0000899243-01-501539.txt : 20011018 0000899243-01-501539.hdr.sgml : 20011018 ACCESSION NUMBER: 0000899243-01-501539 CONFORMED SUBMISSION TYPE: S-6/A PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 20011010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGL SEPARATE ACCOUNT VL R CENTRAL INDEX KEY: 0001051485 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 250598210 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-6/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-65170 FILM NUMBER: 1755380 BUSINESS ADDRESS: STREET 1: 2727 A ALLEN PARKWAY CITY: HOUSTON STATE: TX ZIP: 77019-2191 BUSINESS PHONE: 7135221111 MAIL ADDRESS: STREET 1: 2727 A ALLEN PARKWAY CITY: HOUSTON STATE: TX ZIP: 77019-2191 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL LIFE INSURANCE CO SEPARATE ACCOUNT VL R DATE OF NAME CHANGE: 19971216 S-6/A 1 ds6a.txt PRE-EFFECTIVE AMENDMENT #1 TO FORM S-6 Registration No. 333-65170 As filed with the Securities and Exchange Commission on October 10, 2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R (Exact Name of Trust) AMERICAN GENERAL LIFE INSURANCE COMPANY (Exact Name of Depositor) 2727-A Allen Parkway Houston, Texas 77019-2191 (Complete Address of Depositor's Principal Executive Offices) Pauletta P. Cohn, Esq. Deputy General Counsel American General Life Companies 2929 Allen Parkway Houston, Texas 77019-2191 (Name and Complete Address of Agent for Service) Title and Amount of Securities Being Registered: An Indefinite Amount of Units of Interest in American General Life Insurance Company Separate Account VL-R Under Variable Life Insurance Policies Securities Being Offered: Flexible Premium Variable Life Insurance Policies Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. The Registrant hereby amends this Registration Statement 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), may determine. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R RECONCILIATION AND TIE BETWEEN ITEMS IN FORM N-8B-2 AND THE PROSPECTUS (PURSUANT TO INSTRUCTION 4 OF FORM S-6) CROSS REFERENCE SHEET
ITEM NO. OF FORM N-8B-2* PROSPECTUS CAPTION ------------------------ ------------------ 1 Additional Information: Separate Account VL-R. 2 Additional Information: AGL. 3 Inapplicable. 4 Additional Information: Distribution of Policies. 5, 6 Additional Information: Separate Account VL-R. 7 Inapplicable.** 8 Inapplicable.** 9 Additional Information: Legal Matters. 10(a) Additional Information: Your Beneficiary, Assigning Your Policy. 10(b) Basic Questions You May Have: How will the value of my investment in a Policy change over time? 10(c)(d) Basic Questions You May Have: How can I change my Policy's insurance coverage? How can I access my investment in a Policy? Can I choose the form in which AGL pays out any proceeds from my Policy? Additional Information: Payment of Policy Proceeds. 10(e) Basic Questions You May Have: Must I invest any minimum amount in a policy? 10(f) Additional Information: Voting Privileges. 10(g)(1), 10(g)(4), 10(h)(3), 10(h)(2) Basic Questions You May Have: To what extent will AGL vary the terms and conditions of the Policies in particular cases? Additional Information: Voting Privileges; Additional Rights That We Have. 10(g)(3), 10(g)(4), 10(h)(3), 10(h)(4) Inapplicable.** 10(i) Additional Information: Separate Account VL-R; Tax Effects. 11 Basic Questions You May Have: How will the value of my investment in a Policy change over time? Additional Information: Separate Account VL-R. 12(a) Additional Information: Separate Account VL-R; Front Cover. 12(b) Inapplicable.** 12(c), 12(d) Inapplicable.** 12(e) Inapplicable, because the Separate Account did not commence operations until 1998. 13(a) Basic Questions You May Have: What charges will AGL deduct from my investment in a Policy? What charges and expenses will the Mutual Funds deduct from the amounts I invest through my Policy? Additional Information: More About Policy Charges. 13(b) Illustrations of Hypothetical Policy Benefits. 13(c) Inapplicable.**
13(d) Basic Questions You May Have: To what extent will AGL vary the terms and conditions of the Policy in particular cases? 13(e), 13(f), 13(g) None. 14 Basic Questions You May Have: How can I invest money in a Policy? 15 Basic Questions You May Have: How can I invest money in a Policy? How do I communicate with AGL? 16 Basic Questions You May Have: How will the value of my investment in a Policy change over time? ITEM NO. ADDITIONAL INFORMATION -------- ---------------------- 17(a), 17(b) Captions referenced under Items 10(c), 10(d), and 10(e). 17(c) Inapplicable.** 18(a) Captions referred to under Item 16. 18(b), 18(d) Inapplicable.** 18(c) Additional Information: Separate Account VL-R. 19 Additional Information: Separate Account VL-R; Our Reports to Policy Owners. 20(a), 20(b), 20(c), 20(d), 20(e), 20(f) Inapplicable.** 21(a), 21(b) Basic Questions You May Have: How can I access my investment in a Policy? Additional Information: Payment of Policy Proceeds. 21(c) Inapplicable.** 22 Additional Information: Payment of Policy Proceeds-Delay to Challenge Coverage. 23 Inapplicable.** 24 Basic Questions You May Have; Additional Information. 25 Additional Information: AGL. 26 Inapplicable, because the Separate Account did not commence operations until 1998. 27 Additional Information: AGL. 28 Additional Information: AGL's Management. 29 Additional Information: AGL. 30, 31, 32, 33, 34 Inapplicable, because the Separate Account did not commence operations until 1998. 35 Inapplicable.** 36 Inapplicable.** 37 None. 38, 39 Additional Information: Distribution of the Policies. 40 Inapplicable, because the Separate Account did not commence operations until 1998. 41(a) Additional Information: Distribution of the Policies. 41(b), 41(c) Inapplicable** 41,43 Inapplicable, because the Separate Account did not commence operations or issue any securities until 1998. 44(a)(1), 44(a)(2), 44(a)(3) Basic Questions You May Have: How will the value of my investment in a Policy change over time? 44(a)(4) Additional Information: Tax Effects--Our taxes. 44(a)(5), 44(a)(6) Basic Questions You May Have: What charges will AGL deduct from my investment in a Policy? 44(b) Inapplicable.** 44(c) Caption referenced in 13(d) above.
ITEM NO. ADDITIONAL INFORMATION -------- ---------------------- 45 Inapplicable, because the Separate Account did not commence operations until 1998. 46(a) Captions referenced in 44(a) above. 46(b) Inapplicable.** 47, 48, 49 None. 50 Inapplicable.** 51 Inapplicable.** 52(a), 52(c) Basic Questions You May Have: To what extent can AGL vary the terms and conditions of the Policy in particular cases? Additional Information: Additional Rights That We Have. 52(b), 52(d) None. 53(a) Additional Information: Tax Effects--Our taxes. 53(b), 54 Inapplicable.** 55 Illustrations of Hypothetical Policy Benefits. 56-59 Inapplicable.**
* Registrant includes this Reconciliation and Tie in its Registration Statement in compliance with Instruction 4 as to the Prospectus as set out in Form S-6. Separate Account VL-R (Account) has previously filed a notice of registration as an investment company on Form N-8A under the Investment Company Act of 1940 (Act), and a Form N-8B-2 Registration Statement. Pursuant to Sections 8 and 30(b)(1) of the Act, Rule 30a-1 under the Act, and Forms N-8B-2 and N-SAR under that Act, the Account will keep its Form N-8B-2 Registration Statement current through the filing of periodic reports required by the Securities and Exchange Commission (Commission). ** Not required pursuant to either Instruction 1(a) as to the Prospectus as set out in Form S-6 or the administrative practice of the Commission and its staff of adapting the disclosure requirements of the Commission's registration statement forms in recognition of the differences between variable life insurance policies and other periodic payment plan certificates issued by investment companies and between separate accounts organized as management companies and unit investment trusts. PLATINUM INVESTOR (SM) SURVIVOR II LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY (THE "POLICY") ISSUED BY AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL") ADMINISTRATIVE CENTER: HOME OFFICE: PREMIUM PAYMENTS: (EXPRESS DELIVERY) (U.S. MAIL) VUL Administration VUL Administration 2727-A Allen Parkway (EXPRESS PAYMENTS AND 2727-A Allen Parkway P. O. Box 4880 Houston, Texas 77019-2191 U.S. MAIL) Houston, Texas 77019-2191 Houston, Texas 77210-4880 1-713-831-3443 #1 Franklin Square 1-713-831-3443, 1-888-325-9315 1-888-325-9315 Springfield, IL 62713-0001 (Hearing Impaired) 1-888-436-5258 Fax: 1-877-445-3098 (EXCEPT PREMIUM PAYMENTS)
This booklet is called the "prospectus." Investment options. The AGL declared fixed interest account is the fixed investment option for these Policies. You can also use AGL's Separate Account VL-R ("Separate Account") to invest in the following variable investment options. You may change your selections from time to time:
FUND INVESTMENT ADVISER INVESTMENT OPTION ---- ------------------ ----------------- . AIM Variable Insurance Funds.............. A I M Advisors, Inc............. AIM V.I. International Equity Fund AIM V.I. Value Fund . American Century Variable Portfolios, Inc. American Century Investment..... VP Value Fund Management, Inc. . Ayco Series Trust......................... The Ayco Company, L.P........... Ayco Growth Fund . Credit Suisse Warburg Pincus Trust........ Credit Suisse Asset Management,. Small Company Growth Portfolio LLC . Dreyfus Investment Portfolios............. The Dreyfus Corporation......... MidCap Stock Portfolio - Initial shares . Dreyfus Variable Investment Fund.......... The Dreyfus Corporation......... Quality Bond Portfolio - Initial shares Small Cap Portfolio - Initial shares . Fidelity Variable Insurance Products Fund. Fidelity Management &........... VIP Asset Manager(SM) Portfolio Research Company VIP Contrafund(R) Portfolio VIP Equity-Income Portfolio VIP Growth Portfolio . Janus Aspen Series - Service Shares....... Janus Capital................... Aggressive Growth Portfolio International Growth Portfolio Worldwide Growth Portfolio . J. P. Morgan Series Trust II.............. J. P. Morgan Investment ........ J. P. Morgan Small Company Management Inc. Portfolio . MFS Variable Insurance Trust.............. Massachusetts Financial Services MFS Capital Opportunities Series Company MFS Emerging Growth Series MFS New Discovery Series MFS Research Series . Neuberger Berman Advisers Management...... Neuberger Berman Management..... Mid-Cap Growth Portfolio Trust Inc. . North American Funds Variable Product..... VALIC........................... International Equities Fund Series I MidCap Index Fund Money Market Fund Nasdaq-100 Index Fund Science & Technology Fund Small Cap Index Fund Stock Index Fund . PIMCO Variable Insurance Trust............ Pacific Investment Management... PIMCO Real Return Bond Portfolio Administrative Class Company LLC PIMCO Short-Term Bond Portfolio PIMCO Total Return Bond Portfolio . Putnam Variable Trust..................... Putnam Investment Management,... Putnam VT Diversified Income Fund - Class IB LLC Putnam VT Growth and Income Fund - Class IB Putnam VT International Growth and Income Fund - Class IB . SAFECO Resource Series Trust.............. SAFECO Asset Management......... RST Equity Portfolio Company RST Growth Opportunities Portfolio . The Universal Institutional Funds, Inc.... Morgan Stanley Asset Management. Equity Growth Portfolio Morgan Stanley Investments LP... High Yield Portfolio . Vanguard Variable Insurance Fund.......... Wellington Management........... High Yield Bond Portfolio Company, llp The Vanguard Group.............. REIT Index Portfolio . Van Kampen Life Investment Trust.......... Van Kampen Asset................ Strategic Stock Portfolio - Class I Shares Management Inc.
SEPARATE PROSPECTUSES CONTAIN MORE INFORMATION ABOUT THE MUTUAL FUNDS ("FUNDS" OR "MUTUAL FUNDS") IN WHICH WE INVEST THE AMOUNTS THAT YOU ALLOCATE TO ANY OF THE ABOVE-LISTED INVESTMENT OPTIONS (OTHER THAN OUR DECLARED FIXED INTEREST ACCOUNT OPTION). THE FORMAL NAME OF EACH SUCH FUND IS SET FORTH IN THE CHART THAT APPEARS ON PAGE 1. YOUR INVESTMENT RESULTS IN ANY SUCH OPTION WILL DEPEND ON THOSE OF THE RELATED FUND. YOU SHOULD BE SURE YOU ALSO READ THE PROSPECTUS OF THE MUTUAL FUND FOR ANY SUCH INVESTMENT OPTION YOU MAY BE INTERESTED IN. YOU CAN REQUEST FREE COPIES OF ANY OR ALL OF THE MUTUAL FUND PROSPECTUSES FROM YOUR AGL REPRESENTATIVE OR FROM US AT EITHER OUR HOME OFFICE OR ADMINISTRATIVE CENTER LISTED ABOVE. Right to return. If for any reason you are not satisfied with your Policy, you may return it to us and we will refund you the greater of (i) any premium payments received by us or (ii) your accumulation value plus any charges that have been deducted. To exercise your right to return your Policy, you must mail it directly to the Administrative Center address shown on the first page of this prospectus or return it to the AGL representative through whom you purchased the Policy within 10 days after you receive it. In a few states, this period may be longer. Because you have this right, we will invest your initial net premium payment in the money market investment option from the date your investment performance begins until the first business day that is at least 15 days later. Then we will automatically allocate your investment among the available investment options in the ratios you have chosen. Any additional premium we receive during the 15-day period will also be invested in the money market investment option and allocated to the investment options at the same time as your initial net premium. Charges and expenses. We deduct charges and expenses, including charges for any additional benefit riders you choose, from the amounts you invest in the Policy. These are described beginning on page 7. NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE POLICIES ARE NOT AVAILABLE IN ALL STATES. THE POLICIES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY SIMILAR AGENCY. THEY ARE NOT A DEPOSIT OR OTHER OBLIGATION OF, NOR ARE THEY GUARANTEED OR ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION. AN INVESTMENT IN A VARIABLE UNIVERSAL LIFE INSURANCE POLICY IS SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED. This prospectus is dated October 10, 2001 2 GUIDE TO THIS PROSPECTUS This prospectus contains information that you should know before you purchase a Platinum Investor(SM) Survivor II variable life policy ("Policy") or exercise any of your rights or privileges under a Policy. Please read this prospectus carefully and keep it for future reference. Basic Information. Here are the page numbers in this prospectus where you may find answers to most of your questions:
PAGE TO SEE BASIC QUESTIONS YOU MAY HAVE IN THIS PROSPECTUS ---------------------------- ------------------ . What are the Policies?.............................................. 4 . How can I invest money in a Policy?................................. 5 . How will the value of my investment in a Policy change over time?... 6 . What charges will AGL deduct from my investment in a Policy?........ 7 . What charges and expenses will the Mutual Funds deduct from amounts I invest through my Policy?............................... 10 . What is the amount of insurance ("death benefit") that AGL pays when the last surviving contingent insured dies?.... 14 . Must I invest any minimum amount in a Policy?....................... 16 . How can I change my Policy's investment options?.................... 17 . How can I change my Policy's insurance coverage?.................... 18 . What additional rider benefits might I select?...................... 20 . What is my Policy's exchange option?................................ 22 . How can I access my investment in a Policy?......................... 23 . Can I choose the form in which AGL pays out the proceeds from my Policy?................................................... 25 . To what extent can AGL vary the terms and conditions of the Policy in particular cases?.............................................. 26 . How will my Policy be treated for income tax purposes?.............. 26 . How do I communicate with AGL?...................................... 27
AGL's financial statements. We have included certain financial statements of AGL in this prospectus. These begin on page Q-1. Special words and phrases. If you want more information about any words or phrases that you read in this prospectus, you may wish to refer to the Index of Words and Phrases that appears at the end of this prospectus (page 58, which follows all of the financial pages). That index will refer you to pages that contain more about many of the words and phrases that we use. 3 BASIC QUESTIONS YOU MAY HAVE WHAT ARE THE POLICIES? Summary. This prospectus describes the last survivor flexible premium variable life insurance Policy issued by AGL. The Policy is based on the lives of two persons. We call each person a "contingent insured." We pay the death benefit proceeds upon the death of the last surviving contingent insured. We apply your net premiums to your Policy. You may invest your premiums in our declared fixed interest account or in one or more of the variable investment options, or both. The value of your investment in a variable investment option depends on the investment results of the related Mutual Fund. We do not guarantee any minimum cash value for amounts allocated to the variable investment options. If the Fund investments go down, the value of a Policy can decline. The value of our declared fixed interest account will depend on the interest rates that we declare. Other choices you have. During the insured persons' lifetimes, you may, within limits, (1) request an increase or decrease in the amount of insurance, (2) borrow or withdraw amounts you have invested, (3) choose when and how much you invest, (4) choose whether your accumulation value under your Policy, upon the last surviving contingent insured person's death, will be added to the insurance proceeds we otherwise will pay to the beneficiary, and (5) add or delete certain other optional benefits that we make available by rider to your Policy. At the time of purchase, you can decide whether your policy will be subject to certain tax rules that maximize the cash value or rules that maximize the insurance coverage. Administrative Center. The Administrative Center provides service to all Policy owners. For applicants, your AGL representative will tell you if you should use an address other than the Administrative Center address. All premium payments, requests, directions and other communications should be directed to the appropriate location. See "How do I communicate with AGL?" on page 27. Also see "Services Agreements" on page 56. Illustrations of a hypothetical Policy. Starting on page 28, we have included some examples of how the values of a sample Policy would change over time, based on certain assumptions we have made. Because your circumstances may vary considerably from our assumptions, your AGL representative will also provide you with a similar sample illustration that is more tailored to your own circumstances and wishes. Additional information. You may find the answers to any other questions you have under "Additional Information" beginning on page 33, or in the forms of our Policy and riders. A table of contents for the "Additional Information" portion of this prospectus also appears on page 33. You can obtain copies of our Policy and rider forms from (and direct any other questions to) your AGL representative or our Administrative Center (shown on the first page of this prospectus). 4 HOW CAN I INVEST MONEY IN A POLICY? Premium payments. We call the payments you make "premiums" or "premium payments." The amount we require as your initial premium varies depending on the specifics of your Policy and the contingent insureds. We can refuse to accept a subsequent premium payment that is less than $25. Otherwise, with a few exceptions mentioned below, you can make premium payments at any time and in any amount. Premium payments we receive after your right to return expires, as discussed on page 2, will be allocated upon receipt to the available investment options you have chosen. Limits on premium payments. Federal tax law may limit the amount of premium payments you can make (relative to the amount of your Policy's insurance coverage) and may impose penalties on amounts you take out of your Policy if you do not observe certain additional requirements. These tax law requirements and a discussion of modified endowment contracts are summarized further under "How will my Policy be treated for income tax purposes?" beginning on page 26 and "Tax Effects" beginning on page 34. We will monitor your premium payments, however, to be sure that you do not exceed permitted amounts or inadvertently incur any tax penalties. The tax law limits can vary as a result of changes you make to your Policy. For example, a reduction in the specified amount of your Policy can reduce the amount of premiums you can pay. Also, in certain limited circumstances, additional premiums may cause the death benefit to increase by more than they increase your accumulation value. In such case, we may refuse to accept an additional premium if the contingent insureds do not provide us with adequate evidence that they continue to meet our requirements for issuing insurance. Checks and money orders. You may pay premiums by check or money order drawn on a U.S. bank in U.S. dollars and made payable to "American General Life Insurance Company," or "AGL." Premiums after the initial premium should be sent directly to the appropriate address shown on your billing statement. If you do not receive a billing statement, send your premium directly to the address for premium payments shown on the first page of this prospectus. We also accept premium payments by bank draft, wire or by exchange from another insurance company. Premium payments from salary deduction plans may be made only if we agree. You may obtain further information about how to make premium payments by any of these methods from your AGL representative or from our Administrative Center shown on the first page of this prospectus. Dollar cost averaging. Dollar cost averaging is an investment strategy designed to reduce the risks that result from market fluctuations. The strategy spreads the allocation of your accumulation value among your chosen variable investment options over a period of time. This allows you to reduce the risk of investing most of your funds at a time when prices are high. The success of this strategy depends on market trends and is not guaranteed. Under dollar cost averaging, we automatically make transfers of your accumulation value from the money market investment option to one or more of the other variable investment options that you choose. You tell us whether you want these transfers to be made monthly, quarterly, semi-annually or annually. We make the transfers as of the end of the valuation period that contains the day of the month that you select other than the 29th, 30th or 31st day of the month. (The term 5 "valuation period" is described on page 43.) You must have at least $5,000 of accumulation value to start dollar cost averaging and each transfer under the program must be at least $100. Dollar cost averaging ceases upon your request, or if your accumulation value in the money market investment option becomes exhausted. You cannot use dollar cost averaging at the same time you are using automatic rebalancing. No transfer fees will ever be charged to you for using this service. Automatic rebalancing. This feature automatically rebalances the proportion of your accumulation value in each investment option under your Policy to correspond to your then current premium allocation designation. You tell us whether you want us to do the rebalancing quarterly, semi-annually or annually. Automatic rebalancing will occur as of the end of the valuation period that contains the date of the month your Policy was issued. For example, if your Policy is dated January 17, and you have requested automatic rebalancing on a quarterly basis, automatic rebalancing will start on April 17, and will occur quarterly thereafter. You must have a total accumulation value of at least $5,000 to begin automatic rebalancing. Rebalancing ends upon your request. You cannot use automatic rebalancing at the same time you are using dollar cost averaging. No transfer fees will ever be charged to you for using this service. HOW WILL THE VALUE OF MY INVESTMENT IN A POLICY CHANGE OVER TIME? Your accumulation value. From each premium payment you make, we deduct the charges that we describe on page 7 under "Premium tax charge" (or "Tax charge back" if you are a resident of Oregon when you purchase your Policy) and "Other deductions from each premium payment." We invest the rest in one or more of the investment options listed in the chart on the first page of this prospectus. We call the amount that is at any time invested under your Policy (including any loan collateral we are holding for your Policy loans) your "accumulation value." Your investment options. We invest the accumulation value that you have allocated to any variable investment option in shares of a corresponding Mutual Fund. Over time, your accumulation value in any such investment option will increase or decrease by the same amount as if you had invested in the related Fund's shares directly (and reinvested all dividends and distributions from the Fund in additional Fund shares); except that your accumulation value will also be reduced by certain charges that we deduct. We describe these charges beginning on page 7 under "What charges will AGL deduct from my investment in a Policy?" You can review other important information about the Mutual Funds that you can choose in the separate prospectuses for those Funds. You can request additional free copies of these prospectuses from your AGL representative, from our Home Office or from the Administrative Center (both locations and the telephone numbers are shown on the first page of this prospectus). We invest any accumulation value you have allocated to our declared fixed interest account option as part of our general assets. We credit interest on that accumulation value at a rate which we declare from time to time. We guarantee that the interest will be credited at an annual effective rate of at least 4%. Although this interest increases the amount of any accumulation value that you have in our declared fixed interest account option, such accumulation value will also be reduced by any charges that are allocated to this option under the procedures described under "Allocation of 6 charges" on page 9. The "daily charge" described on page 7 and the charges and expenses of the Mutual Funds discussed on pages 10 - 14 do not apply to our declared fixed interest account option. Policies are "non-participating." You will not be entitled to any dividends from AGL. WHAT CHARGES WILL AGL DEDUCT FROM MY INVESTMENT IN A POLICY? Premium tax charge. Unless your Policy was issued in Oregon, we deduct from each premium a charge for the tax that is then applicable to us in your state or other jurisdiction. These taxes, if any, currently range from 0.75% to 3.5%. Please let us know if you move to another jurisdiction, so we can adjust this charge if required. You are not permitted to deduct the amount of these taxes on your income tax return. Tax charge back. If you are a resident of Oregon at the time you purchase a Policy, there is no premium tax charge. Instead, we will deduct from each premium a tax charge back that is permissible under Oregon law. If you later move from Oregon to a state that has a premium tax, we will not charge you a premium tax. We deduct the tax charge back from each premium you pay, regardless of the state in which you reside at the time you pay the premium. The current tax charge back is 2% of each premium. We may change the tax charge back amount but any change will only apply to new Policies we issue. We use the charge partly to offset our obligation to pay premium taxes on the same Policy if you move to another state. We also use the charge to pay for the cost of additional administrative services we provide under these Policies. Other deductions from each premium payment. After we deduct the applicable premium tax (or a tax charge back if we issued your Policy in Oregon) from your premium payment, we will deduct 5.0% of the remainder on all premiums received each year. We may lower this percentage deduction but it is guaranteed never to exceed 5.0%. Your Policy refers to these deductions as a Premium Expense Charge. We use these charges to cover sales expenses, including commissions. Daily charge. We will deduct a daily charge at an annual effective rate of 0.75% of your accumulation value that is then being invested in any of the variable investment options. After a Policy has been in effect for 15 years, however, we will reduce this rate to an annual effective rate of 0.50%, and after 30 years, to an annual effective rate of 0.15%. Although the years for the reduction of rates may not be changed, we may lower these current rates but they can never exceed the rates set forth in this paragraph. We apply this charge to pay for our mortality and expense risks, except in Maryland. In Maryland, all references in the Policy to the mortality and expense charge have been changed to the "Separate Account Charge." Flat monthly charge. We will deduct $10 from your accumulation value each month. We may lower this charge but it is guaranteed to never exceed $10. The flat monthly charge is the Monthly Administration Fee shown on page 4 of your Policy. We use this charge to pay for the cost of administrative services we provide under the Policies. First Four Years Monthly Expense Charge. The Policies have a monthly expense charge which will be deducted during the first four Policy years, and during the first four years of any increase in base coverage. We will apply this four year monthly expense charge only to the base 7 coverage portion of the specified amount. Any decrease in base coverage will not change the monthly expense charge. This charge varies according to the amount of base coverage and the ages, gender and the premium classes of both of the contingent insureds. This charge is a maximum of $3.01 for each $1000 of base coverage. We use this charge to pay for underwriting costs and other costs of issuing the Policies, and also to help pay for the administrative services we provide under the Policies. Monthly insurance charge. Every month we will deduct from your accumulation value a charge based on the cost of insurance rates applicable to your Policy on the date of the deduction and our "amount at risk" on that date. Our amount at risk is the difference between (a) the death benefit that would be payable before reduction by policy loans if the last surviving contingent insured died on that date and (b) the then total accumulation value under the Policy. For otherwise identical Policies: . greater amounts at risk result in a higher monthly insurance charge; and . higher cost of insurance rates also result in a higher monthly insurance charge. Our cost of insurance rates are guaranteed not to exceed those that will be specified in your Policy. Our current rates are not greater than the guaranteed maximum rates for insured persons in all age, gender and premium classes, although we have the right at any time to raise these rates to not more than the guaranteed maximum. In general, the longer you own your Policy, the higher the cost of insurance rate will be as the contingent insureds grow older. Also our cost of insurance rates will generally be lower if one or both of the insured persons is a female than if a male. Similarly, our current cost of insurance rates are generally lower for non-tobacco users than tobacco users. On the other hand, contingent insureds who present particular health, occupational or non-work related risks may require higher cost of insurance rates and other additional charges based on the specified amount of insurance coverage under their Policy. We use this charge to fund the death benefits we pay under the Policies. Monthly charges for additional benefit riders. We will deduct charges monthly from your accumulation value, if you select additional benefit riders. The charges for any rider you select will vary by Policy within a range based on either the personal characteristics of the contingent insureds or the specific coverage you choose under the rider. The riders we offer are maturity extension rider (a charge of up to $30 for each $1,000 net amount at risk), return of premium death benefit rider and single life annually renewable term insurance rider. The riders are described beginning on page 20, under "What additional rider benefits might I select?" The specific charges for any rider you choose are shown on page 3 of your Policy. We use these charges to pay for the benefits under the riders and to help offset the risks we assume. Surrender charge. The Policies have a surrender charge that applies for a maximum of the first 14 Policy years (and for a maximum of the first 14 Policy years after any requested increase in the Policy's base coverage). We will apply the surrender charge only to the base coverage portion of the specified amount. 8 The surrender charge period depends on the age of the younger of the contingent insureds. The amount of the surrender charge depends on the age, gender and premium classes of both of the contingent insureds. Your Policy's surrender charge will be found in the table on page 4C of the Policy. It may initially be as high as $50 per $1,000 of base coverage or as low as $0 per $1,000 of base coverage (or any increase in the base amount). We are permitted to not charge some or all of the surrender charges under certain limited circumstances, according to the terms of a Policy endorsement. We will deduct the entire amount of any then applicable surrender charge from the accumulation value at the time of a full surrender. Upon a requested decrease in a Policy's base coverage portion of the specified amount, we will deduct any remaining amount of the surrender charge that was associated with the base coverage that is canceled. This includes any decrease that results from any requested partial surrender. See "Partial surrender" beginning on page 23. For those Policies that lapse in the first 14 Policy years, we use this charge to help recover sales expenses. Partial surrender fee. We will charge a maximum fee equal to the lesser of 2% of the amount withdrawn or $25 for each partial surrender you make. This charge is currently $10. We use this charge to help pay for the expense of making a partial surrender. Transfer fee. We may charge a $25 transfer fee for each transfer between investment options that exceeds 12 each Policy Year. We do not currently assess this charge but reserve the right to do so in the future. This charge will be deducted from the investment options in the same ratio as the requested transfer. We use this charge to help pay for the expense of making the requested transfer. Illustrations. If you request illustrations more than once in any Policy year, we may charge $25 for the illustration. Policy loans. We will charge you interest on any loan at an annual effective rate of 4.75%. The loan interest charged on a preferred loan (available after the first 10 Policy years) will never exceed an annual effective rate of 4.25%. See "Policy loans" beginning on page 24. Charge for taxes. We can adjust charges in the future on account of taxes we incur or reserves we set aside for taxes in connection with the Policies. This would reduce the investment experience of your accumulation value. For a further discussion regarding these charges, see "More About Policy Charges" on page 42. Allocation of charges. You may choose the investment options from which we deduct all monthly charges and any applicable surrender charges. If you do not have enough accumulation value in those investment options, we will deduct these charges in the same ratio the charges bear to the unloaned accumulation value you then have in each investment option. 9 WHAT CHARGES AND EXPENSES WILL THE MUTUAL FUNDS DEDUCT FROM AMOUNTS I INVEST THROUGH MY POLICY? Each Mutual Fund pays its investment management fees and other operating expenses. Because they reduce the investment return of a Fund, these fees and expenses also will reduce indirectly the return you will earn on any accumulation value that you have invested in that Fund. The charges and expenses that we show in the following table are for each Fund's most recent fiscal year ended, unless we indicate otherwise: THE MUTUAL FUNDS' ANNUAL EXPENSES/1/ (as a percentage of average net assets)
FUND OTHER FUND TOTAL FUND MANAGEMENT OPERATING OPERATING FEES (AFTER EXPENSES (AFTER EXPENSES (AFTER EXPENSE 12B-1 EXPENSE EXPENSE NAME OF FUND REIMBURSEMENT)/3/ FEES REIMBURSEMENT)/3/ REIMBURSEMENT)/3/ ----------------- ------ ----------------- ----------------- AIM VARIABLE INSURANCE FUNDS:/1/ AIM V.I. International Equity Fund 0.73% 0.29% 1.02% AIM V.I. Value Fund 0.61% 0.23% 0.84% AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.:/1/ VP Value Fund 1.00% 0.00% 1.00% AYCO SERIES TRUST:/2/ Ayco Growth Fund 0.00% 1.00% 1.00% CREDIT SUISSE WARBURG PINCUS TRUST:/1/ Small Company Growth Portfolio/3/ 0.90% 0.21% 1.11% DREYFUS INVESTMENT PORTFOLIOS:/1/ MidCap Stock Portfolio - Initial shares/3, 4/ 0.75% 0.25% 1.00% DREYFUS VARIABLE INVESTMENT FUND:/1/ Quality Bond Portfolio - Initial shares 0.65% 0.07% 0.72% Small Cap Portfolio - Initial shares 0.75% 0.03% 0.78% FIDELITY VARIABLE INSURANCE PRODUCTS FUND:/1, 5/ VIP Asset Manager(SM) Portfolio 0.53% 0.25% 0.10% 0.88% VIP Contrafund(R) Portfolio/6/ 0.57% 0.25% 0.10% 0.92% VIP Equity-Income Portfolio/6/ 0.48% 0.25% 0.10% 0.83% (Footnotes begin on page 12)
10
FUND OTHER FUND TOTAL FUND MANAGEMENT OPERATING OPERATING FEES (AFTER EXPENSES (AFTER EXPENSES (AFTER EXPENSE 12B-1 EXPENSE EXPENSE NAME OF FUND REIMBURSEMENT)/3/ FEES REIMBURSEMENT)/3/ REIMBURSEMENT)/3/ ----------------- ------ ----------------- ----------------- VIP Growth Portfolio/6/ 0.57% 0.25% 0.09% 0.91% JANUS ASPEN SERIES - SERVICE SHARES:/7/ Aggressive Growth Portfolio 0.65% 0.25% 0.02% 0.92% International Growth Portfolio 0.65% 0.25% 0.06% 0.96% Worldwide Growth Portfolio 0.65% 0.25% 0.05% 0.95% J. P. MORGAN SERIES TRUST II:/1/ J. P. Morgan Small Company 0.60% 0.55% 1.15% Portfolio/3/ MFS VARIABLE INSURANCE TRUST:/1/ MFS Capital Opportunities Series/8/ 0.75% 0.16% 0.91% MFS Emerging Growth Series /8/ 0.75% 0.10% 0.85% MFS New Discovery Series/3, 8/ 0.90% 0.16% 1.06% MFS Research Series /8/ 0.75% 0.10% 0.85% NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST:/1/ Mid-Cap Growth Portfolio 0.84% 0.14% 0.98% NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES I:/1, 9/ International Equities Fund 0.35% 0.07% 0.42% MidCap Index Fund 0.30% 0.08% 0.38% Money Market Fund 0.50% 0.10% 0.60% Nasdaq-100(R) Index Fund 0.40% 0.12% 0.52% Science & Technology Fund 0.90% 0.10% 1.00% Small Cap Index Fund 0.35% 0.09% 0.44% Stock Index Fund 0.26% 0.08% 0.34% PIMCO VARIABLE INSURANCE TRUST ADMINISTRATIVE CLASS:/1, 10/ PIMCO Real Return Bond Portfolio 0.25% 0.40% 0.65% PIMCO Short-Term Bond Portfolio 0.25% 0.35% 0.60% (Footnotes begin on page 12)
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FUND OTHER FUND TOTAL FUND MANAGEMENT OPERATING OPERATING FEES (AFTER EXPENSES (AFTER EXPENSES (AFTER EXPENSE 12B-1 EXPENSE EXPENSE NAME OF FUND REIMBURSEMENT)/3/ FEES REIMBURSEMENT)/3/ REIMBURSEMENT)/3/ ----------------- ------ ----------------- ----------------- PIMCO Total Return Bond Portfolio/3/ 0.25% 0.40% 0.65% PUTNAM VARIABLE TRUST:/11/ Putnam VT Diversified Income Fund - 0.68% 0.25% 0.10% 1.03% Class IB/12/ Putnam VT Growth and Income Fund - 0.46% 0.25% 0.04% 0.75% Class IB/12/ Putnam VT International Growth and 0.80% 0.25% 0.17% 1.22% Income Fund - Class IB/12/ SAFECO RESOURCE SERIES TRUST:/1/ RST Equity Portfolio 0.74% 0.04% 0.78% RST Growth Opportunities Portfolio 0.74% 0.03% 0.77% THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:/1/ Equity Growth Portfolio/3/ 0.48% 0.37% 0.85% High Yield Portfolio/3/ 0.26% 0.54% 0.80% VANGUARD VARIABLE INSURANCE FUND: High Yield Bond Portfolio 0.18% 0.08% 0.26% REIT Index Portfolio 0.34% 0.13% 0.47% VAN KAMPEN LIFE INVESTMENT TRUST - CLASS I SHARES:/1/ Strategic Stock Portfolio/3/ 0.13% 0.53% 0.66%
_______________ /1/ Most of the Mutual Funds' advisers or administrators have entered into arrangements under which they pay certain amounts to AGL for services such as proxy mailing and tabulation, mailing of fund related information and responding to Policy owners' inquiries about the Funds. PIMCO Variable Insurance Trust has entered into such an arrangement directly with us. The fees shown above for Total Fund Operating Expenses are unaffected by these arrangements. To the extent we receive these fees, we do not lower the Policy fees we charge you. We do not generate a profit from these fees, but only offset the cost of the services. (See "Certain Arrangements" on page 43 and "Services Agreements" on page 56.) /2/ The Ayco Growth Fund is a new Fund that became effective in December 2000. The Fund has an expense limitation agreement in place to limit its 2001 fees and charges to 1.00%. /3/ For the Funds indicated, management fees and other expenses as shown for fiscal year 2000 would have been the percentages shown below without certain voluntary fee waivers and expense reimbursements from the investment adviser or other parties. Current and future fees and expenses may vary from the fiscal year 2000 fees and expenses. (Footnotes continue on page 13) 12
MANAGEMENT OTHER TOTAL FEES EXPENSES ANNUAL EXPENSES ----------- --------- ---------------- CREDIT SUISSE WARBURG PINCUS TRUST: Small Company Growth Portfolio 0.90% 0.23% 1.13% DREYFUS INVESTMENT PORTFOLIOS: MidCap Stock Portfolio - Initial shares 0.75% 0.29% 1.04% J.P. MORGAN SERIES TRUST II: J.P. Morgan Small Company Portfolio 0.60% 0.72% 1.32% MFS VARIABLE INSURANCE TRUST: MFS New Discovery Series 0.90% 0.19% 1.09% PIMCO VARIABLE INSURANCE TRUST ADMINISTRATIVE CLASS: PIMCO Total Return Bond Portfolio 0.25% 0.41% 0.66% THE UNIVERSAL INSTITUTIONAL FUNDS, INC.: Equity Growth Portfolio 0.55% 0.37% 0.92% High Yield Portfolio 0.50% 0.54% 1.04% VAN KAMPEN LIFE INVESTMENT TRUST - CLASS I SHARES: 0.50% 0.53% 1.03% Strategic Stock Portfolio
