.74%
Federated High Income Bond....................... N/A 11.54%
Wanger Int'l Small Cap........................... N/A -4.33%
Wanger U.S. Small Cap............................ N/A 33.94%
Montgomery Emerging Markets...................... N/A -11.76%
Montgomery Growth................................ N/A 23.87%
DFA Global Bond.................................. N/A 6.37%
DFA Large Value.................................. N/A 22.39%
DFA Int'l Value.................................. N/A -0.08%
DFA Int'l Small.................................. N/A -25.26%
DFA Small Value.................................. N/A 26.42%
DFA Short-Term Fixed............................. N/A 4.24%
</TABLE>

*Returns shown are for the period from each Subaccount's inception date. As of
12/31/97, the Subaccounts had not been in operation for an entire year.

ADDITIONAL PERFORMANCE MEASURES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN

AUSA Life may show Non-Standardized Cumulative 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. AUSA Life may also show Non-
Standardized 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 Cumulative Total Return and the Non-Standardized Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized 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 Cumulative Total Return and Non-Standardized 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 AUSA Life.

7
<PAGE>

NON-STANDARDIZED CUMULATIVE TOTAL RETURN
FOR PERIOD ENDING 12/31/97

<TABLE>
<CAPTION>
SINCE
SUBACCOUNT ONE YEAR* SUBACCOUNT INCEPTION
---------- --------- --------------------
<S> <C> <C>
Federated Prime Money............................ N/A 4.04%
Federated American Leaders....................... N/A 23.04%
Federated U.S. Gov't Securities.................. N/A 7.51%
Federated Utility................................ N/A 24.76%
Federated High Income Bond....................... N/A 11.56%
Wanger Int'l Small Cap........................... N/A -4.31%
Wanger U.S. Small Cap............................ N/A 33.96%
Montgomery Emerging Markets...................... N/A -11.73%
Montgomery Growth................................ N/A 23.89%
DFA Global Bond.................................. N/A 6.40%
DFA Large Value.................................. N/A 22.42%
DFA Int'l Value.................................. N/A -0.05%
DFA Int'l Small.................................. N/A -25.23%
DFA Small Value.................................. N/A 26.45%
DFA Short-Term Fixed............................. N/A 4.26%
</TABLE>
*Returns shown are for the period from each Subaccount's inception date. As of
12/31/97, the Subaccounts had not been in operation for an entire year.

NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING 12/31/97

<TABLE>
<CAPTION>
SINCE
SUBACCOUNT ONE YEAR* SUBACCOUNT INCEPTION
- ---------- --------- --------------------
<S> <C> <C>
Federated Prime Money............................ N/A 4.04%
Federated American Leaders....................... N/A 23.04%
Federated U.S. Gov't Securities.................. N/A 7.51%
Federated Utility................................ N/A 24.76%
Federated High Income Bond....................... N/A 11.56%
Wanger Int'l Small Cap........................... N/A -4.31%
Wanger U.S. Small Cap............................ N/A 33.96%
Montgomery Emerging Markets...................... N/A -11.73%
Montgomery Growth................................ N/A 23.89%
DFA Global Bond.................................. N/A 6.40%
DFA Large Value.................................. N/A 22.42%
DFA Int'l Value.................................. N/A -0.05%
DFA Int'l Small.................................. N/A -25.23%
DFA Small Value.................................. N/A 26.45%
DFA Short-Term Fixed............................. N/A 4.26%
</TABLE>
*Returns shown are for the period from each Subaccount's inception date. As of
12/31/97, the Subaccounts had not been in operation for an entire year.

NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE

AUSA Life 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 AUSA Life.

8
<PAGE>

NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE

<TABLE>
<CAPTION>
TOTAL RETURN YTD
SUBACCOUNT AS OF 12/31/97*
- ---------- ----------------
<S> <C>
Federated Prime Money.......................................... 4.04%
Federated American Leaders..................................... 23.04%
Federated U.S. Gov't Securities................................ 7.51%
Federated Utility.............................................. 24.76%
Federated High Income Bond..................................... 11.56%
Wanger Int'l Small Cap......................................... -4.31%
Wanger U.S. Small Cap.......................................... 33.96%
Montgomery Emerging Markets.................................... -11.73%
Montgomery Growth.............................................. 23.89%
DFA Global Bond................................................ 6.40%
DFA Large Value................................................ 22.42%
DFA Int'l Value................................................ -0.05%
DFA Int'l Small................................................ -25.23%
DFA Small Value................................................ 26.45%
DFA Short-Term Fixed........................................... 4.26%
</TABLE>

*Returns shown are for the period from each Subaccount's inception date. As of
12/31/97, the Subaccounts had not been in operation for an entire year.

NON-STANDARDIZED ONE YEAR RETURN

AUSA Life 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 AUSA Life.

NON-STANDARDIZED ONE YEAR RETURN

<TABLE>
<CAPTION>
SUBACCOUNT 1997
---------- -------
<S> <C>
Federated Prime Money................................................... 4.25%
Federated American Leaders.............................................. 31.48%
Federated U.S. Gov't Securities......................................... 7.88%
Federated Utility....................................................... 25.82%
Federated High Income Bond.............................................. 13.09%
Wanger Int'l Small Cap.................................................. -4.35%
Wanger U.S. Small Cap................................................... 25.64%
Montgomery Emerging Markets............................................. -1.22%
Montgomery Growth....................................................... 27.74%
DFA Global Bond......................................................... 7.09%
DFA Large Value......................................................... 28.39%
DFA Int'l Value......................................................... -2.86%
DFA Int'l Small......................................................... -25.56%
DFA Small Value......................................................... 29.60%
DFA Short-Term Fixed.................................................... 5.00%
</TABLE>

NON-STANDARDIZED HYPOTHETICAL CUMULATIVE RETURN AND NON-STANDARDIZED
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURN

9
<PAGE>

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. However, they reflect
a deduction for the Separate Account expenses and Portfolio expenses. 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 Cumulative 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.

INDIVIDUALIZED COMPUTER GENERATED ILLUSTRATIONS

AUSA Life may from time to time use computer-based software available through
Morningstar, CDA/Wiesenberger 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 Portfolio; (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
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 AUSA Life Insurance Company, Inc. 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;

10
<PAGE>

. 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 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.

11
<PAGE>

. 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 AUSA Life. The assets are
kept physically segregated and held separate and apart from AUSA Life's
General Account assets. The General Account contains all of the assets of AUSA
Life. Records are maintained of all purchases and redemptions of eligible
Portfolio shares held by each of the Subaccounts and the General Account.

AUSA LIFE

AUSA Life is a member of the Insurance Marketplace Standards Association
("IMSA") and, as such, may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and services
for individually-sold life insurance and annuity products.

AUSA Life is a wholly-owned indirect subsidiary of 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 OF AUSA LIFE

AUSA Life is subject to the laws of New York governing insurance companies and
to regulation by the New York Department of Insurance. An annual statement in
a prescribed form is filed with the Department of Insurance each year covering
the operation of AUSA Life for the preceding year and its financial condition
as of the end of such year. Regulation by the Department of Insurance includes
periodic examination to determine AUSA Life's contract liabilities and
reserves so that the Department may determine if the items are correct. AUSA
Life's books and accounts are

12
<PAGE>

subject to review by the Department of Insurance at all times. In addition,
AUSA Life is subject to regulation under the insurance laws of other
jurisdictions in which it may operate.

RECORDS AND REPORTS

All records and accounts relating to the Separate Account will be maintained
by AUSA Life. As presently required by the Investment Company Act of 1940 and
regulations promulgated thereunder, AUSA Life 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. Contract owners will also receive confirmation
of each financial transaction and any other reports required by law or
regulation.

DISTRIBUTION OF THE CONTRACTS

AFSG Securities Corporation ("AFSG"), formerly Providian Securities
Corporation, the principal underwriter of the Contracts, 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.

The Contracts are offered to the public through persons or entities licensed
under the federal securities laws and New York State insurance laws that have
entered into agreements with AFSG. The offering of the Contracts is continuous
and AFSG does not anticipate discontinuing the offering of the Contracts.
However, AFSG does reserve the right to discontinue the offering of the
Contracts.

LEGAL PROCEEDINGS

There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. AUSA Life is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.

OTHER INFORMATION

A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of
the information set forth in the Registration Statement, amendments and
exhibits thereto has been included in this Statement of Additional
Information. Statements contained in this Statement of Additional Information
concerning the content of the Contracts and other legal instruments are
intended to be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the
Securities and Exchange Commission.

FINANCIAL STATEMENTS

The 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 as
of that date. Accordingly, no financial statements are included for the
Separate Account for the year ended December 31, 1996.

The audited supplemental statutory-basis financial statements of AUSA Life,
for the years ended December 31, 1997, 1996, and 1995, respectively, including
the Report of Independent Auditors, thereon, which are also included in this
Statement of Additional Information, should be distinguished from the
financial statements of the Separate Account and should be considered only as
bearing on the ability of AUSA Life 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.

13
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
PGA RETIREMENT ANNUITY
OFFERED BY
AUSA LIFE INSURANCE COMPANY, INC.
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
4333 EDGEWOOD ROAD, N.E.
CEDAR RAPIDS, IOWA 52499

This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the PGA Retirement Annuity variable annuity
contracts (the "Contracts" or a "Contract") offered by AUSA Life Insurance
Company, Inc. ("AUSA Life"). You may obtain a copy of the Prospectus dated
October 1, 1998, by calling 1-800-866-0005 or by writing to our Administrative
Offices, at 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499. Terms used in
the current Prospectus for the Contracts are incorporated in this Statement of
Additional Information.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.

October 1, 1998
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CONTRACTS............................................................. 3
Computation of Variable Annuity Income Payments......................... 3
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 4
GENERAL MATTERS........................................................... 4
Non-Participating....................................................... 4
Misstatement of Age or Sex.............................................. 4
Assignment.............................................................. 4
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 5
PERFORMANCE INFORMATION................................................... 5
30-Day Yield for Non-Money Market Subaccounts........................... 5
Standardized Average Annual Total Return for Subaccounts................ 5
ADDITIONAL PERFORMANCE MEASURES........................................... 6
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 6
Non-Standardized Total Return Year-to-Date.............................. 7
Non-Standardized One Year Return........................................ 7
PERFORMANCE COMPARISONS................................................... 8
SAFEKEEPING OF ACCOUNT ASSETS............................................. 9
AUSA LIFE................................................................. 9
STATE REGULATION OF AUSA LIFE............................................. 10
RECORDS AND REPORTS....................................................... 10
DISTRIBUTION OF THE CONTRACTS............................................. 10
LEGAL PROCEEDINGS......................................................... 10
OTHER INFORMATION......................................................... 11
FINANCIAL STATEMENTS...................................................... 11
Audited Financial Statements............................................ 11
</TABLE>

2
<PAGE>

THE CONTRACT

In order to supplement the description in the Prospectus, the following
provides additional information about the Contract which may be of interest to
Contract Owners.

COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS

(a) = the Annuity Unit Value for the immediately preceding Business Day;

(b) = the Net Investment Factor for the day; and

(c) = the investment result adjustment factor (.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in determining
the Annuity Payment amounts.

The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:

(a) = any increase or decrease in the value of the Subaccount due to
investment results;

(b) = a daily charge assessed at an annual rate of .55% for the mortality
and expense risks assumed by AUSA Life; and

(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.

EXCHANGES

After the Annuity Date you may, by making a written request, exchange the
current value of an existing Subaccount to Annuity Units of any other
Subaccount(s) then available. The written request for an Exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the Exchange is to take effect. This Exchange shall result in
the same dollar amount as that of the Annuity Payment on the date of Exchange
(the "Exchange Date"). Each year you may make an unlimited number of free
Exchanges between Subaccounts. No fee is currently imposed for such Exchanges;
however, we reserve the right to charge a $15 fee for Exchanges in excess of
twelve per Contract Year.

3
<PAGE>

EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS

Notwithstanding the above, any variations in administrative charges or other
deductions from Purchase Payments or in the minimum or maximum transaction or
balance requirements shall reflect differences in costs or services and shall
not be unfairly discriminatory against any person.

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 AUSA Life.

MISSTATEMENT OF AGE OR SEX

ASSIGNMENT

ANNUITY DATA

AUSA Life will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to AUSA Life.

ANNUAL STATEMENT

Once each Contract Year, AUSA Life 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.

4
<PAGE>

OWNERSHIP

PERFORMANCE INFORMATION

Performance information for the Subaccounts, including the yield and the total
return of all Subaccounts, may appear in reports or promotional literature to
current or prospective Contract Owners.

Where applicable in calculating performance information, the Annual Contract
Fee is reflected as a percentage equal to the total amount of fees collected
during a calendar year divided by the total average net assets of the
Portfolios during the same calendar year. During the first year of operations,
we have assumed an average Contract size of $3,000. The fee is assumed to
remain the same in each year of the applicable period. (With respect to
partial year periods, if any, in the examples, the Annual Contract Fee is pro-
rated to reflect only the applicable portion of the partial year period.)

30-DAY YIELD FOR SUBACCOUNTS

Quotations of yield for the Subaccounts will be based on all investment income
per Unit earned during a particular 30-day period, less expenses accrued
during the period ("net investment income"), and will be computed by dividing
net investment income by the value of a Unit on the last day of the period,
according to the following formula:

YIELD = 2[(a-b + 1)/6/-1]
cd

Where:

[a] = the net investment income earned during the period by the Portfolio
attributable to shares owned by a Subaccount;

[b] = the expenses accrued for the period (net of reimbursement);

[c] = the average daily number of Units outstanding during the period; and

[d] = the maximum offering price per Accumulation Unit on the last day of
the period.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS

When advertising performance of the Subaccounts, AUSA Life will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes,
if any.

5
<PAGE>

P(1 + T)/n/ = ERV

Where:

[P] = a hypothetical initial Purchase Payment of $1,000;

[T] = an average annual total return;

[n] = the number of years; and

[ERV] = the ending redeemable value of a hypothetical $1,000 Purchase
Payment made at the beginning of the period (or fractional portion
thereof).

The following table shows the Standardized Average Annual Total Return for the
Subaccounts for the period beginning at the inception of each Subaccount and
ending on December 31, 1997.

<TABLE>
<CAPTION>
SINCE
SUBACCOUNT ONE YEAR* SUBACCOUNT INCEPTION
- ---------- --------- --------------------
<S> <C> <C>
Capital Preservation Portfolio................... N/A 3.79%
Income Oriented Portfolio........................ N/A 7.70%
Growth and Income Portfolio...................... N/A 9.10%
Capital Growth Portfolio......................... N/A 1.51%
Maximum Appreciation Portfolio................... N/A 13.65%
</TABLE>
* Returns shown are for the period from each Subaccount's inception date. As
of 12/31/97, the Subaccounts had not been in operation for an entire year.

ADDITIONAL PERFORMANCE MEASURES

NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN

AUSA Life may show Non-Standardized Cumulative 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. AUSA Life may also show Non-
Standardized 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 Cumulative Total Return and the Non-Standardized Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized 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 Cumulative Total Return and Non-Standardized Average Annual Total
Return also reflect these expenses. However, these percentages do not reflect
the Annual Contract Fee or Premium Taxes (if any), which, if included, would
reduce the percentages reported by AUSA Life.

NON-STANDARDIZED CUMULATIVE TOTAL RETURN
FOR THE PERIOD ENDING 12/31/97

6
<PAGE>

NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING 12/31/97

NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE

AUSA Life may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more Subaccounts with
respect to one or more non-standardized base periods commencing at the
beginning of a calendar year. Total Return YTD figures reflect the percentage
change in actual Accumulation Unit Values during the relevant period. These
percentages reflect a deduction for the Separate Account and Portfolio
expenses, but do not include the Annual Contract Fee or Premium Taxes (if
any), which if included would reduce the percentages reported by AUSA Life.

NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE

<TABLE>
<CAPTION>
TOTAL RETURN YTD
SUBACCOUNT AS OF 12/31/97*
- ---------- ----------------
<S> <C>
Capital Preservation Portfolio................................. 4.44%
Income Oriented Portfolio...................................... 8.35%
Growth and Income Portfolio.................................... 9.75%
Capital Growth Portfolio....................................... 2.16%
Maximum Appreciation Portfolio................................. 14.30%
</TABLE>

* Returns shown are for the period from each Subaccount's inception date. As
of 12/31/97, the Subaccounts had not been in operation for an entire year.

NON-STANDARDIZED ONE YEAR RETURN

AUSA Life 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 or Premium
Taxes (if any), which if included would reduce the percentages reported by
AUSA Life.

NON-STANDARDIZED ONE YEAR RETURN

<TABLE>
<CAPTION>
NON-STANDARDIZED
SUBACCOUNT ONE YEAR RETURN 1997*
- ---------- ---------------------
<S> <C>
Capital Preservation Portfolio............................ 4.44%
Income Oriented Portfolio................................. 8.35%
Growth and Income Portfolio............................... 9.75%
Capital Growth Portfolio.................................. 2.16%
Maximum Appreciation Portfolio............................ 14.30%
</TABLE>

* Returns shown are for the period from each Subaccount's inception date. As
of 12/31/97, the Subaccounts had not been in operation for an entire year.

7
<PAGE>

PERFORMANCE COMPARISONS

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.

. DOW JONES INDUSTRIAL AVERAGE ("DJIA"), an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by Dow Jones & Company, it is cited as
a principal indicator of market conditions.

8
<PAGE>

. THE CONSUMER PRICE INDEX, a measure for determining inflation.

Investors may use such indexes (or reporting services) in addition to the
Funds' Prospectuses to obtain a more complete view of each Portfolio's
performance before investing. Of course, when comparing each Portfolio's
performance to any index, conditions such as composition of the index and
prevailing market conditions should be considered in assessing the
significance of such comparisons. Unmanaged indexes may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.

SAFEKEEPING OF ACCOUNT ASSETS

AUSA LIFE

9
<PAGE>

assumed by AUSA Life. The merger did not affect any provisions of, or rights
or obligations under, those Contracts. In approving the merger on May 26,
1998, and May 29, 1998, respectively, the boards of directors of AUSA Life and
First Providian determined that the merger of two financially strong stock
life insurance companies would result in an overall enhanced capital position
and reduced expenses, which, together, would be in the long-term interests of
the Contract Owners. On May 26, 1998, 100% of the stockholders of AUSA Life
voted to approve the merger, and on May 29, 1998, 100% of the stockholders of
First Providian voted to approve the merger. In addition, the New York
Insurance Department has approved the merger.

STATE REGULATION OF AUSA LIFE

RECORDS AND REPORTS

All records and accounts relating to the Separate Account will be maintained
by AUSA Life. As presently required by the Investment Company Act of 1940 and
regulations promulgated thereunder, AUSA Life 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. Contract Owners will also receive confirmation
of each financial transaction and any other reports required by law or
regulation.

DISTRIBUTION OF THE CONTRACTS

AFSG Securities Corporation, formerly Providian Securities Corporation
("AFSG"), the principal underwriter of the Contracts, 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.

The Contracts are offered to members and employees of the Professional Golfers
Association of America ("PGA") and other golf related associations approved by
the PGA and AUSA Life through persons or entities licensed under the federal
securities laws and New York State insurance laws that have generally entered
into agreements with AFSG. The offering of the Contracts is continuous and
AFSG does not anticipate discontinuing the offering of the Contracts. However,
AFSG does reserve the right to discontinue the offering of the Contracts.

LEGAL PROCEEDINGS

10
<PAGE>

OTHER INFORMATION

FINANCIAL STATEMENTS

The Subaccounts described in the Contract Prospectus had not commenced
operations as of the year ended December 31, 1997, and consequently had no
assets or liabilities. Accordingly, no financial statements are included for
the Separate Account for the year ended December 31, 1997.

The audited supplemental statutory-basis financial statements of AUSA Life for
the periods ended December 31, 1997, 1996 and 1995, including the Reports of
Independent Auditors thereon, which are included in this Statement of
Additional Information, should be considered only as bearing on the ability of
AUSA Life to meet its obligations under the Contracts. They should not be
considered as bearing on the investment performance of the assets to be held
in the Separate Account.

11
<PAGE>

SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS

AUSA LIFE INSURANCE COMPANY, INC.