No other Funds received any fee waivers and expense reimbursements. /4/ The expenses shown in THE MUTUAL FUNDS' ANNUAL EXPENSES table above reflect the MidCap Stock Portfolio adviser's waiver of fees or reimbursement of expenses for the fiscal year ended December 31, 2000. For such fiscal year, the Portfolio's adviser further reimbursed the Portfolio for other expenses so that the total annual Portfolio expenses were 0.98% instead of 1.00%. This additional expense reimbursement was voluntary. The "Other Fund Operating Expenses" information provided in THE MUTUAL FUNDS' ANNUAL EXPENSES table has been restated to reflect the amount the fees would have been without the additional voluntary reimbursement. The Portfolio's adviser has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the Portfolio so that the expenses of the Portfolio (excluding taxes, brokerage commissions, extraordinary expenses, interest expenses and commitment fees on borrowing) do not exceed 1.00%. See the accompanying MidCap Stock Portfolio prospectus for more details. /5/ The prospectuses for Fidelity Variable Insurance Products Fund under "Fund Distribution" discuss this 12b-1 fee. /6/ Actual annual class operating expenses were lower because a portion of the brokerage commissions that the Fund paid was used to reduce the Fund's expenses, and/or because through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the Fund's custodian expenses. See the accompanying prospectuses for Fidelity Variable Insurance Product Fund for details. /7/ Expenses are based upon expenses for the fiscal year ended December 31, 2000, restated to reflect a reduction in the management fee for the Aggressive Growth, International Growth and Worldwide Growth Portfolios. All expenses are shown without the effect of any expense offset arrangements. The prospectus for Janus Aspen Series under "Fees and Expenses" discusses the 12b-1 fee. /8/ Each of the MFS Capital Opportunities, MFS Emerging Growth, MFS New Discovery and MFS Research Series has an expense offset arrangement which reduces the Series' custodian fee based upon the amount of cash maintained by the Series with its custodian and dividend disbursing agent. Each Series may enter into other such arrangements and directed brokerage arrangements, which would also have the effect of reducing the Series' expenses. The "Other Fund Operating Expenses" in THE MUTUAL FUNDS' ANNUAL EXPENSES table above do not take into account these expense reductions, and are therefore higher than the actual expenses of the Series. Had these fee reductions been taken into account, "Total Fund Operating Expenses (After Expense Reimbursements)" in THE MUTUAL FUNDS' (Footnotes continue on page 14) 13 ANNUAL EXPENSES table above would be lower for the Series and would equal 0.90% for MFS Capital Opportunities Series, 0.84% for MFS Emerging Growth Series, 1.05% for MFS New Discovery Series, and 0.84% for MFS Research Series. See the accompanying MFS Variable Insurance Trust prospectus for more details. /9/ The Expenses have been restated to reflect contractual changes effective May 1, 2001. /10/ AGL has entered into a service agreement with PIMCO Variable Insurance Trust under which a portion of the Other Fund Operating Expenses is paid to AGL to reimburse AGL for services provided to the PIMCO Variable Insurance Trust. /11/ The prospectus for Putnam Variable Trust under "Distribution Plan" discusses this 12b-1 fee. /12/ The Fund's 12b-1 fees have been restated to reflect an increase in 12b-1 fees currently payable to Putnam Retail Management. The Trustees of Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. WHAT IS THE AMOUNT OF INSURANCE ("DEATH BENEFIT") THAT AGL PAYS WHEN THE LAST SURVIVING CONTINGENT INSURED DIES? Your specified amount of insurance. In your application to buy a Platinum Investor Survivor II Policy, you tell us how much life insurance coverage you want. We call this the "specified amount" of insurance. Platinum Investor Survivor II is available for specified amounts of $500,000 or more. The specified amount consists of what we refer to as "base coverage" plus any "supplemental coverage" you select. You decide how much base coverage and how much supplemental coverage you want. Base coverage must be at least 10% of the specified amount. We also provide a guarantee of a death benefit equal to the initial specified amount (less any indebtedness) and any benefit riders during the first 5 Policy years. We provide more information about this benefit and the specified amount under "Monthly guarantee premiums," beginning on page 17 and under "More About the Death Benefit" beginning on page 45. You should read these other discussions carefully because they contain important information about how the choices you make can affect your benefits and the amount of premiums and charges you may have to pay. Your death benefit. The death benefit we will pay is reduced by any outstanding Policy loans and increased by any unearned loan interest we may have already charged. At any time before the death of the last surviving contingent insured, you can choose whether the death benefit we will pay is . Option 1--The specified amount on the date of the last surviving contingent insured's death; or . Option 2--The specified amount plus the Policy's accumulation value on the date of the last surviving contingent insured's death. Under Option 2, your death benefit will tend to be higher than under Option 1. However, the monthly insurance charge we deduct will also be higher to compensate us for our additional risk. Because of this, your accumulation value for the same amount of premium will tend to be higher under Option 1 than under Option 2. Any premiums we receive after the last surviving contingent insured's death will be returned and not included in your accumulation value. 14 We may pay a larger death benefit depending on the amount of the accumulation value on the date of death, as explained below. Federal tax law requires a minimum death benefit in relation to the accumulation value in order for a Policy to qualify as life insurance. We will automatically increase the death benefit of a Policy if necessary to ensure that the Policy will continue to qualify as life insurance. One of two tests under current federal tax law can be used: the "guideline premium test" or the "cash value accumulation test." You must elect one of these tests at issue, and, once elected, the choice may not be changed. Factors you should consider in making this choice are discussed below. The "guideline premium test" limits the amount of premiums paid under a Policy at any time to a certain amount which depends on the size of the Policy and the age and gender of the contingent insureds. Therefore, the maximum premiums you can pay are generally more limited under this test than under the cash value accumulation test. The other major difference between the two tax tests involves the Policy's "alternative death benefit." The alternative death benefit is calculated as shown in the tables that follow. During any time when the alternative death benefit works out to be more than the Option 1 or Option 2 death benefit you have chosen, we would automatically deem the death benefit to be such higher amount. As illustrated in the tables below, choosing the cash value accumulation test for tax law compliance generally makes it more likely that an alternative death benefit will apply. Therefore, if you anticipate that your Policy may have a substantial accumulation value in relation to its death benefit, you should be aware that the alternative death benefit may cause your Policy's death benefit to be higher if you choose that test than if you choose the guideline premium test. To the extent that the alternative death benefit does result in a higher death benefit, the cost of insurance charges deducted from your Policy will also tend to be higher. (This compensates us for the additional risk that we might have to pay the higher alternative death benefit.) If you have selected the guideline premium test, we calculate the alternative death benefit by multiplying your Policy's accumulation value by the following percentages: SPECIMEN ALTERNATIVE DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCUMULATION VALUE (ASSUMING YOU SELECT THE GUIDELINE PREMIUM TEST)
YOUNGER CONTINGENT INSURED'S AGE* 40 45 50 55 60 65 70 75 100 % 250% 215% 185% 150% 130% 120% 115% 105% 100%
* Age nearest birthday at the beginning of the Policy year in which the last surviving contingent insured dies. We use the younger contingent insured's age for this purpose even if the younger contingent insured is the first to die. 15 If you have selected the cash value accumulation test, we calculate the alternative death benefit by multiplying your Policy's accumulation value by a percentage that will be set forth on page 4A of your Policy. The percentage varies based on the insurance characteristics of the contingent insureds. Below is an example of applicable alternative death benefit percentages for the cash value accumulation test. The example is for a male non-tobacco user and a female non-tobacco user both preferred premium class and issue age 55. SPECIMEN ALTERNATIVE DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCUMULATION VALUE (ASSUMING YOU SELECT THE CASH VALUE ACCUMULATION TEST)
POLICY YEAR 1 2 3 5 10 20 30 40 45 % 313% 301% 290% 268% 222% 159% 126% 111% 104%
Your Policy calls the multipliers used for each test the "Death Benefit Corridor Rate." MUST I INVEST ANY MINIMUM AMOUNT IN A POLICY? Planned periodic premiums. Page 3 of your Policy will specify a "Planned Periodic Premium." This is the amount that you (within limits) choose to pay. Our current practice is to bill quarterly, semi-annually or annually. However, payment of these or any other specific amounts of premiums is not mandatory. After payment of your initial premium, you need only invest enough to ensure your Policy's cash surrender value stays above zero or that the first 5 Policy year benefit (described under "Monthly guarantee premiums" on page 17) remains in effect. ("Cash surrender value" is explained under "Full surrender" on page 23.) The less you invest, the more likely it is that your Policy's cash surrender value could fall to zero or that the first 5 Policy year benefit is not in effect, as a result of the market performance and/or deductions we periodically make from your accumulation value. Policy lapse and reinstatement. During the first 5 Policy year benefit period discussed on page 17, your Policy will not enter a grace period or terminate if the Monthly Guarantee Premium has been met. After expiration of this benefit, if your Policy's cash surrender value falls to an amount insufficient to cover the monthly charges, we will notify you in a letter and give you a grace period of 61 days to pay at least the amount we estimate is necessary to keep your Policy in force for a reasonable time. If we do not receive your payment by the end of the grace period, your Policy and all riders will end without value and all coverage under your Policy will cease. Although you can apply to have your Policy "reinstated," you must do this within 5 years (or, if earlier, before the Policy's maturity date), and you must present evidence that each contingent insured who was living when the Policy lapsed is still living and meets our requirements for issuing coverage. Also, you will have to pay at least the amount of premium that we estimate will keep your Policy in force for two months, as well as pay or reinstate any indebtedness. You will find additional information in the Policy about the values and terms of the Policy after it is reinstated. 16 Monthly guarantee premiums. Page 3 of your Policy will specify a "Monthly Guarantee Premium." In Maryland, your Policy will instead specify a "No-Lapse Premium" on Page 3. If you pay these guarantee premiums, we will provide at least an Option 1 death benefit, even if your policy's cash surrender value has declined to zero. We provide this benefit for the first 5 Policy years for all Policies. On the first day of each Policy month that the cash surrender value is not sufficient to pay the monthly deduction, we check to see if the cumulative amount of premiums paid under the Policy, less any Policy loans, is at least equal to the sum of the monthly guarantee premiums plus any partial surrenders for all Policy months to date, including the Policy month then starting. (Policy months are measured from the "Date of Issue" that will also be shown on page 3 of your Policy.) So long as at least this amount of premium payments has been paid by the beginning of that Policy month during this guarantee benefit, the Policy will not enter a grace period or terminate (i.e., lapse) because of insufficient cash surrender value. Also, during the first 5 Policy years, whenever you increase or decrease your specified amount, we calculate a new monthly guarantee premium, so the amount you must pay to keep this benefit in force will increase or decrease depending on whether you increase or decrease your specified amount. If you add or increase a benefit rider, your monthly guarantee premium will increase. If you remove or decrease a benefit rider, your monthly guarantee premium will decrease. The more supplemental coverage you choose the higher will be your monthly guarantee premiums. The period of coverage for this benefit is unaffected by the contingent insureds' ages at the Policy's date of issue or your choice of base coverage and supplemental coverage. The period for this benefit will not be extended or otherwise changed by changes in the specified amount, the addition, deletion or change in benefit riders, or by reinstatement of the Policy. HOW CAN I CHANGE MY POLICY'S INVESTMENT OPTIONS? Future premium payments. You may at any time change the investment options in which future premiums you pay will be invested. Your allocation must, however, be in whole percentages that total 100%. Transfers of existing accumulation value. You may also transfer your existing accumulation value from one investment option under the Policy to another. The first 12 transfers in a year are free of charge. We may charge you $25 for each additional transfer. We do not currently assess this charge but reserve the right to do so in the future. You may make transfers from the variable investment options at any time. You may make transfers from the declared fixed interest account only during the 60-day period following each Policy anniversary. The amount that you can transfer each year from the declared fixed interest account is limited to the greater of . 25% of the unloaned accumulation value you have in the declared fixed interest account as of the Policy anniversary, or . the sum of any amounts you transferred or surrendered from the declared fixed interest account during the previous Policy year. 17 Unless you are transferring the entire amount you have in an investment option, including the declared fixed interest account, each transfer must be at least $500. See "Additional Rights That We Have" on page 50. Market Timing. The Policy is not designed for professional market timing organizations or other entities using programmed and frequent transfers involving large amounts. We may not unilaterally terminate or discontinue transfer privileges. However, we reserve the right to suspend such privileges for a reasonable time with reasonable notice to prevent market timing efforts that could disadvantage other Policy owners. HOW CAN I CHANGE MY POLICY'S INSURANCE COVERAGE? Increase in coverage. At any time while both contingent insureds are living, you may request an increase in the specified amount of coverage under your Policy. You must, however, provide us with satisfactory evidence that both contingent insureds continue to meet our requirements for issuing insurance coverage. We treat an increase in specified amount in many respects as if it were the issuance of a new Policy. For example, the monthly insurance charge for the increase will be based on the ages, gender and premium classes of the contingent insureds at the time of the increase. Also, a new amount of surrender charge: . applies to any amount of the increase that you request as base (rather than supplemental) coverage; and . applies for up to 14 Policy years following the increase. You are not required to increase your specified amount in any specific percentage or ratio that your base and supplemental coverage bear to your specified amount before the increase, with one exception. Base coverage must be at least 10% of the total specified amount after the increase. Decrease in coverage. After the first Policy year, you may request a reduction in the specified amount of coverage, but not below certain minimums. After any decrease, the specified amount cannot be less than the greater of: . $500,000, and . any minimum amount which, in view of the amount of premiums you have paid, is necessary for the Policy to continue to meet the Federal tax law definition of life insurance. We will apply a reduction in specified amount in the following order, as long as your base coverage is at least 10% of the specified amount: 18 . against the specified amount provided by the most recent increase, with the decrease applying first to the entire supplemental coverage portion of such increase, if any, followed by the base coverage portion; . against the next most recent increases successively, with the decrease of each prior increase applying first to the entire supplemental coverage portion of such increase, if any, followed by the base coverage portion; . against the specified amount provided under the original application, with the decease applying first to the entire supplemental coverage portion of such amount, if any, followed by the base coverage portion. We will deduct from your accumulation value any remaining surrender charge that is associated only with any amount of base coverage that is canceled in this way. If there is not sufficient accumulation value to pay the surrender charge at the time you request a reduction, the decrease will not be allowed. Change of death benefit option. You may at any time before the death of the last surviving contingent insured request us to change your coverage from death benefit Option 1 to Option 2 or vice-versa. . If you change from Option 1 to Option 2, we also automatically reduce your Policy's specified amount of insurance by the amount of your Policy's accumulation value (but not below zero) at the time of the change. The change will go into effect on the monthly deduction day following the date we receive your request for change. We will apply a reduction in specified amount in the same order as set out under "Decrease in coverage" on page 18, as long as your base coverage is at least 10% of the specified amount. We will not charge a surrender charge for this reduction in specified amount. . If you change from Option 2 to Option 1, we automatically increase your Policy's specified amount by the amount of your Policy's accumulation value. The entire increase in the specified amount will be applied to the last coverage added (either base or supplemental) which has not been removed. For the purpose of this calculation, if the base and supplemental coverages were issued on the same date, we will consider the supplemental coverage to have been issued later. Tax consequences of changes in insurance coverage. Please read "Tax Effects" starting on page 34 of this prospectus to learn about possible tax consequences of changing your insurance coverage under your Policy. Effect of changes in insurance coverage on guarantee benefit. A change in coverage does not result in termination of the guarantee benefit, so that if you pay certain prescribed amounts of premiums, we will pay a death benefit even if your policy's cash surrender value declines to zero. 19 The details of this guarantee are discussed under "Monthly guarantee premiums," beginning on page 17. WHAT ADDITIONAL RIDER BENEFITS MIGHT I SELECT? You can request that your Policy include the additional rider benefits described below. For most of the riders that you choose, a charge, which will be shown on page 3 of your Policy, will be deducted from your accumulation value on each monthly deduction date. Eligibility for and changes in these benefits are subject to our rules and procedures as in effect from time to time. Not all riders are available in all states. More details are included in the form of each rider, which we suggest that you review if you choose any of these benefits. Maturity Extension Rider ------------------------ . This rider permits you to extend the Policy's maturity date beyond what it otherwise would be. You have two versions of this rider from which to choose. Either or both versions may not be available in all states. . The first version provides for a death benefit after the original maturity date that is equal to the accumulation value on the date of the last surviving contingent insured's death. The death benefit will be reduced by any outstanding Policy loan amount. There is no charge for this version until you reach the original maturity date. Thereafter we will charge a monthly fee of no more than $10. . The second version provides for a death benefit (after the death of the last surviving contingent insured) after the original maturity date equal to the death benefit in effect on the day prior to the original maturity date. If the death benefit is based fully, or in part, on the accumulation value, we will adjust the death benefit to reflect future changes in your accumulation value. The death benefit will never be less than the accumulation value. The death benefit will be reduced by any outstanding Policy loan amount. There is a monthly charge of no more than $30 for each $1000 of the net amount at risk. If you wish to purchase this rider, you must inform us in writing at least 9 years before the original maturity date. When the 9-year period begins, each month we will charge you up to the maximum $30 for each $1,000 of the net amount at risk. After the original maturity date, we will terminate this charge, and start charging you a monthly fee of no more than $10. . There are features common to both riders in addition to the $10 maximum monthly fee. Only the insurance coverage associated with the Policy will be extended beyond the original maturity date. We do not allow additional premium payments, new loans, or changes in specified amount after the original maturity date. Once you have exercised your right to extend the original maturity date, you cannot revoke it. You can, however, surrender your Policy 20 at any time. If you wish to extend the original maturity date, you must give us written notice at least 30 days before the original maturity date. . Extension of the maturity date beyond the younger contingent insured's age 100 may result in current taxation of increases in your Policy's accumulation value as a result of interest or investment experience after that time. You should consult a qualified tax adviser before making such an extension. Return of Premium Death Benefit Rider ------------------------------------- . This rider provides additional term life insurance coverage on the life of the last surviving contingent insured. The amount of additional insurance varies so that it always equals the cumulative amount of premiums paid under the Policy (subject to certain adjustments). . You may purchase this rider only as of the date of issue and only if you have selected death benefit Option 1. . There is no separate fee for this rider. The use of this rider increases the specified amount, which results in a change in the amount at risk and an increase in the monthly insurance charge. Single Life Annually Renewable Term Insurance Rider --------------------------------------------------- . This rider allows you to provide term single life insurance on the life of either or both of the contingent insureds. We will pay a death benefit upon the death of the contingent insured on whose life you purchased the rider. The death benefit is in addition to any death benefit we pay under the Policy. . You can purchase this rider on the life of a contingent insured who is younger than age 75. . You cannot purchase this rider on the life of a contingent insured if the premium class for that contingent insured is uninsurable. . This rider terminates at age 75 of the covered insured. . The maximum cost of this rider is $6.66 per thousand of the rider's specified amount. Tax consequences of additional rider benefits. Adding or deleting riders, or increasing or decreasing coverage under existing riders can have tax consequences. See "Tax Effects" starting on page 34. You should consult a qualified tax adviser. 21 WHAT IS MY POLICY'S EXCHANGE OPTION? This option is not a rider. You as the owner of the Policy have the right at any time while both contingent insureds are living to request that the Policy be split into two separate policies, insuring each of the contingent insureds under new, single life policies. In order for you to exercise this option, neither contingent insured could have the "uninsurable" premium class when the original Policy was issued. Here are the additional features about the exchange option: . You can choose the amount of coverage on each policy, as long as the total equals the death benefit amount of the Policy. We will transfer the cash surrender value of the Policy, after paying off any outstanding loan, to the new policies in the same proportion as the new face amounts are to each other (except for Policies issued in Texas, where outstanding loans are also transferred to the new policies in the same proportion as the new face amounts are to each other). . The new policies can be any flexible or level premium whole life policy or endowment plan we would ordinarily issue when the option is exercised. . The new policies are subject to underwriting based on our established procedures. This option requires that both contingent insureds are found to be insurable. . You can choose to exchange without underwriting only if the contingent insureds were married to one another and have divorced, the Federal unlimited marital deduction is repealed, or there is a reduction of at least 50% of the tax rate in the maximum Federal estate tax bracket. However, in the case of divorce, the divorce decree must have been final at least 24 months before the exchange. In these situations, the original Policy's specified amount and cash surrender value will be split equally between the two new policies (except in Pennsylvania, where underwriting is required without exception if the contingent insureds are divorced from one another). . The Policy terminates when we issue the new policies. . Under each of the new policies, if the insured commits suicide within the first two policy years, we will limit the death benefit proceeds to the total of all premiums that have been paid on the Policy insuring the deceased person to the time of death minus any outstanding policy loans (plus any unearned loan interest) and partial surrenders. In Texas the first two policy years limit runs from the date of issue of the Policy but only for insurance coverage that does not require new underwriting information. . There is no additional charge for this option or its exercise. 22 HOW CAN I ACCESS MY INVESTMENT IN A POLICY? Full surrender. You may at any time surrender your Policy in full. If you do, we will pay you the accumulation value, less any Policy loans, plus any unearned loan interest, and less any surrender charge that then applies. We call this amount your "cash surrender value." Because of the surrender charge, it is unlikely that a Platinum Investor Survivor II Policy will have any cash surrender value during at least the first year unless you pay significantly more than the monthly guarantee premiums. Partial surrender. You may, at any time after the first Policy year, make a partial surrender of your Policy's cash surrender value. A partial surrender must be at least $500. We will automatically reduce your Policy's accumulation value by the amount of your withdrawal and any related charges. We do not allow partial surrenders that would reduce the death benefit below $500,000. We will apply a reduction in specified amount in the following order, as long as your base coverage is at least 10% of the specified amount: . against the specified amount provided by the most recent increase, with the decrease applying first to the entire supplemental coverage portion of such increase, if any, followed by the base coverage portion; . against the next most recent increases successively, with the decrease of each prior increase applying first to the entire supplemental coverage portion of such increase, if any, followed by the base coverage portion; . against the specified amount provided under the original application, with the decease applying first to the entire supplemental coverage portion of such amount, if any, followed by the base coverage portion. We will deduct any remaining surrender charge that is associated with any portion of your Policy's base amount of coverage that is canceled. If the Option 2 death benefit is then in effect, we will automatically reduce your accumulation value. You may choose the investment option or options from which money that you withdraw will be taken. Otherwise, we will allocate the partial surrender in the same proportions as then apply for deducting monthly charges under your Policy or, if that is not possible, in proportion to the amount of accumulation value you then have in each investment option. There is a maximum partial surrender fee equal to the lesser of 2% of the amount withdrawn or $25 for each partial surrender you make. This charge currently is $10. Exchange of Policy in certain states. Certain states require that a policy owner be given the right to exchange the Policy for a fixed benefit life insurance policy, within either 18 or 24 months from the date of issue. This right is subject to various conditions imposed by the states and 23 us. In such states, this right has been more fully described in your Policy or related endorsements to comply with the applicable state requirements. Policy loans. You may at any time borrow from us an amount up to your Policy's cash surrender value less the interest that will be payable on your loan through your next Policy anniversary. We remove from your investment options an amount equal to your loan and hold that part of your accumulation value in the declared fixed interest account as collateral for the loan. We will credit your Policy with interest on this collateral amount at a guaranteed annual effective rate of 4% (rather than any amount you could otherwise earn in one of our investment options) and we will charge you interest on your loan at an annual effective rate of 4.75%. Loan interest is payable annually, on the Policy anniversary and in advance at a rate of 4.54%. Any amount not paid by its due date will automatically be added to the loan balance as an additional loan. Interest you pay on Policy loans will not, in most cases, be deductible on your tax returns. You may choose which of your investment options the loan will be taken from. If you do not so specify, we will allocate the loan in the same way that charges under your Policy are being allocated. If this is not possible, we will make the loan pro-rata from each investment option that you then are using. You may repay all or part (but not less than $10 unless it is the final payment) of your loan at any time before the death of the last surviving contingent insured while the Policy is in force. You must designate any loan repayment as such. Otherwise, we will treat it as a premium payment instead. Any loan repayments go first to repay all loans that were taken from our declared fixed interest account option. We will invest any additional loan repayments you make in the investment options you request. In the absence of such a request we will invest the repayment in the same proportion as you then have selected for premium payments that we receive from you. Any unpaid loan (increased by any unearned loan interest we may have already charged) will be deducted from the proceeds we pay following the last surviving contingent insured's death. Preferred loan interest rate. We will charge a lower interest rate on preferred loans (available after the first 10 Policy years). The maximum amount eligible for preferred loans for any year is: . 10% of your Policy's accumulation value (which includes any loan collateral we are holding for your Policy loans) at the Policy anniversary; or . if less, your Policy's maximum remaining loan value at that Policy anniversary. We will always credit your preferred loan collateral amount at a guaranteed annual effective rate of 4.0%. We intend to set the rate of interest you are paying to the same 4.0% rate we credit to your preferred loan collateral amount, resulting in a zero net cost (0.00%) of borrowing for that amount. We have full discretion to vary the rate we charge you, provided that the rate: 24 . will always be greater than or equal to the guaranteed preferred loan collateral rate of 4.0%, and . will never exceed an annual effective rate of 4.25%. Maturity of your Policy. If one or both contingent insureds are living on the "Maturity Date" shown on page 3 of your Policy, we will pay you the cash surrender value of the Policy, and the Policy will end. The maturity date can be no later than the Policy anniversary nearest the younger contingent insured's 100/th/ birthday. Tax considerations. Please refer to "How will my Policy be treated for income tax purposes?" on page 26 for information about the possible tax consequences to you when you receive any loan, surrender or other funds from your Policy. A Policy loan may cause the Policy to lapse which will result in adverse tax consequences. CAN I CHOOSE THE FORM IN WHICH AGL PAYS OUT THE PROCEEDS FROM MY POLICY? Choosing a payment option. You will receive the full proceeds from the Policy as a single sum, unless you elect another method of payment within 60 days of the last surviving contingent insured's death. This also includes proceeds that become payable upon full surrender or the maturity date. You can elect that all or part of such proceeds be applied to one or more of the following payment options: . Option 1--Equal monthly payments for a specified period of time. . Option 2--Equal monthly payments of a selected amount of at least $60 per year for each $1,000 of proceeds until all amounts are paid out. . Option 3--Equal monthly payments for the payee's life, but with payments guaranteed for a specified number of years. These payments are based on annuity rates that are set forth in the Policy or, at the payee's request, the annuity rates that we then are using. . Option 4--Proceeds left to accumulate at an interest rate of 3% compounded annually for any period up to 30 years. At your request we will make payments to you monthly, quarterly, semiannually, or annually. You can also request a partial withdrawal of any amount of $500 or more. Additional payment options may also be available with our consent. We have the right to reject any payment option, if the payee is a corporation or other entity. You can read more about each of these options in the Policy and in the separate form of payment contract that we issue when any such option takes effect. Interest rates that we credit under each option will be at least 3%. 25 Change of payment option. You may give us written instructions to change any payment option you have elected at any time while the Policy is in force and before the start date of the payment option. Tax impact. If a payment option is chosen, you or your beneficiary may have tax consequences. You should consult with a qualified tax adviser before deciding whether to elect one or more payment options. TO WHAT EXTENT CAN AGL VARY THE TERMS AND CONDITIONS OF THE POLICY IN PARTICULAR CASES? Here are some variations we may make in the terms and conditions of a Policy. Any variations will be made only in accordance with uniform rules that we establish. Underwriting and premium classes. We have seven premium classes we use to decide how much the monthly insurance charges under any particular Policy will be: preferred non-tobacco, standard non-tobacco, preferred tobacco, standard tobacco, special non-tobacco, special tobacco and uninsurable. They are each described in your Policy. Policies issued in Arizona, North Carolina and Wisconsin do not have the uninsurable class. The term "uninsurable" is used in a special way when we issue a Policy. "Uninsurable" describes a person proposed to become insured under a Policy who would not pass our requirements to be insured under one of our policies that insures only one life. Under some conditions a person who is uninsurable can become a contingent insured under a Policy. The other contingent insured cannot be uninsurable. Policies purchased through "internal rollovers." We maintain published rules that describe the procedures necessary to replace another life insurance policy we issued with a Policy. Not all types of other insurance we issue are eligible to be replaced with a Policy. Our published rules may be changed from time to time, but are evenly applied to all our customers. State law requirements. AGL is subject to the insurance laws and regulations in every jurisdiction in which the Policies are sold. As a result, various time periods and other terms and conditions described in this prospectus may vary depending on where you reside. These variations will be reflected in your Policy and related endorsements. Variations in expenses or risks. AGL may vary the cost of insurance charges and other terms within the limits of the Policy where special circumstances result in sales, administrative or other expenses, mortality risks or other risks that are different from those normally associated with the Policy. HOW WILL MY POLICY BE TREATED FOR INCOME TAX PURPOSES? Generally, the death benefit paid under a Policy is not subject to income tax, and earnings on your accumulation value are not subject to income tax as long as we do not pay them out to you. If we do pay any amount of your Policy's accumulation value upon surrender, partial surrender, or 26 maturity of your Policy, all or part of that distribution may be treated as a return of the premiums you paid, which is not subject to income tax. Amounts you receive as Policy loans are not taxable to you, unless you have paid such a large amount of premiums that your Policy becomes what the tax law calls a "modified endowment contract." In that case, the loan will be taxed as if it were a partial surrender. Furthermore, loans, partial surrenders and other distributions from a modified endowment contract may require you to pay additional taxes and penalties that otherwise would not apply. If your Policy lapses, you may have to pay income tax on a portion of any outstanding loan. For further information about the tax consequences of owning a Policy, please read "Tax Effects" starting on page 34. HOW DO I COMMUNICATE WITH AGL? When we refer to "you," we mean the person who is authorized to take any action with respect to a Policy. Generally, this is the owner named in the Policy. Where a Policy has more than one owner, each owner generally must join in any requested action, except for transfers and changes in the allocation of future premiums or changes among the investment options. General. You should mail or express checks and money orders for premium payments and loan repayments directly to the appropriate address shown on your billing statement. If you do not receive a billing statement, send your premium directly to the address for premium payments shown on the first page of the prospectus. You must make the following requests in writing: . transfer of accumulation value; . loan; . full surrender; . partial surrender; . change of beneficiary or contingent beneficiary; . change of allocation percentages for premium payments; . loan repayments or loan interest payments; . change of death benefit option or manner of death benefit payment; . change in specified amount; 27 . addition or cancellation of, or other action with respect to, election of a payment option for Policy proceeds; . tax withholding elections; and . telephone transaction privileges. You should mail or express these requests to the Administrative Center address shown on the first page of this prospectus. You should also communicate notice of each contingent insured's death, and related documentation, to our Administrative Center address shown on the first page of this prospectus. We have special forms which should be used for loans, assignments, partial and full surrenders, changes of owner or beneficiary, and all other contractual changes. You will be asked to return your Policy when you request a full surrender. You may obtain these forms from our Administrative Center or from your AGL representative. Each communication must include your name, Policy number and the names of both contingent insureds. We cannot process any requested action that does not include all required information. Telephone transactions. If you have a completed telephone authorization form on file with us, you may make transfers, or change the allocation of future premium payments or deduction of charges, by telephone, subject to the terms of the form. We will honor telephone instructions from any person who provides the correct information, so there is a risk of possible loss to you if unauthorized persons use this service in your name. Our current procedure is that only the owner or your AGL representative may make a transfer request by phone. We are not liable for any acts or omissions based upon instructions that we reasonably believe to be genuine. Our procedures include verification of the Policy number, the identity of the caller, both the contingent insureds' and owner's names, and a form of personal identification from the caller. We will mail you a prompt written confirmation of the transaction. If (a) many people seek to make telephone requests at or about the same time, or (b) our recording equipment malfunctions, it may be impossible for you to make a telephone request at the time you wish. You should submit a written request if you cannot make a telephone transfer. Also, if, due to malfunction or other circumstances, your telephone request is incomplete or not fully comprehensible, we will not process the transaction. The phone number for telephone requests is 1-888-325-9315. ILLUSTRATIONS OF HYPOTHETICAL POLICY BENEFITS To help explain how our Policy works, we have prepared the following tables: PAGE TO SEE IN THIS PROSPECTUS ------------------ Death Benefit Option 1--Current Charges.............. 31 Death Benefit Option 1--Guaranteed Maximum Charges... 32 The tables show how death benefits, accumulation values, and cash surrender values ("Policy benefits") under a sample Policy would change over time if the investment options had constant 28 hypothetical gross annual investment returns of 0%, 6% or 12% over the years covered by each table. The tables are for a male non-tobacco user and female non-tobacco user both preferred premium class and issue age 55. An annual premium payment of $7,000 for an initial $500,000 of specified amount of coverage is assumed to be paid. The illustrations assume no Policy loan has been taken. The differences between the accumulation values and the cash surrender values for the first 14 years in the tables are because of the Policy's surrender charges. As illustrated, this Policy would not be classified as a modified endowment contract (see "Tax Effects" beginning on page 34 for further discussion). The tables show a sample Policy with 100% base coverage only. A Policy with supplemental coverage at current charges will over time have lower monthly insurance charges and a higher accumulation value. Your AGL representative can provide you with Policy illustrations specific to you, showing how your selection of base and supplemental coverage, if any, can affect your Policy values under different assumptions. Although the tables that follow do not include an example of a Policy with an Option 2 death benefit, such a Policy would have higher death benefits and lower cash surrender values. Separate tables are included to show both current and guaranteed maximum charges. The charges assumed in the following tables include: . a charge for state premium tax (or a tax charge back if we issued the Policy in Oregon), assumed to be 2.0% (for both current and guaranteed maximum charges); . after we deduct applicable premium taxes (or a tax charge back if we issued the Policy in Oregon), a deduction from the remainder of each premium payment of 5% for each premium we receive during each Policy year. These rates are for both current and guaranteed charges; . a daily charge for the first 15 Policy years at an annual effective rate of 0.75% (for both current and guaranteed maximum charges); . a daily charge after 15 Policy years at an annual effective rate of 0.50% (for both current and guaranteed maximum charges); . a daily charge after 30 Policy years at an annual effective rate of 0.15% (for both current and guaranteed maximum charges); . a flat monthly charge of $10 (for both current and guaranteed maximum charges); . a monthly charge for each $1,000 of base coverage of $0.434 (for both current and guaranteed maximum charges); and . the monthly insurance charge (for both current and guaranteed maximum charges). 29 The charges assumed by both the current and guaranteed maximum charge tables also include Mutual Fund expenses of 0.79% of aggregate Mutual Fund assets, which is the arithmetic average of the advisory fees payable with respect to each Mutual Fund plus the arithmetic average of all other operating expenses of each such Fund, after all reimbursements, as reflected on pages 10 - 14 of this prospectus. We expect the reimbursement arrangements to continue in the future. If the reimbursement arrangements were not currently in effect, the arithmetic average of Mutual Fund expenses would equal 0.82% of aggregate Mutual Fund assets. Individual illustrations. We may furnish you with additional illustrations based on other characteristics. These characteristics could include different annual investment returns, your choice of investment options which show your premium payments invested in percentages of your choice, the weighted average of Fund expenses, and other differences you request. If you request illustrations more than once in any Policy year, we may charge $25 for the illustration. 30 PLATINUM INVESTOR SURVIVOR II ANNUAL PREMIUM $7,000 INITIAL SPECIFIED AMOUNT $500,000 DEATH BENEFIT OPTION 1 MALE AND FEMALE, AGE 55 NON-TOBACCO USERS, PREFERRED PREMIUM CLASS ASSUMING CURRENT CHARGES
END OF DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE POLICY ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS YEAR ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 1 500,000 500,000 500,000 3,715 4,016 4,318 0 0 0 2 500,000 500,000 500,000 7,371 8,207 9,082 0 57 932 3 500,000 500,000 500,000 10,969 12,581 14,337 2,969 4,581 6,337 4 500,000 500,000 500,000 14,506 17,143 20,132 6,661 9,298 12,287 5 500,000 500,000 500,000 20,564 24,565 29,269 12,879 16,880 21,584 6 500,000 500,000 500,000 26,519 32,305 39,344 18,999 24,785 31,824 7 500,000 500,000 500,000 32,369 40,374 50,451 25,549 33,554 43,631 8 500,000 500,000 500,000 38,111 48,781 62,693 31,965 42,636 56,548 9 500,000 500,000 500,000 43,742 57,538 76,184 38,257 52,053 70,699 10 500,000 500,000 500,000 49,258 66,653 91,047 44,408 61,803 86,197 15 500,000 500,000 500,000 74,791 117,848 191,239 74,791 117,848 191,239 20 500,000 500,000 500,000 96,824 181,078 358,260 96,824 181,078 358,260
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 31 PLATINUM INVESTOR SURVIVOR II ANNUAL PREMIUM $7,000 INITIAL SPECIFIED AMOUNT $500,000 DEATH BENEFIT OPTION 1 MALE AND FEMALE, AGE 55 NON-TOBACCO USERS, PREFERRED PREMIUM CLASS ASSUMING GUARANTEED CHARGES
END OF DEATH BENEFIT ACCUMULATION VALUE CASH SURRENDER VALUE POLICY ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS YEAR ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 1 500,000 500,000 500,000 3,692 3,992 4,294 0 0 0 2 500,000 500,000 500,000 7,274 8,105 8,975 0 0 825 3 500,000 500,000 500,000 10,734 12,332 14,073 2,734 4,332 6,073 4 500,000 500,000 500,000 14,063 16,665 19,617 6,218 8,820 11,772 5 500,000 500,000 500,000 19,831 23,761 28,389 12,146 16,076 20,704 6 500,000 500,000 500,000 25,400 31,060 37,960 17,880 23,540 30,440 7 500,000 500,000 500,000 30,752 38,550 48,393 23,932 31,730 41,573 8 500,000 500,000 500,000 35,861 46,210 59,751 29,716 40,065 53,606 9 500,000 500,000 500,000 40,691 54,012 72,099 35,206 48,527 66,614 10 500,000 500,000 500,000 45,200 61,919 85,504 40,350 57,069 80,654 15 500,000 500,000 500,000 61,205 101,509 171,539 61,205 101,509 171,539 20 500,000 500,000 500,000 59,159 135,929 306,019 59,159 135,929 306,019
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES. THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN. 32 ADDITIONAL INFORMATION A general overview of the Policy appears on pages 1 - 32. The additional information that follows gives more details, but generally does not repeat what is set forth above.
PAGE TO SEE IN THIS CONTENTS OF ADDITIONAL INFORMATION PROSPECTUS ------------------------------------------------------------------------ AGL...................................................... 34 Separate Account VL-R.................................... 34 Tax Effects.............................................. 34 Voting Privileges........................................ 41 Your Beneficiary......................................... 42 Assigning Your Policy.................................... 42 More About Policy Charges................................ 42 Effective Date of Policy and Related Transactions........ 43 More About the Death Benefit............................. 45 More About Our Declared Fixed Interest Account Option.... 46 Distribution of the Policies............................. 47 Payment of Policy Proceeds............................... 48 Adjustments to Death Benefit............................. 49 Additional Rights That We Have........................... 50 Performance Information.................................. 51 Our Reports to Policy Owners............................. 51 AGL's Management......................................... 52 Principal Underwriter's Management....................... 54 Legal Matters............................................ 55 Accounting and Auditing Experts.......................... 56 Actuarial Expert......................................... 56 Services Agreements...................................... 56 Certain Potential Conflicts.............................. 56 Financial Statements..................................... 57
Special words and phrases. If you want more information about any words or phrases that you read in this prospectus, you may wish to refer to the Index of Words and Phrases that appears at the end of this prospectus (pages 58 and 59, which follow all of the financial pages). That index will tell you on what page you can read more about many of the words and phrases that we use. 33 AGL We are American General Life Insurance Company ("AGL"). AGL is a stock life insurance company organized under the laws of Texas. AGL is a successor in interest to a company originally organized under the laws of Delaware on January 10, 1917. AGL is an indirect, wholly-owned subsidiary of American General Corporation ("AGC"), a diversified financial services holding company engaged primarily in the insurance business. American General Financial Group is the marketing name of AGC and its subsidiaries. The commitments under the Policies are AGL's, and AGC has no legal obligation to back those commitments. On May 11, 2001, AGC, a Texas corporation, American International Group, Inc. ("AIG"), a Delaware corporation and Washington Acquisition Corporation, a Texas corporation and a wholly-owned subsidiary of AIG, entered into an agreement pursuant to which AGC would become a wholly-owned subsidiary of AIG (the "Transaction"). On August 15, 2001, the shareholders of AGC voted to approve the Transaction. On August 29, 2001, the Transaction was completed. As a result of the Transaction, AGL is now an indirect, wholly-owned subsidiary of AIG. AGL is a member of the Insurance Marketplace Standards Association ("IMSA"). IMSA is a voluntary membership organization created by the life insurance industry to promote ethical market conduct for individual life insurance and annuity products. AGL's membership in IMSA applies only to AGL and not its products. SEPARATE ACCOUNT VL-R We hold the Mutual Fund shares in which any of your accumulation value is invested in Separate Account VL-R. Separate Account VL-R is registered as a unit investment trust with the SEC under the Investment Company Act of 1940. We created the separate account on May 6, 1997 under Texas law. For record keeping and financial reporting purposes, Separate Account VL-R is divided into 65 separate "divisions," 41 of which correspond to the 41 variable "investment options" available since the inception of the Policy. The remaining 24 divisions, and some of these 41 divisions, represent investment options available under other variable life policies we offer. We hold the Mutual Fund shares in which we invest your accumulation value for an investment option in the division that corresponds to that investment option. The assets in Separate Account VL-R are our property. The assets in Separate Account VL-R would be available only to satisfy the claims of owners of the Policies, to the extent they have allocated their accumulation value to Separate Account VL-R. Our other creditors could reach only those Separate Account VL-R assets (if any) that are in excess of the amount of our reserves and other contract liabilities under the Policies with respect to Separate Account VL-R. TAX EFFECTS This discussion is based on current federal income tax law and interpretations. It assumes that the policy owner is a natural person who is a U.S. citizen and resident. The tax consequences 34 for corporate taxpayers, non-U.S. residents or non-U.S. citizens, may be different. This discussion is general in nature, and should not be considered tax advice, for which you should consult a qualified tax adviser. General. The Policy will be treated as "life insurance" for federal income tax purposes (a) if it meets the definition of life insurance under Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code") and (b) for as long as the investments made by the underlying Mutual Funds satisfy certain investment diversification requirements under Section 817(h) of the Code. We believe that the Policy will meet these requirements and that: . the death benefit received by the beneficiary under your Policy will not be subject to federal income tax; and . increases in your Policy's accumulation value as a result of interest or investment experience will not be subject to federal income tax unless and until there is a distribution from your Policy, such as a surrender or a partial surrender. Although AGL believes that the Policies are in compliance with Section 7702 of the Code, the manner in which Section 7702 should be applied to certain features of a last survivor life insurance policy is not directly addressed by Section 7702. In the absence of final regulations or other guidance issued under Section 7702, there is necessarily some uncertainty whether survivor life insurance policies, like the Platinum Investor Survivor II Policies, will meet the Section 7702 definition of a life insurance contract. The federal income tax consequences of a distribution from your Policy can be affected by whether your Policy is determined to be a "modified endowment contract,"as you can see from the following discussion. In all cases, however, the character of all income that is described as taxable to the payee will be ordinary income (as opposed to capital gain). Testing for modified endowment contract status. The Code provides for a "seven-pay test." This test determines if your Policy will be a "modified endowment contract." If, at any time during the first seven Policy years: . you have paid a cumulative amount of premiums; . the cumulative amount exceeds the premiums you would have paid by the same time under a similar fixed-benefit life insurance policy; and . the fixed benefit policy was designed (based on certain assumptions mandated under the Code) to provide for paid-up future benefits ("paid-up" means no future premium payments are required) after the payment of seven level annual premiums; then your Policy will be a modified endowment contract. 35 Whenever there is a "material change" under a policy, the policy will generally be (a) treated as a new contract for purposes of determining whether the policy is a modified endowment contract and (b) subjected to a new seven-pay period and a new seven-pay limit. The new seven-pay limit would be determined taking into account, under a prescribed formula, the accumulation value of the policy at the time of such change. A materially changed policy would be considered a modified endowment contract if it failed to satisfy the new seven- pay limit at any time during the new seven-pay period. A "material change" for these purposes could occur as a result of a change in death benefit option. A material change will occur as a result of an increase in your Policy's specified amount of coverage, and certain other changes. If your Policy's benefits are reduced during the first seven Policy years (or within seven years after a material change), the calculated seven-pay premium limit will be redetermined based on the reduced level of benefits and applied retroactively for purposes of the seven-pay test. (Such a reduction in benefits could include, for example, a decrease in the specified amount that you request or that results from a partial surrender). If the premiums previously paid are greater than the recalculated seven-payment premium level limit, the Policy will become a modified endowment contract. A life insurance policy that is received in a tax free 1035 exchange for a modified endowment contract will also be considered a modified endowment contract. Other effects of Policy changes. Changes made to your Policy (for example, a decrease in specified amount that you request or that results from a partial surrender that you request) may also have other effects on your Policy. Such effects may include impacting the maximum amount of premiums that can be paid under your Policy, as well as the maximum amount of accumulation value that may be maintained under your Policy. Rider benefits. The premium payments and any death benefits to be paid under any term insurance rider you may purchase under your Policy will not disqualify your Policy as life insurance for tax purposes. However, a term rider may be determined to constitute a "qualified additional benefit" as that term is defined in Section 7702 of the Internal Revenue Code. The death benefit to be paid under a rider that is a "qualified additional benefit" will not be treated as a future benefit of the Policy for tax purposes. The premium payments for the same rider, however, will be treated as future benefits for purposes of compliance with Section 7702. You should consult a qualified tax adviser regarding any term rider you may purchase. Taxation of pre-death distributions if your Policy is not a modified endowment contract. As long as your Policy remains in force during the contingent insureds' lifetime and not as a modified endowment contract, a Policy loan will be treated as indebtedness, and no part of the loan proceeds will be subject to current federal income tax. Interest on the Policy loan generally will not be tax deductible. After the first 15 Policy years, the proceeds from a partial surrender will not be subject to federal income tax except to the extent such proceeds exceed your "basis" in your Policy. (Your basis generally will equal the premiums you have paid, less the amount of any previous distributions from your Policy that were not taxable.) During the first 15 Policy years, however, the proceeds 36 from a partial surrender could be subject to federal income tax, under a complex formula, to the extent that your accumulation value exceeds your basis in your Policy. On the maturity date or upon full surrender, any excess in the amount of proceeds we pay (including amounts we use to discharge any Policy loan) over your basis in the Policy, will be subject to federal income tax. In addition, if a Policy ends after a grace period while there is a policy loan, the cancellation of such loan and any accrued loan interest will be treated as a distribution and could be subject to federal income tax under the above rules. Finally, if you make an assignment of rights or benefits under your Policy you may be deemed to have received a distribution from your Policy, all or part of which may be taxable. Taxation of pre-death distributions if your Policy is a modified endowment contract. If your Policy is a modified endowment contract, any distribution from your Policy while either contingent insured is still living will be taxed on an "income-first" basis. Distributions: . include loans (including any increase in the loan amount to pay interest on an existing loan, or an assignment or pledge to secure a loan) and partial surrenders; . will be considered taxable income to you to the extent your accumulation value exceeds your basis in the Policy; and . have their taxability determined by aggregating all modified endowment contracts issued by the same insurer (or its affiliates) to the same owner (excluding certain qualified plans) during any calendar year. For modified endowment contracts, your basis: . is similar to the basis described above for other policies; and . will be increased by the amount of any prior loan under your Policy that was considered taxable income to you. A 10% penalty tax also will apply to the taxable portion of most distributions from a policy that is a modified endowment contract. The penalty tax will not, however, apply: . to taxpayers 59-1/2 years of age or older; . in the case of a disability (as defined in the Code); or . to distributions received as part of a series of substantially equal periodic annuity payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his or her beneficiary. If your Policy ends after a grace period while there is a Policy loan, the cancellation of the loan will be treated as a distribution to the extent not previously treated as such and could be subject to tax, including the 10% penalty tax, as described above. In addition, on the maturity date or upon 37 a full surrender, any excess of the proceeds we pay (including any amounts we use to discharge any Policy loan) over your basis in the Policy, will be subject to federal income tax and, unless one of the above exceptions applies, the 10% penalty tax. Distributions that occur during a Policy year in which your Policy becomes a modified endowment contract, and during any subsequent Policy years, will be taxed as described in the two preceding paragraphs. In addition, distributions from a policy within two years before it becomes a modified endowment contract also will be subject to tax in this manner. This means that a distribution made from a policy that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract. Policy lapses and reinstatements. A Policy which has lapsed may have the tax consequences described above, even though you may be able to reinstate that Policy. For tax purposes, some reinstatements may be treated as the purchase of a new insurance contract. Taxation of Exchange Option. You can split the policy into two other single life insurance policies under some circumstances. A policy split could have adverse tax consequences if it is not treated as a nontaxable exchange under Section 1035 of the Code. This could include, among other things, recognition as taxable income an amount up to any gain in the Policy at the time of the exchange. Diversification. Under Section 817(h) of the Code, the Treasury Department has issued regulations that implement investment diversification requirements. Our failure to comply with these regulations would disqualify your Policy as a life insurance policy under Section 7702 of the Code. If this were to occur, you would be subject to federal income tax on the income under the Policy for the period of the disqualification and for subsequent periods. Also, if the last surviving contingent insured died during such period of disqualification or subsequent periods, a portion of the death benefit proceeds would be taxable to the beneficiary. Separate Account VL-R, through the Mutual Funds, intends to comply with these requirements. Although we do not have direct control over the investments or activities of the Mutual Funds, we will enter into agreements with them requiring the Mutual Funds to comply with the diversification requirements of the Section 817(h) Treasury Regulations. The Treasury Department has stated that it anticipates the issuance of guidelines prescribing the circumstances in which the ability of a policy owner to direct his or her investment to particular Mutual Funds within Separate Account VL-R may cause the policy owner, rather than the insurance company, to be treated as the owner of the assets in the account. Due to the lack of specific guidance on investor control, there is some uncertainty about when a policy owner is considered the owner of the assets for tax purposes. If you were considered the owner of the assets of Separate Account VL-R, income and gains from the account would be included in your gross income for federal income tax purposes. Under current law, however, we believe that AGL, and not the owner of a Policy, would be considered the owner of the assets of Separate Account VL-R. Estate and generation skipping taxes. If the last surviving contingent insured is the Policy's owner, the death benefit under the Policy will generally be includable in the owner's estate for purposes of federal estate tax. If the owner is not the last surviving contingent insured, under certain 38 conditions, only an amount approximately equal to the cash surrender value of the Policy would be includable. The federal estate tax is integrated with the federal gift tax under a unified rate schedule and unified credit. The Taxpayer Relief Act of 1997 gradually raises the value of the credit to $1,000,000 in 2006. In 2001, the value of the unified credit is $675,000. In addition, an unlimited marital deduction may be available for federal estate tax purposes. On May 26, 2001, our Congress passed legislation which gradually phases out the estate tax between the years 2002 and 2010. However, if Congress does not take further action, the current estate tax rules will automatically be reinstated in 2011. During this phase out period between 2002 and 2010, the estate tax continues with the exemption amount increasing from $1 million in 2002 up to $3.5 million in 2009. During this same time period, the top estate tax rate gradually decreases from 50% in 2002 down to 45% in 2007 and later years. As a general rule, if a "transfer" is made to a person two or more generations younger than the Policy's owner, a generation skipping tax may be payable at rates similar to the maximum estate tax rate in effect at the time. The generation skipping tax provisions generally apply to "transfers" that would be subject to the gift and estate tax rules. Individuals are generally allowed an aggregate generation skipping tax exemption of $1 million. Because these rules are complex, you should consult with a qualified tax adviser for specific information, especially where benefits are passing to younger generations. The particular situation of each Policy owner, contingent insured or beneficiary will determine how ownership or receipt of Policy proceeds will be treated for purposes of federal estate and generation skipping taxes, as well as state and local estate, inheritance and other taxes. Life insurance in split dollar arrangements. The IRS has released a technical advice memorandum ("TAM") on the taxability of insurance policies used in certain split dollar arrangements. A TAM provides advice as to the internal revenue laws, regulations, and related statutes with respect to a specified set of facts and a specified taxpayer. In the TAM, among other things, the IRS concluded that an employee was subject to current taxation on the excess of the cash surrender value of the policy over the premiums to be returned to the employer. Purchasers of life insurance policies to be used in split dollar arrangements are strongly advised to consult with a qualified tax adviser to determine the tax treatment resulting from such an arrangement. The Internal Revenue Service ("IRS") recently issued Notice 2001-10 in an effort to clarify its position and provide guidance regarding split-dollar life insurance arrangements. As part of this Notice, the IRS concluded that the P.S. 58 rates, which have been used to determine the fair market value of life insurance protection, are no longer appropriate and may not be used after December 31, 2001. The Notice indicates that in 2002, the rate table issued under section 79 of the Code must be used to reflect the economic value of the life insurance protection in split dollar arrangements. The parties to a split dollar arrangement also may elect to use published alternate term rates, provided by the issuing insurance company, if the parties comply with certain new conditions. In cases of reverse split dollar or equity split dollar arrangements, the IRS has also stated that an employee will be taxed on the value of any economic benefit above and beyond the employer's investment in the contract. We urge you to contact your tax adviser regarding the federal income 39 tax consequences of split dollar arrangements or reverse split dollar arrangements as a result of the recent IRS Notice 2001-10. Pension and profit-sharing plans. If a life insurance policy is purchased by a trust or other entity that forms part of a pension or profit-sharing plan qualified under Section 401(a) of the Code for the benefit of participants covered under the plan, the federal income tax treatment of such policies will be somewhat different from that described above. The reasonable net premium cost for such amount of insurance that is purchased as part of a pension or profit-sharing plan is required to be included annually in the plan participant's gross income. This cost (generally referred to as the "P.S. 58" cost) is reported to the participant annually. If the plan participant dies while covered by the plan and the policy proceeds are paid to the participant's beneficiary, then the excess of the death benefit over the policy's accumulation value will not be subject to federal income tax. However, the policy's accumulation value will generally be taxable to the extent it exceeds the participant's cost basis in the policy. The participant's cost basis will generally include the costs of insurance previously reported as income to the participant. Special rules may apply if the participant had borrowed from the policy or was an owner-employee under the plan. There are limits on the amounts of life insurance that may be purchased on behalf of a participant in a pension or profit-sharing plan. Complex rules, in addition to those discussed above, apply whenever life insurance is purchased by a tax qualified plan. You should consult a qualified tax adviser. Other employee benefit programs. Complex rules may also apply when a policy is held by an employer or a trust, or acquired by an employee, in connection with the provision of other employee benefits. These policy owners must consider whether the policy was applied for by or issued to a person having an insurable interest under applicable state law and with both contingent insureds' consent. The lack of an insurable interest or consent may, among other things, affect the qualification of the policy as life insurance for federal income tax purposes and the right of the beneficiary to receive a death benefit. ERISA. Employers and employer-created trusts may be subject to reporting, disclosure and fiduciary obligations under the Employee Retirement Income Security Act of 1974, as amended. You should consult a qualified legal adviser. Our taxes. We report the operations of Separate Account VL-R in our federal income tax return, but we currently pay no income tax on Separate Account VL-R's investment income and capital gains, because these items are, for tax purposes, reflected in our variable universal life insurance policy reserves. We currently make no charge to any Separate Account VL-R division for taxes. We reserve the right to make a charge in the future for taxes incurred; for example, a charge to Separate Account VL-R for income taxes we incur that are allocable to the Policy. We may have to pay state, local or other taxes in addition to applicable taxes based on premiums. At present, these taxes are not substantial. If they increase, we may make charges for such taxes when they are attributable to Separate Account VL-R or allocable to the Policy. 40 Certain Mutual Funds in which your accumulation value is invested may elect to pass through to AGL taxes withheld by foreign taxing jurisdictions on foreign source income. Such an election will result in additional taxable income and income tax to AGL. The amount of additional income tax, however, may be more than offset by credits for the foreign taxes withheld which are also passed through. These credits may provide a benefit to AGL. When we withhold income taxes. Generally, unless you provide us with an election to the contrary before we make the distribution, we are required to withhold income tax from any proceeds we distribute as part of a taxable transaction under your Policy. In some cases, where generation skipping taxes may apply, we may also be required to withhold for such taxes unless we are provided satisfactory written notification that no such taxes are due. In the case of non-resident aliens who own a Policy, the withholding rules may be different. With respect to distributions from modified endowment contracts, non-resident aliens are generally subject to federal income tax withholding at a statutory rate of 30% of the distributed amount. In some cases, the non-resident alien may be subject to lower or even no withholding if the United States has entered into a tax treaty with his or her country of residence. Tax changes. The U.S. Congress frequently considers legislation that, if enacted, could change the tax treatment of life insurance policies. Congress recently passed tax legislation on May 26, 2001 which modified the existing estate tax law. In addition, the Treasury Department may amend existing regulations, issue regulations on the qualification of life insurance and modified endowment contracts, or adopt new interpretations of existing law. State and local tax law or, if you are not a U.S. citizen and resident, foreign tax law, may also affect the tax consequences to you, the contingent insureds or your beneficiary, and are subject to change. Any changes in federal, state, local or foreign tax law or interpretation could have a retroactive effect. We suggest you consult a qualified tax adviser. VOTING PRIVILEGES We are the legal owner of the Funds' shares held in Separate Account VL-R. However, you may be asked to instruct us how to vote the Fund shares held in the various Mutual Funds that are attributable to your Policy at meetings of shareholders of the Funds. The number of votes for which you may give directions will be determined as of the record date for the meeting. The number of votes that you may direct related to a particular Fund is equal to (a) your accumulation value invested in that Fund divided by (b) the net asset value of one share of that Fund. Fractional votes will be recognized. We will vote all shares of each Fund that we hold of record, including any shares we own on our own behalf, in the same proportions as those shares for which we have received instructions from owners participating in that Fund through Separate Account VL-R. If you are asked to give us voting instructions, we will send you the proxy material and a form for providing such instructions. Should we determine that we are no longer required to send the owner such materials, we will vote the shares as we determine in our sole discretion. 41 In certain cases, we may disregard instructions relating to changes in a Fund's investment manager or its investment policies. We will advise you if we do and explain the reasons in our next report to policy owners. AGL reserves the right to modify these procedures in any manner that the laws in effect from time to time allow. YOUR BENEFICIARY You name your beneficiary when you apply for a Policy. The beneficiary is entitled to the insurance benefits of the Policy. You may change the beneficiary during the lifetime of either contingent insured unless your previous designation of beneficiary provides otherwise. In this case the previous beneficiary must give us permission to change the beneficiary and then we will accept your instructions. A new beneficiary designation is effective as of the date you sign it, but will not affect any payments we may make before we receive it. If no beneficiary is living when the last surviving contingent insured dies, we will pay the insurance proceeds to the owner or the owner's estate. ASSIGNING YOUR POLICY You may assign (transfer) your rights in a Policy to someone else as collateral for a loan or for some other reason. We will not be bound by an assignment unless it is received in writing. You must provide us with two copies of the assignment. We are not responsible for any payment we make or any action we take before we receive a complete notice of the assignment in good order. We are also not responsible for the validity of the assignment. An absolute assignment is a change of ownership. Because there may be unfavorable tax consequences, including recognition of taxable income and the loss of income tax-free treatment for any death benefit payable to the beneficiary, you should consult a qualified tax adviser before making an assignment. MORE ABOUT POLICY CHARGES Purpose of our charges. The charges under the Policy are designed to cover, in total, our direct and indirect costs of selling, administering and providing benefits under the Policy. They are also designed, in total, to compensate us for the risks we assume and services that we provide under the Policy. These include: . mortality risks (such as the risk that contingent insureds will, on average, die before we expect, thereby increasing the amount of claims we must pay); . sales risks (such as the risk that the number of Policies we sell and the premiums we receive net of withdrawals, are less than we expect, thereby depriving us of expected economies of scale); . regulatory risks (such as the risk that tax or other regulations may be changed in ways adverse to issuers of variable life insurance policies); and . expense risks (such as the risk that the costs of administrative services that the Policy requires us to provide will exceed what we currently project). 