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
WITH REPORT OF INDEPENDENT AUDITORS

<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................. 1
Audited Supplemental Financial Statements
Supplemental Balance Sheets--Statutory Basis............................. 2
Supplemental Statements of Operations--Statutory Basis................... 3
Supplemental Statements of Changes in Capital and Surplus--Statutory
Basis................................................................... 4
Supplemental Statements of Cash Flows--Statutory Basis................... 5
Notes to Supplemental Financial Statements--Statutory Basis.............. 6
</TABLE>

F-i
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
AUSA Life Insurance Company, Inc.

We have audited the accompanying supplemental statutory-basis balance sheets
of AUSA Life Insurance Company, Inc. (reflecting the consolidation of AUSA
Life Insurance Company, Inc. and First Providian Life and Health Insurance
Company as described in Note 1) as of December 31, 1997 and 1996 and the
related supplemental statutory-basis statements of operations, changes in
capital and surplus, and cash flows for each of the three years in the period
ended December 31, 1997. The supplemental financial statements give
retroactive effect to the merger of AUSA Life Insurance Company, Inc. and
First Providian Life and Health Insurance Company on October 1, 1998, which
has been accounted for using the pooling of interests method as described in
the notes to the supplemental financial statements. These supplemental
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

As described in Note 1 to the supplemental financial statements, the Company
presents its financial statements in conformity with accounting practices
prescribed or permitted by the Department of Insurance of the State of New
York, which practices differ from generally accepted accounting principles.
The variances between such practices and generally accepted accounting
principles also are described in Note 1. The effects on the supplemental
financial statements of these variances are not reasonably determinable but
are presumed to be material.

In our opinion, because of the effects of the matters described in the
preceding paragraph, the supplemental financial statements referred to above
do not present fairly, in conformity with generally accepted accounting
principles, the financial position of AUSA Life Insurance Company, Inc. at
December 31, 1997 and 1996, or the results of its operations or its cash flows
for each of the three years in the period ended December 31, 1997.

Also, in our opinion, the supplemental financial statements referred to above
present fairly, in all material respects, the financial position of AUSA Life
Insurance Company, Inc. at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, after giving retroactive effect to the merger of First
Providian Life and Health Insurance Company, as described in the notes to the
supplemental financial statements, in conformity with accounting practices
prescribed or permitted by the Department of Insurance of the State of New
York.

Ernst & Young LLP

Des Moines, Iowa
October 1, 1998

F-1
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

SUPPLEMENTAL BALANCE SHEETS--STATUTORY BASIS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
----------- ----------
<S> <C> <C>
ADMITTED ASSETS
Cash and invested assets:
Cash and short-term investments..................... $ 68,131 $ 28,114
Bonds............................................... 3,988,635 3,698,483
Stocks:
Preferred......................................... 1,792 1,945
Common, at market (cost: $118 in 1997 and $13 in
1996)............................................ 144 18
Mortgage loans on real estate....................... 495,009 618,633
Real estate acquired in satisfaction of debt, at
cost less accumulated depreciation ($1,816 in 1997
and $1,087 in 1996)................................ 45,695 58,100
Policy loans........................................ 3,046 2,916
Other invested assets............................... 22,414 3,454
----------- ----------
Total cash and invested assets.................. 4,624,866 4,411,663
Short-term note receivable from affiliate............. 9,594 361
Premiums deferred and uncollected..................... 6,316 6,450
Accrued investment income............................. 69,989 65,806
Federal income taxes recoverable...................... -- 221
Other assets.......................................... 7,609 5,231
Separate account assets............................... 5,630,093 4,862,449
----------- ----------
Total admitted assets........................... $10,348,467 $9,352,181
=========== ==========
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Aggregate reserves for policies and contracts:
Life.............................................. $ 103,370 $ 50,870
Annuity........................................... 911,075 845,093
Accident and health............................... 16,547 17,904
Policy and contract claim reserves:
Life.............................................. 5,456 4,835
Accident and health............................... 11,125 12,818
Other policyholders' funds.......................... 3,181,719 3,088,311
Remittances and items not allocated................. 35,267 16,289
Asset valuation reserve............................. 67,324 46,878
Interest maintenance reserve........................ 25,882 14,316
Payable to affiliates............................... 2,247 8,109
Short-term note payable to affiliate................ -- 600
Deferred income..................................... 13,421 18,023
Payable under assumption reinsurance agreement...... 56,952 67,217
Other liabilities................................... 8,400 12,719
Federal income taxes due or accrued................. 1,010 --
Separate account liabilities........................ 5,608,364 4,829,292
----------- ----------
Total liabilities............................... 10,048,159 9,033,274
Commitments and contingencies
Capital and surplus:
Common stock, $125 par value, 20 shares authorized,
issued and outstanding............................. 2,500 2,500
Paid-in surplus..................................... 319,180 319,180
Special surplus fund................................ 1,607 1,473
Unassigned surplus (deficit)........................ (22,979) (4,246)
----------- ----------
Total capital and surplus....................... 300,308 318,907
----------- ----------
Total liabilities and capital and surplus....... $10,348,467 $9,352,181
=========== ==========
</TABLE>

See accompanying notes.

F-2
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

SUPPLEMENTAL STATEMENTS OF OPERATIONS--STATUTORY BASIS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net
of reinsurance:
Life.................................. $ 71,899 $ 21,120 $ 21,273
Annuity............................... 1,199,470 1,092,033 1,161,710
Accident and health................... 39,999 52,831 59,270
Net investment income................... 341,540 339,460 333,722
Amortization of interest maintenance
reserve................................ 3,392 2,326 2,348
Commissions and expense allowances on
reinsurance ceded...................... 374 438 418
Other income............................ 17,240 10,739 8,786
---------- ---------- ----------
1,673,914 1,518,947 1,587,527
Benefits and expenses:
Benefits paid or provided for:
Life and accident and health
benefits............................. 39,045 50,647 51,972
Surrender benefits.................... 1,175,051 864,643 835,335
Other benefits........................ 14,316 11,699 9,402
Increase (decrease) in aggregate
reserves for policies and contracts:
Life................................ 52,500 2,492 2,902
Annuity............................. 65,982 53,136 114,330
Accident and health................. (1,357) (1,063) 702
Other............................... 580 609 609
Increase in liability for premium and
other deposit type funds............. 92,280 93,893 229,485
---------- ---------- ----------
1,438,397 1,076,056 1,244,737
Insurance expenses:
Commissions........................... 79,099 87,938 95,944
General insurance expenses............ 92,613 83,885 73,727
Taxes, licenses and fees.............. 3,717 3,335 2,527
Net transfers to separate accounts.... 42,490 255,672 154,080
Other expenses........................ 181 145 58
---------- ---------- ----------
218,100 430,975 326,336
---------- ---------- ----------
1,656,497 1,507,031 1,571,073
---------- ---------- ----------
Gain from operations before federal income
taxes and net realized capital gains
(losses) on investments.................. 17,417 11,916 16,454
Federal income tax expense................ 5,247 5,719 10,147
---------- ---------- ----------
Gain from operations before net realized
capital gains (losses) on investments.... 12,170 6,197 6,307
Net realized capital gains (losses) on
investments (net of related federal
income taxes and amounts transferred to
interest maintenance reserve)............ 831 (12,107) (3,377)
---------- ---------- ----------
Net income (loss)......................... $ 13,001 $ (5,910) $ 2,930
========== ========== ==========
</TABLE>

See accompanying notes.

F-3
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

SUPPLEMENTAL STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS--STATUTORY BASIS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SPECIAL UNASSIGNED TOTAL
COMMON PAID-IN SURPLUS SURPLUS CAPITAL AND
STOCK SURPLUS FUND (DEFICIT) SURPLUS
------ -------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995...... $2,500 $278,180 $1,285 $ 12,195 $294,160
Capital contribution.......... -- 41,000 -- -- 41,000
Net income for 1995........... -- -- -- 2,930 2,930
Net unrealized capital
losses....................... -- -- -- (447) (447)
Change in non-admitted
assets....................... -- -- 72 (985) (913)
Change in reserves due to
change in valuation basis.... -- -- -- 132 132
Surplus effect of
reinsurance.................. -- -- -- (70) (70)
Change in liability for
reinsurance in unauthorized
companies.................... -- -- -- (51) (51)
Change in asset valuation
reserve...................... -- -- -- (10,608) (10,608)
Seed money contributed to
separate account, net of
redemptions.................. -- -- -- (1,000) (1,000)
Change in surplus in separate
account...................... 3,121 3,121
------ -------- ------ -------- --------
Balance at December 31, 1995.... 2,500 319,180 1,357 5,217 328,254
Net loss for 1996............. -- -- -- (5,910) (5,910)
Net unrealized capital
losses....................... -- -- -- (460) (460)
Change in non-admitted
assets....................... -- -- 116 437 553
Change in liability for
reinsurance in unauthorized
companies.................... -- -- -- (42) (42)
Change in asset valuation
reserve...................... -- -- -- (6,217) (6,217)
Seed money contributed to
separate account, net of
redemptions.................. -- -- -- (12,500) (12,500)
Change in surplus in separate
account...................... -- -- -- 14,783 14,783
Prior year federal income tax
adjustment................... -- -- -- 446 446
------ -------- ------ -------- --------
Balance at December 31, 1996.... 2,500 319,180 1,473 (4,246) 318,907
Net income for 1997........... -- -- -- 13,001 13,001
Net unrealized capital
losses....................... -- -- -- (2,710) (2,710)
Change in non-admitted
assets....................... -- -- 134 (8,617) (8,483)
Change in liability for
reinsurance in unauthorized
companies.................... -- -- -- 29 29
Change in asset valuation
reserve...................... -- -- -- (20,446) (20,446)
Seed money withdrawn from
separate account, net of
redemptions.................. -- -- -- 11,700 11,700
Change in surplus in separate
account...................... -- -- -- (11,749) (11,749)
Prior year federal income tax
adjustment................... -- -- -- 59 59
------ -------- ------ -------- --------
Balance at December 31, 1997.... $2,500 $319,180 $1,607 $(22,979) $300,308
====== ======== ====== ======== ========
</TABLE>

See accompanying notes.

F-4
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

SUPPLEMENTAL STATEMENTS OF CASH FLOWS--STATUTORY BASIS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums and other considerations, net
of reinsurance....................... $ 1,340,757 $ 1,177,613 $ 1,251,733
Net investment income................. 340,150 345,153 332,660
Life and accident and health claims... (40,151) (52,590) (50,718)
Surrender benefits and other fund
withdrawals.......................... (1,175,051) (864,643) (835,335)
Other benefits to policyholders....... (14,290) (11,697) (9,387)
Commissions, other expenses and other
taxes................................ (184,457) (193,405) (188,487)
Net transfer to separate account...... (43,309) (257,467) (154,087)
Federal income taxes paid............. (4,704) (4,490) (10,583)
Other, net............................ (3,744) (14,431) 7,360
----------- ----------- -----------
Net cash provided by operating
activities....................... 215,201 124,043 343,156
INVESTING ACTIVITIES
Proceeds from investments sold,
matured or repaid:
Bonds and preferred stocks.......... 968,184 777,107 645,889
Common stocks....................... -- 5,288 2,957
Mortgage loans on real estate....... 179,810 165,460 138,243
Real estate......................... 25,104 -- 4,953
Policy loans........................ 16 4 --
----------- ----------- -----------
1,173,114 947,859 792,042
Cost of investments acquired:
Bonds and preferred stocks.......... (1,260,122) (1,101,918) (1,127,375)
Common stocks....................... (103) (589) (5,174)
Mortgage loans on real estate....... (60,722) (42,118) (54,140)
Real estate......................... -- (521) --
Policy loans........................ (146) (153) (150)
Other............................... (17,805) (2,695) (995)
----------- ----------- -----------
(1,338,898) (1,147,994) (1,187,834)
----------- ----------- -----------
Net cash used in investing
activities....................... (165,784) (200,135) (395,792)
FINANCING ACTIVITIES
Issuance (payment) of intercompany
notes, net........................... (9,400) (19,200) 14,600
Capital contribution.................. -- -- 41,000
----------- ----------- -----------
Net cash provided by (used in)
financing activities................. (9,400) (19,200) 55,600
----------- ----------- -----------
Increase (decrease) in cash and short-
term investments..................... 40,017 (95,292) 2,964
Cash and short-term investments at
beginning of year...................... 28,114 123,406 120,442
----------- ----------- -----------
Cash and short-term investments at end
of year................................ $ 68,131 $ 28,114 $ 123,406
=========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS

DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

AUSA Life Insurance Company, Inc. ("the Company") is a stock life insurance
company and is a wholly-owned subsidiary of First AUSA Life Insurance Company
("First AUSA") which, in turn, is a wholly-owned subsidiary of AEGON USA
("AEGON"). AEGON is a wholly-owned subsidiary of AEGON N.V., a holding company
organized under the laws of The Netherlands. On December 31, 1993, the Company
entered into an assumption reinsurance agreement with Mutual of New York
("MONY") to transfer certain group pension business of MONY to the Company.

In July 1996, the Company completed a merger with International Life Investors
Insurance Company ("ILI"), a wholly-owned subsidiary of Life Investors
Insurance Company of America, another wholly-owned subsidiary of First AUSA,
whereby ILI was merged directly into the Company. The Company received assets
of $688,233 and liabilities of $635,189. The difference between assets and
liabilities was transferred directly to capital and surplus. In accordance
with National Association of Insurance Commissioners ("NAIC") statutory
accounting principles, all prior period financial statements presented have
been restated as if the merger took place at the beginning of such periods.
Historical book values carried over from the separate companies to the
combined entity.

On October 1, 1998, the Company completed a merger with First Providian Life
and Health Insurance Company ("FPLH"), an indirect wholly-owned subsidiary of
Commonwealth General Corporation which, in turn, is an indirect wholly-owned
subsidiary of AEGON, whereby FPLH was merged directly into the Company. For
the purposes of this presentation, these supplemental financial statements
give retroactive effect as if the merger had occurred on January 1, 1995 in
conformity with the practices of the NAIC and accounting practices prescribed
or permitted by the Department of Insurance of the State of New York. This
merger was accounted for under the pooling of interests method of accounting
and, accordingly, the historical book values carried over from the separate
companies to the combined entity. The financial information is not necessarily
indicative of the results that would have been recorded had the merger
actually occurred on January 1, 1995, nor is it indicative of future results.
These financial statements do not extend through to the date of the merger;
however, they will become the historical financial statements of the Company
after financial statements covering the date of the merger have been issued.

Summarized financial information for the Company and FPLH prior to the merger
are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
The Company.......................... $1,585,260 $1,454,207 $1,535,596
FPLH................................. 88,654 64,740 51,931
---------- ---------- ----------
Combined............................... $1,673,914 $1,518,947 $1,587,527
========== ========== ==========
Net income (loss):
The Company.......................... $ 3,503 $ (13,714) $ (5,049)
FPLH................................. 9,498 7,804 7,979
---------- ---------- ----------
Combined............................... $ 13,001 $ (5,910) $ 2,930
========== ========== ==========
</TABLE>

F-6
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
----------- ----------
<S> <C> <C>
Assets:
The Company...................................... $ 9,951,625 $9,028,321
FPLH............................................. 396,842 323,860
----------- ----------
Combined........................................... $10,348,467 $9,352,181
=========== ==========
Liabilities:
The Company...................................... $ 9,745,504 $8,794,341
FPLH............................................. 302,655 238,933
----------- ----------
Combined........................................... $10,048,159 $9,033,274
=========== ==========
Capital and surplus:
The Company...................................... $ 206,121 $ 233,980
FPLH............................................. 94,187 84,927
----------- ----------
Combined........................................... $ 300,308 $ 318,907
=========== ==========
</TABLE>

Nature of Business

The Company primarily sells group fixed and variable annuities and group life
coverages. The Company is licensed in 49 states and the District of Columbia
and is actively in the process of becoming licensed in all 50 states. Sales of
the Company's products are primarily through brokers.

Basis of Presentation

The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract reserves, guarantee fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and
assumptions utilized which could have a material impact on the financial
statements.

The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Department of Insurance of
the State of New York, which practices differ in some respects from generally
accepted accounting principles. The more significant of these differences are
as follows: (a) bonds are generally reported at amortized cost rather than
segregating the portfolio into held-to-maturity (reported at amortized cost),
available-for-sale (reported at fair value), and trading (reported at fair
value) classifications; (b) acquisition costs of acquiring new business are
charged to current operations as incurred rather than deferred and amortized
over the life of the policies; (c) policy reserves on traditional life
products are based on statutory mortality rates and interest which may differ
from reserves based on reasonable assumptions of expected mortality, interest,
and withdrawals which include a provision for possible unfavorable deviation
from such assumptions; (d) policy reserves on certain investment products use
discounting methodologies utilizing statutory interest rates rather than full
account values; (e) reinsurance amounts are netted against the corresponding
asset or liability rather than shown as gross amounts on the balance sheet;
(f) deferred income taxes are not provided for the difference between the
financial statement and income tax bases of assets and liabilities; (g) net
realized gains or losses attributed to changes in the level of interest rates
in the market are deferred and amortized over the remaining life of the bond
or mortgage loan, rather than recognized as gains or losses in the statement
of operations when the sale is completed; (h) declines in the estimated
realizable value of investments are provided for through the establishment of
a formula-determined statutory investment reserve (reported as a liability),
changes to which are charged directly to surplus, rather than through
recognition in the statement of operations for declines in value, when such
declines are judged to be other than temporary; (i) certain assets designated
as "non-admitted assets" have been charged to surplus rather than being

F-7
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

reported as assets; (j) revenues for universal life and investment products
consist of premiums received rather than policy charges for the cost of
insurance, policy administration charges, amortization of policy initiation
fees and surrender charges assessed; (k) pension expense is recorded as
amounts are paid; (l) adjustments to federal income taxes of prior years are
charged or credited directly to unassigned surplus, rather than reported as a
component of expense in the statement of operations; and (m) gains or losses
on dispositions of business are charged or credited directly to unassigned
surplus rather than being reported in the statement of operations. The effects
of these variances have not been determined by the Company.

The National Association of Insurance Commissioners (NAIC) currently is in the
process of recodifying statutory accounting practices, the result of which is
expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is not expected to be completed
before 1999, will likely change, to some extent, prescribed statutory
accounting practices and may result in changes to the accounting practices
that the Company uses to prepare its statutory-basis financial statements.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly
liquid investments with remaining maturity of one year or less when purchased
to be cash equivalents.

Investments

Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortized costs for bonds and mortgage loans on real
estate that were acquired through the reinsurance agreement, described
earlier, were initially recorded at market value, consistent with the
aforementioned agreement and as prescribed by the Department of Insurance of
the State of New York. Amortization is computed using methods which result in
a level yield over the expected life of the security. The Company reviews its
prepayment assumptions on mortgage and other asset backed securities at
regular intervals and adjusts amortization rates retrospectively when such
assumptions are changed due to experience and/or expected future patterns.
Investments in preferred stocks in good standing are reported at cost.
Investments in preferred stocks not in good standing are reported at the lower
of cost or market. Common stocks, which may include shares of mutual funds
(money market and other), are carried at market. Real estate is reported at
cost less allowances for depreciation. Depreciation is computed principally by
the straight-line method. Policy loans are reported at unpaid principal. Other
invested assets consist principally of investments in various joint ventures
and are recorded at equity in underlying net assets. Other "admitted assets"
are valued, principally at cost, as required or permitted by New York
Insurance Laws.

Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve (AVR) is established by the Company to provide for
anticipated losses in the event of default by issuers of certain invested
assets. These amounts are determined using a formula prescribed by the NAIC
and are reported as a liability. The formula for the AVR provides for a
corresponding adjustment for realized gains and losses. Under a formula
prescribed by the NAIC, the Company defers, in the Interest Maintenance
Reserve (IMR), the portion of realized gains and losses on sales of fixed
income investments, principally bonds and mortgage loans, attributable to
changes in the general level of interest rates and amortizes those deferrals
over the remaining period to maturity of the security.

Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. At December 31, 1997, 1996 and 1995, the
Company excluded investment income due and accrued of $473, $469 and $216,
respectively, with respect to such practices.