42 The current monthly insurance charge has been designed primarily to provide funds out of which we can make payments of death benefits under the Policy as the last surviving contingent insured dies. If the charges that we collect from the Policy exceed our total costs in connection with the Policy, we will earn a profit. Otherwise we will incur a loss. Although the paragraphs above describe the primary purposes for which charges under the Policies have been designed, these purposes are subject to considerable change over the life of a Policy. We can retain or use the revenues from any charge for any purpose. Gender neutral policies. Congress and the legislatures of various states have from time to time considered legislation that would require insurance rates to be the same for males and females of the same age, premium class and tobacco user status. In addition, employers and employee organizations should consider, in consultation with counsel, the impact of Title VII of the Civil Rights Act of 1964 on the purchase of life insurance policies in connection with an employment-related insurance or benefit plan. In a 1983 decision, the United States Supreme Court held that, under Title VII, optional annuity benefits under a deferred compensation plan could not vary on the basis of gender. In general, we do not offer the Platinum Investor Survivor II Policy for sale in situations which, under current law, require gender-neutral premiums or benefits. Cost of insurance rates. Because of specified amount increases, different cost of insurance rates may apply to different increments of specified amount under your Policy. See "Monthly insurance charge" on page 8. Certain arrangements. Most of the distributors or advisers of the Mutual Funds listed on page 1 of this prospectus make certain payments to us, on a quarterly basis, for certain administrative, Policy, and policy owner support expenses. These amounts will be reasonable for the services performed and are not designed to result in a profit. These amounts are paid by the distributors or the advisers, and will not be paid by the Mutual Funds, the divisions or Policy owners. No payments have yet been made under these arrangements, because the number of Policies issued does not require a payment. EFFECTIVE DATE OF POLICY AND RELATED TRANSACTIONS Valuation dates, times, and periods. We compute values under a Policy on each day that the New York Stock Exchange is open for business. We call each such day a "valuation date" or a "business day." We compute policy values as of 3:00 p.m., Central time, on each valuation date. We call this our "close of business." We call the time from the close of business on one valuation date to the close of business of the next valuation date a "valuation period." Date of receipt. Generally we consider that we have received a premium payment or another communication from you on the day we actually receive it in full and proper order at any of the 43 addresses shown on the first page of this prospectus. If we receive it after the close of business on any valuation date, however, we consider that we have received it on the day following that valuation date. Commencement of insurance coverage. After you apply for a Policy, it can sometimes take up to several weeks for us to gather and evaluate all the information we need to decide whether to issue a Policy to you and, if so, what the contingent insureds' premium classes should be. We will not pay a death benefit under a Policy unless (a) it has been delivered to and accepted by the owner and at least the initial premium has been paid, and (b) at the time of such delivery and payment, there have been no adverse developments in the contingent insureds' health or risk of death. However, if you pay at least the minimum first premium payment with your application for a Policy, we will provide temporary coverage of up to $300,000 provided the contingent insureds meet certain medical and risk requirements. The terms and conditions of this coverage are described in our "Limited Temporary Life Insurance Agreement." You can obtain a copy from our Administrative Center by writing to the address shown on the first page of this prospectus or from your AGL representative. Date of issue; Policy months and years. We prepare the Policy only after we approve an application for a Policy and assign an appropriate premium class. The day we begin to deduct charges will appear on page 3 of your Policy and is called the "Date of Issue." Policy months and years are measured from the date of issue. To preserve a younger age at issue for the contingent insureds, we may assign a date of issue to a Policy that is up to 6 months earlier than otherwise would apply. Monthly deduction days. Each charge that we deduct monthly is assessed against your accumulation value at the close of business on the date of issue and at the end of each subsequent valuation period that includes the first day of a Policy month. We call these "monthly deduction days." Commencement of investment performance. We begin to credit an investment return to the accumulation value resulting from your initial premium payment on the later of (a) the date of issue, or (b) the date all requirements needed to place the Policy in force have been satisfied, including underwriting approval and receipt of the necessary premium. In the case of a back-dated Policy, we do not credit an investment return to the accumulation value resulting from your initial premium payment until the date stated in (b) above. Effective date of other premium payments and requests that you make. Premium payments (after the first) and transactions made in response to your requests and elections are generally effected at the end of the valuation period in which we receive the payment, request or election and based on prices and values computed as of that same time. Exceptions to this general rule are as follows: . Increases you request in the specified amount of insurance, reinstatements of a Policy that has lapsed, and changes in death benefit option take effect on the Policy's monthly deduction day on or next following our approval of the transaction; 44 . In most states, we may return premium payments, make a partial surrender or reduce the death benefit if we determine that such premiums would cause your Policy to become a modified endowment contract or to cease to qualify as life insurance under federal income tax law or exceed the maximum net amount at risk; . If you exercise the right to return your Policy described on the second page of this prospectus, your coverage will end when you deliver it to your AGL representative or if you mailed it to us, the day it is postmarked; and . If you pay a premium in connection with a request which requires our approval, your payment will be applied when received rather than following the effective date of the change requested so long as your coverage is in force and the amount paid will not cause you to exceed premium limitations under the Code. If we do not approve your request, no premium will be refunded to you except to the extent necessary to cure any violation of the maximum premium limitations under the Code. We will not apply this procedure to premiums you pay in connection with reinstatement requests. MORE ABOUT THE DEATH BENEFIT Base coverage and supplemental coverage. The amount of insurance coverage you select at the time you apply to purchase a Policy is called the specified amount. The specified amount is the total of two types of coverage: your "base coverage" and "supplemental coverage," if any, that you select. You can choose to have only base coverage. You decide how much base coverage and how much supplemental coverage you want, as long as the total is not less than the minimum of $500,000 and at least 10% of the total is base coverage when you purchase the Policy. You can use the mix of base and supplemental coverage to emphasize your own objectives. Whenever you decrease the specified amount, we will reduce your base and supplemental coverages in the order set forth beginning on page 18 under "Decrease in Coverage", as long as at least 10% of the total is base coverage. A partial surrender will reduce the specified amount. In this case, we will deduct any surrender charge that applies to the decrease in base coverage, but not to the decrease in supplemental coverage. You can change the percentage of base coverage when you increase the specified amount but at least 10% of the total specified amount after the increase must be base coverage. Here are the features about supplemental coverage that differ from base coverage: . Supplemental coverage has no surrender charges; . The four year monthly expense charge does not apply to supplemental coverage; and . The monthly insurance charge for supplemental coverage is always equal to or less than the monthly insurance charge for an equivalent amount of base coverage. Generally, if you choose supplemental coverage instead of base coverage, you will reduce your total charges and increase your accumulation value on a current charge basis. The more 45 supplemental coverage you elect, the greater will be the amount of the reduction in charges and increase in accumulation value, on a current charge basis. Keep in mind, however, that our guarantee of a minimum death benefit will require a higher monthly guarantee premium for the first 5 Policy years if supplemental coverage is included. Therefore, before deciding how much, if any, supplemental coverage you should have, you should discuss with your AGL representative what you believe to be your own objectives. Your representative can provide you with further information and Policy illustrations showing how your selection of base and supplemental coverage can affect your Policy values under different assumptions. You can then decide what is to be your initial mix of base and supplemental coverage. Increases after age 90. We allow you to increase your supplemental coverage after the older contingent insured reaches age 90 and until the younger contingent insured reaches age 99 (or would have reached age 99, if deceased), but only under certain conditions: . Increases are allowed only if you have financed the Policy's premiums. . Increases cannot result in a specified amount greater than the amount we approve through underwriting at the time the Policy is issued. . You must purchase the return of premium death benefit rider when the Policy is issued and keep the rider in force at all times. . You may be required to purchase additional base coverage because you must still maintain at least 10% of your specified amount as base coverage. MORE ABOUT OUR DECLARED FIXED INTEREST ACCOUNT OPTION Our general account. Our general account assets are all of our assets that we do not hold in legally segregated separate accounts. Our general account supports our obligations to you under your Policy's declared fixed interest account option. Because of applicable exemptions, no interest in this option has been registered under the Securities Act of 1933, as amended. Neither our general account or our declared fixed interest account is an investment company under the Investment Company Act of 1940. We have been advised that the staff of the SEC has not reviewed the disclosures that are included in this prospectus for your information about our general account or our declared fixed interest account option. Those disclosures, however, may be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. How we declare interest. Except for amounts held as collateral for loans, we can at any time change the rate of interest we are paying on any accumulation value allocated to our declared fixed interest account option, but it will always be at an annual effective rate of at least 4%. Under these procedures, it is likely that at any time different interest rates will apply to different portions of your accumulation value, depending on when each portion was allocated to our declared fixed interest account option. Any charges, partial surrenders, or loans that we take from any accumulation value that you have in our declared fixed interest account option will be taken 46 from each portion in reverse chronological order based on the date that accumulation value was allocated to this option. DISTRIBUTION OF THE POLICIES American General Distributors, Inc. ("AGDI") is the principal underwriter and distributor of the Policies. AGDI is an affiliate of AGL. In the states of Florida and Illinois, AGDI is known as American General Financial Distributors of Florida, Inc. and American General Financial Distributors of Illinois, Inc., respectively. AGDI's principal office is at 2929 Allen Parkway, Houston, Texas 77019. AGDI was organized as a Delaware corporation on June 24, 1994 and is a registered broker-dealer under the Securities Exchange Act of 1934, as amended and a member of the National Association of Securities Dealers, Inc. ("NASD"). AGDI is also the principal underwriter for AGL's Separate Accounts A and D, as well as the underwriter for various separate accounts of other AGL affiliates. These separate accounts are registered investment companies. AGDI, as the principal underwriter and distributor, is not paid any fees on the Policies. We and AGDI have sales agreements with various broker-dealers and banks under which the Policies will be sold by registered representatives of the broker-dealers or employees of the banks. These registered representatives and employees are also required to be authorized under applicable state regulations as life insurance agents to sell variable life insurance. The broker-dealers are ordinarily required to be registered with the SEC and must be members of the NASD. We pay compensation directly to broker-dealers and banks for promotion and sales of the Policies. The compensation may vary with the sales agreement, but is generally not expected to exceed: . 85% of the premiums received in the first Policy year up to a "target" amount; . 3% of the premiums up to the target amount received in each of Policy years two through 10; . 3% of the premiums in excess of the target amount received in any of Policy years one through 10; . 0.20% of the Policy's accumulation value (reduced by any outstanding loans) in the investment options in each of Policy years one through 30; and . 0.10% of the Policy's accumulation value (reduced by any outstanding loans) in the investment options after Policy year 30. We may pay additional compensation in the event a representative, a broker- dealer or bank reaches certain premium production levels. The target amount is an amount of level annual premium that would be necessary to support the benefits under your Policy, based on certain assumptions that we believe are reasonable. For this 47 purpose, we exclude any supplemental coverage and, therefore, the target premium is reduced proportionately by the amount of supplemental coverage. Commissions payable to broker-dealers and registered representatives for sales of the Policies are calculated based on the total premium payments for both the base and supplemental coverage. The commissions vary depending on the ratio of premium necessary for the base and supplemental coverage. The same amount of premium will result in the highest commission when there is no supplementary coverage. The commissions decline as the portion of the specified amount allocated to supplementary coverage increases. The lowest commission amount is payable when you choose the maximum amount of supplementary coverage. The maximum value of any alternative amounts we may pay for sales of the Policies is expected to be equivalent over time to the amounts described above. For example, we may pay a broker-dealer compensation in a lump sum which will not exceed the aggregate compensation described above. We pay a comparable amount of compensation to the broker-dealers or banks with respect to any increase in the specified amount of coverage that you request. In addition, we may pay broker-dealers or banks expense allowances, bonuses, wholesaler fees and training allowances. We pay the compensation directly to any selling broker-dealer firm or bank. We pay the compensation from our own resources which does not result in any additional charge to you that is not described beginning on page 7. Each broker-dealer firm or bank, in turn, may compensate its registered representative or employee who acts as agent in selling you a Policy. We sponsor a non-qualified deferred compensation plan ("Plan") for our insurance agents. Some of our agents are registered representatives of our subsidiary broker-dealer American General Securities Incorporated and sell the Policies. These agents may, subject to regulatory approval, receive benefits under the Plan when they sell the Policies. The benefits are deferred and the Plan terms may result in the agent never receiving the benefits. The Plan provides for a varying amount of benefits annually. We have the right to change the Plan in ways that affect the amount of benefits earned each year. PAYMENT OF POLICY PROCEEDS General. We will pay any death benefit, maturity benefit, cash surrender value or loan proceeds within seven days after we receive the last required form or request (and any other documents that may be required for payment of a death benefit). If we do not have information about the desired manner of payment within 60 days after the date we receive notification of the insured person's death, we will pay the proceeds as a single sum, normally within seven days thereafter. Delay of declared fixed interest account option proceeds. We have the right, however, to defer payment or transfers of amounts out of our declared fixed interest account option for up to six months. If we delay more than 30 days in paying you such amounts, we will pay interest of at least 3% a year from the date we receive all items we require to make the payment. 48 Delay for check clearance. We reserve the right to defer payment of that portion of your accumulation value that is attributable to a payment made by check for a reasonable period of time (not to exceed 15 days) to allow the check to clear the banking system. Delay of Separate Account VL-R proceeds. We reserve the right to defer payment of any death benefit, loan or other distribution that comes from that portion of your accumulation value that is allocated to Separate Account VL-R, if: . the New York Stock Exchange is closed other than customary weekend and holiday closings, or trading on the New York Stock Exchange is restricted; . an emergency exists, as a result of which disposal of securities is not reasonably practicable or it is not reasonably practicable to fairly determine the accumulation value; or . the SEC by order permits the delay for the protection of owners. Transfers and allocations of accumulation value among the investment options may also be postponed under these circumstances. If we need to defer calculation of Separate Account VL-R values for any of the foregoing reasons, all delayed transactions will be processed at the next values that we do compute. Delay to challenge coverage. We may challenge the validity of your insurance Policy based on any material misstatements in your application or any application for a change in coverage. However, . We cannot challenge the Policy after it has been in effect, during either contingent insured's lifetime, for two years from the date the Policy was issued or restored after termination. (Some states may require that we measure this time in another way. Some states may also require that we calculate the amount we are required to pay in another way.) . We cannot challenge any Policy change that requires evidence of insurability (such as an increase in specified amount) after the change has been in effect for two years during either contingent insured's lifetime. . We cannot challenge an additional benefit rider that provides benefits if either contingent insured becomes totally disabled, after two years from the later of the Policy's date of issue or the date the additional benefit rider becomes effective. ADJUSTMENTS TO DEATH BENEFIT Suicide. If either contingent insured commits suicide during the first two Policy years, we will limit the death benefit proceeds to the total of all premiums that have been paid to the time of death minus any outstanding Policy loans (plus credit for any unearned interest) and any partial surrenders. 49 A new two year period begins if you increase the specified amount. You can increase the specified amount only if both contingent insureds are living at the time of the increase. In this case, if either contingent insured commits suicide during the first two years following the increase, we will refund the monthly insurance deductions attributable to the increase. The death benefit will then be based on the specified amount in effect before the increase. Some states require that we compute these periods for noncontestability differently following a suicide. Wrong age or gender. If the age or gender of either contingent insured was misstated on your application for a Policy (or for any increase in benefits), we will adjust any death benefit to be what the monthly insurance charge deducted for the current month would have purchased based on the correct information. Death during grace period. We will deduct from the insurance proceeds any monthly charges that remain unpaid because the last surviving contingent insured died during a grace period. ADDITIONAL RIGHTS THAT WE HAVE We have the right at any time to: . transfer the entire balance in an investment option in accordance with any transfer request you make that would reduce your accumulation value for that option to below $500; . transfer the entire balance in proportion to any other investment options you then are using, if the accumulation value in an investment option is below $500 for any other reason; . end the automatic rebalancing feature if your accumulation value falls below $5,000; . change the underlying Mutual Fund that any investment option uses; . add, delete or limit investment options, combine two or more investment options, or withdraw assets relating to the Policies from one investment option and put them into another; . operate Separate Account VL-R under the direction of a committee or discharge such a committee at any time; . change our underwriting and premium class guidelines; . operate Separate Account VL-R, or one or more investment options, in any other form the law allows, including a form that allows us to make direct investments. Separate Account VL-R may be charged an advisory fee if its investments are made 50 directly rather than through another investment company. In that case, we may make any legal investments we wish; or . make other changes in the Policy that in our judgment are necessary or appropriate to ensure that the Policy continues to qualify for tax treatment as life insurance, or that do not reduce any cash surrender value, death benefit, accumulation value, or other accrued rights or benefits. You will be notified as required by law if there are any material changes in the underlying investments of an investment option that you are using. We intend to comply with all applicable laws in making any changes and, if necessary, we will seek policy owner approval. PERFORMANCE INFORMATION From time to time, we may quote performance information for the divisions of Separate Account VL-R in advertisements, sales literature, or reports to owners or prospective investors. We may quote performance information in any manner permitted under applicable law. We may, for example, present such information as a change in a hypothetical owner's cash value or death benefit. We also may present the yield or total return of the division based on a hypothetical investment in a Policy. The performance information shown may cover various periods of time, including periods beginning with the commencement of the operations of the division or the Mutual Funds in which it invests. The performance information shown may reflect the deduction of one or more charges, such as the premium charge, and we generally expect to exclude costs of insurance charges because of the individual nature of these charges. We may compare a division's performance to that of other variable life separate accounts or investment products, as well as to generally accepted indices or analyses, such as those provided by research firms and rating services. In addition, we may use performance ratings that may be reported periodically in financial publications, such as Money Magazine, Forbes, Business Week, Fortune, Financial Planning and The Wall Street Journal. We also may advertise ratings of AGL's financial strength or claims-paying ability as determined by firms that analyze and rate insurance companies and by nationally recognized statistical rating organizations. Performance information for any division reflects the performance of a hypothetical Policy and is not illustrative of how actual investment performance would affect the benefits under your Policy. You should not consider such performance information to be an estimate or guarantee of future performance. OUR REPORTS TO POLICY OWNERS Shortly after the end of each Policy year, we will mail you a report that includes information about your Policy's current death benefit, accumulation value, cash surrender value and policy loans. We will send you notices to confirm premium payments, transfers and certain other Policy transactions. We will mail to you at your last known address of record, these and any other reports 51 and communications required by law. You should give us prompt written notice of any address change. AGL'S MANAGEMENT The directors, executive officers, and (to the extent responsible for variable life operations) the other principal officers of AGL are listed below.
NAME BUSINESS EXPERIENCE WITHIN PAST FIVE YEARS -------------------------------------------------------------------------------------------- Rodney O. Martin, Jr. Director of American General Life Insurance Company since August 1996. Chairman of the Board and CEO of American General Life Insurance Company since April 2000. President and CEO (August 1996 - July 1998). President of American General Life Insurance Company of New York (November 1995 - August 1996). Donald W. Britton Director of the Board of American General Life Insurance Company since April 1999. President of American General Life Insurance Company since April 2000. President of First Colony Life, Lynchburg, Virginia (1996 - April 1999). David A. Fravel Director of American General Life Insurance Company since November 1996. Elected Executive Vice President in April 1998. Previously held position of Senior Vice President of American General Life Insurance Company since November 1996. Senior Vice President of Massachusetts Mutual, Springfield, Missouri (March 1996 - June 1996). David L. Herzog Director, Executive Vice President and Chief Financial Officer of American General Life Insurance Company since March 2000. Vice President of General American, St. Louis, Missouri (June 1991 - February 2000). John V. LaGrasse Director of American General Life Insurance Company since August 1996. Chief Technology Officer of American General Life Insurance Company since April 2000. Elected Executive Vice President in July 1998. Previously held position of Senior Vice President of American General Life Insurance Company since August 1996. Director of Citicorp Insurance Services, Inc., Dover, Delaware (1986 - 1996). Royce G. Imhoff, II Director of American General Life Insurance Company since November 1997. Previously held various positions with American General Life Insurance Company including Vice President since August 1996.
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NAME BUSINESS EXPERIENCE WITHIN PAST FIVE YEARS -------------------------------------------------------------------------------------------- Gary D. Reddick Director of American General Life Insurance Company since April 2001. Executive Vice President of American General Life Insurance Company since April 1998. Vice Chairman since July 1997 and Executive Vice President - Administration of The Franklin Life Insurance Company since February 1995. Paul L. Mistretta Executive Vice President of American General Life Insurance Company since July 1999. Senior Vice President of First Colony Life Insurance, Lynchburg, Virginia (1992 - July 1999). Don M. Ward Executive Vice President of American General Life Insurance Company since April 2000. Senior Vice President of American General Life Insurance Company since February 1998. Vice President of Pacific Life Insurance Company, Newport Beach, CA (1991 - February 1998). Wayne A. Barnard Senior Vice President of American General Life Insurance Company since November 1997. Previously held various positions with American General Life Insurance Company including Vice President since February 1991. Robert M. Beuerlein Senior Vice President and Chief Actuary of American General Life Insurance Company since September 1999. Previously held position of Vice President of American General Life Insurance Company since December 1998. Director, Senior Vice President and Chief Actuary of The Franklin Life Insurance Company, Springfield, Illinois (January 1991 - June 1999). David J. Dietz Senior Vice President - Corporate Markets Group of American General Life Insurance Company since January 1999. President and Chief Executive Officer - Individual Insurance Operations of The United States Life Insurance Company in the City of New York since September 1997. President of Prudential Select Life, Newark, New Jersey (August 1990 - September 1997). William Guterding Senior Vice President of American General Life Insurance Company since April 1999. Senior Vice President and Chief Underwriting Officer of The United States Life Insurance Company in the City of New York since October 1980. Robert F. Herbert, Jr. Senior Vice President and Treasurer of American General Life Insurance Company since May 1996, and Controller since February 1991.
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NAME BUSINESS EXPERIENCE WITHIN PAST FIVE YEARS -------------------------------------------------------------------------------------------- Simon J. Leech Senior Vice President of American General Life Insurance Company since July 1997. Previously held various positions with American General Life Insurance Company since 1981, including Director of Policy Owners' Service Department in 1993, and Vice President - Policy Administration in 1995. Mark R. McGuire Senior Vice President of American General Life Insurance Company since April 2001. Vice President of American General Life Companies (2000 - March 2001). Vice President of The Franklin Life Insurance Company (1997 - 2000). Previously held various positions with American General Life Insurance Company since August 1988, including Director of Work Site Marketing Administration (1996 - 1997), and Director of Annuity Administration (1994 - 1996). Roy V. Washington Senior Vice President and Chief Compliance Officer of American General Life Insurance Company since April 2001. Senior Vice President and Chief Compliance Officer of American General Life Companies since May 2000. Vice President of Lincoln National Life, Fort Wayne, Indiana (June 1996 - May 2000). Legal Counsel of Lincoln National Life, Fort Wayne, Indiana (August 1994 - June 1996).
The principal business address of each person listed above is our Home Office; except that the street number for Messrs. Fravel, LaGrasse, Leech, Martin, Herzog, Imhoff, Britton, Mistretta, Barnard, and Reddick is 2929 Allen Parkway, the street number for Messrs. Ward and Washington is 2727 Allen Parkway, and the street number for Messrs. Dietz and Guterding is 390 Park Ave, 5/th/ Floor, New York, New York. PRINCIPAL UNDERWRITER'S MANAGEMENT The directors and principal officers of the principal underwriter are:
POSITION AND OFFICES WITH UNDERWRITER, NAME AND PRINCIPAL AMERICAN GENERAL BUSINESS ADDRESS DISTRIBUTORS, INC. ---------------- ------------------ Robert P. Condon Director and Chairman, 2929 Allen Parkway Chief Executive Officer and President Houston, TX 77019 Mary L. Cavanaugh Director and Assistant Secretary 2929 Allen Parkway Houston, TX 77019
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POSITION AND OFFICES WITH UNDERWRITER, NAME AND PRINCIPAL AMERICAN GENERAL BUSINESS ADDRESS DISTRIBUTORS, INC. ---------------- ------------------ David H. den Boer Director, Senior Vice President, 2929 Allen Parkway and Secretary Houston, TX 77019 Jennifer D. Cobbs Executive Vice President 2929 Allen Parkway Houston, TX 77019 Krien VerBerkmoes Chief Compliance Officer 2929 Allen Parkway Houston, TX 77019 John Reiner Chief Financial Officer and Treasurer 2929 Allen Parkway Houston, TX 77019 Robyn Galerston Assistant Vice President - 2919 Allen Parkway Sales Literature Review Houston, TX 77019 D. Lynne Walters Tax Officer 2929 Allen Parkway Houston, TX 77019 Pauletta P. Cohn Assistant Secretary 2929 Allen Parkway Houston, TX 77019 Lauren W. Jones Assistant Secretary 2929 Allen Parkway Houston, TX 77019 Daniel R. Cricks Assistant Tax Officer 2929 Allen Parkway Houston, TX 77019 James D. Bonsall Assistant Treasurer 2929 Allen Parkway Houston, TX 77019
LEGAL MATTERS We are not involved in any legal proceedings that would be considered material with respect to a policy owner's interest in Separate Account VL-R. Pauletta P. Cohn, Esquire, Deputy General 55 Counsel of the American General Life Companies, an affiliate of AGL, has opined as to the validity of the Policies. ACCOUNTING AND AUDITING EXPERTS Ernst & Young LLP, independent auditors, have audited our consolidated financial statements at December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, as set forth in their report. We have included our financial statements in the prospectus in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. The address of Ernst & Young LLP is One Houston Center, 1221 McKinney, Suite 2400, Houston, Texas 77010-2007. ACTUARIAL EXPERT Actuarial matters have been examined by Robert M. Beuerlein who is Senior Vice President and Chief Actuary of AGL. His opinion on actuarial matters is filed as an exhibit to the registration statement we have filed with the SEC in connection with the Policies. SERVICES AGREEMENTS American General Life Companies ("AGLC") is party to an existing general services agreement with AGL. AGLC, an affiliate of AGL, is a business trust established in Delaware on December 30, 2000. Prior to that date, AGLC was a Delaware corporation. Pursuant to this agreement, AGLC provides services to AGL, including most of the administrative, data processing, systems, customer services, product development, actuarial, auditing, accounting and legal services for AGL and the Policies. We have entered into various services agreements with most of the advisers or administrators for the Mutual Funds. We receive fees for the administrative services we perform. These fees do not result in any additional charges under the Policies that are not described under "What charges will AGL deduct from my investment in a Policy?" We have entered into a services agreement with PIMCO Variable Insurance Trust under which we receive fees paid directly by this Mutual Fund for services we perform. CERTAIN POTENTIAL CONFLICTS The Mutual Funds sell shares to separate accounts of insurance companies (and may sell shares to certain qualified plans), both affiliated and not affiliated with AGL. We currently do not foresee any disadvantages to you arising out of such sales. Differences in treatment under tax and other laws, as well as other considerations, could cause the interests of various owners to conflict. For example, violation of the federal tax laws by one separate account investing in the Funds could cause the contracts funded through another separate account to lose their tax-deferred status, unless remedial action were taken. However, each Mutual Fund has advised us that its board of trustees (or directors) intends to monitor events to identify any material irreconcilable conflicts that possibly may arise and to determine what action, if any, should be taken in response. If we believe that a 56 Fund's response to any such event insufficiently protects our policy owners, we will see to it that appropriate action is taken to do so as well as report any material irreconcilable conflicts that we know exist to each Mutual Fund as soon as a conflict arises. If it becomes necessary for any separate account to replace shares of any Mutual Fund in which it invests, that Fund may have to liquidate securities in its portfolio on a disadvantageous basis. FINANCIAL STATEMENTS The financial statements of AGL contained in this prospectus should be considered to bear only upon the ability of AGL to meet its obligations under the Policies. They should not be considered as bearing upon the investment experience of Separate Account VL-R. No financial statements of Separate Account VL-R are included because, at the date of this prospectus, none of the 41 divisions of Separate Account VL-R were available under the Policies.