F-8
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

The Company uses interest rate swaps as part of its overall interest rate risk
management strategy for certain life insurance and annuity products. The
Company entered into an interest rate swap contract to modify the interest
rate characteristics of the underlying liabilities. The net interest effect of
such swap transactions is reported as an adjustment of interest income from
the hedged items as incurred.

Deferred income for unrealized gains and losses on the securities valued at
market at the time of the assumption reinsurance agreement (described in Note
4) are returned to MONY at the time of realization pursuant to the agreement.

Aggregate Policy Reserves

Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables using
statutorily specified interest rates and valuation methods that will provide,
in the aggregate, reserves that are greater than or equal to the minimum
required by law.

The aggregate policy reserves for life insurance policies are based
principally upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary
Mortality Tables. The reserves are calculated using interest rates ranging
from 2.50 to 6.50 percent and are computed principally on the Net Level
Premium Valuation and the Commissioners' Reserve Valuation Methods. Reserves
for universal life policies are based on account balances adjusted for the
Commissioners' Reserve Valuation Method.

Deferred annuity reserves are calculated according to the Commissioners'
Annuity Reserve Valuation Method including excess interest reserves to cover
situations where the future interest guarantees plus the decrease in surrender
charges are in excess of the maximum valuation rates of interest. Reserves for
immediate annuities and supplementary contracts with life contingencies are
equal to the present value of future payments assuming interest rates ranging
from 3.00 to 8.25 percent and mortality rates, where appropriate, from a
variety of tables.

Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.

Policy and Contract Claim Reserves

Claim reserves represent the estimated accrued liability for claims reported
to the Company and claims incurred but not yet reported through the statement
date. These reserves are estimated using either individual case-basis
valuations or statistical analysis techniques. These estimates are subject to
the effects of trends in claim severity and frequency. The estimates are
continually reviewed and adjusted as necessary as experience develops or new
information becomes available.

Separate Accounts

Assets held in trust for purchases of separate account contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. Income and gains and losses with respect to these
assets accrue to the benefit of the policyholders and, accordingly, the
operations of the separate accounts are not included in the accompanying
financial statements.

2. FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures About Derivative Financial Instruments and
Fair Value of Financial Instruments, requires additional disclosures about
derivatives. In

F-9
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparisons to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.

The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

Cash and short-term investments: The carrying amounts reported in the
statutory-basis balance sheet for these instruments approximate their fair
values.

Investment securities: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values
are estimated using values obtained from independent pricing services or,
in the case of private placements, are estimated by discounting expected
future cash flows using a current market rate applicable to the yield,
credit quality, and maturity of the investments. The fair values for equity
securities are based on quoted market prices.

Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal its carrying
value.

Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash
flow calculations, based on interest rates currently being offered for
similar contracts with maturities consistent with those remaining for the
contracts being valued.

Interest rate swap: Estimated fair value of the interest rate swaps are
based upon the pricing differential for similar swap agreements.

Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk, which minimizes exposure
to changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.

The following sets forth a comparison of the fair values and carrying values
of the Company's financial instruments subject to the provisions of Statement
of Financial Accounting Standards No. 107 and No. 119:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1997 1996
--------------------- ----------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
ADMITTED ASSETS
Bonds.................... $3,988,635 $4,083,280 $3,698,483 $ 3,736,999
Preferred stocks......... 1,792 1,892 1,945 1,940
Common stock............. 144 144 18 18
Mortgage loans on real
estate.................. 495,009 504,947 618,633 619,479
Interest rate swap....... -- 391 -- --
Policy loans............. 3,046 3,046 2,916 2,916
Cash and short-term
investments............. 68,131 68,131 28,114 28,114
Separate account assets.. 5,630,093 5,640,386 4,862,449 4,862,099
LIABILITIES
Investment contract
liabilities............. 4,091,938 4,011,465 3,932,668 3,804,240
Separate account
annuities............... 5,594,880 5,577,854 4,814,853 4,784,574
</TABLE>

F-10
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

3. INVESTMENTS

The carrying value and estimated market value of investments in debt securities
were as follows:

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Bonds:
United States Government
and agencies........... $ 102,628 $ 943 $ 255 $ 103,316
State, municipal and
other government....... 60,427 1,413 1,761 60,079
Public utilities........ 251,071 4,943 892 255,122
Industrial and
miscellaneous.......... 2,301,979 66,409 5,867 2,362,521
Foreign corporate*...... 22,363 474 557 22,280
Mortgage-backed
securities and asset-
backed................. 1,250,167 32,779 2,984 1,279,962
---------- -------- ------- ----------
3,988,635 106,961 12,316 4,083,280
Preferred stocks.......... 1,792 100 -- 1,892
---------- -------- ------- ----------
$3,990,427 $107,061 $12,316 $4,085,172
========== ======== ======= ==========
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Bonds:
United States Government
and agencies........... $ 152,410 $ 1,236 $ 1,112 $ 152,534
State, municipal and
other government....... 30,121 925 36 31,010
Public utilities........ 229,732 2,086 2,977 228,841
Industrial and
miscellaneous.......... 2,156,463 38,067 15,854 2,178,676
Foreign corporate*...... 5,556 -- -- 5,556
Mortgage-backed
securities and asset-
backed................. 1,124,201 22,579 6,398 1,140,382
---------- ------- ------- ----------
3,698,483 64,893 26,377 3,736,999
Preferred stocks.......... 1,945 5 10 1,940
---------- ------- ------- ----------
$3,700,428 $64,898 $26,387 $3,738,939
========== ======= ======= ==========
</TABLE>
- -------
*Substantially all are U. S. dollar denominated.

The carrying value and estimated market value of bonds at December 31, 1997, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
VALUE VALUE
---------- ----------
<S> <C> <C>
Due in one year or less............................ $ 138,325 $ 138,396
Due after one year through five years.............. 1,388,726 1,415,687
Due after five years through ten years............. 964,444 988,714
Due after ten years................................ 246,973 260,521
---------- ----------
2,738,468 2,803,318
Mortgage-backed and asset-backed securities........ 1,250,167 1,279,962
---------- ----------
$3,988,635 $4,083,280
========== ==========
</TABLE>

F-11
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

A detail of net investment income is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Interest on bonds and notes.................. $285,730 $267,510 $246,462
Mortgage loans............................... 57,659 83,511 98,653
Real estate.................................. 13,976 7,225 2,400
Dividends on equity investments.............. 223 220 269
Interest on policy loans..................... 168 154 152
Derivative instruments....................... 100 -- --
Other investment gain (loss)................. 1,543 (5,482) (3,765)
-------- -------- --------
Gross investment income...................... 359,399 353,138 344,171
Investment expenses.......................... 17,859 13,678 10,449
-------- -------- --------
Net investment income........................ $341,540 $339,460 $333,722
======== ======== ========
</TABLE>

Proceeds from sales and maturities of debt securities and related gross
realized gains and losses were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Proceeds................................... $968,184 $777,107 $645,889
======== ======== ========
Gross realized gains....................... $ 19,165 $ 9,697 $ 9,668
Gross realized losses...................... (11,997) (12,291) (16,405)
-------- -------- --------
Net realized gains (losses)................ $ 7,168 $ (2,594) $ (6,737)
======== ======== ========
</TABLE>

At December 31, 1997, investments with an aggregate carrying value of $3,970
were on deposit with regulatory authorities or were restrictively held in bank
custodial accounts for the benefit of such regulatory authorities as required
by statute.

Realized investment gains (losses) and changes in unrealized gains (losses) for
investments are summarized below:
<TABLE>
<CAPTION>
REALIZED
----------------------------
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Debt securities............................ $ 7,168 $ (2,594) $ (6,737)
Common stock............................... -- 244 --
Preferred stock............................ (7) (44) --
Short-term investments..................... (6) (115) (26)
Mortgage loans on real estate.............. 287 (12,415) (3,650)
Real estate................................ 4,059 -- (628)
Other invested assets...................... 5,035 6,872 11,109
-------- -------- --------
16,536 (8,052) 68
Tax effect................................. (747) 87 343
Transfer to interest maintenance reserve... (14,958) (4,142) (3,788)
-------- -------- --------
Total realized gains (losses).............. $ 831 $(12,107) $ (3,377)
======== ======== ========
<CAPTION>
CHANGE IN UNREALIZED
----------------------------
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Debt securities............................ $ 56,129 $(87,888) $266,783
Equity securities.......................... 21 (190) 74
-------- -------- --------
Change in unrealized appreciation.......... $ 56,150 $(88,078) $266,857
======== ======== ========
</TABLE>

F-12
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Gross unrealized gains and gross unrealized losses on equity securities at
December 31, 1997, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Unrealized gains........................................ $ 38 $ 16 $206
Unrealized losses....................................... (12) (11) (11)
---- ---- ----
Net unrealized gains.................................... $ 26 $ 5 $195
==== ==== ====
</TABLE>

During 1997, the Company issued mortgage loans with interest rates ranging
from 8.10% to 8.72%. The maximum percentage of any one loan to the value of
the underlying real estate at origination was 85%. No mortgage loans were non-
income producing for the previous twelve months and, accordingly, no accrued
interest related to these mortgage loans was excluded from investment income.
During 1997, the Company refinanced the mortgage loans of one property with an
aggregate carrying value of $24,888 to reduce the interest rates, as a result
of the current interest rate environment. The Company requires all mortgage
loans to carry fire insurance equal to the value of the underlying property.

During 1997, 1996 and 1995, there were $4,427, $28,929 and $14,264,
respectively, in foreclosed mortgage loans that were transferred to real
estate. At December 31, 1997 and 1996, the Company held a mortgage loan loss
reserve in the asset valuation reserve of $20,191 and $8,368, respectively.
The mortgage loan portfolio is diversified by geographic region and specific
collateral property type as follows:

<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION
-----------------------
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Pacific................. 20% 2%
South Atlantic.......... 20 37
Mid-Atlantic............ 16 5
E. North Central........ 16 21
Mountain................ 15 15
New England............. 7 10
W. North Central........ 2 5
W. South Central........ 2 5
E. South Central........ 2 --
</TABLE>
<TABLE>
<CAPTION>
PROPERTY TYPE DISTRIBUTION
--------------------------
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Office.................. 30% 42%
Apartment............... 23 10
Retail.................. 19 30
Other................... 15 17
Industrial.............. 13 1
</TABLE>

At December 31, 1997, the Company had the following investments, excluding U.
S. Government guaranteed or insured issues, which individually represented
more than ten percent of capital and surplus and the asset valuation reserve:

<TABLE>
<CAPTION>
CARRYING
DESCRIPTION OF SECURITY VALUE
----------------------- --------
<S> <C>
Bonds:
Chase Manhattan Corp........................................... $37,953
</TABLE>

The Company utilizes an interest rate swap agreement as part of its efforts to
hedge and manage fluctuations in the market value of its investment portfolio
attributable to changes in general interest rate levels and to manage duration
mismatch of assets and liabilities. The contract or notional amounts of those
instruments reflect the extent of involvement in the various types of
financial instruments.

The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company

F-13
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

has delivered funds or securities under terms of the contract) that would
result in an accounting loss and replacement cost risk (i.e., the cost to
replace the contract at current market rates should the counterparty default
prior to settlement date). Credit loss exposure resulting from nonperformance
by a counterparty for commitments to extend credit is represented by the
contractual amounts of the instruments.

At December 31, 1997 and 1996, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:

<TABLE>
<CAPTION>
NOTIONAL
AMOUNT
------------
1997 1996
------- ----
<S> <C> <C>
Derivative securities:
Interest rate swaps:
Receive fixed--pay floating.............................. $50,800 $--
</TABLE>

4. REINSURANCE

The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to
meet its obligation under the reinsurance treaty.

Premiums earned reflect the following reinsurance assumed and ceded amounts
for the year ended December 31:

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Direct premiums....................... $1,309,731 $1,185,163 $1,244,902
Reinsurance assumed................... 6,905 9,962 37,423
Reinsurance ceded..................... (5,268) (29,141) (40,072)
---------- ---------- ----------
Net premiums earned................... $1,311,368 $1,165,984 $1,242,253
========== ========== ==========
</TABLE>

The Company received reinsurance recoveries in the amounts of $1,992, $1,758
and $1,417 during 1997, 1996 and 1995, respectively.

The aggregate reserves for policies and contracts were reduced for reserve
credits for reinsurance ceded at December 31, 1997 and 1996 of $153,092 and
$157,421, respectively.

On December 31, 1993, the Company and MONY entered into an assumption
reinsurance agreement whereby all of the general account liabilities were
novated to the Company from MONY as state approvals were received.

In accordance with the agreement, MONY will receive payments relating to the
performance of the assets and liabilities that exist at the date of closing
for a period of nine years. These payments will be reduced for certain
administrative expenses as defined in the agreement. The Company will
recognize operating gains and losses on renewal premiums received after
December 31, 1993 of the business in-force at December 31, 1993, and on all
new business written after that date. At the end of nine years, the Company
will purchase from MONY the remaining transferred business inforce based upon
a formula described in the agreement. At December 31, 1997 and 1996, the
Company owed MONY $56,952 and $67,217, respectively, which represents the
amount earned by MONY under the gain sharing calculation and certain fees for
investment management services for the respective years.

In connection with the transaction, MONY purchased $150,000 and $50,000 in
Series A and Series B notes, respectively, of AEGON. The proceeds were used to
enhance the surplus of the Company. Both the Series A and Series B notes bear
a market rate of interest and mature in nine years from the date of closing.

F-14
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

AEGON provides general and administrative services for the transferred
business under a related agreement with MONY. The agreement specifies
prescribed rates for expenses to administer the business up to certain levels.
In addition, AEGON also provides investment management services on the assets
underlying the new business written by the Company while MONY continues to
provide investment management services for assets supporting the remaining
policy liabilities which were transferred at December 31, 1993.

On October 1, 1995, the Company entered into a reinsurance agreement with a
non-affiliate. As a result, the Company received $4,242 of assets, including
$38 of cash, and $4,312 of liabilities. The difference between the assets and
the liabilities of $70 was charged directly to unassigned surplus.

5. INCOME TAXES

The Company files a separate federal income tax return.

Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before federal
income taxes and net realized capital gains (losses) on investments primarily
due to differences in the statutory and tax treatment of certain investments,
deferred policy acquisition costs, dividends received deduction, carryforward
(utilization) of operating loss, and IMR amortization.

Federal income tax expense (benefit) differs from the amount computed by
applying the statutory federal income tax rate to realized gains (losses) due
to the agreement between MONY and the Company, as discussed in Note 4 to the
financial statements. In accordance with this agreement, these gains and
losses are included in the net payments MONY will receive relating to the
performance of the assets that existed at the date of closing. Accordingly,
income taxes relating to gains and losses on such assets are not provided for
on the income tax return filed by the Company.

Prior to 1984, as provided for under the Life Insurance Company Tax Act of
1959, a portion of statutory income was not subject to current taxation but
was accumulated for income tax purposes in a memorandum account referred to as
the policyholders' surplus account. No federal income taxes have been provided
for in the financial statements on income deferred in the policyholders'
surplus account ($2,428 at December 31, 1997). To the extent dividends are
paid from the amount accumulated in the policyholders' surplus account, net
earnings would be reduced by the amount of tax required to be paid. Should the
entire amount in the policyholders' surplus account become taxable, the tax
thereon computed at current rates would amount to approximately $850.

At December 31, 1997, the Company had net operating loss carryforwards of
approximately $19,155 which expire through 2011.

An examination by the Internal Revenue Service is underway for years 1993-
1995.

F-15
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

6. POLICY AND CONTRACT ATTRIBUTES

A portion of the Company's policy reserves and other policyholders' funds
relate to liabilities established on a variety of the Company's products that
are not subject to significant mortality or morbidity risk; however, there may
be certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The amount of reserves on these products, by withdrawal
characteristics, are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1997 1996
------------------ ------------------
PERCENT PERCENT
OF OF
AMOUNT TOTAL AMOUNT TOTAL
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Subject to discretionary
withdrawal with market value
adjustment....................... $ 910,528 9% $ 834,176 9%
Subject to discretionary
withdrawal at book value less
surrender charge................. 1,045,807 11 1,619,210 18
Subject to discretionary
withdrawal at market value....... 2,950,639 30 2,361,359 27
Subject to discretionary
withdrawal at book value (minimal
or no charges or adjustments).... 2,616,308 27 1,951,742 22
Not subject to discretionary
withdrawal provision............. 2,317,823 23 2,139,682 24
---------- --- ---------- ---
9,841,105 100% 8,906,169 100%
=== ===
Less reinsurance ceded............ 152,726 157,039
---------- ----------
Total policy reserves on
annuities and deposit fund
liabilities.................. $9,688,379 $8,749,130
========== ==========
</TABLE>

F-16
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Separate and variable account assets held by the Company represent contracts
where the benefit is determined by the performance of the investments held in
the separate account. Information regarding the separate accounts of the
Company as of and for the years ended December 31, 1997, 1996 and 1995 is as
follows:

<TABLE>
<CAPTION>
GUARANTEED NON-GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
---------- -------------- ----------
<S> <C> <C> <C>
Premiums, deposits and other
considerations for the year ended
December 31, 1997.................. $ 147,638 $ 648,056 $ 795,694
========== ========== ==========
Reserves for separate accounts with
assets as of December 31, 1997 at:
Fair value........................ $2,204,931 $2,767,245 $4,972,176
Amortized cost.................... 622,703 -- 622,703
---------- ---------- ----------
Total........................... $2,827,634 $2,767,245 $5,594,879
========== ========== ==========
Premiums, deposits and other
considerations for the year ended
December 31, 1996.................. $ -- $ 747,506 $ 747,506
========== ========== ==========
Reserves for separate accounts with
assets as of December 31, 1996 at:
Fair value........................ $2,022,843 $2,178,445 $4,201,288
Amortized cost.................... 613,565 -- 613,565
---------- ---------- ----------
Total........................... $2,636,408 $2,178,445 $4,814,853
========== ========== ==========
Premiums, deposits and other
considerations for the year ended
December 31, 1995.................. $ -- $ 553,110 $ 553,110
========== ========== ==========
Reserves for separate accounts with
assets as of December 31, 1995 at:
Fair value........................ $2,147,500 $1,557,952 $3,705,452
Amortized cost.................... 599,254 -- 599,254
---------- ---------- ----------
Total........................... $2,746,754 $1,557,952 $4,304,706
========== ========== ==========
</TABLE>

F-17
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

There may be certain restrictions placed upon the amount of funds that can be
withdrawn without penalty. The amount of separate account liabilities on these
products, by withdrawal characteristics, are summarized as follows:

<TABLE>
<CAPTION>
NON-
GUARANTEED GUARANTEED
SEPARATE SEPARATE
ACCOUNT ACCOUNT TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
DECEMBER 31, 1997
Subject to discretionary withdrawal
with market value adjustment........ $ 358,061 $ -- $ 358,061
Subject to discretionary withdrawal
at book value less surrender
charge.............................. 264,642 -- 264,642
Subject to discretionary withdrawal
at market value..................... 180,802 2,767,245 2,948,047
Not subject to discretionary
withdrawal.......................... 2,024,129 -- 2,024,129
---------- ---------- ----------
$2,827,634 $2,767,245 $5,594,879
========== ========== ==========
DECEMBER 31, 1996
Subject to discretionary withdrawal
with market value adjustment........ $ 269,991 $ -- $ 269,991
Subject to discretionary withdrawal
at book value less surrender
charge.............................. 279,399 -- 279,399
Subject to discretionary withdrawal
at market value..................... 181,158 2,178,445 2,359,603
Not subject to discretionary
withdrawal.......................... 1,905,860 -- 1,905,860
---------- ---------- ----------
$2,636,408 $2,178,445 $4,814,853
========== ========== ==========
</TABLE>

A reconciliation of the amounts transferred to and from the separate accounts
is presented below:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Transfers as reported in the summary of
operations of the separate accounts
statement:
Transfers to separate accounts............. $795,663 $747,677 $553,110
Transfers from separate accounts........... 767,049 505,592 406,978
-------- -------- --------
Net transfers to (from) separate accounts.... 28,614 242,085 146,132
Reconciling adjustments--HUB level fees not
paid to AUSA general account................ 13,756 13,520 7,904
Fees paid to external fund manager......... 120 67 44
-------- -------- --------
Net adjustments.............................. 13,876 13,587 7,948
-------- -------- --------
Transfers as reported in the summary of
operations of the life, accident and health
annual statement............................ $ 42,490 $255,672 $154,080
======== ======== ========
</TABLE>

F-18
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next
anniversary date. At December 31, 1997 and 1996, these assets (which are
reported as premiums deferred and uncollected) and the amounts of the related
gross premiums and loadings, are as follows:

<TABLE>
<CAPTION>
GROSS LOADING NET
------ ------- ------
<S> <C> <C> <C>
DECEMBER 31, 1997
Ordinary direct first year business............. $ 460 $ 336 $ 124
Ordinary direct renewal business................ 6,138 1,081 5,057
Group life direct business...................... 1,267 433 834
Credit life..................................... 41 -- 41
Reinsurance ceded............................... (14) -- (14)
------ ------ ------
7,892 1,850 6,042
Accident and health:
Direct........................................ 325 -- 325
Reinsurance ceded............................. (51) -- (51)
------ ------ ------
Total accident and health................... 274 -- 274
------ ------ ------
$8,166 $1,850 $6,316
====== ====== ======
DECEMBER 31, 1996
Ordinary direct first year business............. $ 409 $ 226 $ 183
Ordinary direct renewal business................ 6,277 1,037 5,240
Group life direct business...................... 1,414 499 915
Credit life..................................... 5 -- 5
Reinsurance ceded............................... (163) -- (163)
------ ------ ------
7,942 1,762 6,180
Accident and health:
Direct........................................ 270 -- 270
Reinsurance ceded............................. -- -- --
------ ------ ------
Total accident and health................... 270 -- 270
------ ------ ------
$8,212 $1,762 $6,450
====== ====== ======
</TABLE>

At December 31, 1997 and 1996, the Company had insurance in force aggregating
$597,855 and $615,025, respectively, in which the gross premiums are less than
the net premiums required by the valuation standards established by the
Department of Insurance of the State of New York. The Company established
policy reserves of $1,476 and $1,520 to cover these deficiencies at December
31, 1997 and 1996, respectively.

7. DIVIDEND RESTRICTIONS

Generally, an insurance company's ability to pay dividends is limited to the
amount that their net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital requirements. However,
payment of such amounts as dividends may be subject to approval by regulatory
authorities. The Company is not entitled to pay out any dividends in 1998
without prior approval.

8. RETIREMENT AND COMPENSATION PLANS

The Company's employees participate in a qualified benefit pension plan
sponsored by AEGON. The Company has no legal obligation for the plan. The
Company recognizes pension expense equal to its allocation from AEGON. The

F-19
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONTINUED)
(DOLLARS IN THOUSANDS)

pension expense is allocated among the participating companies based on the
FASB 87 expense as a percent of salaries. The benefits are based on years of
service and the employee's compensation during the highest five consecutive
years of employment. The Company was allocated $0, $13 and $14 of pension
expense for the years ended December 31, 1997, 1996 and 1995, respectively.
The plan is subject to the reporting and disclosure requirements of the
Employee Retirement Income Security Act of 1974.

The Company's employees also participate in a contributory defined
contribution plan sponsored by AEGON which is qualified under Section 401(k)
of the Internal Revenue Service Code. Employees of the Company who customarily
work at least 1,000 hours during each calendar year and meet the other
eligibility requirements, are participants of the plan. Participants may elect
to contribute up to fifteen percent of their salary to the plan. The Company
will match an amount up to three percent of the participant's salary.
Participants may direct all of their contributions and plan balances to be
invested in a variety of investment options. The plan is subject to the
reporting and disclosure requirements of the Employee Retirement Income
Security Act of 1974. The Company was allocated $12, $21 and $8 of expense for
the years ended December 31, 1997, 1996 and 1995, respectively.

AEGON sponsors supplemental retirement plans to provide the Company's senior
management with benefits in excess of normal pension benefits. The plans are
noncontributory and benefits are based on years of service and the employee's
compensation level. The plans are unfunded and nonqualified under the Internal
Revenue Service Code. In addition, AEGON has established incentive deferred
compensation plans for certain key employees of the Company. AEGON also
sponsors an employee stock option plan for individuals employed at least three
years and a stock purchase plan for its producers, with the participating
affiliated companies establishing their own eligibility criteria, producer
contribution limits and company matching formula. These plans have been
accrued or funded as deemed appropriate by management of AEGON and the
Company.

In addition to pension benefits, the Company participates in plans sponsored
by AEGON that provide postretirement medical, dental and life insurance
benefits to employees meeting certain eligibility requirements. Portions of
the medical and dental plans are contributory. The expenses of the
postretirement plans calculated on the pay-as-you-go basis are charged to
affiliates in accordance with an intercompany cost sharing arrangement. The
Company expensed $2 for each of the years ended December 31, 1996 and 1995. No
expense related to these plans was recorded for 1997.

9. RELATED PARTY TRANSACTIONS

In accordance with an agreement between AEGON and the Company, AEGON will
ensure the maintenance of certain minimum tangible net worth, operating
leverage and liquidity levels of the Company, as defined in the agreement,
through the contribution of additional capital by the Company's parent as
needed.

The Company shares certain officers, employees and general expenses with
affiliated companies.

The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1997,
1996 and 1995, the Company paid $7,330, $5,739 and $6,761, respectively, for
these services, which approximates their costs to the affiliates.

Payable to affiliates and intercompany borrowings bear interest at the thirty-
day commercial paper rate of 5.60% at December 31, 1997. During 1997, 1996 and
1995, the Company paid net interest of $142, $29 and $289, respectively, to
affiliates.

10. COMMITMENTS AND CONTINGENCIES

The Company is a party to legal proceedings incidental to its business.
Although such litigation sometimes includes substantial demands for
compensatory and punitive damages, in addition to contract liability, it is
management's opinion, after consultation with counsel and a review of
available facts, that damages arising from such demands will not be material
to the Company's financial position.

F-20
<PAGE>

AUSA LIFE INSURANCE COMPANY, INC.

NOTES TO SUPPLEMENTAL FINANCIAL STATEMENTS--STATUTORY BASIS--(CONCLUDED)
(DOLLARS IN THOUSANDS)

The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance
companies for the benefit of policyholders and claimants in the event of
insolvency of other insurance companies. In accordance with the purchase
agreement, assessments related to periods prior to the purchase of the Company
will be paid by Dreyfus. Assessments attributable to business reinsured from
MONY for premiums received prior to the date of the transaction will be paid
by MONY. The Company will be responsible for assessments, if any, attributable
to premium income after the date of purchase. Assessments are charged to
operations when received by the Company except where right of offset against
other taxes paid is allowed by law; amounts available for future offsets are
recorded as an asset on the Company's balance sheet. Potential future
obligations for unknown insolvencies are not determinable by the Company. The
future obligation has been based on the most recent information available from
the National Organization of Life and Health Insurance Guaranty Association.
The guaranty fund expense was $586, $246 and $(204) for the years ended
December 31, 1997, 1996 and 1995, respectively.

11. YEAR 2000 (UNAUDITED)

AEGON 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. The Company has begun to
convert or modify, where necessary, critical data processing systems. It is
contemplated that the plan will be substantially completed by early 1999. The
Company does 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, the Company has undertaken communications with its
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 the Company.

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 the Company, its
ability to function unaffected to and through the Year 2000 may be adversely
affected by actions (or failure to act) of third parties beyond its knowledge
or control.

F-21
<PAGE>

Financial Statements

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

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 - Advisor's Edge

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 -
Advisor's Edge

We have audited the accompanying statement of assets and liabilities of First
Providian Life and Health Insurance Company Separate Account C - Advisor's Edge
(comprising, DFA Small Value; DFA Large Value; DFA International Value; DFA
International Small; DFA Short-Term Fixed; DFA Global Bond; Federated American
Leaders Fund II; Federated Utility Fund II; Federated Prime Money Fund II;
Federated High Income Bond Fund II; Federated Fund for U.S. Government
Securities II; Wanger U.S. Small Cap Advisor; Wanger International Small Cap
Advisor; Montgomery Growth; Montgomery Emerging Markets; Strong International
Stock Fund II; Stein Roe Special Venture Fund, Variable Series; Warburg Pincus
International Equity; Warburg Pincus Small Company Growth; Weiss, Peck & Greer's
Core Large-Cap Stock Fund; and Weiss, Peck & Greer's Core Small-Cap Stock Fund
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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting the First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge 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 - Advisor's Edge

Statement of Assets and Liabilities

<TABLE>
<CAPTION>
DECEMBER 31
1997
------------
<S> <C>
ASSETS
Investments:

DFA Small Value Portfolio (cost: $84,255) $ 93,058

DFA Large Value Portfolio (cost: $141,161) 151,227

DFA International Value Portfolio (cost: $134,979) 129,487

DFA International Small Portfolio (cost: $114,494) 89,571

DFA Short-Term Fixed Portfolio (cost: $323,343) 322,007

DFA Global Bond Portfolio (cost: $81,876) 77,804

Federated American Leaders Fund II (cost: $75,110) 77,036

Federated Utility Fund II (cost: $68,933) 78,055

Federated Prime Money Fund II (cost: $3,028) 3,028

Federated High Income Bond Fund II (cost: $496,722) 506,304

Federated Fund for U.S. Government Securities II (cost: $239,730) 245,499

Wanger U.S. Small Cap Advisor (cost: $63,019) 63,000

Wanger International Small Cap Advisor (cost: $23,320) 21,818

Montgomery Growth Portfolio (cost: $40,837) 37,771

Montgomery Emerging Markets Portfolio (cost: $62,492) 54,811

Strong International Stock Fund II (cost: $34,729) 30,026

Stein Roe Special Venture Fund, Variable Series (cost: $34,296) 32,186

Warburg Pincus International Equity Portfolio (cost: $14,990) 12,427

Warburg Pincus Small Company Growth Portfolio (cost: $18,010) 17,768
------------
TOTAL INVESTMENTS AND TOTAL ASSETS 2,042,883
LIABILITIES
Amounts due to First Providian Life and Health Insurance
Company 12
------------
NET ASSETS $ 2,042,871
============
</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31
1997
-----------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS
<S> <C>
DFA Small Value Subaccount $ 93,058

DFA Large Value Subaccount 151,227

DFA International Value Subaccount 129,487

DFA International Small Subaccount 89,559

DFA Short-Term Fixed Subaccount 322,007

DFA Global Bond Subaccount 77,804

Federated American Leaders Fund II Subaccount 77,036

Federated Utility Fund II Subaccount 78,055

Federated Prime Money Fund II Subaccount 3,028

Federated High Income Bond Fund II Subaccount 506,304

Federated Fund for U.S. Government Securities II Subaccount 245,499

Wanger U.S. Small Cap Advisor Subaccount 63,000

Wanger International Small Cap Advisor Subaccount 21,818

Montgomery Growth Subaccount 37,771

Montgomery Emerging Markets Subaccount 54,811

Strong International Stock Fund II Subaccount 30,026

Stein Roe Special Venture Fund, Variable Series Subaccount 32,186

Warburg Pincus International Equity Subaccount 12,427

Warburg Pincus Small Company Growth Subaccount 17,768

-----------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS $ 2,042,871
===========
</TABLE>

See accompanying notes.

3
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Statement of Operations

For the Period Since Inception through December 31, 1997

<TABLE>
<CAPTION>
Federated
DFA DFA American
DFA Small DFA Large International International DFA Short- DFA Global Leaders
Value Value Value Small Term Fixed Bond Fund II
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 6,662 $ 11,393 $ 3,767 $ 2,145 $ 15,661 $ 8,762 $ -

Expenses:
Mortality and expense risk and
administrative charges 439 708 633 449 1,689 420 117
-----------------------------------------------------------------------------------------------
Net investment income (expense) 6,223 10,685 3,134 1,696 13,972 8,342 (117)

Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) from
investment transactions:
Proceeds from sales 9,187 11,010 6,208 1,174 4,976 431 119
Cost of investments sold 8,093 10,212 5,768 1,300 4,759 448 117
-----------------------------------------------------------------------------------------------
1,094 798 440 (126) 217 (17) 2

Net unrealized appreciation
(depreciation) on investments:
At end of year 8,803 10,066 (5,492) (24,923) (1,336) (4,072) 1,926
-----------------------------------------------------------------------------------------------
Net gain (loss) on investments 9,897 10,864 (5,052) (25,049) (1,119) (4,089) 1,928
-----------------------------------------------------------------------------------------------

Net increase (decrease) in net
assets resulting from operations $ 16,120 $ 21,549 $ (1,918) $ (23,353) $ 12,853 $ 4,253 $ 1,811
===============================================================================================

<CAPTION>
Federated Wanger
Federated Federated Fund for U.S. Wanger U.S. International
Federated Prime Money High Income Government Small Cap Small Cap
Utility Fund II Fund II Bond Fund II Securities II Advisor Advisor
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ - $ 102 $ 25 $ 101 $ - $ -

Expenses:
Mortality and expense risk and
administrative charges 123 14 589 429 106 40
--------------------------------------------------------------------------------------------
Net investment income (expense) (123) 88 (564) (328) (106) (40)

Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) from
investment transactions:
Proceeds from sales 133 10,061 595 435 105 39
Cost of investments sold 118 10,061 584 425 106 42
--------------------------------------------------------------------------------------------
15 - 11 10 (1) (3)

Net unrealized appreciation
(depreciation) on investments:
At end of year 9,122 - 9,582 5,769 (19) (1,502)
--------------------------------------------------------------------------------------------
Net gain (loss) on investments 9,137 - 9,593 5,779 (20) (1,505)
--------------------------------------------------------------------------------------------

Net increase (decrease) in net
assets resulting from operations $ 9,014 $ 88 $ 9,029 $ 5,451 $ (126) $ (1,545)
============================================================================================

<CAPTION>
Stein Roe Warburg Warburg
Montgomery Strong Special Pincus Pincus Small
Montgomery Emerging International Venture Fund International Company
Growth Markets Stock Fund II Variable Series Equity Growth
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 1,784 $ 92 $ - $ - $ 797 $ -

Expenses:
Mortality and expense risk and
administrative charges 63 103 55 57 28 34
-------------------------------------------------------------------------------------------
Net investment income (expense) 1,721 (11) (55) (57) 769 (34)

Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) from
investment transactions:
Proceeds from sales 63 102 55 57 28 34
Cost of investments sold 69 45 63 61 35 34
-------------------------------------------------------------------------------------------
(6) 57 (8) (4) (7) -

Net unrealized appreciation
(depreciation) on investment
At end of year (3,066) (7,681) (4,703) (2,110) (2,563) (242)
-------------------------------------------------------------------------------------------
Net gain (loss) on investments (3,072) (7,624) (4,711) (2,114) (2,570) (242)
-------------------------------------------------------------------------------------------

Net increase (decrease) in net
assets resulting from operation $ (1,351) $ (7,635) $ (4,766) $ (2,171) $ (1,801) $ (276)
===========================================================================================

<CAPTION>
Weiss, Peck Weiss, Peck
& Greer's & Greer's
Core Large- Core Small-
Cap Stock Cap Stock
Fund Fund Total
---------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends $ - $ - $ 51,291

Expenses:
Mortality and expense risk and
administrative charges 16 13 6,125
---------------------------------------
Net investment income (expense) (16) (13) 45,166

Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) from
investment transactions:
Proceeds from sales 18,648 16,185 79,645
Cost of investments sold 17,680 15,180 75,200
---------------------------------------
968 1,005 4,445

Net unrealized appreciation
(depreciation) on investments:
At end of year - - (12,441)
---------------------------------------
Net gain (loss) on investments 968 1,005 (7,996)
---------------------------------------

Net increase (decrease) in net
assets resulting from operations $ 952 $ 992 $ 37,170
=======================================
</TABLE>

See accompanying notes.

<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Statement of Changes in Net Assets

For the Period Since Inception through December 31, 1997

<TABLE>
<CAPTION>
Federated
DFA DFA American
DFA Small DFA Large International International DFA Short- DFA Global Lenders
Value Value Value Small Term Fund Bond Fund II
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (expense) $ 6,223 $ 10,685 $ 3,134 $ 1,696 $ 13,972 $ 8,342 $ (117)
Net realized gain (loss) on investments 1,094 798 440 (126) 217 (17) 2
Net unrealized appreciation
(depreciation) on investments 8,803 10,066 (5,492) (24,923) (1,336) (4,072) 1,926
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 16,120 21,549 (1,918) (23,353) 12,853 4,253 1,811

Changes from variable annuity
contract transactions:
Transfers for net premiums 85,590 139,776 131,379 99,264 310,569 70,946 56,608
Transfers for terminations (581) (959) (962) (723) (562) - -
Net transfers within Separate
Account C - Advisor's Edge (8,071) (9,139) 988 14,371 (853) 2,605 18,617
---------------------------------------------------------------------------------------
Net increase (decrease) in net assets
derived from variable annuity
contract transactions 76,938 129,678 131,405 112,912 309,154 73,551 75,225
---------------------------------------------------------------------------------------
Net increase in net assets 93,058 151,227 129,487 89,559 322,007 77,804 77,036
---------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 93,058 $ 151,227 $ 129,487 $ 89,559 $ 322,007 $ 77,804 $ 77,036
=======================================================================================

<CAPTION>
Federated Wanger
Federated Federated Fund for U.S. Wanger U.S. International
Federated Volume Money High Income Government Small Cap Small Cap
Utility Fund II Fund II Bond Fund II Securities II Advisor Advisor
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (expense) $ (123) $ 88 $ (564) $ (328) $ (106) $ (40)
Net realized gain (loss) on investments 15 - 11 10 (1) (3)
Net unrealized appreciation
(depreciation) on investments 9,122 - 9,582 5,769 (19) (1,502)
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 9,014 88 9,029 5,451 (126) (1,545)

Changes from variable annuity
contract transactions:
Transfers for net premiums 69,041 12,986 496,138 240,048 56,359 22,019
Transfers for terminations - - - - - -
Net transfers within Separate
Account C - Advisor's Edge - (10,046) 1,137 - 6,767 1,344
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
derived from variable annuity
contract transactions 69,041 2,940 497,275 240,048 63,126 23,363
----------------------------------------------------------------------------------------
Net increase in net assets 78,055 3,028 506,304 245,499 63,000 21,818
----------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 78,055 $ 3,028 $ 506,304 $ 245,499 $ 63,000 $ 21,818
========================================================================================

<CAPTION>
Warburg
Stein Roe Warburg Pincus
Montgomery Strong Special Pincus Small
Montgomery Emerging International Venture Fund, International Company
Growth Markets Stock Fund II Variable Series Equity Growth
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (expense) $ 1,721 $ (11) $ (55) $ (57) $ 769 $ (34)
Net realized gain (loss) on investments (6) 57 (8) (4) (7) -
Net unrealized appreciation
(depreciation) on investments (3,066) (7,681) (4,703) (2,110) (2,563) (242)
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (1,351) (7,635) (4,766) (2,171) (1,801) (276)

Changes from variable annuity
contract transactions:
Transfers for net premiums 39,122 61,102 34,792 34,357 12,678 11,511
Transfers for terminations - - - - - -
Net transfers within Separate
Account C - Advisor's Edge - 1,344 - - 1,550 6,533
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
derived from variable annuity
contract transactions 39,122 62,446 34,792 34,357 14,228 18,044
----------------------------------------------------------------------------------------
Net increase in net assets 37,771 54,811 30,026 32,186 12,427 17,768
----------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 37,771 $ 54,811 $ 30,026 $ 32,186 $ 12,427 $ 17,768
========================================================================================

<CAPTION>
Weiss Peck Weiss Peck
& Greer's & Greer's
Core Large- Core Small-
Cap Stock Cap Stock
Fund Fund Total
-------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets
resulting from operations:
Net investment income (expense) $ (16) $ (13) $ 45,166
Net realized gain (loss) on investments 968 1,005 4,445
Net unrealized appreciation
(depreciation) on investments - - (12,441)
------------------------------------
Net increase (decrease) in net assets
resulting from operations 952 992 37,170

Changes from variable annuity
contract transactions:
Transfers for net premiums 14,048 11,155 2,009,488
Transfers for terminations - - (3,787)
Net transfers within Separate
Account C - Advisor's Edge (15,000) (12,147) -
-------------------------------------
Net increase (decrease) in net assets
derived from variable annuity
contract transactions (952) (992) 2,005,701
-------------------------------------
Net increase in net assets - - 2,042,871
-------------------------------------
Balances at December 31, 1997 $ - $ - $ 2,042,871
=====================================
</TABLE>

See accompanying notes.