PAGE TO CONSOLIDATED FINANCIAL STATEMENTS OF SEE IN THIS AMERICAN GENERAL LIFE INSURANCE COMPANY PROSPECTUS --------------------------------------- ---------- Unaudited Consolidated Balance Sheet as of June 30, 2001...... Q-1 Unaudited Consolidated Income Statement for the six months ended June 30, 2001........................................ Q-3 Report of Ernst & Young LLP Independent Auditors.............. F-1 Consolidated Balance Sheets as of December 31, 2000 and 1999.. F-2 Consolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998........................... F-4 Consolidated Statements of Shareholder's Equity for the years ended December 31, 2000, 1999 and 1998..................... F-5 Consolidated Statements of Comprehensive Income for the years ended December 31, 2000, 1999, and 1998...... F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998..................... F-7 Notes to Consolidated Financial Statements.................... F-8
57 American General Life Insurance Company Consolidated Balance Sheet (Unaudited) June 30 2001 ------------- (In Thousands) ASSETS Investments: Fixed maturity securities, at fair value (amortized cost- $27,569,206) $27,677,835 Equity securities, at fair value (cost - $374,350) 412,662 Mortgage loans on real estate 2,223,944 Policy loans 1,307,253 Investment real estate 66,520 Other long-term investments 59,058 Short-term investments 1,771,759 Derivatives 16,632 ------------- Total investments 33,535,663 Cash 90,043 Investment in Parent Company (cost - $7,958) 64,994 Indebtedness from affiliates 63,214 Accrued investment income 479,605 Accounts receivable 1,195,476 Deferred policy acquisition costs 2,078,068 Property and equipment 80,134 Other assets 459,830 Assets held in separate accounts 21,152,666 ------------- Total assets $59,199,693 ============= Q-1 American General Life Insurance Company Consolidated Balance Sheet (Unaudited) June 30 2001 ------------- (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Future policy benefits $30,188,492 Other policy claims and benefits payable 65,653 Other policyholders' funds 393,745 Federal income taxes 488,052 Indebtedness to affiliates 10,721 Other liabilities 3,166,337 Liabilities related to separate accounts 21,152,666 ------------- Total liabilities 55,465,666 Shareholders' equity: Common stock, $10 par value, 600,000 shares authorized, issued, and outstanding 6,000 Preferred stock, $100 par value, 8,500 shares authorized, issued, and outstanding 850 Additional paid-in capital 1,417,250 Accumulated other comprehensive income/(loss) 83,847 Retained earnings 2,226,080 ------------- Total shareholders' equity 3,734,027 ------------- Total liabilities and shareholders' equity $59,199,693 ============= Q-2 American General Life Insurance Company Consolidated Income Statement (Unaudited) Six months ended June 30, 2001 ---------------- (In Thousands) Revenues: Premium and other considerations $ 325,505 Net investment income 1,193,047 Net realized investment loss (143,901) Other 64,364 ------------- 1,437,015 Benefits and expenses: Benefits 887,730 Operating costs and expenses 289,506 ------------- Total benefits and expenses 1,177,236 ------------- Income before income tax expense 259,779 Income tax expense 74,909 ------------- $ 184,870 Cumulative effect of accounting change (22,383) ------------- $ 162,487 ============= Q-3 [Ernst & Young Letterhead] Report of Independent Auditors Board of Directors and Stockholder American General Life Insurance Company We have audited the accompanying consolidated balance sheets of American General Life Insurance Company (an indirectly wholly-owned subsidiary of American General Corporation) and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, shareholder's equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American General Life Insurance Company and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. February 5, 2001 /s/ Ernst & Young F-1 American General Life Insurance Company Consolidated Balance Sheets
December 31 2000 1999 ------------------------------------ (In Thousands) Assets Investments: Fixed maturity securities, at fair value (amortized cost - $27,098,978 in 2000 and $27,725,167 in 1999) $ 26,991,695 $ 27,029,409 Equity securities, at fair value (cost - $413,959 in 2000 and $198,640 in 1999) 413,908 237,065 Mortgage loans on real estate 2,084,299 1,918,956 Policy loans 1,297,438 1,234,729 Investment real estate 124,117 125,563 Other long-term investments 46,833 129,155 Short-term investments 140,496 123,779 ------------------------------------ Total investments 31,098,786 30,798,656 Cash 44,747 45,983 Investment in Parent Company (cost - $8,597 in 2000 and 1999) 57,019 53,083 Indebtedness from affiliates 78,225 75,195 Accrued investment income 472,187 482,652 Accounts receivable 664,395 186,592 Deferred policy acquisition costs 2,090,810 1,956,653 Property and equipment 80,665 78,908 Other assets 228,685 250,299 Assets held in separate accounts 22,225,525 23,232,419 ------------------------------------ Total assets $ 57,041,044 $ 57,160,440 ====================================
F-2 Consolidated Balance Sheets
December 31 2000 1999 ------------------------------------ (In Thousands) Liabilities and shareholder's equity Liabilities: Future policy benefits $ 29,524,610 $ 29,901,842 Other policy claims and benefits payable 47,369 53,326 Other policyholders' funds 388,433 371,632 Federal income taxes 466,314 375,332 Indebtedness to affiliates 6,909 7,086 Other liabilities 920,570 372,416 Liabilities related to separate accounts 22,225,525 23,232,419 ------------------------------------ Total liabilities 53,579,730 54,314,053 Shareholder's equity: Common stock, $10 par value, 600,000 shares authorized, issued, and outstanding 6,000 6,000 Preferred stock, $100 par value, 8,500 shares authorized, issued, and outstanding 850 850 Additional paid-in capital 1,370,821 1,371,687 Accumulated other comprehensive loss (31,466) (356,865) Retained earnings 2,115,109 1,824,715 ------------------------------------ Total shareholder's equity 3,461,314 2,846,387 ------------------------------------ Total liabilities and shareholder's equity $ 57,041,044 $ 57,160,440 ====================================
See accompanying notes. F-3 American General Life Insurance Company Consolidated Statements of Income
Year ended December 31 2000 1999 1998 ------------------------------------------------------ (In Thousands) Revenues: Premiums and other considerations $ 659,901 $ 540,029 $ 470,238 Net investment income 2,362,694 2,348,196 2,316,933 Net realized investment gains (losses) (98,109) 5,351 (33,785) Other 134,769 82,581 69,602 ------------------------------------------------------ Total revenues 3,059,255 2,976,157 2,822,988 Benefits and expenses: Benefits 1,775,120 1,719,375 1,788,417 Operating costs and expenses 481,107 495,606 467,067 Interest expense 734 74 15 Litigation settlement - - 97,096 ------------------------------------------------------ Total benefits and expenses 2,256,961 2,215,055 2,352,595 ------------------------------------------------------ Income before income tax expense 802,294 761,102 470,393 Income tax expense 260,860 263,196 153,719 ------------------------------------------------------ Net income $ 541,434 $ 497,906 $ 316,674 ======================================================
See accompanying notes. F-4 American General Life Insurance Company Consolidated Statements of Shareholder's Equity
Year ended December 31 2000 1999 1998 ------------------------------------------------------ (In Thousands) Common stock: Balance at beginning of year $ 6,000 $ 6,000 $ 6,000 Change during year - - - ------------------------------------------------------ Balance at end of year 6,000 6,000 6,000 Preferred stock: Balance at beginning of year 850 850 850 Change during year - - - ------------------------------------------------------ Balance at end of year 850 850 850 Additional paid-in capital: Balance at beginning of year 1,371,687 1,368,089 1,184,743 Capital contribution from Parent Company - - 182,284 Other changes during year (866) 3,598 1,062 ------------------------------------------------------ Balance at end of year 1,370,821 1,371,687 1,368,089 Accumulated other comprehensive (loss) income: Balance at beginning of year (356,865) 679,107 427,526 Change in unrealized gains (losses) on securities 325,399 (1,035,972) 251,581 ------------------------------------------------------ Balance at end of year (31,466) (356,865) 679,107 Retained earnings: Balance at beginning of year 1,824,715 1,514,489 1,442,495 Net income 541,434 497,906 316,674 Dividends paid (251,040) (187,680) (244,680) ------------------------------------------------------ Balance at end of year 2,115,109 1,824,715 1,514,489 ------------------------------------------------------ Total shareholder's equity $ 3,461,314 $ 2,846,387 $ 3,568,535 ======================================================
See accompanying notes. F-5 American General Life Insurance Company Consolidated Statements of Comprehensive Income
Year ended December 31 2000 1999 1998 ------------------------------------------------------ (In Thousands) Net income $ 541,434 $ 497,906 $ 316,674 Other comprehensive income: Gross change in unrealized gains (losses) on securities (pretax: $435,000; ($1,581,500); $341,000) 282,743 (1,027,977) 222,245 Less: gains (losses) realized in net income (42,656) 7,995 (29,336) ------------------------------------------------------ Change in net unrealized gains (losses) on securities (pretax: $500,000; ($1,593,800); $387,000) 325,399 (1,035,972) 251,581 ------------------------------------------------------ Comprehensive (loss) income $ 866,833 $ (538,066) $ 568,255 ======================================================
See accompanying notes. F-6 American General Life Insurance Company Consolidated Statements of Cash Flows
Year ended December 31 2000 1999 1998 ---------------------------------------------------------------- (In Thousands) Operating activities Net income $ 541,434 $ 497,906 $ 316,674 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Change in accounts receivable (477,803) 10,004 11,613 Change in future policy benefits and other policy claims (2,566,783) (2,422,221) (866,428) Amortization of policy acquisition costs 23,443 101,066 125,062 Policy acquisition costs deferred (299,306) (307,854) (244,196) Change in other policyholders' funds 16,801 (26,955) 273 Provision for deferred income tax expense 57,228 85,257 15,872 Depreciation 28,677 24,066 19,418 Amortization 22,831 (30,894) (26,775) Change in indebtedness to/from affiliates (3,207) 74,814 (51,116) Change in amounts payable to brokers 478,132 (43,321) (894) Net loss on sale of investments 52,670 45,379 37,016 Other, net 47,646 (170,413) 57,307 ---------------------------------------------------------------- Net cash used in operating activities (2,078,237) (2,163,166) (606,174) Investing activities Purchases of investments and loans made (33,436,962) (44,508,908) (28,231,615) Sales or maturities of investments and receipts from repayment of loans 33,627,301 43,879,377 26,656,897 Sales and purchases of property, equipment, and software, net (45,078) (87,656) (105,907) ---------------------------------------------------------------- Net cash provided by (used in) investing activities 145,261 (717,187) (1,680,625) Financing activities Policyholder account deposits 6,144,393 5,747,658 4,688,831 Policyholder account withdrawals (3,960,747) (2,754,915) (2,322,307) Dividends paid (251,040) (187,680) (244,680) Capital contribution from Parent - - 182,284 Other (866) 3,598 1,062 ---------------------------------------------------------------- Net cash provided by financing activities 1,931,740 2,808,661 2,305,190 ---------------------------------------------------------------- (Decrease) increase in cash (1,236) (71,692) 18,391 Cash at beginning of year 45,983 117,675 99,284 ---------------------------------------------------------------- Cash at end of year $ 44,747 $ 45,983 $ 117,675 ================================================================
Interest paid amounted to approximately $50,673,000, $2,026,000, and $420,000 in 2000, 1999, and 1998, respectively. See accompanying notes. F-7 American General Life Insurance Company Notes to Consolidated Financial Statements December 31, 2000 NATURE OF OPERATIONS American General Life Insurance Company (the "Company") is a wholly-owned subsidiary of AGC Life Insurance Company, which is a wholly-owned subsidiary of American General Corporation (the "Parent Company"). The Company's wholly-owned life insurance subsidiaries are American General Life Insurance Company of New York ("AGNY") and The Variable Annuity Life Insurance Company ("VALIC"). During 1998, the Company formed a new wholly-owned subsidiary, American General Life Companies ("AGLC"), to provide management services to certain life insurance subsidiaries of the Parent Company. The Company offers a complete portfolio of the standard forms of universal life, variable universal life, interest-sensitive whole life, term life, structured settlements, and fixed and variable annuities throughout the United States. In addition, a variety of equity products are sold through its wholly-owned broker/dealer, American General Securities, Inc. The Company serves the estate planning needs of middle- and upper-income households and the life insurance needs of small- to medium-sized businesses. AGNY offers a broad array of traditional and interest-sensitive insurance, in addition to individual annuity products. VALIC provides tax-deferred retirement annuities and employer-sponsored retirement plans to employees of health care, educational, public sector, and other not-for-profit organizations throughout the United States. 1. Accounting Policies 1.1 Preparation of Financial Statements The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and include the accounts of the Company and its wholly-owned subsidiaries. Transactions with the Parent Company and other subsidiaries of the Parent Company are not eliminated from the financial statements of the Company. All other material intercompany transactions have been eliminated in consolidation. The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and disclosures of contingent assets and liabilities. Ultimate results could differ from those estimates. F-8 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.2 Statutory Accounting The Company and its wholly-owned life insurance subsidiaries are required to file financial statements with state regulatory authorities. State insurance laws and regulations prescribe accounting practices for calculating statutory net income and equity. In addition, state regulators may permit statutory accounting practices that differ from prescribed practices. The use of such permitted practices by the Company and its wholly-owned life insurance subsidiaries did not have a material effect on statutory equity at December 31, 2000. Statutory financial statements differ from GAAP financial statements. Significant differences were as follows (in thousands):
2000 1999 1998 ------------------------------------------------------ Net income: Statutory net income (2000 net income is unaudited) $ 360,578 $ 350,294 $ 259,903 Deferred policy acquisition costs and cost of insurance purchased 302,965 200,285 116,597 Deferred income taxes (85,401) (86,456) (53,358) Adjustments to policy reserves 4,717 23,110 52,445 Goodwill amortization (1,910) (2,437) (2,033) Net realized gain (loss) on investments, net of tax (62,075) 2,246 41,488 Litigation settlement - - (63,112) Other, net 22,560 10,864 (35,256) ------------------------------------------------------ GAAP net income $ 541,434 $ 497,906 $ 316,674 ====================================================== Shareholders' equity: Statutory capital and surplus (2000 balance is unaudited) $ 1,908,887 $ 1,753,570 $ 1,670,412 Deferred policy acquisition costs 2,090,810 1,975,667 1,109,831 Deferred income taxes (457,054) (350,258) (698,350) Adjustments to policy reserves (250,808) (202,150) (274,532) Acquisition-related goodwill 27,069 52,317 54,754 Asset valuation reserve ("AVR") 353,818 351,904 310,564 Interest maintenance reserve ("IMR") 18,942 53,226 27,323 Investment valuation differences (121,982) (683,500) 1,487,658 Surplus from separate accounts (155,471) (180,362) (174,447) Other, net 47,103 75,973 55,322 ------------------------------------------------------ Total GAAP shareholders' equity $ 3,461,314 $ 2,846,387 $ 3,568,535 ======================================================
F-9 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.2 Statutory Accounting (continued) The more significant differences between GAAP and statutory accounting principles are that under GAAP: (a) acquisition costs related to acquiring new business are deferred and amortized (generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality, and expense margins), rather than being charged to operations as incurred; (b) future policy benefits are based on estimates of mortality, interest, and withdrawals generally representing the Company's experience, which may differ from those based on statutory mortality and interest requirements without consideration of withdrawals; (c) deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, at the enacted tax rates expected to be in effect when the temporary differences reverse; (d) certain assets (principally furniture and equipment, agents' debit balances, computer software, and certain other receivables) are reported as assets rather than being charged to retained earnings; (e) acquisitions are accounted for using the purchase method of accounting rather than being accounted for as equity investments; and (f) fixed maturity investments are carried at fair value rather than amortized cost. In addition, statutory accounting principles require life insurance companies to establish an AVR and an IMR. The AVR is designed to address the credit-related risk for bonds, preferred stocks, derivative instruments, and mortgages and market risk for common stocks, real estate, and other invested assets. The IMR is composed of investment- and liability-related realized gains and losses that result from interest rate fluctuations. These realized gains and losses, net of tax, are amortized into income over the expected remaining life of the asset sold or the liability released. 1.3 Insurance Contracts The insurance contracts accounted for in these financial statements include primarily long-duration contracts. Long-duration contracts include traditional whole life, endowment, guaranteed renewable term life, universal life, limited payment, and investment contracts. Long-duration contracts generally require the performance of various functions and services over a period of more than one year. The contract provisions generally cannot be changed or canceled by the insurer during the contract period; however, most new contracts written by the Company allow the insurer to revise certain elements used in determining premium rates or policy benefits, subject to guarantees stated in the contracts. At December 31, 2000 and 1999, insurance investment contracts of $25.0 million and $25.9 million, respectively, were included in the Company's liabilities. F-10 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.4 Investments Fixed Maturity and Equity Securities Substantially all fixed maturity and equity securities were classified as available-for-sale and recorded at fair value at December 31, 2000 and 1999. After adjusting related balance sheet accounts as if the unrealized gains (losses) had been realized, the net adjustment is recorded in accumulated other comprehensive income (loss), within shareholders' equity. If the fair value of a security classified as available-for-sale declines below its cost and this decline is considered to be other than temporary, the security's amortized cost is reduced to its fair value, and the reduction is recorded as a realized loss. At various times, the Company holds trading securities and reports them at fair value. Our trading security portfolio was immaterial at year-end 2000 and 1999. Realized and unrealized gains (losses) related to trading securities are included in net investment income, however, trading securities did not have a material effect on net investment income in 2000, 1999, and 1998. Equity partnerships, which are reported in equity securities, are accounted for under the equity method of accounting. For those partnerships that report changes in the fair value of underlying equity investments in earnings, the Company records its proportionate interest in investment gains (losses). Mortgage Loans Mortgage loans are reported at amortized cost, net of an allowance for losses. The allowance for losses covers estimated losses based on our assessment of risk factors such as potential non-payment or non-monetary default. The allowance is primarily based on a loan-specific review. Loans for which the Company determines that collection of all amounts due under the contractual terms is not probable are considered to be impaired. The Company generally looks to the underlying collateral for repayment of impaired loans. Therefore, impaired loans are reported at the lower of amortized cost or fair value of the underlying collateral, less estimated cost to sell. F-11 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.4 Investments (continued) Policy Loans Policy loans are reported at unpaid principal balance. Real Estate Real estate is classified as held for investment or available for sale, based on management's intent. Real estate held for investment is carried at cost, less accumulated depreciation and impairment write-downs. Real estate available for sale is carried at the lower of cost (less accumulated depreciation, if applicable) or fair value less cost to sell. Dollar Roll Agreements Dollar rolls are agreements to sell mortgage-backed securities and to repurchase substantially the same securities at a specified price and date in the future. We account for dollar rolls as short-term collateralized financings and include the repurchase obligation in other liabilities. There were no dollar rolls outstanding at December 31, 2000 or 1999. Investment Income Interest on fixed maturity securities and performing mortgage loans is recorded as income when earned and is adjusted for any amortization of premium or discount. Interest on delinquent mortgage loans is recorded as income when received. Dividends are recorded as income on ex-dividend dates. Income on mortgage-backed securities is recognized using a constant effective yield based on estimated prepayments of the underlying mortgages. If actual prepayments differ from estimated prepayments, a new effective yield is calculated and the net investment in the security is adjusted accordingly. The adjustment is recognized in net investment income. Realized Investment Gains Realized investment gains (losses) are recognized using the specific-identification method and reported in net realized investment gains (losses). F-12 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.5 Separate Accounts Separate Accounts are assets and liabilities associated with certain contracts, principally annuities, for which the investment risk lies solely with the contract holder. Therefore, the Company's liability for these accounts equals the value of the account assets. Investment income, realized investment gains (losses), and policyholder account deposits and withdrawals related to separate accounts are excluded from the consolidated statements of income, comprehensive income, and cash flows. Assets held in Separate Accounts are primarily shares in mutual funds, which are carried at fair value based on the quoted net asset value per share. 1.6 Deferred Policy Acquisition Costs ("DPAC") and Cost of Insurance Purchased ("CIP") Certain costs of writing an insurance policy, including commissions, underwriting, and marketing expenses, are deferred and reported as DPAC. CIP represents the cost assigned to insurance contracts in force that are acquired through the purchase of a block of business. At December 31, 2000, CIP of $15.6 million was reported within other assets. DPAC and CIP associated with interest-sensitive life contracts, insurance investment contracts, and participating life insurance contracts is charged to expense in relation to the estimated gross profits of those contracts. If estimated gross profits change significantly, DPAC and CIP balances are recalculated using the new assumptions. Any resulting adjustment is included in current earnings as an adjustment to DPAC or CIP amortization. DPAC and CIP associated with all other insurance contracts is charged to expense over the premium-paying period or as the premiums are earned over the life of the contract. Interest is accreted on the unamortized balance of DPAC at rates used to compute policyholder reserves and on the unamortized balance of CIP at rates of 2.5% to 7.88%. DPAC and CIP are adjusted for the impact on estimated future gross profits as if net unrealized gains (losses) on securities had been realized at the balance sheet date. The impact of this adjustment is included in accumulated other comprehensive income within shareholder's equity. F-13 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.6 Deferred Policy Acquisition Costs ("DPAC") and Cost of Insurance Purchased ("CIP") (continued) The Company reviews the carrying amount of DPAC and CIP on at least an annual basis. Management considers estimated future gross profits or future premiums, expected mortality, interest earned and credited rates, persistency, and expenses in determining whether the carrying amount is recoverable. Any amounts deemed unrecoverable are charged to expense. 1.7 Other Assets Goodwill is charged to expense in equal amounts, generally over 40 years. The Company reviews goodwill for indicators of impairment in value which it believes are other than temporary, including unexpected or adverse changes in the following: (1) the economic or competitive environments in which the Company operates, (2) profitability analyses, (3) cash flow analyses, and (4) the fair value of the relevant subsidiary. If facts and circumstances suggest that a subsidiary's goodwill is impaired, the Company assesses the fair value of the underlying business based on an independent appraisal and reduce goodwill to an amount that results in the book value of the subsidiary approximating fair value. 1.8 Policy and Contract Claims Reserves Substantially all of the Company's insurance and annuity liabilities relate to long duration contracts. The contracts normally cannot be changed or canceled by the Company during the contract period. For interest-sensitive life insurance and investment contracts, reserves equal the sum of the policy account balance and deferred revenue charges. Reserves for other contracts are based on estimates of the cost of future policy benefits. Reserves are determined using the net level premium method. Interest assumptions used to compute reserves ranged from 2.00% to 13.50% at December 31, 2000. F-14 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.9 Premium Recognition Most receipts for annuities and interest-sensitive life insurance policies are classified as deposits instead of revenue. Revenues for these contracts consist of mortality, expense, and surrender charges. Policy charges that compensate the Company for future services are deferred and recognized in income over the period earned, using the same assumptions used to amortize DPAC. For limited-payment contracts, net premiums are recorded as revenue, and the difference between the gross premium received and the net premium is deferred and recognized in a constant relationship to insurance in force. For all other contracts, premiums are recognized when due. 1.10 Reinsurance The Company limits its exposure to loss on any single insured to $2.5 million by ceding additional risks through reinsurance contracts with other insurers. The Company diversifies its risk of reinsurance loss by using a number of reinsurers that have strong claims-paying ability ratings. If the reinsurer could not meet its obligations, the Company would reassume the liability as the Company remains primarily liable to the policyholder. A receivable is recorded for the portion of benefits paid and insurance liabilities that have been reinsured. Reinsurance recoveries on ceded reinsurance contracts were $20 million, $28 million, and $63 million, during 2000, 1999, and 1998, respectively. The cost of reinsurance is recognized over the life of the reinsured policies using assumptions consistent with those used to account for the underlying policies. Benefits paid and future policy benefits related to ceded insurance contracts are recorded as reinsurance receivables, and are included in accounts receivable. 1.11 Participating Policy Contracts Participating life insurance accounted for approximately 1% of life insurance in force at December 31, 2000 and 1999. F-15 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.11 Participating Policy Contracts (continued) The portion of earnings allocated to participating policyholders is excluded from net income and shareholder's equity. Dividends to be paid on participating life insurance contracts are determined annually based on estimates of the contracts' earnings. Policyholder dividends were $4.4 million, $4.6 million, and $4.9 million in 2000, 1999, and 1998, respectively. 1.12 Income Taxes The Company and its life insurance subsidiaries, together with certain other life insurance subsidiaries of the Parent Company, are included in a life/non-life consolidated tax return with the Parent Company and its noninsurance subsidiaries. The Company participates in a tax sharing agreement with other companies included in the consolidated tax return. Under this agreement, tax payments are made to the Parent Company as if the companies filed separate tax returns; and companies incurring operating and/or capital losses are reimbursed for the use of these losses by the consolidated return group. Deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, at the enacted tax rates expected to be in effect when the temporary differences reverse. The effect of a tax rate change is recognized in income in the period of enactment. State income taxes are included in income tax expense. A valuation allowance for deferred tax assets is provided if it is more likely than not that some portion of the deferred tax asset will not be realized. An increase or decrease in a valuation allowance that results from a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset is included in income. Changes related to fluctuations in fair value of available-for-sale securities are included in the consolidated statements of comprehensive income and accumulated other comprehensive income in shareholder's equity. F-16 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 1. Accounting Policies (continued) 1.13 Accounting Changes SFAS 133 On January 1, 2001, the Company will adopt Statement of Financial Accounting Standards ("SFAS") 133, Accounting for Derivative Instruments and Hedging Activities, which requires all derivative instruments to be recognized at fair value in the balance sheet. Changes in the fair value of a derivative instrument will be reported in net income or other comprehensive income, depending upon the intended use of the derivative instrument. The adoption of SFAS 133 is not expected to have a material impact on the company's results of operations and financial position in future periods. The impact of fair value adjustments on derivatives which do not qualify for hedge accounting and any ineffectiveness resulting from hedging activities will be recorded in investment gains (losses). Codification The Company has performed a review of the revised Accounting Practices and Procedures Manual ("Codification") effective January 1, 2001 and determined that the effect of these changes will not result in a significant reduction in the Company's statutory basis-capital and surplus as of adoption. F-17 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Investments 2.1 Investment Income Investment income by type of investment was as follows for the year ended:
2000 1999 1998 ------------------------------------------------------ (In Thousands) Investment income: Fixed maturities $ 2,050,503 $ 2,118,794 $ 2,101,730 Equity securities 22,996 17,227 1,813 Mortgage loans on real estate 159,414 134,878 148,447 Investment real estate 22,749 20,553 23,139 Policy loans 71,927 69,684 66,573 Other long-term investments 13,062 7,539 3,837 Short-term investments 66,296 24,874 15,492 Investment income from affiliates 10,733 8,695 10,536 ------------------------------------------------------ Gross investment income 2,417,680 2,402,244 2,371,567 Investment expenses 54,986 54,048 54,634 ------------------------------------------------------ Net investment income $ 2,362,694 $ 2,348,196 $ 2,316,933 ======================================================
The carrying value of investments that produced no investment income during 2000 was less than 1.5% of total invested assets. The ultimate disposition of these investments is not expected to have a material effect on the Company's results of operations and financial position. Derivative financial instruments did not have a material effect on net investment income in 2000, 1999, or 1998. F-18 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Investments (continued) 2.2 Net Realized Investment Gains (Losses) Realized gains (losses) by type of investment were as follows for the year ended:
2000 1999 1998 ------------------------------------------------------ (In Thousands) Fixed maturities: Gross gains $ 62,856 $ 118,427 $ 20,109 Gross losses (174,057) (102,299) (62,657) ------------------------------------------------------ Total fixed maturities (111,201) 16,128 (42,548) Equity securities - 793 645 Other investments 13,092 (11,570) 8,118 ------------------------------------------------------ Net realized investment gains (losses) before tax (98,109) 5,351 (33,785) Income tax expense (benefit) (34,338) 1,874 (11,826) ------------------------------------------------------ Net realized investment gains (losses) after tax $ (63,771) $ 3,477 $ (21,959) ======================================================
F-19 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Investments (continued) 2.3 Fixed Maturity and Equity Securities All fixed maturity and equity securities are classified as available-for-sale and reported at fair value. Amortized cost and fair value at December 31, 2000 and 1999 were as follows:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gain Loss Value ------------------------------------------------------------------------ (In Thousands) December 31, 2000 Fixed maturity securities: Corporate securities: Investment-grade $ 18,495,450 $ 420,049 $ (420,341) $ 18,495,158 Below investment-grade 1,662,879 14,888 (287,880) 1,389,887 Mortgage-backed securities* 6,340,762 145,597 (5,907) 6,480,452 U.S. government obligations 215,220 22,526 (21) 237,725 Foreign governments 209,305 7,402 (1,655) 215,052 State and political subdivisions 168,302 2,940 (4,821) 166,421 Redeemable preferred stocks 7,060 - (60) 7,000 ------------------------------------------------------------------------ Total fixed maturity securities $ 27,098,978 $ 613,402 $ (720,685) $ 26,991,695 ======================================================================== Equity securities $ 413,959 $ 10,146 $ (10,197) $ 413,908 ======================================================================== Investment in Parent Company $ 8,597 $ 48,422 $ - $ 57,019 ========================================================================
* Primarily include pass-through securities guaranteed by and mortgage obligations ("CMOs") collateralized by the U.S. government and government agencies. F-20 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Investments (continued) 2.3 Fixed Maturity and Equity Securities (continued)
Gross Gross Amortized Unrealized Unrealized Fair Cost Gain Loss Value ------------------------------------------------------------------------ (In Thousands) December 31, 1999 Fixed maturity securities: Corporate securities: Investment-grade $ 19,455,518 $ 134,003 $ (704,194) $ 18,885,326 Below investment-grade 1,368,494 11,863 (114,260) 1,266,098 Mortgage-backed securities* 6,195,003 45,022 (74,746) 6,165,279 U.S. government obligations 276,621 15,217 (2,376) 289,462 Foreign governments 245,782 5,774 (1,767) 249,789 State and political subdivisions 154,034 499 (10,836) 143,697 Redeemable preferred stocks 29,715 43 - 29,758 ------------------------------------------------------------------------ Total fixed maturity securities $ 27,725,167 $ 212,421 $ (908,179) $ 27,029,409 ======================================================================== Equity securities $ 198,640 $ 39,381 $ (956) $ 237,065 ======================================================================== Investment in Parent Company $ 8,597 $ 44,486 $ - $ 53,083 ========================================================================
* Primarily include pass-through securities guaranteed by and mortgage obligations ("CMOs") collateralized by the U.S. government and government agencies. F-21 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Investments (continued) 2.3 Fixed Maturity and Equity Securities (continued) Net unrealized gains (losses) on securities included in accumulated comprehensive income in shareholders' equity at December 31 were as follows:
2000 1999 ------------------------------- (In Thousands) Gross unrealized gains $ 671,970 $ 296,288 Gross unrealized losses (730,882) (909,135) DPAC and other fair value adjustments 23,119 200,353 Deferred federal income taxes 4,330 55,631 Other (3) (2) -------------------------------- Net unrealized losses on securities $ (31,466) $ (356,865) ================================
The contractual maturities of fixed maturity securities at December 31, 2000 were as follows:
2000 1999 ----------------------------------------------------------------------- Amortized Market Amortized Market Cost Value Cost Value ----------------------------------------------------------------------- (In thousands) (In thousands) Fixed maturity securities, excluding mortgage-backed securities: Due in one year or less $ 832,001 $ 833,695 $ 810,124 $ 813,683 Due after one year through five years 5,539,620 5,562,918 5,380,557 5,394,918 Due after five years through ten years 7,492,395 7,433,403 8,350,207 8,080,065 Due after ten years 6,894,200 6,681,227 6,988,799 6,575,461 Mortgage-backed securities 6,340,762 6,480,452 6,195,480 6,165,282 ----------------------------------------------------------------------- Total fixed maturity securities $27,098,978 $ 26,991,695 $27,725,167 $27,029,409 =======================================================================
Actual maturities may differ from contractual maturities, since borrowers may have the right to call or prepay obligations. In addition, corporate requirements and investment strategies may result in the sale of investments before maturity. Proceeds from sales of fixed maturities were $12.3 billion, $12.3 billion, and $5.4 billion, during 2000, 1999, and 1998, respectively. F-22 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Investments (continued) 2.4 Mortgage Loans on Real Estate Diversification of the geographic location and type of property collateralizing mortgage loans reduces the concentration of credit risk. For new loans, the Company requires loan-to-value ratios of 75% or less, based on management's credit assessment of the borrower. The mortgage loan portfolio was distributed as follows at December 31, 2000 and 1999:
Outstanding Percent of Percents Amount Total Nonperforming --------------------------------------------- (In Millions) December 31, 2000 Geographic distribution: South Atlantic $ 461 22.0% 0.0% Pacific 374 17.9 7.6 West South Central 200 9.6 0.0 East South Central 158 7.6 0.0 East North Central 290 13.9 0.0 Mid-Atlantic 374 18.0 0.0 Mountain 89 4.3 0.0 West North Central 68 3.3 0.0 New England 79 3.8 0.0 Allowance for losses (9) (0.4) 0.0 -------------------------- Total $ 2,084 100.0% 1.4% ========================== Property type: Retail $ 596 28.5% 0.0% Office 900 43.2 3.2 Industrial 300 14.4 0.0 Apartments 181 8.7 0.0 Hotel/motel 77 3.7 0.0 Other 39 1.9 0.0 Allowance for losses (9) (0.4) 0.0 -------------------------- Total $ 2,084 100.0% 1.4% ==========================
F-23 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Investments (continued) 2.4 Mortgage Loans on Real Estate (continued)
Outstanding Percent of Percent Amount Total Nonperforming ------------------------------------------------------- (In Millions) December 31, 1999 Geographic distribution: South Atlantic $ 470 24.6% 0.2% Pacific 363 18.9 7.8 Mid-Atlantic 185 9.6 0.0 East North Central 144 7.5 0.0 Mountain 256 13.3 0.0 West South Central 323 16.8 0.9 East South Central 107 5.6 13.8 West North Central 43 2.2 0.0 New England 44 2.3 0.0 Allowance for losses (16) (0.8) 0.0 ----------------------------------- Total $ 1,919 100.0% 2.4% =================================== Property type: Office $ 628 32.6% 2.5% Retail 746 38.9 4.2 Industrial 302 15.7 0.0 Apartments 189 9.9 0.0 Hotel/motel 46 2.4 0.0 Other 24 1.3 0.2 Allowance for losses (16) (0.8) 0.0 ----------------------------------- Total $ 1,919 100.0% 2.4% ===================================
Impaired mortgage loans on real estate and related interest income is not material. F-24 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Deferred Policy Acquisitions Costs The balance of DPAC at December 31 and the components of the change reported in operating costs and expenses for the years then ended were as follows:
2000 1999 1998 ------------------------------------------------------ (In Thousands) Balance at January 1 $ 1,956,653 $ 1,087,718 $ 835,031 Capitalization 174,379 191,143 135,023 Accretion of interest 124,927 116,711 109,173 Amortization (23,443) (101,066) (125,062) Effect of net realized and unrealized gains (losses) on securities (141,706) 662,147 133,553 -------------------------------------------------------- Balance at December 31 $ 2,090,810 $ 1,956,653 $ 1,087,718 ========================================================
4. Other Assets Other assets consisted of the following:
December 31 2000 1999 ------------------------------------ (In Thousands) Goodwill $ 27,069 $ 52,317 Cost of insurance purchased ("CIP") 15,598 19,014 Computer software 73,215 117,571 Other 112,803 61,397 ------------------------------------ Total other assets $ 228,685 $ 250,299 ====================================
F-25 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 4. Other Assets (continued) A rollforward of CIP for the year ended December 31, 2000, was as follows:
2000 1999 ------------------------------------ (In Thousands) Balance at January 1 $ 19,014 $ 22,113 Accretion of interest at 5.02% 788 926 Amortization (3,432) (4,025) Other changes (772) - ------------------------------------ Balance at December 31 $ 15,598 $ 19,014 ====================================
5. Federal Income Taxes 5.1 Tax Liabilities Income tax liabilities were as follows:
December 31 2000 1999 ------------------------------------ (In Thousands) Current tax (receivable) payable $ 9,260 $ 25,074 Deferred tax liabilities, applicable to: Net income 463,117 405,889 Net unrealized investment gains (6,063) (55,631) ------------------------------------ Total deferred tax liabilities 457,054 350,258 ------------------------------------ Total current and deferred tax liabilities $ 466,314 $ 375,332 ====================================
F-26 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 5. Federal Income Taxes (continued) 5.1 Tax Liabilities (continued) Components of deferred tax liabilities and assets at December 31 were as follows:
2000 1999 ------------------------------------ (In Thousands) Deferred tax liabilities applicable to: Deferred policy acquisition costs $ 624,393 $ 601,678 Basis differential of investments 55,603 - Other 143,307 171,763 ------------------------------------ Total deferred tax liabilities 823,303 773,441 Deferred tax assets applicable to: Policy reserves (285,488) (215,465) Basis differential of investments - (158,421) Other (89,761) (141,236) ------------------------------------ Total deferred tax assets before valuation allowance (375,249) (515,122) Valuation allowance 9,000 91,939 ------------------------------------ Total deferred tax assets, net of valuation allowance (366,249) (423,183) ------------------------------------ Net deferred tax liabilities $ 457,054 $ 350,258 ====================================
Under prior Federal income tax law, one-half of the excess of a life insurance company's income form operations over its taxable investment income was not taxed, but was set aside in a special tax account designated as "policyholders' surplus." At December 31, 2000, the Company had approximately $88.2 million of policyholders' surplus on which no payment of Federal income taxes will be required unless it is distributed as a dividend, or under other specified conditions. Barring the passage of unfavorable tax legislation, the Company does not believe that any significant portion of the account will be taxed in the foreseeable future. Accordingly, no deferred tax liability has been recognized in relation to the policyholders' surplus account. If the entire balance of the policyholders' surplus became taxable at the current federal income tax rates, the tax would be approximately $30.9 million. F-27 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 5. Federal Income Taxes (continued) 5.2 Tax Expense Components of income tax expense for the years were as follows:
2000 1999 1998 ------------------------------------------------------ (In Thousands) Current expense $ 174,263 $ 176,725 $ 134,344 Deferred expense (benefit): Deferred policy acquisition cost 82,739 65,377 33,230 Policy reserves 12,738 (22,654) 2,189 Basis differential of investments 14,627 (4,729) 11,969 Litigation settlement 2,764 22,641 (33,983) Year 2000 - - (9,653) Internally developed software 3,702 18,654 - Other, net (29,973) 7,182 15,623 ------------------------------------------------------ Total deferred expense 86,597 86,471 19,375 ------------------------------------------------------ Income tax expense $ 260,860 $ 263,196 $ 153,719 ======================================================
A reconciliation between the income tax expense computed by applying the federal income tax rate (35%) to income before taxes and the income tax expense reported in the financial statement is presented below.