<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements

December 31, 1997

1. ACCOUNTING POLICIES

ORGANIZATION OF THE ACCOUNT

First Providian Life and Health Insurance Company Separate Account C - Advisor's
Edge (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 on January 21, 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.

As of December 31, 1997, the Separate Account has nineteen subaccounts that
invest exclusively in shares of the corresponding portfolios of DFA Investment
Dimensions Group, Inc. (advised by Dimensional Fund Advisors, Inc.), The
Federated Insurance Series (advised by Federated Advisers), Wanger Advisors
Trust (advised by Wanger Asset Management, L.P.) The Montgomery Funds III
(advised by Montgomery Asset Management, LLC), Strong Variable Insurance Funds,
Inc. (advised by Strong Capital Management, Inc.), SteinRoe Variable Investment
Trust (advised by Stein Roe & Farnham Incorporated), and Warburg Pincus Trust
(advised by Warburg Pincus

6
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

Counsellors, Inc.) (each a "Fund" and collectively the "Funds"). Each Fund is
an open-end management investment company.

The portfolios in each Fund as of December 31, 1997 are as follows:

DFA INVESTMENT DIMENSIONS GROUP, INC.
DFA Small Value Portfolio
DFA Large Value Portfolio
DFA International Value Portfolio
DFA International Small Portfolio
DFA Short-Term Fixed Portfolio
DFA Global Bond Portfolio

THE FEDERATED INSURANCE SERIES
Federated American Leaders Fund II
Federated Utility Fund II
Federated Prime Money Fund II
Federated High Income Bond Fund II
Federated Fund for U.S. Government Securities II

WANGER ADVISORS TRUST
Wanger U.S. Small Cap Advisor
Wanger International Small Cap Advisor

THE MONTGOMERY FUNDS III
Montgomery Growth Portfolio
Montgomery Emerging Markets Portfolio

STRONG VARIABLE INSURANCE FUNDS, INC.
Strong International Stock Fund II

STEINROE VARIABLE INVESTMENT TRUST
Stein Roe Special Venture Fund, Variable Series

7
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

WARBURG PINCUS TRUST
Warburg Pincus International Equity Portfolio
Warburg Pincus Small Company Growth Portfolio

Prior to October 1997, the Separate Account had 2 additional subaccounts that
invested exclusively in shares of the following portfolios of Tomorrow Funds
Retirement Trust (advised by Weiss, Peck & Greer, L.L.C.): Weiss, Peck &
Greer's Core Large-Cap Stock Fund Portfolio and Weiss, Peck & Greer's Core
Small-Cap Stock Fund Portfolio. Effective October 1997, contract owners were no
longer permitted to allocate purchase payments to, or transfers into, these
subaccounts.

Effective March 1997, the portfolios of the DFA Investment Dimensions Group,
Inc. are no longer available to new contract owners within this Separate
Account. Existing contract owners may continue to allocate purchase payments
to, or transfer into, these subaccounts.

Upon approval of the Insurance Department of the state of New York, the
portfolios in the following Funds will be added to the Separate Account (or, for
certain Funds, additional contributions to the existing Funds will be available
to the Separate Account):

STRONG VARIABLE INSURANCE FUNDS, INC.
Strong International Stock Fund II
Strong Schafer Value Fund II

WARBURG PINCUS TRUST
Warburg Pincus International Equity Portfolio
Warburg Pincus Small Company Growth Portfolio

ENDEAVOR SERIES TRUST
T. Rowe Price International Stock Portfolio
Dreyfus Small Cap Value Portfolio
Enhanced Index Portfolio

8
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

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 objective.

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, twenty days) and
a five day grace period but bears full investment risk for any amounts allocated
to the portfolios 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.

9
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

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.

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 FAIR
PORTFOLIO SHARES VALUE VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DFA Small Value 6,489.400 $ 14.34 $ 93,058
DFA Large Value 9,916.525 15.25 151,227
DFA International Value 12,250.426 10.57 129,487
DFA International Small 12,136.992 7.38 89,571
DFA Short-Term Fixed 32,136.427 10.02 322,007
DFA Global Bond 7,971.721 9.76 77,804
Federated American Leaders Fund II 3,924.401 19.63 77,036
Federated Utility Fund II 5,462.211 14.29 78,055
Federated Prime Money Fund II 3,027.520 1.00 3,028
Federated High Income Bond Fund II 46,237.808 10.95 506,304
Federated Fund for U.S. Government
Securities II 23,292.125 10.54 245,499
Wanger U.S. Small Cap Advisor 2,935.694 21.46 63,000
Wanger International Small Cap Advisor 1,279.648 17.05 21,818
Montgomery Growth 2,503.048 15.09 37,771
Montgomery Emerging Markets 5,185.525 10.57 54,811
Strong International Stock Fund II 3,221.674 9.32 30,026
Stein Roe Special Venture Fund, Variable
Series 1,788.111 18.00 32,186
Warburg Pincus International Equity 1,184.652 10.49 12,427
Warburg Pincus Small Company Growth 1,078.155 16.48 17,768
------------
$ 2,042,883
============
</TABLE>

10
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

2. INVESTMENTS (CONTINUED)

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>
DFA Small Value $ 92,348
DFA Large Value 151,373
DFA International Value 140,747
DFA International Small 115,794
DFA Short-Term Fixed 328,102
DFA Global Bond 82,324
Federated American Leaders Fund II 75,227
Federated Utility Fund II 69,051
Federated Prime Money Fund II 13,089
Federated High Income Bond Fund II 497,306
Federated Fund for U.S. Government Securities II 240,155
Wanger U.S. Small Cap Advisor 63,125
Wanger International Small Cap Advisor 23,362
Montgomery Growth 40,906
Montgomery Emerging Markets 62,537
Strong International Stock Fund II 34,792
Stein Roe Special Venture Fund, Variable Series 34,357
Warburg Pincus International Equity 15,025
Warburg Pincus Small Company Growth 18,044
Weiss, Peck & Greer's Core Large-Cap Stock Fund 17,680
Weiss, Peck & Greer's Core Small-Cap Stock Fund 15,180
--------------
$ 2,130,524
==============
</TABLE>

11
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

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 to the funds of the Separate Account.
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 .50%.

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 contract 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.

12
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

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
------------
<S> <C>
DFA SMALL VALUE

Issuance of units 8,069.078
Redemption of units (710.080)
------------
Outstanding units at end of period 7,358.998
============

End of period:
Unit value $ 12.645472
============
Subaccount value $ 93,058
============

DFA LARGE VALUE

Issuance of units 13,210.842
Redemption of units (857.768)
------------
Outstanding units at end of period 12,353.074
============

End of period:
Unit value $ 12.242079
============
Subaccount value $ 151,227
============

DFA INTERNATIONAL VALUE

Issuance of units 13,463.893
Redemption of units (509.364)
------------
Outstanding units at end of period 12,954.529
============

End of period:
Unit value $ 9.995466
============
Subaccount value $ 129,487
============
</TABLE>

13
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

6. CONTRACT OWNER TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
1997
------------
<S> <C>
DFA INTERNATIONAL SMALL

Issuance of units 11,770.774
Redemption of units (81.246)
------------
Outstanding units at end of period 11,689.528
============

End of period:
Unit value $ 7.661452
============
Subaccount value $ 89,559
============

DFA SHORT-TERM FIXED

Issuance of units 31,198.070
Redemption of units (314.438)
------------
Outstanding units at end of period 30,883.632
============

End of period:
Unit value $ 10.426479
============
Subaccount value $ 322,007
============

DFA GLOBAL BOND

Issuance of units 7,312.219
Redemption of units -
------------
Outstanding units at end of period 7,312.219
============

End of period:
Unit value $ 10.640277
============
Subaccount value $ 77,804
============
</TABLE>

14
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

6. CONTRACT OWNER TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
1997
------------
<S> <C>
FEDERATED AMERICAN LEADERS FUND II

Issuance of units 6,260.866
Redemption of units -
------------
Outstanding units at end of period 6,260.866
============

End of period:
Unit value $12.304323
============
Subaccount value $ 77,036
============

FEDERATED UTILITY FUND II

Issuance of units 6,256.427
Redemption of units -
------------
Outstanding units at end of period 6,256.427
============

End of period:
Unit value $12.476023
============
Subaccount value $ 78,055
============

FEDERATED PRIME MONEY FUND II

Issuance of units 1,285.649
Redemption of units (994.606)
------------
Outstanding units at end of period 291.043
============

End of period:
Unit value $10.403808
============
Subaccount value $ 3,028
============
</TABLE>

15
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

6. CONTRACT OWNER TRANSACTIONS (CONTINUED)

1997
-------------
<S> <C>
FEDERATED HIGH INCOME BOND FUND II

Issuance of units 45,383.287
Redemption of units -
-------------
Outstanding units at end of period 45,383.287
=============

End of period:
Unit value $ 11.156182
=============
Subaccount value $ 506,304
=============

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

Issuance of units 22,834.496
Redemption of units -
-------------
Outstanding units at end of period 22,834.496
=============

End of period:
Unit value $ 10.751240
=============
Subaccount value $ 245,499
=============

WANGER U.S. SMALL CAP ADVISOR

Issuance of units 4,702.844
Redemption of units -
-------------
Outstanding units at end of period 4,702.844
=============

End of period:
Unit value $ 13.396094
=============
Subaccount value $ 63,000
=============
</TABLE>

<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

6. CONTRACT OWNER TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
1997
----------
<S> <C>
WANGER INTERNATIONAL SMALL CAP ADVISOR

Issuance of units 2,280.053
Redemption of units -
----------
Outstanding units at end of period 2,280.053
==========

End of period:
Unit value $ 9.569197
==========
Subaccount value $ 21,818
==========

MONTGOMERY GROWTH

Issuance of units 3,048.704
Redemption of units -
----------
Outstanding units at end of period 3,048.704
==========

End of period:
Unit value $12.389078
==========
Subaccount value $ 37,771
==========

MONTGOMERY EMERGING MARKETS

Issuance of units 6,209.783
Redemption of units -
----------
Outstanding units at end of period 6,209.783
==========

End of period:
Unit value $ 8.826629
==========
Subaccount value $ 54,811
==========
</TABLE>

17
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

6. CONTRACT OWNER TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
1997
----------
<S> <C>
STRONG INTERNATIONAL STOCK FUND II

Issuance of units 3,581.450
Redemption of units -
----------
Outstanding units at end of period 3,581.450
==========

End of period:
Unit value $ 8.383621
==========
Subaccount value $ 30,026
==========

STEIN ROE SPECIAL VENTURE FUND, VARIABLE SERIES

Issuance of units 2,781.581
Redemption of units -
----------
Outstanding units at end of period 2,781.581
==========

End of period:
Unit value $11.571187
==========
Subaccount value $ 32,186
==========

WARBURG PINCUS INTERNATIONAL EQUITY

Issuance of units 1,294.288
Redemption of units -
----------
Outstanding units at end of period 1,294.288
==========

End of period:
Unit value $ 9.601136
==========
Subaccount value $ 12,427
==========
</TABLE>

18
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

6. CONTRACT OWNER TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
1997
-----------
<S> <C>
WARBURG PINCUS SMALL COMPANY GROWTH

Issuance of units 1,347.819
Redemption of units -
-----------
Outstanding units at end of period 1,347.819
===========

End of period:
Unit value $ 13.183010
===========
Subaccount value $17,768
===========

WEISS, PECK & GREER'S CORE LARGE-CAP STOCK FUND

Issuance of units 1,564.756
Redemption of units (1,564.756)
-----------
Outstanding units at end of period -
===========

End of period:
Unit value $ 11.701473
===========
Subaccount value $ -
===========

WEISS, PECK & GREER'S CORE SMALL-CAP STOCK FUND

Issuance of units 1,327.476
Redemption of units (1,327.476)
-----------
Outstanding units at end of period -
===========

End of period:
Unit value $ 12.374161
===========
Subaccount value $ -
===========
</TABLE>

<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

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>
DFA DFA
DFA SMALL DFA LARGE INTERNATIONAL INTERNATIONAL DFA SHORT-
VALUE VALUE VALUE SMALL TERM FIXED
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract owner transactions $ 76,938 $129,678 $ 131,405 $112,912 $309,154
Accumulated net investment
income 6,223 10,685 3,134 1,696 13,972
Accumulated net realized gain
(loss) on investments 1,094 798 440 (126) 217
Net unrealized appreciation
(depreciation) on investments 8,803 10,066 (5,492) (24,923) (1,336)
-------------------------------------------------------------------------------------
$ 93,058 $151,227 $ 129,487 $ 89,559 $322,007
=====================================================================================
</TABLE>

<TABLE>
<CAPTION>
FEDERATED FEDERATED FEDERATED
DFA GLOBAL AMERICAN FEDERATED PRIME MONEY HIGH INCOME
BOND LEADERS FUND II UTILITY FUND II FUND II BOND FUND II
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contract owner transactions $ 73,551 $ 75,225 $ 69,041 $ 2,940 $497,275
Accumulated net investment
income (expense) 8,342 (117) (123) 88 (564)
Accumulated net realized gain
(loss) on investments (17) 2 15 - 11
Net unrealized appreciation
(depreciation) on investments (4,072) 1,926 9,122 - 9,582
-----------------------------------------------------------------------------------
$ 77,804 $ 77,036 $ 78,055 $ 3,028 $506,304
===================================================================================
</TABLE>

<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge

Notes to Financial Statements (continued)

7. NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
FEDERATED WANGER
FUND FOR U.S. WANGER U.S. INTERNATIONAL MONTGOMERY STRONG
GOVERNMENT SMALL CAP SMALL CAP MONTGOMERY EMERGING INTERNATIONAL
SECURITIES II ADVISOR ADVISOR GROWTH MARKETS STOCK FUND II
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract owner transactions $ 240,048 $ 63,126 $ 23,363 $ 39,122 $ 62,446 $ 34,792
Accumulated net investment
income (expense) (328) (106) (40) 1,721 (11) (55)
Accumulated net realized gain
(loss) on investments 10 (1) (3) (6) 57 (8)
Net unrealized appreciation
(depreciation) on investments 5,769 (19) (1,502) (3,066) (7,681) (4,703)
-------------------------------------------------------------------------------------------
$ 245,499 $ 63,000 $ 21,818 $ 37,771 $ 54,811 $ 30,026
===========================================================================================
</TABLE>

<TABLE>
<CAPTION>
WEISS, PECK
STEIN ROE WARBURG & GREER'S WEISS PECK &
SPECIAL WARBURG PINCUS PINCUS SMALL CORE LARGE- GREER'S CORE
VENTURE FUND, INTERNATIONAL COMPANY CAP STOCK SMALL-CAP
VARIABLE SERIES EQUITY GROWTH FUND STOCK FUND TOTAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Contract owner transactions $ 34,357 $ 14,228 $ 18,044 $ (952) $ (992) $2,005,701
Accumulated net investment
income (expense) (57) 769 (34) (16) (13) 45,166
Accumulated net realized gain
(loss) on investments (4) (7) - 968 1,005 4,445
Net unrealized (depreciation)
on investments (2,110) (2,563) (242) - - (12,441)
------------------------------------------------------------------------------------------
$ 32,186 $ 12,427 $ 17,768 $ - $ - $2,042,871
==========================================================================================
</TABLE>

<PAGE>

Financial Statements

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

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 - Dimensional Variable Annuity

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............................................ 3
Statement of Changes in Net Assets................................. 4
Notes to Financial Statements...................................... 5
</TABLE>
<PAGE>

Report of Independent Auditors

Contract Owners
First Providian Life and Health Insurance Company Separate Account C -
Dimensional Variable Annuity

We have audited the accompanying statement of assets and liabilities of First
Providian Life and Health Insurance Company Separate Account C - Dimensional
Variable Annuity (comprising DFA Large Value, DFA Small Value, DFA Short-Term
Fixed, DFA International Value, and DFA International Small 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.

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 - Dimensional Variable Annuity 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 - Dimensional Variable Annuity

Statement of Assets and Liabilities

<TABLE>
<CAPTION>
December 31
1997
---------------------
<S> <C>
ASSETS
Investments:

DFA Large Value Fund (cost: $34,754) $ 33,747

DFA Small Value Portfolio (cost: $21,351) 19,901

DFA Short-Term Fixed Portfolio (cost: $20,149) 19,982

DFA International Value Portfolio (cost: $35,236) 33,189

DFA International Small Portfolio (cost: $28,777) 25,080
------------
TOTAL INVESTMENTS AND TOTAL ASSETS 131,899
LIABILITIES
Amounts due to First Providian Life and Health Insurance Company 1
------------
NET ASSETS $ 131,898
============

NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS

DFA Large Value Subaccount $ 33,747

DFA Small Value Subaccount 19,901

DFA Short-Term Fixed Subaccount 19,982

DFA International Value Subaccount 33,189

DFA International Small Subaccount 25,079
------------
NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS $ 131,898
============
</TABLE>

See accompanying notes.

2
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Statement of Operations

For the Period Since Inception through December 31, 1997

<TABLE>
<CAPTION>
DFA DFA DFA
DFA LARGE DFA SMALL SHORT-TERM INTERNATIONAL INTERNATIONAL TOTAL
VALUE VALUE FIXED VALUE SMALL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 2,289 $ 1,418 $ 315 $ 961 $ 597 $ 5,580

Expenses:
Mortality and expense risk and
administrative charges 37 22 22 37 29 147
----------------------------------------------------------------------------------------
Net investment income 2,252 1,396 293 924 568 5,433

Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) from
investment transactions:
Proceeds from sales 669 154 288 38 29 1,178
Cost of investments sold 728 172 278 39 32 1,249
----------------------------------------------------------------------------------------
(59) (18) 10 (1) (3) (71)

Net unrealized depreciation on
investments:
At end of year (1,007) (1,450) (167) (2,047) (3,697) (8,368)
----------------------------------------------------------------------------------------
Net loss on investments (1,066) (1,468) (157) (2,048) (3,700) (8,439)
----------------------------------------------------------------------------------------

Net increase (decrease) in net
assets resulting from operations $ 1,186 $ (72) $ 136 $ (1,124) $ (3,132) $ (3,006)
========================================================================================
</TABLE>

See accompanying notes.

3
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Statement of Changes in Net Assets

For the Period Since Inception through December 31, 1997

<TABLE>
<CAPTION>
DFA LARGE VALUE DFA SMALL VALUE DFA SHORT-TERM FIXED
------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets resulting from operations:
Net investment income $ 2,252 $ 1,396 $ 293
Net realized gain (loss) on investments (59) (18) 10
Net unrealized depreciation on
investments (1,007) (1,450) (167)
------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,186 (72) 136

Changes from variable annuity contract transactions:
Transfers for net premiums 33,181 20,104 20,112
Net transfers within Separate Account
C - Dimensional Variable Annuity (620) (131) (266)
------------------------------------------------------------------
Net increase in net assets derived from
variable annuity contract transactions 32,561 19,973 19,846
------------------------------------------------------------------
Net increase in net assets 33,747 19,901 19,982
------------------------------------------------------------------
Balances at December 31, 1997 $ 33,747 $ 19,901 $ 19,982
==================================================================

<CAPTION>
DFA INTERNATIONAL VALUE DFA INTERNATIONAL SMALL TOTAL
---------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets resulting from operations:
Net investment income $ 924 $ 568 $ 5,433
Net realized gain (loss) on investments (1) (3) (71)
Net unrealized depreciation on
investments (2,047) (3,697) (8,368)
---------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (1,124) (3,132) (3,006)

Changes from variable annuity contract transactions:
Transfers for net premiums 34,035 27,472 134,904
Net transfers within Separate Account
C - Dimensional Variable Annuity 278 739 -
---------------------------------------------------------------
Net increase in net assets derived from
variable annuity contract transactions 34,313 28,211 134,904
---------------------------------------------------------------
Net increase in net assets 33,189 25,079 131,898
---------------------------------------------------------------
Balances at December 31, 1997 $ 33,189 $ 25,079 $ 131,898
===============================================================
</TABLE>

See accompanying notes.

4
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Notes to Financial Statements

December 31, 1997

1. ACCOUNTING POLICIES

ORGANIZATION OF THE ACCOUNT

First Providian Life and Health Insurance Company Separate Account C -
Dimensional Variable Annuity (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 October, 1997.

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.

As of December 31, 1997, the Separate Account has seven subaccounts, five of
which had activity in 1997. The Subaccounts invest exclusively in shares of the
corresponding portfolios of DFA Investment Dimensions Group Inc. (advised by
Dimensional Fund Advisors Inc.) and The Federated Insurance Series (advised by
Federated Advisers) (each a "Fund" and collectively the "Funds"). Each Fund is
an open-end management investment company.

5
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

The portfolios available in each Fund as of December 31, 1997 are as follows:

DFA INVESTMENT DIMENSIONS GROUP INC.
DFA Large Value Portfolio
DFA Small Value Portfolio
DFA Short-Term Fixed Portfolio
DFA International Value Portfolio
DFA International Small Portfolio
DFA Global Bond Portfolio

THE FEDERATED INSURANCE SERIES
Federated Prime Money Fund II

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 objective.

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

6
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

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.

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.

2. INVESTMENTS

The following is a summary of shares and amounts outstanding for each of the
respective portfolios as of December 31, 1997:

7
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Notes to Financial Statements (continued)

2. INVESTMENTS (CONTINUED)

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>
DFA Large Value $ 35,482
DFA Small Value 21,523
DFA Short-Term Fixed 20,427
DFA International Value 35,275
DFA International Small 28,809
------------
$ 141,516
============
</TABLE>

3. FEDERAL INCOME TAXES

4. ADVISORY AND SERVICE FEES

8
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Notes to Financial Statements (continued)

5. EXPENSES

9
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

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
--------------
<S> <C>
DFA LARGE VALUE
Issuance of units 2,808.202
Redemption of units (51.602)
------------
Outstanding units at end of period 2,756.600
============
End of period:
Unit value $ 12.242079
============
Subaccount value $ 33,747
============

DFA SMALL VALUE
Issuance of units 1,584.159
Redemption of units (10.374)
------------
Outstanding units at end of period 1,573.785
============
End of period:
Unit value $ 12.645472
============
Subaccount value $ 19,901
============

DFA SHORT-TERM FIXED
Issuance of units 1,942.076
Redemption of units (25.604)
------------
Outstanding units at end of period 1,916.472
============
End of period:
Unit value $ 10.426479
============
Subaccount value $ 19,982
============
</TABLE>

10
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Notes to Financial Statements (continued)

6. CONTRACT OWNER TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
1997
-------------
<S> <C>
DFA INTERNATIONAL VALUE
Issuance of units 3,320.401
Redemption of units -
-------------
Outstanding units at end of period 3,320.401
=============

End of period:
Unit value $ 9.995466
=============
Subaccount value $ 33,189
=============

DFA INTERNATIONAL SMALL
Issuance of units 3,273.454
Redemption of units -
-------------
Outstanding units at end of period 3,273.454
=============

End of period:
Unit value $ 7.661452
=============
Subaccount value $ 25,079
=============
</TABLE>

11
<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

Notes to Financial Statements (continued)

7. NET ASSETS

Net assets at December 31, 1997 for each of the respective subaccounts are
summarized in the following tables:

<TABLE>
<CAPTION>
DFA LARGE VALUE DFA SMALL VALUE DFA SHORT-TERM FIXED
----------------------------------------------------------------
<S> <C> <C> <C>
Contract owner transactions $ 32,561 $ 19,973 $ 19,846
Accumulated net investment 2,252 1,396 293
income
Accumulated net realized gain
(loss) on investments (59) (18) 10
Net unrealized depreciation on
investments (1,007) (1,450) (167)
----------------------------------------------------------------
$ 33,747 $ 19,901 $ 19,982
================================================================
</TABLE>

<TABLE>
<CAPTION>
DFA INTERNATIONAL VALUE DFA INTERNATIONAL SMALL TOTAL
-----------------------------------------------------------------
<S> <C> <C> <C>
Contract owner transactions $ 34,313 $ 28,211 $ 134,904
Accumulated net investment
income 924 568 5,433
Accumulated net realized gain
(loss) on investments (1) (3) (71)
Net unrealized appreciation
(depreciation) on investments (2,047) (3,697) (8,368)
-----------------------------------------------------------------
$ 33,189 $ 25,079 $ 131,898
=================================================================
</TABLE>

<PAGE>

First Providian Life and Health Insurance Company
Separate Account C - Dimensional Variable Annuity

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.

13
<PAGE>

OTHER INFORMATION

Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Part A. None
Part B. Audited Financial Statements of AUSA Life Insurance Company,
Inc. Separate Account C - Advisor's Edge and Dimensional
(formerly First Providian Life and Health Insurance Company
Separate Account C - Advisor's Edge and Dimensional), for the
Period Since Inception Through Year ended December 31, 1997,
with Report of Independent Auditors/1/

Supplemental Financial Statements - Statutory Basis of AUSA
Life Insurance Company, Inc. for the Years ended December 31,
1997, 1996 and 1995, 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) Articles of Incorporation of AUSA Life Insurance
Company, Inc./4/
(b) By-Laws of AUSA Life Insurance Company, Inc./4/
(7) Not Applicable.

(8) (a) Participation Agreement by and between Wanger Advisors
Trust and First Providian Life and Health Insurance
Company dated November 15, 1996./3/
(b) Amendment No. 1 dated December 16, 1996 to
Participation Agreement by and between Wanger Advisors
Trust and First Providian dated November 15, 1996./3/
(c) Participation Agreement among Federated Insurance
Series, Federated Advisers, Federated Securities Corp.
and First Providian dated November 15, 1996./3/
(d) Participation Agreement among DFA Investment
Dimensions Group Inc., Dimensional Fund Advisors Inc.,
DFA Securities, Inc. and First Providian dated
November 15, 1996./3/
(e) Marketing Agreement between DFA Securities, Inc. and
First Providian dated November 15, 1996./3/
(f) Amendment dated February 10, 1997 to the Marketing
Agreement between DFA Securities, Inc. and First
Providian dated November 15, 1996./3/
(g) Amendment dated March 4, 1997 to the Participation
Agreement among DFA Investment Dimensions Group Inc.,
Dimensional Fund Advisors Inc., DFA Securities, Inc.
and First Providian and Marketing Agreement between
DFA Securities, Inc. and First Providian dated
November 15, 1996./3/
(h) Amendment dated April 15, 1997 to the Participation
Agreement among DFA Investment Dimensions Group Inc.,
Dimensional Fund Advisors Inc., DFA Securities, Inc.
and First Providian dated November 15, 1996./3/
(i) Participation Agreement among Montgomery Funds III,
Montgomery Asset Management, L.P. and First Providian
dated November 15, 1996./3/
(j) Participation Agreement among First Providian Life and
Health Insurance Company, Warburg, Pincus Trust,
Warburg Pincus Asset Management, Inc. and Counsellors
Securities, Inc. dated August 11, 1998./1/

(9) (a) Opinion and Consent of Counsel./1/
(b) Consent of Counsel./1/
(10) Consent of Independent Auditors./1/
(11) No Financial Statements are omitted from Item 23.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(a) None
(b) Not Applicable.

- -------------------------------------
/1/Filed herewith.

/2/Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement of First Providian Life and Health Insurance Company,
File No. 33-94204 (as filed July 16, 1996).

/3/Incorporated by reference from Post-Effective Amendment No. 2 to the
Registration Statement of First Providian Life and Health Insurance Company,
File No. 33-94204 (as filed July 29, 1997).

/4/Incorporated by reference from Initial Registration Statement on Form N-4 of
AUSA Life Insurance Company, Inc. - AUSA Endeavor Variable Annuity Account,
File No. 33-83560 (as filed on September 1, 1994).

<PAGE>

Item 25. Directors and Officers of the Depositor

Name and Principal Business Address Positions and Offices with Depositor
- ----------------------------------- ------------------------------------
Tom A. Schlossberg Director and President
4 Manhattanville Road
Purchase, NY 10577

Larry G. Brown Director and Chairman of the Board
201 Highland Avenue
Largo, FL 33770

William L. Busler Director and Vice President
4333 Edgewood Road NE
Cedar Rapids, IA 52499

Patrick S. Baird Vice President and Chief Financial
4333 Edgewood Road NE Officer
Cedar Rapids, IA 52499

Craig D. Vermie Secretary
4333 Edgewood Road NE
Cedar Rapids, IA 52499

Colette Vargas Director and Chief Actuary
4 Manhattanville Road
Purchase, NY 10577

Brenda K. Clancy Treasurer
4333 Edgewood Road NE
Cedar Rapids, IA 52499

Jack R. Dykhouse Director
Brown Trail, Suite 302
Bedford, TX 76021

Steven E. Frushtick Director
500 Fifth Avenue
New York, NY 10110

Carl Thor Hanson Director
900 Birdseye Road
P.O. Box 112
Orient, NY 11957-0112

B. Larry Jenkins Director and Vice President
2 East Chase Street
Baltimore, MD 21202

Vera F. Mihaic Director and Vice President
666 Fifth Avenue
New York, NY 10103-0001

Peter P. Post Director
415 Madison Avenue
New York, NY 10017

Cor H. Verhagen Director
51 JFK Parkway
Short Hills, NJ 07078

E. Kirby Warren Director
725 Uris Hall
116th Street & Broadway
New York, NY 10027

<PAGE>

Item 26. Persons controlled by or Under Common Control with the Depositor or
Registrant.

The Depositor, AUSA Life Insurance Company, Inc. ("AUSA Life"), 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 AUSA
Life.

The following chart indicates the persons controlled by or under
common control with AUSA Life:

<PAGE>

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

AEGON Nevak Holding B.V. Netherlands 100% of AEGON N.V. Holding company
Corporation Netherlands Corporation

AEGON International N.V. Netherlands 100% of AEGON N.V. Holding company
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
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

Monumental General Maryland 100% Monumental General Provides management srvcs.
Administrators, Inc. Insurance Group, Inc. to unaffiliated third party
administrator

Executive Management and Maryland 100% Monumental General Provides actuarial consulting
Consultant Services, Inc. Administrators, Inc. services

Monumental General Mass Maryland 100% Monumental General Marketing arm for sale of
Marketing, Inc. Insurance Group, Inc. mass marketed insurance
coverages

Diversified Investment Delaware 100% AUSA Holding Co. Registered investment advisor
Advisors, Inc.

Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advisors, Inc.

AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer

Supplemental Ins. Division, Inc. Tennessee 100% AUSA Holding Co. Insurance

Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance

CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network Inc.

AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.

AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment services

Quantra Corporation Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Quantra Software Corporation Delaware 100% Quantra Corporation Manufacture and sell
mortgage loan and security
management software

Landauer Realty Advisors, Inc. Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc.

Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.

Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Information Systems for
Advisors, Inc. real estate investment
management

AEGON USA Realty Iowa 100% AEGON USA Real estate management
Management, Inc Realty Advisors, Inc.

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.

RCC Properties Limited Iowa AEGON USA Realty Advisors, Limited Partnership
Partnership Inc. is General Partner and 5%
owner

AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing

Endeavor Investment Advisors California 49% AUSA Financial General Partnership
Markets, Inc.

Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator

Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. 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 Delaware 100% AUSA Holding Co. Registered investment advisor
Services, Inc.

Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer

Associated Mariner Financial Michigan 100% Intersecurities, Inc. Holding co./management
Group, Inc. services
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
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 100% Associated Mariner Insurance agency
Ohio, Inc. Agency, Inc.

Associated Mariner Agency Texas 100% Associated Mariner Insurance agency
Texas, Inc. Agency, Inc.

Associated Mariner Agency New Mexico 100% Associated Mariner Insurance agency
New Mexico, Inc. Agency, Inc.

Mariner Mortgage 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 Series Fund Massachusetts Various Mutual fund

First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding company
Company

AUSA Life Insurance New York 100% First AUSA Life Insurance
Company, Inc. Insurance Company

Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America

Life Investors Alliance, LLC Delaware 100% LIICA Purchase, own, and hold the
equity interest of other entities

Bankers United Life Iowa 100% Life Investors Ins. Marketing
Assurance Company Company of America

Life Investors Agency Iowa 100% Life Investors Ins. Marketing
Group, Inc. Company of America
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance

AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.

AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of structured
of Kentucky Services Group, Inc. settlements

AEGON Assignment Corporation Illinois 100% AEGON Financial Administrator of structured
Services 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 Ohio 100% First AUSA Life Ins. Co. Insurance
Co. 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 Florida 100% Western Reserve Life Registered investment advisor
Management, Inc. Assurance Co. of Ohio

ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
Assurance Co. of Ohio

ISI Insurance Agency Ohio 100% ISI Insurance Agency, Inc. Insurance agency
of Ohio, Inc.

ISI Insurance Agency Texas 100% ISI Insurance Agency, Inc. Insurance agency
of Texas, Inc.

ISI Insurance Agency Massachusetts 100% ISI Insurance Agency, Inc. Insurance agency
of Massachusetts, Inc.

AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance agency
Assurance Co. of Ohio

Monumental Life Insurance Co. Maryland 100% First AUSA Life Ins. Co. Insurance

AEGON Special Markets Maryland 100% Monumental Life Ins. Co. Marketing
Group, Inc.

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
</TABLE>
<PAGE>

<S> <C> <C> <C>
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company

Commonwealth General Delaware 100% AEGON USA, Inc. Holding company
Corporation ("CGC")

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

Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent

Commonwealth General Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements

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
Development Corporation lessor

Capital General Development Delaware 100% CGC Holding company
Corporation

Commonwealth Life Kentucky 100% Capital General Insurance company
Insurance Company Development Corporation

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

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
</TABLE>
<PAGE>

<S> <C> <C> <C>
Independent Automobile Florida 100% Capital Security Automobile Club
Association, Inc. Life Insurance Company

Independent 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.

Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. 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

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.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
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.

NCOA 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.

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.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
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

Peoples Benefit Life 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% Peoples Benefit Life Insurance company
Insurance Company

Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
</TABLE>
<PAGE>

Item 27. Number of Contract Owners

As of August 31, 1998, there were 21 Advisor's Edge Variable Annuity
contract owners, one contract owner of the Dimensional Variable Annuity and 64
contact owners of PGA Retirement Annuity.

Item 28. Indemnification

The New York Code (Section 721 et seq.) provides for permissive
indemnification in certain situations, mandatory indemnification in other
situations, and prohibits indemnification in certain situations. The Code also
specifies procedures for determining when indemnification payments can be made.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
directors, officers, and controlling persons of the Depositor pursuant to the
foregoing provisions, or otherwise, the Depositor has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Depositor of expenses incurred or
paid by a director, officer, or controlling person in connection with the
securities being registered), the Depositor will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
<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 and AUSA Endeavor
Variable Annuity Account of AUSA Life Insurance Company, Inc.

(b) Directors and Officers of AFSG Securities Corporation/5/

Positions and Officers
Name with Underwriter
---- ----------------------

Larry N. Norman President
Lisa A. Wachendorf Vice President and Chief
Compliance Officer
Debra C. Cubero Vice President
Michael F. Lane Vice President
Anne M. Spaes Vice President
Sarah J. Strange Vice President
Frank A. Camp Secretary
Linda Gilmer Controller and Treasurer
Robert W. Warner Assistant Compliance Officer
Emily Bates Assistant Treasurer
William C. White Assistant Treasurer
Clifton W. Flenniken Assistant Treasurer
Colleen S. Lyons Assistant Secretary
John F. Reesor Assistant Secretary

Directors
---------

Larry N. Norman
Frank A. Camp
Sarah J. Strange

- --------------
/5/ The principal business address of each person listed is 4333 Edgewood Road,
N.E., Cedar Rapids, Iowa 52499-0001, or 400 West Market Street, Louisville,
Kentucky 40202.
<PAGE>

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 AUSA Life Insurance Company, Inc. at 666 Fifth
Avenue, New York, New York 10103, or its administrative offices at 4333 Edgewood
Road, N.E. Cedar Rapids, Iowa 52499.

Item 31. Management Services

All management contracts are discussed in Part A or Part B.

Item 32. Undertakings

(a) Registrant undertakes that it will file a post-effective amendment to
this registration statement as frequently as necessary to ensure that
the audited financial statements in the registration statement are
never more than 16 months old for so long as Premiums under the Policy
may be accepted.

(b) Registrant undertakes that it will include either (i) a postcard or
similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional
Information or (ii) a space in the Policy application that an
applicant can check to request a Statement of Additional Information.

(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request to AUSA Life
Insurance Company, Inc., at the address or phone number listed in the
Prospectus.

(d) AUSA Life Insurance Company, Inc. hereby represents that the fees and
charges deducted under the policies 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 AUSA Life Insurance Company, Inc.

Section 403(b) Representations
------------------------------
AUSA Life represents that it is relying on a no-action letter dated
November 28, 1998, to the American Council of Life Insurance
(Ref. No. IP-6-88), regarding Sections 22(e), 27(c)(1), and 27(d) of the
Investment Company Act of 1940, as amended, in connection with
redeemability restrictions on Section 403(b) Policies, and that paragraphs
numbered (1) through (4) of that letter will be complied with.
<PAGE>

As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the duties indicated.

Signatures Title Date

/s/ William Brown, Jr. Director September 28, 1998
- ------------------------
William Brown, Jr.

/s/ Larry G. Brown Director September 28, 1998
- ------------------------
Larry G. Brown

/s/ William L. Busler Director September 28, 1998
- ------------------------
William L. Busler

/s/ Jack R. Dykhouse Director September 28, 1998
- ------------------------
Jack R. Dykhouse

/s/ Steven E. Frushtick Director September 28, 1998
- ------------------------
Steven E. Frushtick

/s/ Carl T. Hanson Director September 28, 1998
- ------------------------
Carl T. Hanson

/s/ B. Larry Jenkins Director September 28, 1998
- ------------------------
B. Larry Jenkins

/s/ Colette Vargas Director September 28, 1998
- ------------------------
Colette Vargas

/s/ Vera F. Mihaic Director September 28, 1998
- ------------------------
Vera F. Mihaic

/s/ Peter P. Post Director September 28, 1998
- ------------------------
Peter P. Post

/s/ Tom A. Schlossberg Director (Principal September 28, 1998
- ------------------------
Tom A. Schlossberg Executive Officer)

/s/ Cor H. Verhagen Director September 28, 1998
- ------------------------
Cor H. Verhagen

/s/ E. Kirby Warren Director September 28, 1998
- ------------------------
E. Kirby Warren

/s/ Brenda K. Clancy Treasurer (Chief September 28, 1998
- ------------------------
Brenda K. Clancy Accounting Officer

<PAGE>

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant hereby certifies that this Amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Registration Statement to be signed on its behalf,
in the City of Purchase and State of New York, on this 28th day of September,
1998.

AUSA LIFE INSURANCE COMPANY, INC.
SEPARATE ACCOUNT C
Registrant

AUSA LIFE INSURANCE COMPANY, INC.
Depositor

/s/ Tom A. Schlossberg
-----------------------
Tom A. Schlossberg
President
<PAGE>

SEPARATE ACCOUNT C
ADVISOR'S EDGE VARIABLE ANNUITY, DIMENSIONAL VARIABLE ANNUITY
AND PGA RETIREMENT ANNUITY

INDEX TO EXHIBITS

EXHIBIT 8(j) PARTICIPATION AGREEMENT AMONG FIRST PROVIDIAN LIFE
AND HEALTH INSURANCE COMPANY, WARBURG, PINCUS TRUST,
WARBURG PINCUS ASSET MANAGEMENT, INC. AND
COUNSELLORS SECURITIES, INC. DATED AUGUST 11, 1998

EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL

EXHIBIT 9(b) CONSENT OF COUNSEL

EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS

<PAGE>

EXHIBIT 8J

PARTICIPATION AGREEMENT
By and Among
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
And
WARBURG, PINCUS TRUST
And
WARBURG PINCUS ASSET MANAGEMENT, INC.
And
COUNSELLORS SECURITIES INC.