2000 1999 1998 ------------------------------------------------------ (In Thousands) Income tax at statutory percentage of GAAP pretax income $ 279,241 $ 266,386 $ 164,638 Tax-exempt investment income (16,654) (16,423) (11,278) Goodwill 669 853 712 Other (2,396) 12,380 (353) ------------------------------------------------------ Income tax expense $ 260,860 $ 263,196 $ 153,719 ======================================================
F-28 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 5. Federal Income Taxes (continued) 5.3 Taxes Paid Income taxes paid amounted to approximately $182 million, $126 million, and $159 million, in 2000, 1999, and 1998, respectively. 5.4 Tax Return Examinations The Parent Company and the majority of its subsidiaries file a consolidated federal income tax return. The Internal Revenue Service ("IRS") has completed examinations of the Parent Company's tax returns through 1992. The IRS is currently examining tax returns for 1993 through 1999. In addition, the tax returns of companies recently acquired are also being examined. Although the final outcome of any issues raised in examination is uncertain, the Parent Company believes that the ultimate liability, including interest, will not materially exceed amounts recorded in the consolidated financial statements. 6. Transactions With Affiliates Affiliated notes and accounts receivable were as follows:
December 31, 2000 December 31, 1999 -------------------------------------------------------------------- Par Value Book Value Par Value Book Value -------------------------------------------------------------------- (In Thousands) American General Corporation, 9%, due 2008 $ 4,725 $ 3,486 $ 4,725 $ 3,410 American General Corporation, Promissory notes, due 2004 9,786 9,786 12,232 12,232 American General Corporation, Restricted Subordinated Note, 13 1/2%, due 2002 25,321 25,321 27,378 27,378 -------------------------------------------------------------------- Total notes receivable from affiliates 39,832 38,593 44,335 43,020 Accounts receivable from affiliates - 39,632 - 32,175 -------------------------------------------------------------------- Indebtedness from affiliates $ 39,832 $ 78,225 $ 44,335 $ 75,195 ====================================================================
F-29 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 6. Transactions With Affiliates (continued) Various American General companies provide services to the Company, principally mortgage servicing and investment management services, provided by American General Investment Management Corporation on a fee basis. The Company paid approximately $85,002,378, $55,318,000, and $46,921,000, for such services in 2000, 1999, and 1998, respectively. Accounts payable for such services at December 31, 2000 and 1999 were not material. The Company rents facilities and provides services on an allocated cost basis to various American General companies. Beginning in 1998, amounts received by the Company from affiliates include amounts received by its wholly-owned, non-life insurance subsidiary, American General Life Companies ("AGLC"). AGLC provides shared services, including technology, to a number of American General Corporation's life insurance subsidiaries. The Company received approximately $171,650,000, $138,885,000, and $66,550,000, for such services and rent in 2000, 1999, and 1998, respectively. Accounts receivable for rent and services at December 31, 2000 and 1999 were not material. The Company has 8,500 shares of $100 par value cumulative preferred stock authorized and outstanding with an $80 dividend rate, redeemable at $1,000 per share after December 31, 2000. The holder of this stock, The Franklin Life Insurance Company ("Franklin"), an affiliated company, is entitled to one vote per share, voting together with the holders of common stock. 7. Benefit Plans 7.1 Pension Plans The Company has non-contributory defined benefit pension plans covering most employees. Pension benefits are based on the participant's compensation and length of credited service. Equity and fixed maturity securities were 65% and 28%, respectively, of the plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of plan assets were invested in general investment accounts of the Parent Company's subsidiaries through deposit administration insurance contracts. F-30 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 7. Benefit Plans (continued) 7.1 Pension Plans (continued) The benefit plans have purchased annuity contracts from American General Corporation's subsidiaries to provide benefits for certain retirees. These contracts are expected to provide future annual benefits to certain retirees of American General Corporation and its subsidiaries of approximately $58 million. The components of pension (income) expense and underlying assumptions were as follows:
2000 1999 1998 ------------------------------------------------------ (In Thousands) Service cost $ 4,605 $ 3,575 $ 3,693 Interest cost 9,818 7,440 6,289 Expected return on plan assets (17,815) (12,670) (9,322) Amortization (918) (820) (557) Recognized Net Actuarial Loss/(Gain) (868) - - ------------------------------------------------------ Pension (income) expense $ (5,178) $ (2,475) $ 103 ====================================================== Discount rate on benefit obligation 8.00% 7.75% 7.00% Rate of increase in compensation levels 4.50% 4.25% 4.25% Expected long-term rate of return on plan assets 10.35% 10.35% 10.25%
The Company's funding policy is to contribute annually no more than the maximum deductible for federal income tax purposes. The funded status of the plans and the prepaid pension expense included in other assets at December 31 were as follows:
2000 1999 ------------------------------------ (In Thousands) Projected benefit obligation (PBO) $ 130,175 $ 100,600 Plan assets at fair value 187,266 145,863 ------------------------------------ Plan assets at fair value in excess of PBO 57,091 45,263 Other unrecognized items, net (32,730) (26,076) ------------------------------------ Prepaid pension expense $ 24,361 $ 19,187 ====================================
F-31 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 7. Benefit Plans (continued) 7.1 Pension Plans (continued) The change in PBO was as follows:
2000 1999 ------------------------------------ (In Thousands) PBO at January 1 $ 100,600 $ 96,554 Service and interest costs 14,423 11,015 Benefits paid (5,394) (4,919) Actuarial loss 1,668 (12,036) Amendments, transfers, and acquisitions 18,878 9,986 ------------------------------------ PBO at December 31 $ 130,175 $ 100,600 ====================================
The change in the fair value of plan assets was as follows:
2000 1999 ------------------------------------ (In Thousands) Fair value of plan assets at January 1 $ 145,863 $ 120,898 Actual return on plan assets 9,249 17,934 Benefits paid (5,344) (4,919) Acquisitions and other 37,498 11,950 ------------------------------------ Fair value of plan assets at December 31 $ 187,266 $ 145,863 ====================================
Postretirement Benefits Other Than Pensions The Company has life, medical, supplemental major medical, and dental plans for certain retired employees and agents. Most plans are contributory, with retiree contributions adjusted annually to limit employer contributions to predetermined amounts. The Company has reserved the right to change or eliminate these benefits at any time. F-32 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 7. Benefit Plans (continued) 7.2 Postretirement Benefits Other Than Pensions (continued) The life plans are insured through December 31, 1999. A portion of the retiree medical and dental plans is funded through a voluntary employees' beneficiary association ("VEBA"); the remainder is unfunded and self-insured. All of the retiree medical and dental plans' assets held in the VEBA were invested in readily marketable securities at its most recent balance sheet date. Postretirement benefit expense in 2000, 1999, and 1998 was $35,000, $254,000, and $60,000, respectively. The accrued liability for postretirement benefits was $20.5 million and $18.8 million at December 31, 2000, 1999, and 1998, respectively. These liabilities were discounted at the same rates used for the pension plans. 8. Derivative Financial Instruments 8.1 Use of Derivative Financial Instruments The Company's use of derivative financial instruments is generally limited to reducing its exposure to interest rate and currency exchange risk. The Company uses interest rate and currency swap agreements and options to enter into interest rate swap agreements. The Company accounts for these derivative and financial instruments as hedges. Hedge accounting requires a high correlation between changes in fair values or cash flows of the derivative financial instrument and the specific item being hedged, both at inception and throughout the life of the hedge. 8.2 Interest Rate and Currency Swap Agreements Interest rate swap agreements are used to convert specific investment securities from a floating to a fixed rate basis, or vice versa, and to hedge against the risk of declining interest rates on anticipated security purchases. Currency swap agreements are used to convert cash flows from specific investment securities denominated in foreign currencies into U.S. dollars at specific exchange rates and to hedge against currency rate fluctuation on anticipated security purchases. F-33 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. Derivative Financial Instruments (continued) 8.2 Interest Rate and Currency Swap Agreements (continued) The difference between amounts paid and received on swap agreements is recorded on an accrual basis as an adjustment to net investment income or interest expense, as appropriate, over the periods covered by the agreements. The related amount payable to or receivable from counterparties is included in other liabilities or assets. The fair values of swap agreements are recognized in the consolidated balance sheets if the hedge investments are carried at fair value or if they hedge anticipated purchases of such investments. In this event, changes in the fair value of a swap agreement are reported in net unrealized gains on securities included in other accumulated comprehensive income in shareholders' equity, consistent with the treatment of the related investment security. For swap agreements hedging anticipated investment purchases, the net swap settlement amount or unrealized gain or loss is deferred and included in the measurement of the anticipated transaction when it occurs. Swap agreements generally have terms of two to ten years. Any gain or loss from early termination of a swap agreement is deferred and amortized into income over the remaining term of the related investment. If the underlying investment is extinguished or sold, any related gain or loss on swap agreements is recognized in income. F-34 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. Derivative Financial Instruments (continued) 8.2 Interest Rate and Currency Swap Agreements (continued) Interest rate and currency swap agreements related to investment securities at December 31 were as follows:
2000 1999 --------------------------- (Dollars in Millions) Interest rate swap agreements to receive fixed rate: Notional amount $ 160 $ 160 Average receive rate 6.74% 6.73% Average pay rate 6.94% 6.55% Currency swap agreements (receive U.S. dollars/pay Canadian dollars): Notional amount (in U.S. dollars) $ 74 $ 124 Average exchange rate 1.43 1.50 Currency swap agreements (receive U.S. dollars/pay Australian dollars): Notional amount (in U.S. dollars) $ 23 $ 23 Average exchange rate 1.85 0.65
8.3 Swaptions Options to enter into interest rate swap agreements are used to limit the Company's exposure to reduced spreads between investment yields and interest crediting rates should interest rates decline significantly over prolonged periods. During such periods, the spread between investment yields and interest crediting rates may be reduced as a result of certain limitations on the Company's ability to manage interest crediting rates. Call swaptions allow the Company to enter into interest rate swap agreements to receive fixed rates and pay lower floating rates, effectively increasing the spread between investment yields and interest crediting rates. During prolonged periods of increasing interest rates, the spread between investment yields and interest crediting rates may be reduced if the Company decides to increase interest crediting rates to limit surrenders. Put swaptions, which allow the Company to enter into interest rate swap agreements to pay fixed rates and receive higher floating rates, effectively maintain the spread between investment yields and interest crediting rates during such periods. F-35 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. Derivative Financial Instruments (continued) 8.3 Swaptions (continued) Premiums paid to purchase swaptions are included in investments and are amortized to net investment income over the exercise period of the swaptions. If a swaption is terminated, any gain is deferred and amortized to insurance and annuity benefits over the expected life of the insurance and annuity contracts and any unamortized premium is charged to income. If a swaption ceases to be an effective hedge, any related gain or loss is recognized in income. Swaptions at December 31 were as follows:
2000 1999 ------------------------------ (Dollars in Millions) Call swaptions: Notional amount $ 723 $ 3,780 Average strike rate 5.00% 4.52% Put swaptions: Notional amount $ 790 $ 2,140 Average strike rate 8.70% 8.60%
8.4 Credit and Market Risk Derivative financial instruments expose the Company to credit risk in the event of non-performance by counterparties. The Company limits this exposure by entering into agreements with counterparties having high credit ratings and by regularly monitoring the ratings. The Company does not expect any counterparty to fail to meet its obligation; however, non-performance would not have a material impact on the Company's consolidated results of operations or financial position. The Company's exposure to market risk is mitigated by the offsetting effects of changes in the value of the agreements and the related items being hedged. F-36 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 9. Fair Value of Financial Instruments Carrying amounts and fair values for certain of the Company's financial instruments at December 31 are presented below. Care should be exercised in drawing conclusions based on fair value, since (1) the fair values presented do not include the value associated with all the Company's assets and liabilities, and (2) the reporting of investments at fair value without a corresponding evaluation of related policyholders liabilities can be misinterpreted.
2000 1999 Fair Carrying Fair Carrying Value Amount Value Amount ---------------------------------------------------------------- (In millions) Assets Fixed maturity and equity securities $ 27,406 $ 27,406 $ 27,266 $ 27,266 Mortgage loans on real estate 2,090 2,084 1,829 1,919 Policy loans 1,357 1,297 1,205 1,235 Short-term investments 140 140 124 124 Assets held in separate accounts 22,226 22,226 23,232 23,232 Liabilities Insurance investment contracts 25,038 25,328 24,099 25,917 Liabilities related to separate accounting 22,226 22,226 23,232 23,232
The following methods and assumptions were used to estimate the fair value of financial instruments: Fixed Maturity and Equity Securities Fair values of fixed maturity and equity securities were based on quoted market prices, where available. For investments not actively traded, fair values were estimated using values obtained from independent pricing services or, in the case of some private placements, by discounting expected future cash flows using a current market rate applicable to yield, credit quality, and average life of investments. F-37 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 9. Fair Value of Financial Instruments (continued) Mortgage Loans on Real Estate Fair value of mortgage loans was estimated primarily using discounted cash flows, based on contractual maturities and risk-adjusted discount rates. Policy Loans Fair value of policy loans was estimated using discounted cash flows and actuarially determined assumptions, incorporating market rates. Investment in Parent Company The fair value of the investment in Parent Company is based on quoted market prices of American General Corporation common stock. Assets and Liabilities Related to Separate Accounts The fair value of Separate Account assets and liabilities was based on quoted net asset value per share of the underlying mutual funds. Derivative Financial Instruments If the Company elected to terminate the interest rate swaps, they would have paid $-0- million and $4.7 million at December 31, 2000 and 1999, respectively, and received $11.4 million and $2.3 million at December 31, 2000 and 1999. These fair values were estimated using cash flows discounted at current market rates. Insurance Investment Contracts Fair value of insurance investment contracts was estimated using cash flows discounted at market interest rates. F-38 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 9. Fair Value of Financial Instruments (continued) Indebtedness From Affiliates Indebtedness from affiliates is composed of accounts receivable and notes receivable from affiliates. Due to the short-term nature of accounts receivable, fair value is assumed to equal carrying value. Fair value of notes receivable was estimated using discounted cash flows based on contractual maturities and discount rates that were based on U.S. Treasury rates for similar maturity ranges. 10. Dividends Paid American General Life Insurance Company paid $251 million, $187 million, and $244 million, in dividends on common stock to AGC Life Insurance Company in 2000, 1999, and 1998, respectively. The Company also paid $680 thousand per year in dividends on preferred stock to an affiliate, The Franklin Life Insurance Company, in 2000, 1999, and 1998. 11. Restrictions, Commitments, and Contingencies The Company and its insurance subsidiaries are restricted by state insurance laws as to the amounts they may pay as dividends without prior approval from their respective state insurance departments. At December 31, 2000, approximately $3.1 billion of consolidated shareholder's equity represents net assets of the Company, which cannot be transferred, in the form of dividends, loans, or advances to the Parent Company. Approximately $2.3 billion of consolidated shareholders' equity is similarly restricted as to transfer from its subsidiaries to the Company. Generally, the net assets of the Company's subsidiaries available for transfer to the Parent are limited to the amounts that the subsidiaries' net assets, as determined in accordance with statutory accounting practices, exceed minimum statutory capital requirements. However, payments of such amounts as dividends may be subject to approval by regulatory authorities and are generally limited to the greater of 10% of policyholders' surplus or the previous year's statutory net gain from operations. The Company has various leases, substantially all of which are for office space and facilities. Rentals under financing leases, contingent rentals, and future minimum rental commitments and rental expense under operating leases are not material. F-39 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 11. Restrictions, Commitments, and Contingencies (continued) In recent years, various life insurance companies have been named as defendants in class action lawsuits relating to life insurance pricing and sales practices, and a number of these lawsuits have resulted in substantial settlements. On December 16, 1998, American General Corporation announced that certain of its life insurance subsidiaries had entered into agreements to resolve all pending market conduct class action lawsuits. In conjunction with the proposed settlements, the Company recorded a charge of $97.1 million ($63.1 million after-tax) in the fourth quarter of 1998. The charge covered the cost of policyholder benefits and other anticipated expenses resulting from the proposed settlements, as well as other administrative and legal costs. On December 31, 1998, the Company entered into an agreement with the Parent Company whereby the Company assigned, and the Parent Company assumed, $80.1 million of the liabilities of the Company related to the proposed resolution. The liabilities of American General Life Insurance Company of New York, which totaled $17.0 million, were not assumed by the Parent Company. As consideration for the assumption of the liabilities, the Company paid the Parent Company an amount equal to the liabilities recorded with respect to the proposed resolution of the litigation. As of December 31, 2000, the Company has a remaining market conduct litigation liability of $6.3 million recorded. The Company is party to various other lawsuits and proceedings arising in the ordinary course of business. These lawsuits and proceedings include certain class action claims and claims filed by individuals who have excluded themselves from settlement of class action lawsuits relating to life insurance pricing and sales practices. In addition, many of these proceedings are pending in jurisdictions that permit damage awards disproportionate to the actual economic damages alleged to have been incurred. Based upon information presently available, the Company believes that the total amounts that will ultimately be paid, if any, arising from these lawsuits and proceedings will not have a material adverse effect on the Company's results of operations and financial position. However, it should be noted that the frequency of large damage awards, including large punitive damage awards, that bear little or no relation to actual economic damages incurred by plaintiffs in some jurisdictions continues to create the potential for an unpredictable judgment in any given suit. F-40 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 11. Restrictions, Commitments, and Contingencies (continued) Insurance companies that are under regulatory supervision result in assessments by state guaranty funds to cover losses to policyholders of insolvent or rehabilitated insurance companies. Those mandatory assessments may be partially recovered through a reduction in future premium taxes in certain states. At December 31, 2000 and 1999, the Company has accrued $3.8 million and $8.6 million, respectively, for guaranty fund assessments, net of $-0- million and $3.4 million, respectively, of premium tax deductions. The Company has recorded receivables of $5.9 million and $4.4 million at December 31, 2000 and 1999, respectively, for expected recoveries against the payment of future premium taxes. Expenses incurred for guaranty fund assessments were $6.2 million, $2.1 million, and $3.6 million, in 2000, 1999, and 1998, respectively. F-41 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 12. Reinsurance Reinsurance transactions for the years ended December 31, 2000, 1999, and 1998 were as follows:
Ceded to Assumed Percentage Gross Other From Other of Amount Amount Companies Companies Net Amount Assumed to Net ----------------------------------------------------------------------------------- (In Thousands) December 31, 2000 Life insurance in force $ 53,258,777 $ 21,254,765 $ 401,854 $ 32,405,866 1.24% ==================================================================== Premiums: Life insurance and annuities 138,418 77,566 810 61,662 1.31% Accident and health insurance 877 127 - 750 0.00% -------------------------------------------------------------------- Total premiums $ 139,295 $ 77,693 $ 810 $ 62,412 1.30% ==================================================================== December 31, 1999 Life insurance in force $ 50,060,334 $ 17,056,734 $ 524,062 $ 33,527,662 1.56% ==================================================================== Premiums: Life insurance and annuities $ 101,900 $ 49,530 $ 252 $ 52,622 0.48% Accident and health insurance 977 84 - 893 0.00% -------------------------------------------------------------------- Total premiums $ 102,877 $ 49,614 $ 252 $ 53,515 0.47% ==================================================================== December 31, 1998 Life insurance in force $ 46,057,031 $ 13,288,183 $ 629,791 $ 33,398,639 1.89% ==================================================================== Premiums: Life insurance and annuities $ 90,298 $ 42,235 $ 117 $ 48,180 0.24% Accident and health insurance 1,134 87 - 1,047 0.00% -------------------------------------------------------------------- Total premiums $ 91,432 $ 42,322 $ 117 $ 49,227 0.24% ====================================================================
Reinsurance recoverable on paid losses was approximately $12.2 million, $8.0 million, and $7.7 million, at December 31, 2000, 1999, and 1998, respectively. Reinsurance recoverable on unpaid losses was approximately $3.2 million, $10.5 million, and $2.5 million, at December 31, 2000, 1999, and 1998, respectively. F-42 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 13. Division Operations 13.1 Nature of Operations The Company manages its business operation through two divisions, which are based on products and services offered. Retirement Services The Retirement Services Division provides tax-deferred retirement annuities and employer-sponsored retirement plans to employees of educational, health care, public sector, and other not-for-profit organizations marketed nationwide through exclusive sales representatives. Life Insurance The Life Insurance division provides traditional, interest-sensitive, and variable life insurance and annuities to a broad spectrum of customers through multiple distribution channels focused on specific market segments. F-43 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 13. Division Operations 13.2 Division Results Results of each division exclude goodwill amortization, net realized investment gains, and non-recurring items. Division earnings information was as follows:
Revenues Income Before Taxes Earnings ------------------------------------------------------------------------------------------------ 2000 1999 1998 2000 1999 1998 2000 1999 1998 ------------------------------------------------------------------------------------------------ (In Millions) Retirement Services $ 2,215 $ 2,088 $ 1,987 $ 702 $ 567 $ 469 $ 463 $ 374 $ 315 Life Insurance 942 883 870 199 191 162 143 123 107 ------------------------------------------------------------------------------------------------ Total divisions 3,157 2,971 2,857 901 758 631 606 497 422 Goodwill amortization - - - (1) (2) (2) (1) (2) (2) RG (L) (98) 5 (34) (98) 5 (34) (64) 3 (22) Nonrecurring items - - - - - (125)(a) - - (81)(a) ------------------------------------------------------------------------------------------------ Total consolidated $ 3,059 $ 2,976 $ 2,823 $ 802 $ 761 $ 470 $ 541 $ 498 $ 317 ================================================================================================
(a) Includes $97 million pretax ($63 million after-tax) in litigation settlements and $28 million pretax ($18 million after-tax) in Year 2000 costs. Division balance sheet information was as follows:
Assets Liabilities ----------------------------------------------------------------- December 31 ----------------------------------------------------------------- In millions 2000 1999 2000 1999 ----------------------------------------------------------------- Retirement Services $ 46,356 $ 47,323 $ 43,970 $ 45,359 Life Insurance 10,685 9,837 9,610 8,955 ----------------------------------------------------------------- Total consolidated $ 57,041 $ 57,160 $ 53,580 $ 54,314 =================================================================
F-44 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 14. Subsequent Event On March 11, 2001, American General Corporation entered into a definitive merger agreement with Prudential plc. Under the agreement, American General Corporation's shareholders will exchange shares of American General Corporation's common stock for 3.6622 shares of Prudential plc common stock. The transaction, which is subject to shareholder and regulatory approvals, is expected to be completed in third quarter 2001. F-45 INDEX OF WORDS AND PHRASES This index should help you to locate more information about some of the terms and phrases used in this prospectus.
PAGE TO SEE IN THIS DEFINED TERM PROSPECTUS ------------ ---------- accumulation value........................... 6 Administrative Center........................ 1,4 AGLC......................................... 56 AGL.......................................... 34 amount at risk............................... 8 automatic rebalancing........................ 6 base coverage................................ 14, 45 basis........................................ 36 beneficiary.................................. 42 cash surrender value......................... 23 cash value accumulation test................. 15 close of business............................ 43 Code......................................... 35 contingent insured........................... 4 cost of insurance rates...................... 43 daily charge................................. 7 date of issue................................ 44 death benefit................................ 14 declared fixed interest account option....... 46 dollar cost averaging........................ 5 full surrender............................... 23 Fund, Funds.................................. 2 guideline premium test....................... 15 investment option............................ 1 lapse........................................ 16 last surviving contingent insured............ 4 loan, loan interest.......................... 24 maturity, maturity date...................... 25 modified endowment contract.................. 35 monthly deduction day........................ 44 monthly guarantee premium.................... 17 monthly insurance charge..................... 8 Mutual Fund.................................. 2
58
PAGE TO SEE IN THIS DEFINED TERM PROSPECTUS ------------ ---------- Option 1, Option 2........................... 14 planned periodic premium..................... 16 Policy....................................... 1 Policy loan.................................. 24 Policy month, year........................... 44 premium payments............................. 5 reinstate, reinstatement..................... 16 SEC.......................................... 2 Separate Account............................. 1 Separate Account VL-R........................ 34 seven-pay test............................... 35 specified amount............................. 14 surrender.................................... 23 telephone transactions....................... 28 transfers.................................... 17 uninsurable.................................. 26 valuation date, period....................... 43 variable investment option................... 1
We have filed a registration statement relating to Separate Account VL-R and the Policy with the SEC. The registration statement, which is required by the Securities Act of 1933, includes additional information that is not required in this prospectus. If you would like the additional information, you may obtain it from the SEC's Website at http://www.sec.gov or main office in Washington, D.C. You will have to pay a fee for the material. You should rely only on the information contained in this prospectus or sales materials we have approved. We have not authorized anyone to provide you with information that is different. The policies are not available in all states. This prospectus is not an offer in any state to any person if the offer would be unlawful. 59 PART II (OTHER INFORMATION) UNDERTAKING TO FILE REPORTS Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with the Securities and Exchange Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore, or hereafter duly adopted pursuant to authority conferred in that section. RULE 484 UNDERTAKING American General Life Insurance Company's Bylaws provide in Article VII for indemnification of directors, officers and employees of the Company. Insofar as indemnification for liability arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A) OF THE INVESTMENT COMPANY ACT OF 1940 American General Life Insurance Company hereby represents that the fees and charges deducted under the Policy, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and risks assumed by American General Life Insurance Company. II-1 CONTENTS OF REGISTRATION STATEMENT This Registration Statement contains the following papers and documents: The facing sheet. Cross-Reference Table. Prospectus, consisting of 59 pages of text, plus 48 financial pages of American General Life Insurance Company. The undertaking to file reports. The Rule 484 undertaking. Representation pursuant to Section 26(e)(2)(A). The signatures. Written Consents of the following persons: (a) Pauletta P. Cohn, Deputy General Counsel of American General Life Companies (b) American General Life Insurance Company's Actuary (c) Independent Auditors The following exhibits: 1. Exhibits required by Article IX, paragraph A of Form N-8B-2: (1)(a) Resolutions of Board of Directors of American General Life Insurance Company authorizing the establishment of Separate Account VL-R. (1) (b) Resolutions of Board of Directors of American General Life Insurance Company authorizing the establishment of variable life insurance standards of suitability and conduct. (1) (2) Not applicable. (3)(a) Form of Distribution Agreement between American General Life Insurance Company and American General Distributors, Inc. (16) (b)(i) Form of Selling Group Agreement. (16) (ii) Form of Selling Group Agreement, Schedule A (identifying the policy offered) and Schedule B (describing the commissions paid). (14) (c) Schedule of Commissions (incorporated by reference from the text included under the heading "Distribution of the Policies" in the prospectus that is filed as part of this Registration Statement). II-2 (4) Not applicable. (5) Specimen form of the "Platinum Investor/SM/ Survivor II" Last Survivor Flexible Premium Variable Universal Life Insurance Policy (Policy Form No. 01206). (Filed herewith) (6)(a) Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective December 31, 1991. (2) (b) Bylaws of American General Life Insurance Company, adopted January 22, 1992. (3) (c) Amendment to the Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective July 13, 1995. (5) (7) Not applicable. (8)(a)(i) Form of Participation Agreement by and Among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated. (6) (ii) Form of Amendment Four to Participation Agreement by and Among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated. (Filed herewith) (b)(i) Form of Participation Agreement by and between The Variable Annuity Life Insurance Company, American General Series Portfolio Company, American General Securities Incorporated and American General Life Insurance Company. (10) (ii) Amendment One to Participation Agreement by and between The Variable Annuity Life Insurance Company, American General Series Portfolio Company, American General Securities Incorporated and American General Life Insurance Company dated as of July 21, 1998. (8) (iii) Form of Amendment Two to Participation Agreement by and between The Variable Annuity Life Insurance Company, American General Series Portfolio Company, American General Securities Incorporated and American General Life Insurance Company. (15) (iv) Form of Amendment Three to Participation Agreement by and between The Variable Annuity Life Insurance Company, American General Series II-3 Portfolio Company, American General Securities Incorporated and American General Life Insurance Company. (16) (c)(i) Form of Participation Agreement Between American General Life Insurance Company and Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. (6) (ii) Amendment One to Participation Agreement by and among American General Life Insurance Company, Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. dated December 1, 1998. (8) (d)(i) Form of Participation Agreement Among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (6) (ii) Form of Amendment Five to Participation Agreement by and among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (15) (iii) Form of Amendment Six to Participation Agreement by and among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (Filed herewith) (e)(i) Participation Agreement among Morgan Stanley Universal Funds, Inc., Morgan Stanley Asset Management Inc., Miller Anderson & Sherrerd LLP, Van Kampen American Capital Distributors, Inc., American General Life Insurance Company and American General Securities Incorporated. (9) (ii) Amendment Number 1 to Participation Agreement among Morgan Stanley Universal Funds, Inc., Morgan Stanley Asset Management Inc., Miller Anderson & Sherrerd LLP, Van Kampen American Capital Distributors, Inc., American General Life Insurance Company and American General Securities Incorporated. (11) (iii) Form of Amendment Seven to Participation Agreement among Morgan Stanley Universal Funds, Inc., Van Kampen American Capital Distributors, Inc., Morgan Stanley Asset Management Inc., Miller Anderson & Sherrerd, LLP, American General Life Insurance Company and American General Securities Incorporated. (16) (iv) Form of Amendment Eight to Participation Agreement among Morgan Stanley Universal Funds, Inc., Van Kampen American Capital II-4 Distributors, Inc., Morgan Stanley Asset Management Inc., Miller Anderson & Sherrerd, LLP, American General Life Insurance Company and American General Distributors, Inc. (Filed herewith) (f) Form of Participation Agreement Among Putnam Variable Trust, Putnam Mutual Funds Corp., and American General Life Insurance Company. (6) (g)(i) Form of Participation Agreement Among American General Life Insurance Company, American General Securities Incorporated, SAFECO Resources Series Trust and SAFECO Securities, Inc. (6) (ii) Form of Amendment Four to Participation Agreement among American General Life Insurance Company, American General Securities Incorporated, SAFECO Resource Series Trust and SAFECO Securities, Inc. (16) (iii) Form of Amendment Five to Participation Agreement among American General Life Insurance Company, American General Securities Incorporated, SAFECO Resource Series Trust and SAFECO Securities, Inc. (Filed herewith) (h)(i) Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen American Capital Life Investment Trust, Van Kampen American Capital Asset Management, Inc., and Van Kampen American Capital Distributors, Inc. (9) (ii) Amendment One to Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen American Capital Life Investment Trust, Van Kampen American Capital Asset Management, Inc., and Van Kampen American Capital Distributors, Inc. (8) (iii) Form of Amendment Six to Amended and Restated Participation Agreement among Van Kampen Life Investment Trust, Van Kampen Funds Inc., Van Kampen Asset Management Inc., American General Life Insurance Company and American General Securities Incorporated. (16) (iv) Form of Amendment Seven to Amended and Restated Participation Agreement among Van Kampen Life Investment Trust, Van Kampen Funds Inc., Van Kampen Asset Management Inc., American General Life Insurance Company and American General Securities Incorporated. (Filed herewith) II-5 (i) Form of Administrative Services Agreement between American General Life Insurance Company and fund distributor. (5) (j) Form of Administrative Services Agreement between American General Life Insurance Company, Miller Anderson & Sherrard LLP and Morgan Stanley Dean Witter Investment Management Inc. (14) (k) Form of Administrative Services Agreement between American General Life Insurance Company and SAFECO Asset Management Company. (14) (l) Form of Administrative Services Agreement between Van Kampen Asset Management Inc. and American General Life Insurance Company dated January 1, 2000. (13) (m) Form of Services Agreement dated July 31, 1975, (limited to introduction and first two recitals, and sections 1-3) among various affiliates of American General Corporation, including American General Life Insurance Company and American General Life Companies. (7) (n) Administrative Services Agreement dated as of June 1, 1998, between American General Life Insurance Company and AIM Advisors, Inc. (4) (o)(i) Administrative Services Agreement dated as of August 11, 1998, between American General Life Insurance Company and The Dreyfus Corporation. (4) (ii) Amendment to Administrative Services Agreement dated as of August 11, 1998, between American General Life Insurance Company and the Dreyfus Corporation effective as of December 1, 1998. (4) (p)(i) Form of Participation Agreement by and between American General Life Insurance Company, Ayco Asset Management and Ayco Series Trust. (15) (ii) Form of Amendment No. 1 to Participation Agreement by and between American General Life Insurance Company, Ayco Asset Management and Ayco Series Trust. (Filed herewith) (q)(i) Form of Amended and Restated Participation Agreement by and between Variable Insurance Products Fund, Fidelity Distributors Corporation and American General Life Insurance Company. (15) (ii) Form of Amendment No. 1 to Amended and Restated Participation Agreement by and between Variable Insurance Products Fund, Fidelity II-6 Distributors Corporation and American General Life Insurance Company. (Filed herewith) (r)(i) Form of Amended and Restated Participation Agreement by and between Variable Insurance Products Fund II, Fidelity Distributors Corporation and American General Life Insurance Company. (15) (ii) Form of Amendment No. 1 to Amended and Restated Participation Agreement by and between Variable Insurance Products Fund II, Fidelity Distributors Corporation and American General Life Insurance Company. (Filed herewith) (s) Form of Participation Agreement by and between American General Life Insurance Company and J. P. Morgan Series Trust II. (15) (t)(i) Form of Fund Participation Agreement by and between American General Life Insurance Company and Janus Aspen Series. (15) (ii) Form of Amendment No. 1 to Fund Participation Agreement by and between American General Life Insurance Company and Janus Aspen Series. (Filed herewith) (u) Form of Participation Agreement by and between American General Life Insurance Company, PIMCO Variable Insurance Trust and PIMCO Funds Distributor LLC. (15) (v) Form of Participation Agreement by and between Vanguard Variable Insurance Funds, The Vanguard Group, Inc., Vanguard Marketing Corporation and American General Life Insurance Company. (15) (w) Form of Participation Agreement by and between American General Life Insurance Company, Warburg Pincus Trust, Credit Suisse Asset Management, LLC and Credit Suisse Asset Management Securities, Inc. (15) (x)(i) Form of Administrative Services Agreement by and between Ayco Asset Management and American General Life Insurance Company. (15) (ii) Form of Amendment No. 1 to Administrative Services Agreement by and between Ayco Asset Management and American General Life Insurance Company. (Filed herewith) (y) Form of Service Contract by and between Fidelity Distributors Corporation and American General Life Insurance Company. (15) II-7 (z) Form of Service Agreement by and between Fidelity Investments Institutional Operations Company, Inc. and American General Life Insurance Company. (15) (aa) Form of Administrative Services Agreement by and between American General Life Insurance Company and Morgan Guaranty Trust Company of New York. (15) (bb) Form of Distribution and Shareholder Services Agreement by and between Janus Distributors, Inc. and American General Life Insurance Company. (15) (cc) Form of Services Agreement by and between American General Life Insurance Company and Pacific Investment Management, LLC. (15) (dd) Form of PIMCO Variable Insurance Trust Services Agreement by and between American General Life Insurance Company and PIMCO Variable Insurance Trust. (15) (ee) Form of Administrative Services Agreement by and between American General Life Insurance Company and Credit Suisse Asset Management, LLC. (15) (ff) Form of Shareholder Services Agreement by and between American General Life Insurance Company and American Century Investment Management, Inc. (19) (gg) Sales Agreement by and between American General Life Insurance Company, Neuberger & Berman Advisors Management Trust and Neuberger & Berman Management Incorporated. (19) (hh) Form of Assignment and Modification Agreement by and between Neuberger & Berman Management Incorporated and American General Life Insurance Company. (19) (ii) Form of Administrative Services Agreement by and between American General Life Insurance Company and Neuberger & Berman Management Incorporated. (19) (9) Not applicable. (10)(a) Specimen form of Multiple Insured Life Insurance Application- Part A. (14) II-8 (b) Specimen form of Multiple Insured Life Insurance Application - Part B. (14) (c) Specimen form of Medical Exam Form Life Insurance Application. (14) (d) Specimen form of product specific Service Request Form. (Filed herewith) (e) Description of American General Life Insurance Company's Issuance, Transfer and Redemption Procedures for Variable Universal Life Insurance Policies Pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940. (18) (f) Specimen form of Variable Universal Life Insurance Supplemental Application. (Filed herewith) (11) Not applicable. Rule 17j(1)(c)(i) of the Investment Company Act of 1940 specifically exempts the Separate Account from adopting a code of ethics. 