THIS AGREEMENT, made and entered into this 11th day of August, 1998, by and
among First Providian Life and Health Insurance Company, organized under the
laws of New York (the "Company"), on its own behalf and on behalf of each
separate account of the Company named in Schedule 1 to this Agreement as may be
amended from time to time (each account referred to as the "Account"), Warburg,
Pincus Trust, an open-end management investment company and business trust
organized under the laws of the Commonwealth of Massachusetts (the "Fund");
Warburg Pincus Asset Management, Inc. a corporation organized under the laws of
the State of Delaware (the "Adviser"); and Counsellors Securities Inc., a
corporation organized under the laws of the State of New York ("CSI").

WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment vehicle
for separate accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies that have
entered into participation agreements similar to this Agreement (the
"Participating Insurance Companies"), and

WHEREAS, beneficial interests in the Fund are divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and

WHEREAS, the Fund has received an order from the Securities and Exchange
Commission (the "SEC") granting Participating Insurance Companies and variable
annuity separate accounts and variable life insurance separate accounts relief
from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended (the "1940 Act"), and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund to
be sold to and held by variable annuity separate accounts and variable life
insurance separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and qualified pension and retirement plans outside of the
separate account context (the "Mixed and Shared Funding Exemptive Order"). The
parties to this Agreement agree that the conditions or undertakings specified in
the Mixed and Shared
<PAGE>

Funding Exemptive Order and that may be imposed on the Company, the Fund, the
Adviser and/or CSI by virtue of the receipt of such order by the SEC will be
incorporated herein by reference, and such parties agree to comply with such
conditions and undertakings to the extent applicable to each such party; and

WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"); and

WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and

WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of New York, to set aside and invest assets
attributable to the Contracts; and

WHEREAS, the Company has registered the Account as a unit investment trust
under the 1940 Act; and

WHEREAS, CSI, the Fund's distributor, is registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934 (the "1934 Act") and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Portfolios named in
Schedule 2, as such schedule may be amended from time to time (the "Designated
Portfolios"), on behalf of the Account to fund the Contracts, and the Fund is
authorized to sell such shares to unit investment trusts such as the Account at
net asset value;

NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Adviser and CSI agree as follows:

ARTICLE I. Sale of Fund Shares

1.1. The Fund agrees to sell to the Company those shares of the Designated
Portfolios that each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt and acceptance by the Fund or
its designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company will be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee will constitute receipt by
the Fund; provided that the Fund receives notice of such order by 10:00 a.m.
Eastern Time on the next following Business Day ("T+1"). "Business Day" will
mean any
<PAGE>

day on which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.

1.2. The Company will pay for Fund shares on T+1 in each case that an order to
purchase Fund shares is made in accordance with Section 1.1 above. Payment will
be in federal funds transmitted by wire. This wire transfer will be received by
CSI no later than 4:00 p.m. Eastern Time.

1.3. The Fund agrees to make shares of the Designated Portfolios available
indefinitely for purchase at the applicable net asset value per share by
Participating Insurance Companies, including the Company, and their separate
accounts on those days on which the Fund calculates its Designated Portfolio net
asset value pursuant to rules of the SEC and the Fund shall use reasonable
efforts to calculate such net asset value on each day the NYSE is open for
trading; provided, however, that the Fund, the Adviser or CSI may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in its or their sole discretion acting in
good faith, necessary in the best interests of the shareholders of such
Portfolio.

1.4. On each Business Day on which the Fund calculates its net asset value, the
Company will aggregate and calculate the net purchase or redemption orders for
each Account maintained by the Fund in which contract owner assets are invested.
Net orders will only reflect orders that the Company has received prior to the
close of regular trading on the NYSE currently 4:00 p.m., Eastern Time) on that
Business Day. Orders that the Company has received after the close of regular
trading on the NYSE will be treated as though received on the next Business Day.
Each communication of orders by the Company will constitute a representation
that such orders were received by it prior to the close of regular trading on
the NYSE on the Business Day on which the purchase or redemption order is priced
in accordance with Rule 22c-1 under the 1940 Act. Other procedures relating to
the handling of orders will be in accordance with the prospectus and statement
of information of the relevant Designated Portfolio or with oral or written
instructions that CSI or the Fund will forward to the Company from time to time.

1.5. The Fund agrees that shares of the Fund will be sold only to Participating
Insurance Companies and their separate accounts, qualified pension and
retirement plans or such other persons as are permitted under applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and regulations promulgated thereunder, the sale to which will
not impair the tax treatment currently afforded the Contracts. No shares of any
Portfolio will be sold to the general public except as set forth in this Section
1.5.
<PAGE>

1.6. The Fund agrees to redeem for cash, upon the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt and acceptance
by the Fund or its designee of the request for redemption. For purposes of this
Section 1.6, the Company will be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee will
constitute receipt by the Fund, provided the Fund receives notice of request for
redemption by 10:00 a.m. Eastern Time on the next following Business Day.
Payment will be in federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on the same Business Day
the Fund receives notice of the redemption order from the Company. The Fund
reserves the right to delay payment of redemption proceeds, but in no event may
such payment be delayed longer than the period permitted by the 1940 Act. The
Fund will not bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be responsible for such
action. If notification of redemption is received after 10:00 a.m. Eastern
Time, payment for redeemed shares will be made on the next following Business
Day.

1.7. The Company agrees to purchase and redeem the shares of the Designated
Portfolios offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus.

1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.

1.9. The Fund will furnish same day notice (by telecopier, followed by written
confirmation) to the Company of the declaration of any income, dividends or
capital gain distributions payable on each Designated Portfolio's shares. The
Company hereby elects to receive all such dividends and distributions as are
payable on the Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and distributions. The Company
reserves the right to revoke this election upon reasonable prior notice to the
Fund and to receive all such dividends and distributions in cash.

1.10. The Fund will make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and will use its
best efforts to make such net asset value per share available by 6:00 p.m.,
Eastern Time, but in no event later than 7:00 p.m., Eastern Time, each Business
Day.
<PAGE>

1.11. In the event adjustments are required to correct any error in the
computation of the net asset value of the Fund's shares, the Fund or CSI will
notify the Company as soon as practicable after discovering the need for those
adjustments that result in an aggregate reimbursement of $150 or more to any one
Account maintained by a Designated Portfolio unless notified otherwise by the
Company (or, if lesser, results in an adjustment of $10 or more to each
contractowner's account). Any such notice will state for each day for which an
error occurred the incorrect price, the correct price and, to the extent
communicated to the Fund's shareholders, the reason for the price change. The
Company may send this notice or a derivation thereof (so long as such derivation
is approved in advance by CSI or the Adviser) to contractowners whose accounts
are affected by the price change. The parties will negotiate in good faith to
develop a reasonable method for effecting such adjustments.

ARTICLE II. Representations and Warranties

2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and sold in
compliance with all applicable federal and state laws, including state insurance
suitability requirements. The Company further represents and warrants that it
is an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account as a separate
account under applicable state law and has registered the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, and that it will maintain such
registration for so long as any Contracts are outstanding. The Company will
amend the registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Account from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.

2.2. The Company represents that the Contracts are currently and at the time of
issuance will be treated as annuity contracts under applicable provisions of the
Internal Revenue Code, and that it will make every effort to maintain such
treatment and that it will notify the Fund and the Adviser immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.

2.3. The Company represents and warrants that it will not purchase shares of
the Designated Portfolios with assets derived from tax-qualified retirement
plans except, indirectly, through Contracts purchased in connection with such
plans.

2.4. The Fund represents and warrants that Fund shares of the Designated
Portfolios sold pursuant to this Agreement will be registered under the 1933 Act
and duly authorized for issuance in accordance with applicable law and that the
Fund is and will remain registered
<PAGE>

under the 1940 Act for as long as such shares of the Designated Portfolios are
outstanding. The Fund will amend the registration statement for its shares under
the 1933 Act and the 1940 Act from time to time as required in order to effect
the continuous offering of its shares or as may otherwise be required by
applicable law. The Fund will register and qualify the shares of the Designated
Portfolios for sale in accordance with the laws of the various states only if
and to the extent deemed advisable by the Fund.

2.5. The Fund represents that each Designated Portfolio is currently qualified
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code and that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing that a
Designated Portfolio has ceased to so qualify or that it might not so qualify in
the future.

2.6. The Fund represents and warrants that in performing the services described
in this Agreement, the Fund will comply with all applicable laws, rules and
regulations. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies, objectives and restrictions) complies with the insurance laws and
regulations of any state. The Fund and CSI agree that upon request they will
use their best efforts to furnish the information required by state insurance
laws so that the Company can obtain the authority needed to issue the Contracts
in the various states.

2.7. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it
reserves the right to make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1 the Fund
undertakes to have its Fund Board formulate and approve any plan under Rule
12b-1 to finance distribution expenses in accordance with the 1940 Act.

2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of The Commonwealth of Massachusetts and that it does and will
comply in all material respects with applicable provisions of the 1940 Act.

2.9. CSI represents and warrants that it will distribute the Fund shares of the
Designated Portfolios in accordance with all applicable federal and state
securities laws including, without limitation, the 1933 Act, the 1934 Act and
the 1940 Act.

2.10. CSI represents and warrants that it is and will remain (a) duly
registered under all applicable federal and state securities laws, (b) a member
in good standing of the National Association of Securities Dealers and (c)
registered as a broker-dealer with the SEC; and that it will perform its
obligations for the Fund in accordance in all material respects with any
applicable state and federal securities laws.
<PAGE>

2.11. The Fund represents and warrants that all of its trustees, officers,
employees, and other individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund in an amount not
less than the minimal coverage as required currently by Rule 17g-(1) of the 1940
Act or related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is issued by a
reputable bonding company. CSI and the Fund's investment advisers represent and
warrant that they are and continue to be at all times covered by policies
similar to the aforesaid bond.

2.12. The Adviser represents and warrants that it is and will remain duly
registered under all applicable federal and state securities laws, including
registration as an investment adviser under the Investment Advisors Act of 1940,
as amended, and that it will perform its obligations hereunder in accordance in
all material respects with any applicable state and federal securities laws.

ARTICLE III. Prospectuses and Proxy Statements; Voting

3.1. The Fund or CSI will provide the Company, at the Fund's or its affiliate's
expense, with as many copies of the current Fund prospectus for the Designated
Portfolios as the Company may reasonably request for distribution, at the
Company's expense, to prospective contractowners and applicants. The Fund or
CSI will provide, at the Fund's or its affiliate's expense, as many copies of
said prospectus as necessary for distribution, at the Company's expense, to
existing contractowners. The Fund or CSI will provide the copies of said
prospectus to the Company or to its mailing agent. If requested by the Company,
the Fund or CSI will provide such documentation, including a computer diskette
of the Company's specification or a final copy of a current prospectus set in
type at the Fund's or its affiliate's expense, and such other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the Fund's
prospectus, the prospectus for the Contracts and the prospectuses of other
mutual funds in which assets attributable to the Contracts may be invested
printed together in one document (the "Multifund Prospectus"), in which case the
Fund or its affiliate will bear its reasonable share of expenses as described
above, allocated based on the proportionate number of pages of the Fund's and
other funds' respective portions of the document.

3.2. The Fund or CSI will provide the Company, at the Fund's or its affiliate's
expense, with as many copies of the statement of additional information as the
Company may reasonably request for distribution, at the Company's expense, to
prospective contractowners and applicants. The Fund or CSI will provide, at the
Fund's or its affiliate's expense, as many copies of said statement of
additional information as necessary for distribution, at the Company's expense,
to any existing contractowner who requests such statement or whenever state or
federal law otherwise requires that such statement be provided. The Fund or CSI
will
<PAGE>

provide the copies of said statement of additional information to the Company or
to its mailing agent.

3.3. To the extent that the Fund or CSI desires to change (whether by revision
or supplement) any of the information contained in any form of Fund prospectus
or statement of additional information provided to the Company for inclusion in
a Multifund Prospectus, the Company agrees to make such changes within a
reasonable period of time after receipt of a request to make such change from
the Fund or CSI, subject to the following limitation. To the extent that the
Fund is legally required to make a change to a Fund prospectus or statement of
additional information provided to the Company for inclusion in a Multifund
Prospectus, the Company agrees to make any such change as soon as possible
following receipt of the form of revised prospectus and/or statement of
additional information or supplement, as applicable, but in no event later than
five days following receipt. To the extent that the Fund is required by law to
cease selling shares of a Designated Portfolio, the Company agrees to cease
offering shares of the Designated Portfolio until the Fund or CSI notifies the
Company otherwise.

3.4. The Fund or CSI, at the Fund's or its affiliate's expense, will provide
the Company or its mailing agent with copies of its proxy material, if any,
reports to shareholders and other communications to shareholders in such
quantity as the Company will reasonably require. The Company will distribute
this proxy material, reports and other communications to existing contract
owners and tabulate the votes.

3.5. If and to the extent required by law the Company will:

(a) solicit voting instructions from contractowners;

(b) vote the shares of the Designated Portfolios held in the Account
in accordance with instructions received from contractowners; and

(c) vote shares of the Designated Portfolios held in the Account for
which no timely instructions have been received, as well as shares it owns, in
the same proportion as shares of such Designated Portfolio for which
instructions have been received from the Company's contractowners;

so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass-through voting privileges for variable contractowners.
Except as set forth above, the Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Company will be responsible for assuring that each of its separate
accounts participating in the Fund calculates voting privileges in a manner
consistent with all legal requirements, including the Mixed and Shared Funding
Exemptive Order.
<PAGE>

3.6. The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular, the Fund either will provide for annual
meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not
to require such meetings) or, as the Fund currently intends, will comply with
Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the SEC may promulgate
with respect thereto. If applicable, the Adviser will provide for the
calculation of voting privileges and the conducting of proxy solicitations as
required by the Mixed and Shared Funding Exemptive Order.

ARTICLE IV. Sales Material and Information

4.1. CSI will provide the Company on a timely basis with investment performance
information for each Designated Portfolio in which the Company maintains an
Account, including total return for the preceding calendar month and calendar
quarter, the calendar year to date, and the prior one-year, five-year, and ten
year (or life of the Designated Portfolio) periods. The Company may, based on
the SEC mandated information supplied by CSI, prepare communications for
contractowners ("Contractowner Materials"). The Company will provide copies of
all Contractowner Materials concurrently with their first use for CSI's internal
recordkeeping purposes. It is understood that neither CSI nor any Designated
Portfolio will be responsible for errors or omissions in, or the content of,
Contractowner Materials except to the extent that the error or omission resulted
from information provided by or on behalf of CSI or the Designated Portfolio.
Any printed information that is furnished to the Company pursuant to this
Agreement other than each Designated Portfolio's prospectus or statement of
additional information (or information supplemental thereto), periodic reports
and proxy solicitation materials is CSI's sole responsibility and not the
responsibility of any Designated Portfolio or the Fund. The Company agrees that
the Portfolios, the shareholders of the Portfolios and the officers and
governing Board of the Fund will have no liability or responsibility to the
Company in these respects.

4.2. The Company will not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained in
the registration statement, prospectus or statement of additional information
for Fund shares, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in published reports for the Fund
which are in the public domain or approved by the Fund or CSI for distribution,
or in sales literature or other material provided by the Fund, the Adviser or by
CSI.
<PAGE>

Nothing in this Section 4.2 will be construed as preventing the Company or
its employees or agents from giving advice on investment in the Fund.

4.3. The Fund, the Adviser and CSI will not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, each Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the Company for
distribution to contractowners, or in sales literature or other material
provided by the Company, except with permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis. The
Fund, the Adviser or CSI will furnish, or will cause to be furnished, to the
Company or its designee, each piece of major sales literature or other
significant promotional material in which the Company or its Account is named at
least ten (10) business days prior to its use. No such material will be used if
the Company reasonably objects to such use within five (5) business days after
receipt of such material.

4.4. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additions information,
reports, proxy statements, major sales literature and other significant
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or its
shares, contemporaneously with the filing of such document with the SEC, the
NASD or other regulatory authority.

4.5. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, major sales literature and other
significant promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC, the NASD or other regulatory authority.

4.6. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media (e.g., on-line
networks such as the Internet or other electronic messages)), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisements sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements
<PAGE>

of additional information, shareholder reports, proxy materials and any other
material constituting sales literature or advertising under the NASD rules, the
1933 Act or the 1940 Act.

4.7. The Fund and CSI hereby consent to the Company's use of the names Warburg,
Pincus Trust Post-Venture Capital Portfolio, or other Designated Portfolio, and
Warburg Pincus Asset Management, Inc. in connection with the marketing of the
Contracts, subject to the terms of Sections 4.1 and 4.2 of this Agreement. Such
consent will continue only as long as any Contracts are invested in the relevant
Designated Portfolio.

ARTICLE V. Fees and Expenses

5.1. The Fund, the Adviser and CSI will pay no fee or other compensation to the
Company (other than as set forth in the administrative services letter agreement
between the Adviser and the Company) except if the Fund or any Designated
Portfolio adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution expenses, then, subject to obtaining any required
exemptive orders or other regulatory approvals, the Fund may make payments to
the Company or to the underwriter for the Contracts if and in such amounts
agreed to by the Fund in writing.

5.2. All expenses incident to performance by the Fund of this Agreement will be
paid by the Fund to the extent permitted by law. The Fund will bear the
expenses for the cost of registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of additional
information and registration statement, proxy materials and reports; setting in
type and printing the Fund's prospectus; setting in type and printing proxy
materials and reports by it to contractowners (including the costs of printing a
Fund prospectus that contains an annual report); the preparation of all
statements and notices required by any federal or state law; all taxes on the
issuance or transfer of the Fund's shares; any expenses permitted to be paid or
assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940
Act; and all other expenses set forth in Article III of this Agreement.

ARTICLE VI. Diversification

6.1. The Adviser will ensure that the Fund will at all times invest money from
the Contracts in such a manner as to ensure that the Contracts will be treated
as variable annuity contracts under the Internal Revenue Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund will comply with Section 817(h) of the Internal Revenue Code and Treasury
Regulation 1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulation. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps: (a) to notify the
<PAGE>

Company of such breach; and (b) to adequately diversify the Fund so as to
achieve compliance within the grace period afforded by Treasury Regulation
1.817-5.

ARTICLE VII. Potential Conflicts

7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the Fund
for the existence of any irreconcilable material conflict among the interests of
the contractowners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax or securities laws or regulations, or
a public ruling, private letter ruling, no-action or interpretative letter, or
any similar action by insurance, tax or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by Participating Insurance Companies or
by variable annuity and variable life insurance contractowners; or (f) a
decision by an insurer to disregard the voting instructions of contractowners.
The Fund Board will promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.

7.2. The Company will report any potential or existing conflicts of which it is
aware to the Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities, as delineated in the Mixed and Shared Funding
Exemptive Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This includes, but
is not limited to, an obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are to be disregarded. The Company's
responsibilities hereunder will be carried out with a view only to the interest
of contractowners.

7.3. If it is determined by a majority of the Fund Board, or a majority of its
disinterested trustees, that an irreconcilable material conflict exists, the
Company will, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (a) withdrawing the assets allocable to some or all of the Accounts
from the Fund or any Designated Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e., variable annuity
contractowners or variable life insurance contractowners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making such a change; and
(b) establishing a new registered management investment company or managed
separate account.
<PAGE>

7.4. If a material irreconcilable conflict arises because of a decision by the
Company to disregard contractowner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
subaccount of the Account's investment in the Fund and terminate this Agreement
with respect to such subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the foregoing
irreconcilable material conflict as determined by a majority of the
disinterested trustees of the Fund Board. No charge or penalty will be imposed
as a result of such withdrawal.

7.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Fund and terminate this
Agreement with respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a majority of the
disinterested directors of the Fund Board. No charge or penalty will be imposed
as a result of such withdrawal.

7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Fund Board will determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund or the Adviser (or any other investment adviser to the Fund) be
required to establish a new funding medium for the Contracts. The Company will
not be required by Section 7.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
contractowners materially affected by the irreconcilable material conflict.

7.7. The Company will at least annually submit to the Fund Board such reports,
materials or data as the Fund Board may reasonably request so that the Fund
Board may fully carry out the duties imposed upon it as delineated in the Mixed
and Shared Funding Exemptive Order, and said reports, materials and data will be
submitted more frequently if deemed appropriate by the Fund Board.