2. Other Exhibits 2(a) Opinion and Consent of Pauletta P. Cohn, Deputy General Counsel of American General Life Companies. (Filed herewith) 2(b) Opinion and Consent of American General Life Insurance Company's actuary. (Filed herewith) 3 Not applicable. 4 Not applicable. 6 Consent of Independent Auditors. (Filed herewith) 7 Powers of Attorney. (20) ------------ (1) Incorporated by reference to initial filing of Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R filed on December 18, 1997. (2) Incorporated by reference to initial filing of Form N-4 Registration Statement (File No. 33-43390) of American General Life Insurance Company Separate Account D filed on October 16, 1991. (3) Incorporated by reference to Post-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 33-43390) of American General Life Insurance Company Separate Account D filed on April 30, 1992. II-9 (4) Incorporated by reference to initial filing of Form N-4 Registration Statement (File No. 333-70667) of American General Life Insurance Company Separate Account D filed on January 15, 1999. (5) Incorporated by reference to Pre-Effective Amendment No. 3 to Form S-6 Registration Statement (File No. 333-53909) of American General Life Insurance Company Separate Account VL-R filed on August 19, 1998. (6) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R filed on March 23, 1998. (7) Incorporated by reference to Pre-Effective Amendment No. 23 to Form N-4 Registration Statement (File No. 33-44745) of American General Life Insurance Company Separate Account A filed on April 24, 1998. (8) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-70667) of American General Life Insurance Company Separate Account D filed on March 18, 1999. (9) Incorporated by reference to Post-Effective Amendment No. 12 to Form N-4 Registration Statement (File No. 33-43390) of American General Life Insurance Company Separate Account D filed on April 30, 1997. (10) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-40637) of American General Life Insurance Company Separate Account D filed on February 12, 1998. (11) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-80191) of American General Life Insurance Company Separate Account VL-R filed on August 25, 1999. (12) Incorporated by reference to initial filing of Form S-6 Registration Statement (File No. 333-90787) of American General Life Insurance Company Separate Account VL-R filed on November 12, 1999. (13) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-87307) of American General Life Insurance Company Separate Account VL-R filed on January 20, 2000. (14) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-90787) of American General Life Insurance Company Separate Account VL-R filed on February 4, 2000. II-10 (15) Incorporated by reference to Post-Effective Amendment No. 2 to Form S-6 Registration Statement (File No. 333-80191) of American General Life Insurance Company Separate Account VL-R filed on September 20, 2000. (16) Incorporated by reference to Post-Effective Amendment No. 4 to Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R filed on October 11, 2000. (17) Incorporated by reference to Post-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-90787) of American General Life Insurance Company Separate Account VL-R filed on October 18, 2000. (18) Incorporated by reference to Post-Effective Amendment No. 2 to Form S-6 Registration Statement (File No. 333-89897) of American General Life Insurance Company Separate Account VL-R filed on April 10, 2001. (19) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-89897) of American General Life Insurance Company Separate Account VL-R filed on January 21, 2000. (20) Incorporated by reference to initial filing of Form S-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on July 16, 2001. II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant, American General Life Insurance Company Separate Account VL-R, has duly caused this amended registration statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the city of Houston, and state of Texas, on the 9th day of October, 2001. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R (Registrant) BY: AMERICAN GENERAL LIFE INSURANCE COMPANY (On behalf of the Registrant and itself) BY: /s/ ROBERT F. HERBERT, JR. --------------------------- Robert F. Herbert, Jr. Senior Vice President, Treasurer and Controller [SEAL] ATTEST: /s/ LAUREN W. JONES -------------------- Lauren W. Jones Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed by the following persons in the capacities and on the dates indicated. RODNEY O. MARTIN, JR.* Director, Chairman and October 9, 2001 ---------------------- Chief Executive Officer (Rodney O. Martin, Jr.) DONALD W. BRITTON* Director October 9, 2001 ------------------ (Donald W. Britton) DAVID L. HERZOG* Director and Chief October 9, 2001 ---------------- Financial Officer (David L. Herzog) Signature Title Date --------- ----- ---- DAVID A. FRAVEL* Director October 9, 2001 ---------------- (David A. Fravel) ROYCE G. IMHOFF, II* Director October 9, 2001 -------------------- (Royce G. Imhoff, II) JOHN V. LAGRASSE* Director October 9, 2001 ----------------- (John V. LaGrasse) GARY D. REDDICK* Director October 9, 2001 ---------------- (Gary D. Reddick) THOMAS M. ZUREK* Director October 9, 2001 ---------------- (Thomas M. Zurek) */s/ ROBERT F. HERBERT, JR. ---------------------------- By: Robert F. Herbert, Jr. Attorney-in-Fact EXHIBIT INDEX: The following exhibits: 1. Exhibits required by Article IX, paragraph A of Form N-8B-2: (5) Specimen form of the "Platinum Investor/SM/ Survivor II" Last Survivor Flexible Premium Variable Universal Life Insurance Policy (Policy Form No. 01206). (8)(a)(ii) Form of Amendment Four to Participation Agreement by and Among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated. (8)(d)(iii) Form of Amendment Six to Participation Agreement by and among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (8)(e)(iv) Form of Amendment Eight to Participation Agreement among Morgan Stanley Universal Funds, Inc., Van Kampen American Capital Distributors, Inc., Morgan Stanley Asset Management Inc., Miller Anderson & Sherrerd, LLP, American General Life Insurance Company and American General Securities Incorporated. (8)(g)(iii) Form of Amendment Five to Participation Agreement among American General Life Insurance Company, American General Securities Incorporated, SAFECO Resource Series Trust and SAFECO Securities, Inc. (8)(h)(iv) Form of Amendment Seven to Amended and Restated Participation Agreement among Van Kampen Life Investment Trust, Van Kampen Funds Inc., Van Kampen Asset Management Inc., American General Life Insurance Company and American General Securities Incorporated. (8)(p)(ii) Form of Amendment No. 1 to Participation Agreement by and between American General Life Insurance Company, Ayco Asset Management and Ayco Series Trust. (8)(q)(ii) Form of Amendment No. 1 to Amended and Restated Participation Agreement by and between Variable Insurance Products Fund, Fidelity Distributors Corporation and American General Life Insurance Company. E-1 (8)(r)(ii) Form of Amendment No. 1 to Amended and Restated Participation Agreement by and between Variable Insurance Products Fund II, Fidelity Distributors Corporation and American General Life Insurance Company. (8)(t)(ii) Form of Amendment No. 1 to Fund Participation Agreement by and between American General Life Insurance Company and Janus Aspen Series. (8)(x)(ii) Form of Amendment No. 1 to Administrative Services Agreement by and between Ayco Asset Management and American General Life Insurance Company. (10)(d) Specimen form of product specific Service Request Form. (10)(f) Specimen form of Variable Universal Life Insurance Supplemental Application. 2. Other Exhibits 2(a) Opinion and Consent of Pauletta P. Cohn, Deputy General Counsel of American General Life Companies. 2(b) Opinion and Consent of American General Life Insurance Company's actuary. 6 Consent of Independent Auditors. E-2 EX-5 4 dex5.txt SPECIMEN FORM OF POLICY EXHIBIT (5) 07/10/01 AMERICAN GENERAL LIFE Insurance Company Home Office: Houston, Texas 2727-A Allen Parkway POLICY NUMBER: [AMERICAN GENERAL LOGO] P.O. Box 4880 A STOCK COMPANY Houston, Texas 77210 (888) 325-9315 Subsidiary of American General Corporation WE WILL PAY THE DEATH BENEFIT PROCEEDS to the designated Beneficiary if the last surviving Contingent Insured named on the Policy Schedule dies prior to the Maturity Date and while this policy is in force. Payment will be made after We receive due proof of the deaths of both Contingent Insureds, and will be subject to the terms of this policy. The method for determining the amount payable is stated in the Death Benefit Proceeds provision. WE WILL PAY THE CASH SURRENDER VALUE of this policy to the Owner on the Maturity Date if one or both Contingent Insureds are living on that date. NO BENEFITS UNDER THE BASIC POLICY WILL BE PAID UPON THE DEATH OF THE FIRST CONTINGENT INSURED. THE AMOUNT OR DURATION OF THE DEATH BENEFIT PROCEEDS AND THE ACCUMULATION VALUES PROVIDED BY THIS POLICY WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. ACCUMULATION VALUES MAY INCREASE OR DECREASE. The consideration for this policy is the application and payment of the first premium. The first premium must be paid on or before delivery of this policy. This is a JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. An adjustable Death Benefit is payable upon the LAST SURVIVING Contingent Insured's death prior to the Maturity Date. Investment results are reflected in policy benefits. ACCUMULATION VALUES are flexible and will be based on the amount and frequency of premiums paid and the investment results of the Separate Account. NONPARTICIPATING - NOT ELIGIBLE FOR DIVIDENDS. NOTICE OF TEN DAY RIGHT TO EXAMINE POLICY You may return this policy within 10 days after delivery if You are not satisfied with it for any reason. The policy may be returned to Us or to the registered representative through whom it was purchased. Upon surrender of this policy within the 10 day period, it will be deemed void from the Date of Issue, and We will refund the greater of: (1) any premiums received by Us; or (2) Your Accumulation Value as of the first Valuation Date occurring on or next following the date on which Your request is received plus any charges that have been deducted. SIGNED AT THE HOME OFFICE ON THE DATE OF ISSUE. /s/ Pauletta P. Cohn /s/ Donald W. Britton ---------------------- ---------------------- Secretary President JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY READ YOUR POLICY CAREFULLY 01206 INDEX
Annual Report 27 Last Surviving Contingent Insured 5 Automatic Rebalancing 20 Maturity Date 3 Beneficiary and Proceeds 22 Monthly Administration Fee 15 Cash Surrender Value 14 Monthly Expense Charge 15 Cash Value 14 Monthly Guarantee Premium 16 Changing Your Insurance Policy 8 Owner 5 Change of Ownership or Beneficiary 23 Payment Options 23 Changing the Death Benefit Option 9 Policy Loans 21 Changing the Specified Amount 8 Policy Values 12 Contract 5 Premium Class 2 Cost of Insurance Rate Table 4B Premium Expense Charge 6 Date of Issue 5 Premium Payments 5 Death Benefit and Death Benefit Options 7 Reinstatement 28 Death Benefit Corridor Rates 4A Separate Account 9 Dollar Cost Averaging 19 Specified Amount 8 Exchange Option 28 Suicide 26 First Death, Notification of 5 Surrender Charges 14 General Account 12 Surrender, Full and Partial 17 General Provisions 26 Suspension and Deferral of Grace Period 16 Payments Provision 20 Incontestability 26 Transfer Provision 18 Investment Advisor or Valuation of Assets 10 Investment Objective, Change of 11 Valuation Dates 10 Investments of the Separate Account 10 Valuation Units 10 When This Policy Terminates 27
COMPANY REFERENCE. We, Our, Us, or Company means American General Life Insurance Company.YOU, YOUR. The words You or Your mean the Owner of this policy. HOME OFFICE. Our office at 2727-A Allen Parkway, Houston, Texas 77019; Mailing Address P. O. Box 4880, Houston, Texas 77210-4880. WRITTEN, IN WRITING. A written request or notice in acceptable form and content, which is signed and dated, and received at Our Home Office. PREMIUM CLASS. One or a combination of the following terms will be used to describe the Premium Class for each Contingent Insured: PREFERRED. The term "Preferred" means the cost of insurance is based on the Contingent Insured being a better than average mortality risk. STANDARD. The term "Standard" means "Substandard" or "Rated". This means the cost of insurance is based on the Contingent Insured being an average mortality risk. TOBACCO. The term "Tobacco" means the cost of insurance is based on the Contingent Insured being a user of tobacco. NON-TOBACCO. The term "Non-Tobacco" means the cost of insurance is based on the Contingent Insured being a non-user of tobacco. SPECIAL. The term "Special" means "Substandard" or "Rated". This means an extra amount is being charged due to the health, occupation or avocation of a Contingent Insured. UNINSURABLE. The term "Uninsurable" means the Contingent Insured would not pass the Underwriting requirements for a single life policy. NOTICE This Policy Is A Legal Contract Between The Policy Owner And the Company. 01206 Page 2 POLICY SCHEDULE BASIC POLICY YEARS PAYABLE MONTHLY COST LAST SURVIVOR VARIABLE LIFE 65 SEE PAGE 4B ADDITIONAL BENEFITS PROVIDED BY RIDERS NONE SCHEDULE OF PREMIUMS INITIAL PREMIUM: $1,011.06 PLANNED PERIODIC PREMIUM: $1,011.60 PAYABLE ANNUALLY MONTHLY DEDUCTION DAY: 1ST DAY OF EACH MONTH MONTHLY GUARANTEE PREMIUM (SEE MONTHLY $80.60 GUARANTEE PREMIUM PROVISION THAT GUARANTEES THIS POLICY WILL NOT TERMINATE DURING THE GUARANTEE PERIOD UNDER CERTAIN CIRCUMSTANCES) MINIMUM PARTIAL SURRENDER: $500 MINIMUM VALUE THAT MAY BE RETAINED IN A DIVISION AFTER A PARTIAL SURRENDER OR TRANSFER: $500 MINIMUM DEATH BENEFIT AMOUNT (AFTER A DECREASE IN SPECIFIED AMOUNT): $500,000 DEATH BENEFIT COMPLIANCE TEST: CASH VALUE ACCUMULATION COVERAGE MAY EXPIRE PRIOR TO THE MATURITY DATE SHOWN WHERE EITHER NO PREMIUMS ARE PAID FOLLOWING PAYMENT OF THE INITIAL PREMIUM, OR SUBSEQUENT PREMIUMS ARE INSUFFICIENT TO CONTINUE COVERAGE TO SUCH DATE. POLICY DATA CONTINGENT INSURANCE PREMIUM INSUREDS AGES CLASSES JOHN DOE 35 PREFERRED/NON TOBACCO JIM DOE 35 PREFERRED/NON TOBACCO BASE COVERAGE: $100,000 DEATH BENEFIT OPTION: 1 SUPPLEMENTAL COVERAGE: $0 INITIAL SPECIFIED AMOUNT: $100,000 DATE OF ISSUE JULY 1, 2001 POLICY NUMBER: 0000000000 MATURITY DATE: JULY 1, 2066 THIS IS A (STATE NAME) POLICY 01206 Page 3 POLICY SCHEDULE CONTINUED - POLICY NUMBER 0000000000 MORTALITY AND EXPENSE CHARGES: DEDUCTIONS FROM THE SEPARATE ACCOUNT WILL BE MADE AT AN ANNUAL RATE NOT TO EXCEED THE RATES STATED BELOW. THE ACTUAL DEDUCTION WILL BE MADE ON A DAILY BASIS. POLICY YEARS CURRENT ANNUAL RATE GUARANTEED ANNUAL RATE 1-15 [0.75%] 0.75% 16-30 [0.50%] 0.50% THEREAFTER [0.15%] 0.15% EXPENSE CHARGES: PREMIUM TAX (IF APPLICABLE). DEPENDING ON THE LAWS OF THE JURISDICTION IN WHICH THIS POLICY WAS ISSUED, AND SUBJECT TO FUTURE CHANGES IN RESIDENCE, A PERCENTAGE OF EACH PREMIUM MAY BE DEDUCTED FOR PREMIUM TAX. PREMIUM TAX RATES ARE SUBJECT TO CHANGE. THE PREMIUM TAX RATE FOR THIS POLICY ON THE DATE OF ISSUE IS [0%]. PREMIUM EXPENSE CHARGE: CURRENT GUARANTEED (ADJUSTABLE PREMIUM EXPENSE CHARGE [5.0%] 5.0% PERCENTAGE) MONTHLY ADMINISTRATION FEE: CURRENT GUARANTEED [$10.00] $10.00 MONTHLY EXPENSE CHARGE FOR FIRST FOUR YEARS: [ ] BASIC POLICY CHARGES AND FEES COST OF INSURANCE CHARGES. GUARANTEED MAXIMUM COST OF INSURANCE RATE PER $1,000 OF NET AMOUNT AT RISK ARE SHOWN ON PAGE 4B. SURRENDER CHARGES. SURRENDER CHARGES WILL APPLY IF THIS POLICY IS SURRENDERED OR THE BASE COVERAGE IS REDUCED DURING THE SURRENDER CHARGE PERIOD FOLLOWING THE DATE OF ISSUE. SURRENDER CHARGES WILL ALSO APPLY DURING THE SURRENDER CHARGE PERIOD FOLLOWING AN INCREASE IN BASE COVERAGE. SURRENDER CHARGES APPLICABLE TO THIS POLICY APPEAR ON PAGE 4C 01206 Page 4 DEATH BENEFIT CORRIDOR RATES BASED ON CASH VALUE ACCUMULATION TEST POLICY POLICY YEAR RATE YEAR RATE 1 6.0982 36 1.6787 2 5.8637 37 1.6303 3 5.6385 38 1.5851 4 5.4220 39 1.5425 5 5.2140 40 1.5028 6 5.0142 41 1.4659 7 4.8222 42 1.4317 8 4.6378 43 1.4000 9 4.4607 44 1.3706 10 4.2906 45 1.3434 11 4.1272 46 1.3180 12 3.9703 47 1.2944 13 3.8197 48 1.2726 14 3.6751 49 1.2525 15 3.5363 50 1.2341 16 3.4031 51 1.2174 17 3.2753 52 1.2023 18 3.1527 53 1.1885 19 3.0351 54 1.1759 20 2.9225 55 1.1642 21 2.8146 56 1.1530 22 2.7113 57 1.1423 23 2.6125 58 1.1315 24 2.5179 59 1.1206 25 2.4276 60 1.1089 26 2.3412 61 1.0963 27 2.2588 62 1.0828 28 2.1803 63 1.0684 29 2.1054 64 1.0539 30 2.0342 65 1.0400 31 1.9666 32 1.9026 33 1.8418 34 1.7844 35 1.7301 FOR DEATH BENEFIT CORRIDOR RATES BETWEEN POLICY ANNIVERSARIES: 1. DETERMINE THE DIFFERENCE IN RATES BETWEEN THE TWO ANNIVERSARIES; 2. ADD TO THE EARLIER RATE 1/12 OF THE DIFFERENCE IN RATES FOR EACH MONTH THAT HAS PASSED THE EARLIER POLICY ANNIVERSARY. 01206 Page 4A DEATH BENEFIT CORRIDOR RATES BASED ON GUIDELINE PREMIUM TEST ATTAINED ATTAINED AGE OF AGE OF YOUNGER YOUNGER CONTINGENT CONTINGENT INSURED RATE INSURED RATE 0-40 2.50 60 1.30 41 2.43 61 1.28 42 2.36 62 1.26 43 2.29 63 1.24 44 2.22 64 1.22 45 2.15 65 1.20 46 2.09 66 1.19 47 2.03 67 1.18 48 1.97 68 1.17 49 1.91 69 1.16 50 1.85 70 1.15 51 1.78 71 1.13 52 1.71 72 1.11 53 1.64 73 1.09 54 1.57 74 1.07 55 1.50 75-90 1.05 56 1.46 91 1.04 57 1.42 92 1.03 58 1.38 93 1.02 59 1.34 94 1.01 95+ 1.00 01206 Page 4A TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES PER $1,000 OF NET AMOUNT AT RISK POLICY POLICY YEAR RATE YEAR RATE 1 0.00021 36 0.91157 2 0.00067 37 1.08075 3 0.00121 38 1.26820 4 0.00186 39 1.50766 5 0.00266 40 1.79530 6 0.00360 41 2.13054 7 0.00476 42 2.51400 8 0.00613 43 2.94442 9 0.00775 44 3.42118 10 0.00962 45 3.95359 11 0.01184 46 4.55879 12 0.01443 47 5.25323 13 0.01748 48 6.05602 14 0.02104 49 6.98106 15 0.02522 50 8.01516 16 0.03014 51 9.14987 17 0.03602 52 10.36448 18 0.04311 53 11.65487 19 0.05167 54 13.00037 20 0.06184 55 14.41268 21 0.07386 56 15.89204 22 0.08791 57 17.45991 23 0.10398 58 19.15687 24 0.12221 59 21.05478 25 0.14352 60 23.36818 26 0.16877 61 26.51705 27 0.19882 62 31.35472 28 0.23560 63 39.59522 29 0.28104 64 54.65267 30 0.33649 65 83.33000 31 0.40202 32 0.47841 33 0.56575 34 0.66447 35 0.77774 THE RATES SHOWN ABOVE REPRESENT THE GUARANTEED (MAXIMUM) MONTHLY COST OF INSURANCE FOR EACH $1,000 OF NET AMOUNT AT RISK 01206 Page 4B TABLE OF SURRENDER CHARGES PER $1,000 OF INITIAL BASE COVERAGE THE FOLLOWING CHARGES APPLY TO EACH $1000 OF INITIAL BASE COVERAGE SURRENDERED DURING THE SURRENDER CHARGE PERIOD. THE CHARGE FOR THE SURRENDER OF ALL OR ANY PORTION OF THE INITIAL BASE COVERAGE WILL BE EQUAL TO THE RATE SHOWN BELOW FOR THE YEAR OF SURRENDER MULTIPLIED BY THE NUMBER OF THOUSANDS OF BASE COVERAGE BEING SURRENDERED. IN ADDITION, THERE WILL BE A CHARGE NOT TO EXCEED THE LESSER OF 2.0% OF THE AMOUNT WITHDRAWN OR $25.00 FOR EACH PARTIAL SURRENDER. POLICY SURRENDER YEAR CHARGE 1 14.63 2 14.55 3 14.46 4 14.37 5 14.27 6 14.17 7 14.06 8 13.95 9 13.84 10 13.71 11 12.87 12 11.33 13 9.81 14 8.31 A NEW SURRENDER CHARGE SCHEDULE WILL BE FURNISHED IF THERE IS AN INCREASE IN BASE COVERAGE 01206 Page 4C CONTRACT. Your policy is a legal contract that You have entered into with Us. You have paid the first premium and have submitted an application, a copy of which is attached. In return, We promise to provide the insurance coverage described in this policy. The entire contract consists of: 1. The basic policy; 2. The riders that add benefits to the basic policy, if any; 3. Endorsements, if any; and 4. The attached copies of the applications, and any amendments or supplemental applications. DATE OF ISSUE. The Date of Issue of this policy is the date from which the first policy charges are due. The Date of Issue is also the date from which all policy years, anniversaries, and monthly deduction dates are determined. OWNER. The Owner is as stated in the application unless later changed. During the last surviving Contingent Insured's lifetime, the Owner may exercise every right the policy confers or We allow (subject to the rights of any assignee of record). You may have multiple Owners of the policy. In that case, the authorizations of all Owners are required for all policy changes except for transfers, premium allocations and deduction allocations. We will accept the authorization of one Owner for transfers and changes in premium and deduction allocations. The Owner or Owners may be the same as one or both Contingent Insureds, but this is not required. If an Owner dies while the policy is in force and a Contingent Insured is living, ownership rights pass on to a successor owner, if any, or to the estate of the Owner. LAST SURVIVING CONTINGENT INSURED. Payment of a death benefit under this policy will be made upon the death of the last survivor of the Contingent Insureds named on the Policy Schedule. As used in this policy, the terms "last survivor" and "second to die" mean "last surviving Contingent Insured." NOTIFICATION OF FIRST DEATH. While Death Benefit Proceeds will be payable upon the death of the second to die, We must receive proof of the death of both Contingent Insureds before payment will be made. Therefore, it is important that Written proof of the first death be furnished to the Company at the time of such death. PREMIUM PAYMENTS All premiums after the first are payable in advance. Premium payments are flexible. This means You may choose the amount and frequency of payments. The actual amount and frequency of premium payments will affect the Accumulation Value and the amount and duration of insurance. Please refer to the Policy Values Provision for a detailed explanation. 01206 Page 5 PLANNED PERIODIC PREMIUMS. The amount and frequency of the Planned Periodic Premiums You selected are shown on the Policy Schedule. You may request a change in the amount and frequency. We may limit the amount of any increase. (See "Maximum Premium"). UNSCHEDULED ADDITIONAL PREMIUMS. You may pay additional premiums at any time before the Maturity Date shown on the Policy Schedule. We may limit the number and amount of additional premiums. (See "Maximum Premium" and "Maximum Net Amount at Risk"). MAXIMUM PREMIUM. We reserve the right to refund any premium that would cause this policy to fail to qualify as life insurance under the Death Benefit Compliance Test selected, and under applicable tax laws. The test selected is shown on the Policy Schedule. MAXIMUM NET AMOUNT AT RISK. We reserve the right to refund any premium that would cause an immediate increase in the Net Amount at Risk unless both Contingent Insureds are living and provide evidence of insurability satisfactory to Us. Net Amount at Risk is an amount equal to the Death Benefit Amount under the basic policy less the Accumulation Value. PREMIUM EXPENSE CHARGE. The Premium Expense Charge is calculated by multiplying the premium paid (after deduction of any state premium tax) by the Premium Expense Charge Percentage shown on the Policy Schedule. NET PREMIUM. The Net Premium is the premium paid less any applicable state premium tax and the Premium Expense Charge. ALLOCATION OF NET PREMIUMS. The initial allocation of Net Premiums is shown in the application for this policy and will remain in effect until changed by Written notice from the Owner. The percentage allocation for future Net Premiums may be changed at any time by Written Notice. The initial Net Premium will be allocated to the Money Market Division on the later of the following dates: 1. The Date of Issue; or 2. The date all requirements needed to place the policy in force have been satisfied, including underwriting approval and receipt in the Home Office of the necessary premium. The initial Net Premium will remain in the Money Market Division until the first Valuation Date following the 15th day after it was applied. Any additional Net Premiums received prior to the first Valuation Date which follows the 15th day after the initial Net Premium was applied will be allocated to the Money Market Division until such Valuation Date. At that time, We will transfer the Accumulation Value to the selected Investment Option(s). Each Net Premium received after such Valuation Date will be applied directly to the elected Investment Option(s) as of the Business Day received. Changes in the allocation of Net Premiums will be effective on the date we receive the Owner's notice. The allocation may be 100% to any available Division or may be divided among these options in whole percentage points totaling 100%. 01206 Page 6 WHERE TO PAY. You may make Your payments to Us at Our Home Office or to an authorized agent. A receipt signed by an officer of the Company will be furnished upon request. DEATH BENEFIT AND DEATH BENEFIT OPTIONS DEATH BENEFIT PROCEEDS. If both Contingent Insureds die prior to the Maturity Date and while this policy is in force, We will pay the Death Benefit Proceeds to the Beneficiary. The Death Benefit Proceeds will be subject to: 1. The Death Benefit Option in effect on the date of the second death; and 2. Any increases or decreases made to the Specified Amount. The Initial Specified Amount is shown on the Policy Schedule. You can find guidelines for changing the Death Benefit Option or the Specified Amount in the section entitled "Changing Your Insurance Policy." Any premium received after the date of the second death will be refunded and will not be included in the Accumulation Value for purposes of calculating the Death Benefit Amount. The Death Benefit Proceeds will be the Death Benefit Amount, after reversing any premium received after the date of the second death, less any outstanding policy loan and will be subject to the other provisions of the Beneficiary and Proceeds section. DEATH BENEFIT COMPLIANCE TEST. Death benefit compliance tests are used to determine if a policy will qualify as life insurance under applicable tax laws. There are two compliance tests which may be used: The Guideline Premium Test and the Cash Value Accumulation Test. The test which You selected when this policy was issued is shown on the Policy Schedule. You cannot change Your election of the death benefit compliance test after the Date of Issue. DEATH BENEFIT OPTION. The Death Benefit Option which You have chosen is shown on the Policy Schedule as either Option 1 or Option 2. OPTION 1. If You have chosen Option 1, the Death Benefit Amount will be the greater of: 1. The Specified Amount on the date of the second death; or 2. The Accumulation Value on the date of the second death multiplied by the applicable Death Benefit Corridor Rate. OPTION 2. If You have chosen Option 2, the Death Benefit Amount will be the greater of: 1. The Specified Amount plus the Accumulation Value on the date of the second death; or 2. The Accumulation Value on the date of the second death multiplied by the applicable Death Benefit Corridor Rate. Death Benefit Corridor Rates are shown in the table for the Death Benefit Compliance Test which You selected. 01206 Page 7 SPECIFIED AMOUNT. The Specified Amount is the total of two types of coverage: Base Coverage and Supplemental Coverage. Base Coverage is subject to surrender charges and a four year Monthly Expense Charge, but Supplemental Coverage is not. If Supplemental Coverage is made a part of the Specified Amount, policy costs will be lower (during the first 4 policy years, and the first 4 years of an increase) than if the same Specified Amount is issued without Supplement Coverage. However, realizing the benefits of the Monthly Guarantee Premium provision will require a higher Monthly Guarantee Premium if Supplemental Coverage is included. The amounts of Base Coverage, Supplemental Coverage (if any) and Specified Amount are shown on the Policy Schedule. CHANGING YOUR INSURANCE POLICY You may request a change in the Specified Amount or Death Benefit Option at any time except that: 1. A decrease in the Specified Amount may not become effective prior to the end of the first policy year; and 2. Increases in the Specified Amount will be considered only while both Contingent Insureds are living. Your request must be submitted to Our Home Office In Writing. INCREASING THE SPECIFIED AMOUNT. You may apply for an increase in Specified Amount by submitting for each Contingent Insured: 1. A supplemental application; and 2. Evidence of insurability satisfactory to Us. The proportion of Base to Supplemental Coverage following an increase may be in any proportion as long as Base Coverage is at least 10% of the total Specified Amount. An increase will be effective on the Monthly Deduction Day on or next following the date the applications for increase are approved by Us. The effective date will appear in an endorsement to this policy. DECREASING THE SPECIFIED AMOUNT. Any decrease will go into effect on the Monthly Deduction Day following the Business Day We receive the request. The Death Benefit Amount remaining in effect after any decrease cannot be less than the greater of: 1. The Minimum Death Benefit Amount shown on the Policy Schedule; and 2. Any Death Benefit Amount required to qualify this policy as life insurance under applicable tax laws. Any such decrease will be applied in the following order: 01206 Page 8 1. Against the Specified Amount provided by the most recent increase, with the decrease applying first to the entire Supplemental Coverage portion of such increase, if any, followed by the Base Coverage portion; 2. Against the next most recent increases successively, with the decrease of each prior increase applying first to the entire Supplemental Coverage portion of such increase, if any, followed by the Base Coverage portion; 3. Against the Specified Amount provided under the original application, with the decrease applying first to the entire Supplemental Coverage portion of such amount, if any, followed by the Base Coverage portion. Any reduction in Base Coverage will be subject to any applicable surrender charges on a pro-rata basis with the Surrender Charge prior to the reduction in Specified Amount being reduced proportionately. However, if such charge is greater than the Accumulation Value, the Specified Amount decrease will not be allowed. CHANGING THE DEATH BENEFIT OPTION. You may request a change in the Death Benefit Option You have chosen. The change will go into effect on the Monthly Deduction Day following the date We receive Your request for change. 1. If You request a change from Option 1 to Option 2: The new Specified Amount will be the Specified Amount, prior to change, less the Accumulation Value as of the effective date of the change, but not less than zero. Any such decrease in Specified Amount will be subject to the same guidelines and restrictions as outlined in the Decreasing the Specified Amount provision. 2. If You request a change from Option 2 to Option 1: The new Specified Amount will be the Death Benefit Amount as of the effective date of the change. The entire increase in Specified Amount will be applied to the last coverage added (either Base or Supplemental) which has not been removed. For the purpose of this calculation, if the Base and Supplemental Coverages were issued on the same date, We will consider the Supplemental Coverage to have been issued later. CHANGING THE TERMS OF YOUR POLICY. Any change in Your policy must be approved by the President, a Vice President, an Administrative Officer or the Secretary of the Company. No agent has the authority to make any changes or waive any of the terms of Your policy. SEPARATE ACCOUNT PROVISIONS SEPARATE ACCOUNT. Separate Account VL-R is a segregated investment account established by the Company under Texas law to separate the assets funding the variable benefits for the class of policies to which this policy belongs from the other assets of the Company. That portion of the assets of the Separate Account equal to the reserves and other policy liabilities with respect to the Separate Account shall not be chargeable with liabilities arising out of any other business We may conduct. Income, gains and losses, whether or not realized from assets allocable to the Separate Account, are credited to or charged against such Account without regard to Our other income, gains or losses. 01206 Page 9 INVESTMENTS OF THE SEPARATE ACCOUNT. The Separate Account is segmented into Divisions. Each Division invests in a single Investment Option. Net Premiums will be applied to the Separate Account and allocated to one or more Divisions. The assets of the Separate Account are invested in the Investment Option(s) listed on the application for this policy. From time to time, We may add additional Divisions. We may also discontinue offering one or more Divisions as provided in the Rights Reserved by Us provision. You may make a change in investment selections by filing a Written change form with Our Home Office. You may make transfers to the additional Divisions subject to the rules stated in the Transfer Provision section and any new rules or limitations which may apply to such additional Divisions. If shares of any of the Investment Options become unavailable for investment by the Separate Account, or the Company's Board of Directors deems further investment in these shares is inappropriate, the Company may limit further investment in the shares or may substitute shares of another Investment Option for shares already purchased under this policy as provided in the Rights Reserved by Us provision. VALUATION OF ASSETS. The assets of the Separate Account are valued as of each Valuation Date at their fair market value in accordance with Our established procedures. The Separate Account Value as of any Valuation Date prior to the Maturity Date is the sum of Your account values in each Division of the Separate Account as of that date. VALUATION UNITS. In order to determine policy values in the Divisions, We use Valuation Units which are calculated separately for each Division. The Valuation Unit value for each Division will vary to reflect the investment experience of the applicable Investment Option. The Valuation Unit for a Division will be determined on each Valuation Date for the Division by multiplying the Valuation Unit value for the Division on the preceding Valuation Date by the Net Investment Factor for that Division for the current Valuation Date. NET INVESTMENT FACTOR. The Net Investment Factor for each Division is determined by dividing (1) by (2) and subtracting (3), where: 1. Is the net asset value per share of the applicable Investment Option as of the current Valuation Date (plus any per share amount of any dividend or capital gains distribution paid by the Investment Option since the last Valuation Date); and 2. Is the net asset value per share of the shares held in the Division as determined as of the previous Valuation Date; and 3. Is a factor representing the Mortality and Expense Charge. The net asset value of an Investment Option's shares held in each Division shall be the value reported to Us by that Investment Option. VALUATION DATES. Valuation of the various Divisions will occur on each Business Day during each month. If the underlying Investment Option is unable to value or determine the Division's investment in an Investment Option due to any of the reasons stated in the Suspension and Deferral of Payments Provision, the Valuation Date for the Division with respect to the unvalued portion shall be the first Business Day that the assets can be valued or determined. 