7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
<PAGE>

ARTICLE VIII. Indemnification

8.1. Indemnification By The Company

(a) The Company agrees to indemnify and hold harmless the Fund, the
Adviser, CSI, and each person, if any, who controls or is associated with the
Fund, the Adviser or CSI within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:

(1) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration statement,
prospectus or statement of additional information for the Contracts or contained
in the Contracts or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the foregoing), including
any prospectuses or statements of additional information of the Fund to which
the Company has made any changes to the information provided to the Company or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated or necessary to make such
statements not misleading in light of the circumstances in which they were made;
provided that this agreement to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company by the Fund, the Adviser or CSI for use in the registration
statement, prospectus or statement of additional information for the Contracts
or in the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund shares;
or

(2) arise out of or as a result of statements or representations by
or on behalf of the Company or wrongful conduct of the Company or persons under
its control, with respect to the sale or distribution of the Contracts or Fund
shares (other than statements or representations contained in the Fund
registration statement, Fund prospectus, Fund statement of additional
information, sales literature or other promotional material of the Fund not
supplied by the Company or persons under its control); or

(3) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Fund registration statement, prospectus,
statement of additional information or sales literature or other promotional
material of the Fund (or amendment or supplement) or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make such statements not misleading in light of the
<PAGE>

circumstances in which they were made, if such a statement or omission was made
in reliance upon and in conformity with information furnished to the Fund by or
on behalf of the Company or persons under its control; or

(4) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or

(5) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result from
any other material breach by the Company of this Agreement, including, but not
limited to, a failure to comply with the provisions of Section 3.3;

in each case except to the extent provided in Sections 8.1(b) and 8.3
hereof. This indemnification will be in addition to any liability that the
Company otherwise may have.

(b) No party will be entitled to indemnification under Section 8.1(a) to
the extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of such
party's duties under this Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this Agreement by the party seeking
indemnification.

(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or actions by regulatory
authorities against them in connection with the issuance or sale of the Fund
shares or the Contracts or the operation of the Fund, should such litigation,
proceeding, complaint or action represent, allege or concern a material breach
of any representation, warranty or covenant of this Agreement.

8.2. Indemnification By The Adviser, the Fund and CSI

(a) The Adviser, the Fund and CSI, in each case solely to the extent
relating to such party's responsibilities hereunder, agree to indemnify and hold
harmless the Company and each person, if any, who controls or is associated with
the Company within the meaning of such terms under the federal securities laws
and any director, trustee, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Adviser) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
<PAGE>

(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Fund or sales
literature or other promotional material of the Fund (or any amendment or
supplement to any of the foregoing) or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated or necessary to make such statements not misleading in light of the
circumstances in which they were made (in each case substantially as transmitted
to you by the Fund or CSI), provided that this agreement to indemnify will not
apply as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Adviser, CSI or the Fund by or on behalf of the
Company for use in the registration statement, prospectus or statement of
additional information for the Fund or in sales literature of the Fund (or any
amendment or supplement thereto) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or

(2) arise out of or as a result of statements or representations or
wrongful conduct of the Adviser, the Fund or CSI or persons under the control of
the Adviser, the Fund or CSI respectively, with respect to the sale of the Fund
shares (other than statements or representations contained in a registration
statement, prospectus, statement of additional information, sales literature or
other promotional material covering the Contracts not supplied by CSI or persons
under its control); or

(3) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, statement of
additional information or sales literature or other promotional material
covering the Contracts (or any amendment or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make such statement or statements not misleading in light of the
circumstances in which they were made, if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by the Adviser, the Fund or CSI or persons under the control of the
Adviser, the Fund or CSI; or

(4) arise as a result of any failure by the Fund, the Adviser or CSI
to provide the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements and procedures
related thereto specified in Article VI of this Agreement); or

(5) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser, the Fund or CSI in this
Agreement, or arise out of or result from any other material breach of this
Agreement by the Adviser the Fund or CSI;
<PAGE>

in each case except to the extent provided in Sections 8.2(b) and 8.3
hereof. These indemnifications will be in addition to any liability that the
Fund, Adviser or CSI otherwise may have.

(b) No party will be entitled to indemnification under Section 8.2(a) to
the extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of such
party's duties under this Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this Agreement by the party seeking
indemnification.

(c) The Indemnified Parties will promptly notify the Adviser, the Fund and
CSI of the commencement of any litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with the issuance or sale of
the Contracts or the operation of the account, should such litigation,
proceeding, complaint or action represent, allege or concern a material breach
of any representation, warranty or covenant of this Agreement.

8.3. Indemnification Procedure

Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.3) will not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("Indemnified Party" for the purpose of this Section 8.3) unless such
Indemnified Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim will have been served upon such
Indemnified Party (or after such party will have received notice of such service
on any designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of the indemnification provision of this Article VIII, except to
the extent that the failure to notify results in the failure of actual notice to
the Indemnifying Party and such Indemnifying Party is damaged solely as a result
of failure to give such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to participate, at
its own expense, in the defense thereof. The Indemnifying Party also will be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Indemnifying Party to the
Indemnified Party of the Indemnifying Party's election to assume the defense
thereof, the Indemnified Party will bear the fees and expenses of any additional
counsel retained by it, and the Indemnifying Party will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation, unless: (a) the Indemnifying Party and the
Indemnified Party will have mutually agreed to the retention of such counsel; or
(b)
<PAGE>

the named parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Indemnifying Party will not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there is a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from
and against any loss or liability by reason of such settlement or judgment. A
successor by law of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive any
termination of this Agreement.

ARTICLE IX. Applicable Law

9.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York.

9.2. This Agreement will be subject to the provisions of the 1933 Act, the 1934
Act and the 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof will be interpreted and construed in accordance
therewith.

ARTICLE X. Termination

10.1. This Agreement will terminate:

(a) at the option of any party, following the first anniversary hereof,
with or without cause, with respect to some or all of the Designated Portfolios,
upon ninety (90) days' advance written notice to the other parties; or

(b) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to any Designated Portfolio if shares
of the Designated Portfolio are not reasonably available to meet the
requirements of the Contracts as determined in good faith by the Company; or

(c) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to any Designated Portfolio in the
event any of the Designated Portfolio's shares are not registered, issued or
sold in accordance with applicable state and/or Federal law or such law
precludes the use of such shares as the underlying investment media of the
Contracts issued or to be issued by Company; or
<PAGE>

(d) at the option of the Fund, upon receipt of the Fund's written notice
by the other parties, upon institution of formal proceedings against the Company
by the NASD, the SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the administration of the Contracts, the operation
of the Account, or the purchase of the Fund shares, provided that the Fund
determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Company's ability to
perform its obligations under this Agreement; or

(e) at the option of the Company, upon receipt of the Company's written
notice by the other parties, upon institution of formal proceedings against the
Fund, Adviser or CSI by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body, provided that the Company determines in
its sole judgment, exercised in good faith, that any such proceeding would have
a material adverse effect on the Fund's, Adviser's or CSI's ability to perform
its obligations under this Agreement; or

(f) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to any Designated Portfolio if the
Designated Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code, or under any successor or similar
provision, or if the Company reasonably and in good faith believes that the
Designated Portfolio may fail to so qualify; or

(g) at the option of the Company, upon receipt of the Company's written
notice by the other parties, with respect to any Designated Portfolio if the
Designated Portfolio fails to meet the diversification requirements specified in
Article VI hereof or if the Company reasonably and in good faith believes the
Designated Portfolio may fail to meet such requirements; or

(h) at the option of any party to this Agreement, upon written notice to
the other parties, upon another party's material breach of any provision of this
Agreement which material breach is not cured within thirty (30) days of said
notice; or

(i) at the option of the Company, if the Company determines in its sole
judgment exercised in good faith, that either the Fund, the Adviser or CSI has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company, such termination to be effective sixty (60) days'
after receipt by the other parties of written notice of the election to
terminate; or

(j) at the option of the Fund or CSI, if the Fund or CSI respectively,
determines in its sole judgment exercised in good faith, that the Company has
suffered a material adverse
<PAGE>

change in its business, operations or financial condition since the date of this
Agreement or is the subject of material adverse publicity which is likely to
have a material adverse impact upon the business and operations of the Fund or
the Adviser, such termination to be effective sixty (60) days' after receipt by
the other parties of written notice of the election to terminate; or

(k) at the option of the Company or the Fund upon receipt of any necessary
regulatory approvals and/or the vote of the contractowners having an interest in
the Account (or any subaccount) to substitute the shares of another investment
company for the corresponding Designated Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Designated Portfolio
shares had been selected to serve as the underlying investment media. The
Company will give sixty (60) days' prior written notice to the Fund of the date
of any proposed vote or other action taken to replace the Fund's shares; or

(l) at the option of the Company or the Fund upon a determination by a
majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests of:
(1) all contractowners of variable insurance products of all separate accounts;
or (2) the interests of the Participating Insurance Companies investing in the
Fund as set forth in Article VII of this Agreement; or

(m) at the option of the Fund in the event any of the Contracts are not
issued or sold in material accordance with applicable federal and/or state law.
Termination will be effective immediately upon such occurrence without notice.

10.2. Notice Requirement

Except as specified in Section 10.1(m), no termination of this Agreement
will be effective unless and until the party terminating this Agreement gives
prior written notice to all other parties of its intent to terminate, which
notice will set forth the basis for the termination.

10.3. Effect of Termination

In the event of any termination of this Agreement other than pursuant to
subsection (d), (j), (l) or (m) of Section 10.1, the Fund and CSI will, at the
option of the Company, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Designated Portfolios (as in effect on such date), redeem investments in the
Designated Portfolios and/or invest in the Designated Portfolios upon the making
of additional purchase payments under the Existing Contracts.
<PAGE>

10.4. Surviving Provisions

Notwithstanding any termination of this Agreement, each party's obligations
under Article VIII to indemnify other parties will survive and not be affected
by any termination of this Agreement. In addition, each party's obligations
under Section 12.6 will survive and not be affected by any termination of this
Agreement. Finally, with respect to Existing Contracts, all provisions of this
Agreement also will survive and not be affected by any termination of this
Agreement.

ARTICLE XI. Notices

11.1. Any notice will be deemed duly given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other parties.

If to the Company: If to the Fund, the Adviser and/or CSI:
AEGON Financial Services 466 Lexington Avenue
Group, Inc. 10th Floor
400 West Market Street New York, NY 10017
Louisville, KY 40202 Attn: Eugene P. Grace
Attn: FMD-Law Department Senior Vice President

ARTICLE XII. Miscellaneous

12.1. The Fund, the Adviser and CSI acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the "Company
Protected Parties" for purposes of this Section 12.1), information maintained
regarding those customers, and all computer programs and procedures or other
information developed or used by the Company Protected Parties or any of their
employees or agents in connection with the Company's performance of its duties
under this Agreement are the valuable property of the Company Protected Parties.
The Fund, the Adviser and CSI agree that if they come into possession of any
list or compilation of the identities of or other information about the Company
Protected Parties' customers, or any other information or property of the
Company Protected Parties, other than such information as is publicly available
or as may be independently developed or compiled by the Fund, the Adviser or CSI
from information supplied to them by the Company Protected Parties' customers
who also maintain accounts directly with the Fund, the Adviser or CSI, the Fund,
the Adviser and CSI will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Company's prior written consent; or (b) as
required by law or judicial process. The Company acknowledges that the
identities of the customers of the Fund (other than owners of Contracts), the
Adviser, CSI or any of their affiliates (collectively the "Adviser Protected
Parties" for purposes of this Section 12.1), information maintained regarding
those customers,
<PAGE>

and all computer programs and procedures or other information developed or used
by the Adviser Protected Parties or any of their employees or agents in
connection with the Fund's, the Adviser's or CSI's performance of their
respective duties under this Agreement are the valuable property of the Adviser
Protected Parties. The Company agrees that if it comes into possession of any
list or compilation of the identities of or other information about the Adviser
Protected Parties' customers, or any other information or property of the
Adviser Protected Parties, other than such information as is publicly available
or as may be independently developed or compiled by the Company from information
supplied to them by the Adviser Protected Parties' customers who also maintain
accounts directly with the Company, the Company will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with the Fund's, the Adviser's or
CSI's prior written consent; or (b) as required by law or judicial process. Each
party acknowledges that any breach of the agreements in this Section 12.1 would
result in immediate and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the event of such a breach,
the other parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.

12.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.

12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.

12.4. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement will
not be affected thereby.

12.5. This Agreement will not be assigned by any party hereto without the prior
written consent of all the parties.

12.6. Each party to this Agreement will maintain all records required by law,
including records detailing the services it provides. Such records will be
preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and such authorities reasonable access to
its books and records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby. Upon request by the
Fund or CSI, the Company agrees to promptly make copies or, if required,
originals of all records pertaining to the performance of services under this
Agreement available to the Fund or CSI, as the case may be. The Fund agrees that
the Company will have the right to inspect, audit and copy all
<PAGE>

records pertaining to the performance of services under this Agreement pursuant
to the requirements of any state insurance department. Each party also agrees to
promptly notify the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete manner. This provision will
survive termination of this Agreement.

12.7. Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.

12.8. The parties to this Agreement acknowledge and agree that all liabilities
of the Fund arising, directly or indirectly, under this agreement, will be
satisfied solely out of the assets of the Fund and that no trustee, officer,
agent or holder of shares of beneficial interest of the Fund will be personally
liable for any such liabilities. No Portfolio or series of the Fund will be
liable for the obligations or liabilities of any other Portfolio or series.

12.9. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts, the
Accounts or the Designated Portfolios of the Fund or other applicable terms of
this Agreement.

12.10. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.

FIRST PROVIDIAN LIFE AND HEALTH
INSURANCE COMPANY

SEAL By: /s/ Michael F. Lane
--------------------------
Name: Michael F. Lane
--------------------------
Title: Vice President
--------------------------
ATTEST:

By: /s/ Gregory E. Miller-Breetz, Assistant Secretary
---------------------------------------------------
<PAGE>

WARBURG, PINCUS TRUST

SEAL By: /s/ Eugene P. Grace
------------------------------
Name: Eugene P. Grace
------------------------------
Title: Vice President and Secretary
------------------------------

ATTEST:

By: /s/ Maryann Maglia
---------------------

WARBURG PINCUS ASSET
MANAGEMENT, INC.

SEAL By: /s/ Eugene P. Grace
------------------------------
Name: Eugene P. Grace
------------------------------
Title: Senior Vice President
------------------------------

ATTEST:

By: /s/ Maryann Maglia
---------------------

COUNSELLORS SECURITIES INC.

SEAL By: /s/ Eugene P. Grace
------------------------------
Name: Eugene P. Grace
------------------------------
Title: Vice President
------------------------------

ATTEST:

By: /s/ Maryann Maglia
--------------------
<PAGE>

Schedule 1
PARTICIPATION AGREEMENT
By and Among
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
And
WARBURG, PINCUS TRUST
And
WARBURG PINCUS ASSET MANAGEMENT, INC.
And
COUNSELLORS SECURITIES INC.

The following separate accounts of First Providian Life and Health Insurance
Company are permitted in accordance with the provisions of this Agreement to
invest in Designated Portfolios of the Fund shown in Schedule 2:

Separate Account C, established November 4, 1994

_______________, 1998
<PAGE>

Schedule 2
PARTICIPATION AGREEMENT
By and Among
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
And
WARBURG, PINCUS TRUST
And
WARBURG PINCUS ASSET MANAGEMENT, INC.
And
COUNSELLORS SECURITIES INC.

The Separate Account(s) shown on Schedule 1 may invest in the following
Designated Portfolios of the Warburg, Pincus Trust:

Warburg Pincus International Equity Portfolio
Warburg Pincus Small Company Growth Portfolio

_______________, 1998

<PAGE>

EXHIBIT 9(a)

September 28, 1998

AUSA Life Insurance Company, Inc.
AEGON Financial Services Group, Inc.
400 West Market Street
Louisville, Kentucky 40202

RE: AUSA Life Insurance Company, Inc. Separate Account C-- Opinion and Consent

To Whom It May Concern:

This opinion and consent is furnished in connection with the filing of the
Initial Registration Statement on Form N-4 under the Securities Act of 1933, as
amended (the "1933 Act"), and Amendment No. 6 to the Registration Statement on
Form N-4 under the Investment Company Act of 1940, as amended (the "1940 Act"),
File No. 811-9062 (the "Registration Statement"), of AUSA Life Insurance
Company, Inc. Separate Account C (Advisor's Edge Variable Annuity, Dimensional
Variable Annuity and PGA Retirement Annuity) ("Separate Account C"). Separate
Account C receives and invests premiums allocated to it under a group flexible
premium multi-funded annuity contract, the Advisor's Edge Variable Annuity,
Dimensional Variable Annuity and PGA Retirement Annuity (the "Annuity
Contracts"). The Annuity Contracts are offered in the manner described in the
prospectuses contained in the Registration Statement (the "Prospectuses").

In my capacity as legal adviser to AUSA Life Insurance Company, Inc. ("AUSA
Life"), I hereby confirm the establishment of Separate Account C as a separate
account for assets applicable to the Annuity Contracts, pursuant to the
provisions of Section 4240 of the New York Insurance Statutes. First Providian
will be merged with and into AUSA Life on October 1, 1998. 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. AUSA Life Insurance Company, Inc. is a corporation duly organized and
validly existing under the laws of the State of New York.

2. Effective as of October 1, 1998, Separate Account C will be an account
maintained by AUSA Life Insurance Company, Inc. 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 will be 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
AUSA Life Insurance Company, Inc. may conduct.

3. Assets allocated to Separate Account C will be owned by AUSA Life Insurance
Company, Inc. The assets in Separate Account C attributable to the Annuity
Contract generally will not be chargeable with liabilities arising out of
any other business which AUSA Life Insurance Company, Inc. may conduct.
Effective as of October 1, 1998, the assets of Separate Account C will be
available to cover the general liabilities

1
<PAGE>

of AUSA Life Insurance Company, Inc. only to the extent that the assets of
Separate Account C exceed the liabilities arising under the Annuity
Contracts.

4. The Annuity Contracts will have been duly authorized by AUSA Life Insurance
Company, Inc. and, when sold in jurisdictions authorizing such sales, in
accordance with the Registration Statement, will constitute validly issued
and binding obligations of AUSA Life Insurance Company, Inc. 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 AUSA Life Insurance Company,
Inc. other than those provided in the Annuity Contract.

I hereby consent to the use of this opinion as an exhibit to the Registration
Statement 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)

September 28, 1998

AUSA Life Insurance Company, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499

Ladies and Gentlemen:

We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in the Initial Registration Statement on
Form N-4 under the Securities Act of 1933, as amended (the "1933 Act"), and
Amendment No. 6 to the Registration Statement on Form N-4 under the Investment
Company Act of 1940, as amended (the "1940 Act"). File No. 811-9062 (the
"Registration Statement"), filed on or around October 1, 1998 by AUSA Life
Insurance Company, Inc. and AUSA Life Insurance Company, Inc. Separate Account C
(funding the Advisor's Edge Variable Annuity, the Dimensional Variable Annuity,
and the PGA Retirement Annuity) with the Securities and Exchange Commission
under the 1933 Act and the 1940 Act.

Very truly yours,

/s/ Jorden Burt Boros Cicchetti
Berenson & Johnson LLP
-------------------------------
JORDEN BURT BOROS CICCHETTI
BERENSON & JOHNSON LLP

<PAGE>

[LETTERHEAD OF ERNST & YOUNG LLP]

Consent of Independent Auditors

We consent to the reference to our firm under the captions "Financial
Statements" and "Auditors" and to the use of our reports dated April 24, 1998,
with respect to the financial statements of First Providian Life and Health
Insurance Company Separate Account C -- Advisor's Edge and First Providian Life
and Health Insurance Company Separate Account C -- Dimensional Variable
Annuity, and to the use of our report dated October 1, 1998 with respect to the
supplemental statutory-basis financial statements of AUSA Life Insurance
Company, Inc. in the Registration Statement (Form N-4) for AUSA Life Insurance
Company, Inc. Separate Account C and related Prospectuses for the Advisor's
Edge Variable Annuity, Dimensional Variable Annuity, and PGA Retirement Annuity
for the registration of group variable annuity contracts.

/s/ Ernst & Young LLP

Des Moines, Iowa
October 1, 1998