01206 Page 10 BUSINESS DAY. A Business Day is each day during which the New York Stock Exchange is open for business. We will treat any information or Written communications We receive after the close of a Business Day to have been received as of the next Business Day. For the purpose of collecting daily charges, a Business Day immediately preceded by one or more non-business calendar days will include those non-business days as a part of that Business Day. For example, a Business Day which falls on a Monday will consist of a Monday and the immediately preceding Saturday and Sunday. MINIMUM VALUE. The Minimum Value that may be retained in a Division after a partial surrender or transfer is shown on the Policy Schedule. If a partial surrender causes the balance in any Division to drop below such minimum amount, the Company reserves the right to transfer the remaining balance to the Money Market Division. If a transfer causes the balance in any Division to drop below the minimum amount, the Company reserves the right to transfer the remaining balance in proportion to the transfer request. CHANGE OF INVESTMENT ADVISOR OR INVESTMENT OBJECTIVE. Unless otherwise required by law or regulation, the investment advisor or any investment objective may not be changed without Our consent. If required, approval of or change of any investment objective will be filed with the Insurance Department of the state where the policy is being delivered. RIGHTS RESERVED BY US. Upon notice to You, this policy may be modified by Us, but only if such modification is necessary to: 1. Operate the Separate Account in any form permitted under the Investment Company Act of 1940 or in any other form permitted by law; 2. Transfer any assets in any Division to another Division, or to one or more other separate accounts; 3. Add, combine or remove Divisions in the Separate Account, or combine the Separate Account with another separate account; 4. Make any new Division available to You on a basis to be determined by Us; 5. Substitute for the shares held by any Division the shares of another Division or the shares of another investment company or any other investment permitted by law; 6. Make any changes as required by the Internal Revenue Code, or by any other applicable law, regulation or interpretation in order to continue treatment of this policy as life insurance; 7. Make any changes required to comply with the requirements of any underlying Investment Option; or 8. Make other changes in this policy that in Our judgment are necessary or appropriate to ensure that this policy continues to qualify for tax treatment as life insurance, or that do not reduce any Cash Surrender Value, Death Benefit Amount, Accumulation Value or other accrued right or benefit. When required by law, We will obtain Your approval of changes and We will gain approval from any appropriate regulatory authority. 01206 Page 11 GENERAL ACCOUNT The General Account is a fixed account within Our general assets which We have established for: 1. Any amounts transferred from the Divisions as a result of a loan; or 2. Any amounts the Owner allocated to such Account. The guaranteed interest rate used in calculating Accumulation Values of amounts allocated to the General Account is .3274% per month compounded monthly. This is equivalent to 4.0% per year, compounded annually, and is not based on the investment experience of any Division of the Separate Account. We can use interest rates greater than the guaranteed rates to calculate Accumulation Values of amounts allocated to the General Account. POLICY VALUES PROVISION Accumulation Value. The Accumulation Value of Your policy is the total of all values in the Divisions of the Separate Account and in the General Account. The Accumulation Value reflects: 1. Net Premiums paid; 2. Monthly deductions; 3. The investment experience of the Divisions selected less the Mortality and Expense Charge; 4. Amounts allocated to the General Account, including interest earned on amounts in the General Account; 5. Deductions due to partial surrenders and any charges for partial surrenders; and 6. Deductions, if any, resulting from decreases in Specified Amount. Net premiums are allocated, in accordance with Your instructions, to the General Account or allocated to the selected Divisions of the Separate Account and converted to Valuation Units. On each Monthly Deduction Day, a Monthly Deduction will be made by reducing the unloaned portion of the General Account or redeeming Valuation Units from each applicable Division in the same ratio as the allocation of policy deductions in effect on the Monthly Deduction Day. You must state In Writing in advance how Monthly Deductions should be made if other than this method is to be used. If the unloaned portion of the General Account or the balance in any Division of the Separate Account is insufficient to make a Monthly Deduction in this manner, We will cancel Valuation Units from each applicable Division and reduce the unloaned portion of the General Account in the same ratio the Monthly Deduction bears to the unloaned Accumulation Value of Your policy. 01206 Page 12 The Accumulation Value in any Division is determined by multiplying the value of a Valuation Unit by the number of Valuation Units held under the policy in that Division. The value of the Valuation Units equal to the amount being borrowed from the Separate Account will be transferred to the General Account as of the Business Day that the loan request is received In Writing. Valuation Units are surrendered to reflect a partial surrender as of the Business Day that the request for partial surrender is received In Writing. ON THE DATE OF ISSUE. The Accumulation Value on the Date of Issue is: 1. The Net Premium received; less 2. The Monthly Deduction for the first policy month. (See "How We Calculate a Monthly Deduction.") The first deduction day is the Date of Issue. The Monthly Deduction Day is shown on the Policy Schedule. ON EACH MONTHLY DEDUCTION DAY. On each Monthly Deduction Day after the Date of Issue, We will determine the Accumulation Value as follows: 1. We will take the Accumulation Value as of the last Monthly Deduction Day; 2. Add the interest earned for the month on the excess of the General Account value on the last Monthly Deduction Day over any partial surrenders and transfers made from the General Account since the last Monthly Deduction Day; 3. Add all Net Premiums received since the last Monthly Deduction Day; 4. Add any investment gain (or subtract any investment loss) on the Divisions of the Separate Account since the last Monthly Deduction Day as measured by the change in the value of the Valuation Units; 5. Subtract any partial surrender made and any charges for partial surrenders since the last Monthly Deduction Day; and 6. Subtract the Monthly Deduction for the policy month following the Monthly Deduction Day. (See "How We Calculate a Monthly Deduction.") ON ANY VALUATION DATE OTHER THAN A MONTHLY DEDUCTION DAY. The Accumulation Value on any Valuation Date other than a Monthly Deduction Day will be the sum of: 1. The value of the General Account as of the last Monthly Deduction Day; 2. Less any partial surrenders and any charges for partial surrenders since the last Monthly Deduction Day; 3. Plus all Net Premiums received since the last Monthly Deduction Day; and 01206 Page 13 4. Plus the sum of the values of the Divisions of the Separate Account as of the last Monthly Deduction Day, plus the amount of any investment gain (or minus any investment loss) on the Divisions since the last Monthly Deduction Day as measured by the change in the value of the Valuation Units. CASH VALUE. The Cash Value of this policy will be equal to the Accumulation Value less the Surrender Charge, if any. CASH SURRENDER VALUE. The Cash Surrender Value of this policy will be equal to the Cash Value less any indebtedness. MONTHLY DEDUCTIONS MAY BE MADE ONLY IF THERE IS SUFFICIENT CASH SURRENDER VALUE (UNLESS THE POLICY IS BEING CONTINUED UNDER THE MONTHLY GUARANTEE PREMIUM PROVISION). Unless this policy is being continued in force under the Monthly Guarantee Premium provision, a Monthly Deduction from the Accumulation Value may be made only if the Cash Surrender Value is equal to or greater than the Monthly Deduction. The Accumulation Value will be reduced by the amount of each Monthly Deduction which will cause an equal reduction in the Cash Surrender Value. If the Cash Surrender Value on a Monthly Deduction Day is not sufficient to meet the Monthly Deduction for the current month, this policy will be subject to the Grace Period and Monthly Guarantee Premium provisions. SURRENDER CHARGES. The Surrender Charge applies only to the Base Coverage portion of the Specified Amount. The Surrender Charge for the amount of Base Coverage on the Date of Issue will apply if such Base Coverage is surrendered or reduced during the Surrender Charge Period. Surrender Charges for any increases in Base Coverage will apply if such increases are surrendered or reduced during the Surrender Charge Period of each increase. The Surrender Charge Period will be based on the age at issue of the younger Contingent Insured (or the younger Contingent Insured's age on the date of an increase). You may make a request for surrender at any time during the last surviving Contingent Insured's lifetime before the Maturity Date. The amount being surrendered or reduced will terminate on or next following the date We receive a Written request for surrender or reduction. HOW WE CALCULATE A MONTHLY DEDUCTION. Each Monthly Deduction includes: 1. The cost of insurance provided by the basic policy; 2. The cost of insurance for benefits provided by riders, if any; and 3. The Monthly Administration Fee; and 4. During the first four policy years, a Monthly Expense Charge. (This charge also applies to the amount of any increase in Base Coverage during the first four years of such increase. 01206 Page 14 HOW WE CALCULATE THE COST OF INSURANCE FOR THE BASIC POLICY. We calculate the cost of insurance at the beginning of each policy month on the Monthly Deduction Day. The cost of insurance is determined as follows: 1. Reduce the Death Benefit Amount by the amount of Accumulation Value on the Monthly Deduction Day before the cost of insurance deduction is taken, and after the Monthly Expense Charge, if any, and the Monthly Administration Fee are deducted; 2. Multiply the difference by the cost of insurance rate per $1,000 of Net Amount at Risk as provided in the Cost of Insurance Rate provision; and 3. Divide the result by 1,000. Net Amount at Risk is an amount equal to the Death Benefit Amount under the basic policy less the Accumulation Value. COST OF INSURANCE FOR BENEFITS PROVIDED BY RIDERS. The cost of insurance for benefits provided by riders, if any, will be as stated on the Policy Schedule or in an endorsement to this policy. MONTHLY ADMINISTRATION FEE. An administration fee will be deducted monthly. The amount of the monthly fee may be adjusted, but will never be greater than the guaranteed Monthly Administration Fee shown on the Policy Schedule. FIRST FOUR YEARS MONTHLY EXPENSE CHARGE. A Monthly Expense Charge will be deducted during the first four policy years, and during the first four years of any increase in Base Coverage. The Monthly Expense Charge for the first four years for the initial amount of Base Coverage is shown on the Policy Schedule. The Monthly Expense Charge for the first four years for any increase in Base coverage will be provided in an endorsement to this policy. Any decrease in Base Coverage will not change the Monthly Expense Charge then in effect. COST OF INSURANCE RATE. The cost of insurance rate for the Initial Specified Amount, and for each Specified Amount increase, is based on each Contingent Insured's: 1. Gender; 2. Age nearest birthday on each policy anniversary; and 3. Premium class associated with the Initial Specified Amount and each increase in the Specified Amount. The premium class is shown on the Policy Schedule. A table of guaranteed monthly cost of insurance rates is included in this policy. We can use cost of insurance rates that are lower than the guaranteed rates. Any change in rates will apply to all policies in the same rate class as this policy. The rate class of this policy is determined on its Date of Issue according to: 1. The calendar year of issue and policy year; 2. The plan of insurance; 3. The amount of insurance; and 01206 Page 15 4. The age, gender and premium class of each Contingent Insured. CHANGES IN RATES, CHARGES AND FEES. This policy does not participate in Our profits or surplus. Any redetermination of the cost of insurance rates, Mortality and Expense Charges, Premium Expense Charge Percentage or Monthly Administration Fee will be based on Our future expectations as to mortality, persistency, expenses, reinsurance costs and state and federal taxes. Any redetermination of interest rates used in calculating Accumulation Values of amounts allocated to the General Account will be based only on Our expectations of future investment earnings. We will not change these charges in order to recoup any prior losses. GRACE PERIOD. If the Cash Surrender Value on a Monthly Deduction Day is not enough to meet the Monthly Deduction for the current month, this policy will remain in force during the 61-day period that follows. If the Cash Surrender Value on a policy anniversary is not enough to pay any loan interest due, this policy will remain in force during the 61-day period that follows. Such 61-day period is referred to in this policy as the "Grace Period." There is no Grace Period for the initial Monthly Deduction. If the amount We require to keep Your policy in force is not paid by the end of the Grace Period, this policy will terminate without value. However, We will give You at least 31 days notice prior to termination that Your policy is in the Grace Period and advise You of the amount required to keep Your policy in force. Such 31 days prior notice will be sent to You at Your last known address, and to the assignee of record, if any. If the last surviving Contingent Insured dies during the Grace Period, Monthly Deductions through the policy month in which the death occurred will be deducted from the proceeds. If a surrender request is received within 31 days after the Grace Period commences, the Cash Surrender Value payable will not be less than the Cash Surrender Value on the Monthly Deduction Day the Grace Period commenced. The Monthly Deduction for the policy month following such Monthly Deduction Day will not be subtracted in the calculation of such Cash Surrender Value. MONTHLY GUARANTEE PREMIUM. The Monthly Guarantee Premium for the Initial Specified Amount and any benefit riders in force on the Date of Issue is shown on the Policy Schedule. The Monthly Guarantee Premium Period (Guarantee Period) will be the first 5 policy years. This policy will not terminate during the Guarantee Period if, on each Monthly Deduction Day within the Guarantee Period the sum of premiums paid equals or exceeds: 1. The sum of the Monthly Guarantee Premiums from the start of the Guarantee Period, including the current month; plus 2. Any partial surrenders and any increase in the loan amount since the start of the Guarantee Period. If the Specified Amount is increased, during the Guarantee Period, a new Monthly Guarantee Premium for the amount of the increase will be calculated as a combined rate based on each Contingent Insured's age and premium class at the time of such increase. The new Monthly Guarantee Premium will be calculated using the combined rate for the amount of the increase, plus any Monthly Guarantee Premium(s) previously calculated for the initial Specified Amount, and each prior increase, plus the cost of any benefit riders. If the Specified Amount is decreased, the Monthly Guarantee Premium will be decreased. 01206 Page 16 If a benefit rider is added or increased, during the Guarantee Period the Monthly Guarantee Premium will be increased. If a benefit rider is removed or decreased during the Guarantee Period the Monthly Guarantee Premium will be decreased accordingly. If a policy is reinstated with no change to the Specified Amount, Premium Class or benefit riders, if any, the Monthly Guarantee Premium upon reinstatement will be the same as it was when the policy lapsed. The Guarantee Period will not be extended or otherwise changed by changes in the Specified Amount, the addition, deletion or change in benefit riders, or by reinstatement of the policy. The policy value at the end of the Guarantee Period may be insufficient to keep the policy in force unless an additional payment is made at that time. FULL SURRENDER. Subject to the Beneficiary and Proceeds section, You may return Your policy to Us and request its Cash Surrender Value at any time during the last surviving Contingent Insured's lifetime before the Maturity Date. The Cash Surrender Value will be determined as of the Business Day the policy and the Written request for surrender are received. The Company may delay payment if the Suspension and Deferral of Payments Provision is in effect. PARTIAL SURRENDER. At any time after the first policy year, You may request a portion of the Cash Surrender Value of the policy. Your request must be made In Writing during the last surviving Contingent Insured's lifetime before the Maturity Date. The minimum partial surrender is shown on the Policy Schedule. Valuation Units are surrendered to reflect a partial surrender as of the Business Day We receive the Written request for partial surrender. A partial surrender will result in a reduction of the Cash Value, Accumulation Value and the Death Benefit Amount. The Cash and Accumulation Values will be reduced by the amount of the partial surrender. The reduced Death Benefit Amount will be determined in accordance with the Death Benefit Option provision. If Your Death Benefit Option is Option 1, the Specified Amount will be reduced by the amount of the partial surrender. The reduction in Specified Amount will be subject to the same guidelines and restrictions as outlined in the Decreasing the Specified Amount provision. The Death Benefit Amount remaining after this reduction must be no less than the Minimum Death Benefit Amount after a Decrease in Specified Amount shown on the Policy Schedule. A partial surrender will result in the cancellation of Valuation Units from each applicable Division and a reduction of the unloaned portion of the General Account in the same ratio as the allocation of policy deductions in effect on the date of partial surrender. If the number of Valuation Units in any Division or in the unloaned portion of the General Account is insufficient to make a partial surrender in this manner, We will cancel Valuation Units from each applicable Division and reduce the unloaned portion of the General Account in the ratio the partial surrender request bears to the Cash Surrender Value of Your policy. You must state In Writing in advance how partial surrenders should be made if other than this method is to be used. There will be a charge for each partial surrender not to exceed the lesser of 2% of the amount withdrawn or $25 in addition to the amounts shown in the Table of Surrender Charges. 01206 Page 17 The Company may delay payment if the Suspension and Deferral of Payments Provision is in effect. PERIOD OF INSURANCE COVERAGE IF AMOUNT OR FREQUENCY OF PREMIUM PAYMENTS IS REDUCED OR IF PREMIUM PAYMENTS ARE DISCONTINUED. If You reduce the amount or frequency of premium payments, or if You discontinue payment of premiums and do not surrender this policy, We will continue making Monthly Deductions (as long as there is sufficient Cash Surrender Value to make such deductions) until the Maturity Date. During the Guarantee Period, this policy will remain in force as long as the Monthly Guarantee Premium requirements are met. After the Guarantee Period, this policy will remain in force until the earliest of the following dates: 1. The Maturity Date (if there is sufficient Cash Surrender Value to make Monthly Deductions to that date); 2. Full surrender of the policy; 3. The end of the Grace Period; or 4. Death of the last surviving Contingent Insured. TRANSFER PROVISION TRANSFER OF ACCUMULATION VALUE. Transfers will be made as of the Business Day We receive the Written transfer request, subject to the restrictions that follow. If You elect to use the transfer privilege, We will not be liable for a transfer made in accordance with Your instructions. We reserve the right to terminate, suspend or modify the transfer privilege, and to charge a $25 fee for each transfer in excess of 12 in a policy year. Transfers under the Dollar Cost Averaging or Automatic Rebalancing programs will not count toward the 12 free transfers. TRANSFER OF ACCUMULATION VALUE (SEPARATE ACCOUNT) AS OF THE MATURITY DATE. Your interest in each of the Separate Account Divisions will be transferred to the General Account on the Maturity Date, and the resulting Cash Surrender Value paid to the Owner if one or both Contingent Insureds are living on that date. If the underlying investment Option is unable to value or determine the Division's investment in an Investment Option on the scheduled Maturity Date, the unvalued portion shall be valued and transferred on the first Business Day that the assets can be valued or determined. Transfer of Your interest in a Separate Account Division on the Maturity Date will not be subject to a Transfer Fee. Our right to deter payment of values allocated to the General Account for up to six months will not apply to values transferred to the General Account under this provision. TRANSFER OF ACCUMULATION VALUE (SEPARATE ACCOUNT). You may transfer all or part of Your interest in a Division of the Separate Account subject to the following: 1. The minimum amount which may be transferred is $500. 2. If the entire amount in a Division of the Separate Account is not being transferred, the minimum which must remain is $500. 01206 Page 18 Transfers between Separate Account Divisions result in the redemption of Valuation Units in one Division and the purchase of Valuation Units in the Division to which the transfer is made. We will not honor Your request for a transfer if the Separate Account is unable to purchase shares of an Investment Option for any reason. TRANSFER OF ACCUMULATION VALUE (GENERAL ACCOUNT). A transfer from the General Account to a Division of the Separate Account may be made during the 60 day period following each policy anniversary. The amount that may be transferred will be the greatest of the following amounts: 1. Twenty-five percent (25%) of the unloaned portion of the General Account as of the policy anniversary; 2. The total dollar amount withdrawn from the General Account during the prior policy year (whether the amount withdrawn was a partial surrender for cash or was being transferred to the Separate Account); 3. $500. TELEPHONE TRANSFER AND ALLOCATION PRIVILEGE. If We have on file a completed telephone authorization form (Telephone Transaction), We will allow transfers and the percentage allocation for future Net Premiums and Policy Deductions to be changed at any time by telephone. We will honor instructions for Telephone Transactions from any person who provides the correct information. There is a risk of possible loss to You if unauthorized persons use this service in Your name. Under Telephone Transactions, We are not liable for any acts or omissions based upon instructions that We reasonably believe to be genuine, including losses arising from errors in the communication of telephone instructions. DOLLAR COST AVERAGING. Dollar Cost Averaging (DCA) is an automatic transfer of funds made periodically prior to the Maturity Date in accordance with instructions from the Owner. Transfers will be made in accordance with the Transfer provisions, except as provided below: 1. DCA transfers may be made: (a) On any day of the month except the 29th, 30th or 31st; (b) On a monthly, quarterly, semi-annual or annual basis; and (c) From the Money Market Division to one or more of the other Separate Account Divisions. 2. DCA may be elected only if the Accumulation Value at the time of election is $5,000 or more. 3. The minimum amount of each DCA transfer is $100, or the remaining amount in the Money Market Division, if less. 4. DCA may not begin prior to the first Valuation Date following the 15th day after the initial Net Premium is applied. 5. DCA will end when there is no longer any value in the Money Market Division, or when You request that DCA end. 01206 Page 19 6. Amounts applied to the Money Market Division while DCA is active will be available for future dollar cost averaging in accordance with the current DCA request. 7. There is no charge for DCA. 8. DCA is not available if Automatic Rebalancing is active. AUTOMATIC REBALANCING. Automatic Rebalancing occurs when funds are transferred by the Company between the Separate Account Divisions so that the values in each Division match the premium allocation percentages then in effect. You may choose Automatic Rebalancing on a quarterly, semi-annual or annual basis if your Accumulation Value is $5,000 or more. The date Automatic Rebalancing occurs will be based on the Date of Issue of Your policy. For example, if Your policy is dated January 17, and You have requested Automatic Rebalancing on a quarterly basis, Automatic Rebalancing will start on April 17, and will occur quarterly thereafter. After Automatic Rebalancing is elected, it will continue until We are notified In Writing that it is to be discontinued. There is no charge for Automatic Rebalancing. Automatic Rebalancing is not available if DCA is active. SUSPENSION AND DEFERRAL OF PAYMENTS PROVISION We reserve the right to defer payment of any Death Benefit Amount, loan or other distribution that comes from that portion of Your Accumulation Value that is allocated to Separate Account VL-R, if: 1. The New York Stock Exchange is closed other than customary weekend and holiday closings, or trading on the New York Stock Exchange is restricted; 2. An emergency exists, as a result of which disposal of securities is not reasonably practicable or it is not reasonably practicable to fairly determine the Accumulation Value; or 3. The U.S. Securities and Exchange Commission by order permits the delay for the protection of Owners. As to amounts allocated to the General Account, We may defer payment of any Cash Surrender Value withdrawal or loan amount for up to six months, or the period allowed by law, whichever is less, after We receive the request In Writing. Written notice of both the imposition and termination of any such suspension will be given to the Owners, assignees of record and any irrevocable Beneficiaries. Payments which were due to have been made and which were deferred following the suspension of the calculation of the Cash Surrender Value will be made within thirty (30) days following the lifting of the suspension, and will be calculated based on the Valuation Date which immediately follows termination of the suspension. 01206 Page 20 POLICY LOANS You may borrow from Us at any time while this policy is in force, an amount which is equal to or less than the policy loan value. The policy loan value will be the Cash Surrender Value, less interest on the amount to be borrowed (including interest on any prior outstanding policy loan) to the next policy anniversary. The value of Valuation Units equal to the amount You borrow from the Separate Account will be transferred to the General Account as of the Business Day that We receive Your Written loan request. OBTAINING A LOAN. You may obtain a policy loan by Written request and assignment of the policy as sole security for the loan. The Company may delay processing the loan requested if the Suspension and Deferral of Payments Provision is in effect. EFFECT OF A LOAN. When a loan is made, an amount equal to the amount being borrowed from the Separate Account will be transferred to the General Account. A loan will result in cancellation of units from each applicable Division and reduction of the unloaned portion of the General Account according to the allocation of policy deductions then in effect. The resulting amount will be added to the loaned portion of the General Account. If the number of Valuation Units in any Division or unloaned portion of the General Account is insufficient for a loan to be made in this manner, We will cancel Valuation Units from each applicable Division and reduce the unloaned portion of the General Account in the same ratio the loan bears to the unloaned Accumulation Value of Your policy. You must state In Writing in advance which Division units are to be canceled if a different method is to be used. Repayment of a loan will first be allocated to the General Account until You have repaid any loaned amounts that were allocated to the General Account. You may tell Us how to allocate repayments above that amount. If You do not tell Us, an amount equal to the loan repayment will be transferred from the General Account to the Divisions in the same ratio currently in effect for the allocation of Net Premiums. A loan, whether or not repaid, will have a permanent effect on the Cash Surrender Values and on the death benefits. If not repaid, any indebtedness will reduce the amount of Death Benefit Proceeds and the amount available upon surrender of the policy. LOAN INTEREST. Except for Preferred Loans, loan interest will accrue daily at an annual effective rate of 4.54% payable in advance. (This is equivalent to an annual effective rate of 4.75% paid in arrears.) On each policy anniversary, loan interest for the next year is due. Unpaid loan interest will be deducted from the various accounts according to the Allocation of Policy Deductions then in effect, and added to the loaned portion of the General Account. You must state In Writing in advance how unpaid loan interest should be deducted if other than this method is to be used. If the number of Valuation Units in any Division or unloaned portion of the General Account is insufficient to deduct unpaid loan interest in this manner, We will cancel Valuation Units from each applicable Division and reduce the unloaned portion of the General Account in the same ratio the unpaid loan interest bears to the unloaned Accumulation Value of Your policy. 01206 Page 21 We will credit interest monthly on the loaned portion of the General Account at an annual effective rate of 4.0%. PREFERRED LOANS. A "Preferred Loan" is a policy loan that is made at a net cost to the Owner that is less than the net cost of other policy loans. By "net cost" We mean the amount of interest charged for the loan less interest credited to the amount of the Accumulation Value offset by a loan. Starting on the tenth policy anniversary, this policy will be eligible for "Preferred Loans" subject to the following guidelines: 1. The maximum amount of the loan value eligible for Preferred Loans during a policy year is restricted to the lesser of the following values on the first day of such policy year: a) The policy loan value; or b) 10% of the Accumulation Value. 2. When a Preferred Loan is made, loan interest to the next policy anniversary will accrue daily at an annual effective rate of not less than 3.85% nor more than 4.08%. (This is equivalent to an effective rate of not less than 4.0% nor more than 4.25% respectively, paid in arrears.) HOW YOU MAY REPAY A POLICY LOAN. You may repay all or part of a policy loan at any time, except that; 1. Repayment may be made only while this policy is in force and prior to the death of the last surviving Contingent Insured; 2. A partial repayment must be at least $10; and 3. At the time You repay all or part of a policy loan, You must specify the payment is to repay all or part of the policy loan. Except as provided in the Grace Period provision, at any time Your policy loan exceeds the Cash Value, this policy will lapse. However, at least 31 days prior notice must be mailed by Us to Your last known address and to the assignee of record, if any. WE CAN DELAY PAYMENT. We can delay lending You money for up to 6 months, or the period allowed by law, whichever is less. However, We cannot delay lending You money if the amount is to be used to pay a premium to Us. BENEFICIARY AND PROCEEDS BENEFICIARY. The Beneficiary of the last surviving Contingent Insured, will be as named in the application, or later changed by the Owner. Unless the Owner provides otherwise, upon the death of the last surviving Contingent Insured We will pay proceeds in equal shares to the named Beneficiaries that survive such Contingent Insured. Unless otherwise provided by the beneficiary designation, proceeds will be paid as follows: 1. If any Beneficiary of the last surviving Contingent Insured dies while the last surviving Contingent Insured is living, that Beneficiary's interest will pass to any other Beneficiaries of the last surviving Contingent Insured according to their respective interests. 01206 Page 22 2. If there is no Beneficiary upon the death of the last surviving Contingent Insured (and there is no provision to the contrary), proceeds will be paid in one sum to the Owner, if living; otherwise, proceeds will be paid to the Owner's estate. COMMON DISASTER. If We cannot determine whether a Beneficiary or the last surviving Contingent Insured died first in a common disaster, We will assume that the Beneficiary died first. We will pay proceeds on this basis unless an endorsement to this policy provides otherwise. SIMULTANEOUS DEATH OF CONTINGENT INSUREDS. If We are unable to determine to Our satisfaction that one of the Contingent Insureds predeceased the other, it will be assumed that the Contingent Insureds died simultaneously. Thereupon, one- half of the Death Benefit Proceeds will be payable with respect to each of the Contingent Insureds. PROCEEDS. Proceeds means the amount payable on: 1. The Maturity Date; 2. Exercise of the full surrender benefit; or 3. The death of the last surviving Contingent Insured. The Proceeds on the Maturity Date will be the Cash Surrender Value. The Proceeds on the last surviving Contingent Insured's death will be the Death Benefit Amount less any outstanding policy loan. All Proceeds and partial surrender benefits are subject to the provisions of the Payment Options section and the other provisions of this policy. CHANGE OF OWNERSHIP OR BENEFICIARY You may change the Owner or the Beneficiary at any time prior to the death of the last surviving Contingent Insured unless the previous designation provides otherwise. To do so, send a Written request to Our Home Office. The change will go into effect when We have recorded the change. However, after the change is recorded, it will be deemed effective as of the date of Your Written request for change. The change will be subject to any payment made or action We take before the request is recorded. PAYMENT OPTIONS Instead of being paid in one sum, all or part of the proceeds may be applied under any of the Payment Options described in this provision. In addition to these options other methods of payment may be chosen with Our consent. 01206 Page 23 PAYMENT CONTRACT. When proceeds become payable under a Payment Option, a Payment Contract will be issued to each payee. The Payment Contract will state the rights and benefits of the payee. It will also name those who are to receive any balance unpaid at the death of the payee. ELECTION OF OPTIONS. The Owner may elect or change any Payment Option prior to the death of the last surviving Contingent Insured, subject to the provisions of this policy. This election or change must be In Writing. Within 60 days after We receive Written notification of the last surviving Contingent Insured's death, a payee entitled to proceeds in one sum may elect to receive proceeds under any Payment Option (subject to the limitations stated in the Availability of Options provision). OPTION 1. PAYMENTS FOR A SPECIFIED PERIOD: Equal monthly payments will be made for a specified period. The Option 1 Table in this policy shows the monthly income for each $1,000 of proceeds applied. OPTION 2. PAYMENTS OF A SELECTED AMOUNT: Equal monthly payments of a selected amount will be made. Each payment must be at least $60 a year for each $1,000 of proceeds applied. Payments will continue until the amount applied, with interest, has been paid in full. OPTION 3. MONTHLY PAYMENTS FOR LIFE WITH PERIOD CERTAIN: Equal monthly payments will be made for a specified period, and will continue after that period for as long as the payee lives. The specified period may be 10, 15 or 20 years. The Option 3 Table in this policy shows the monthly income for each $1,000 of proceeds applied. The tables are based on the Annuity 2000 Male or Female Tables adjusted by 50% of projection scale G for females and 100% of projection scale G for males for 20 years, with interest at the rate of 3% per year. At the time payments are to begin under this option, the payee may choose one of the following: 1. Monthly payments based on the Option 3 Table; or 2. Monthly payments equal to a monthly annuity based on Our single premium immediate annuity rates then in use. OPTION 4. PROCEEDS LEFT AT INTEREST: Proceeds may be left on deposit with Us for any period up to 30 years. Interest earned on the proceeds may be: 1. Left on deposit to accumulate at the rate of 3% compounded annually; or 2. Paid in installments at the rate for each $1,000 of proceeds of $30 annually, $14.89 semiannually, $7.42 quarterly or $2.47 monthly. Upon the death of the payee, or at the end of the specified period, any balance left on deposit will be paid in a lump sum or under Payment Options 1, 2 or 3. 01206 Page 24 INTEREST RATES. The guaranteed rate of interest for proceeds held under Payment Options 1, 2, 3 and 4 is 3% compounded annually. We may credit interest at a higher rate. Any higher rate will be determined by Us. PAYMENTS. The first payment under Options 1, 2 and 3 will be made when the claim for payment of proceeds has been approved. Payments after the first will be made according to the manner of payment chosen. Interest under Option 4 will be credited from the date We receive Written notification of death and paid or added to the proceeds as provided in the Payment Contract. AVAILABILITY OF OPTIONS. If the proposed payee is not a natural person, payment options may be chosen only with Our consent. If this policy is assigned, We will have the right to pay the assignee in one sum the amount to which the assignee is entitled. Any balance will be applied according to the option chosen. The amount to be applied under any one option must be at least $2,000. The payment elected under any one option must be at least $25. If the total policy proceeds are less than $2,000, payment will be made in one lump sum. EVIDENCE THAT PAYEE IS ALIVE. Before making any payment under a Payment Option, We may ask for proof that the payee is alive. If We request proof, no payment will be made or considered due until We receive proof. DEATH OF A PAYEE. If a payee dies, any unpaid balance will be paid as stated in the Payment Contract. If there is no surviving payee named in the Payment Contract, We will pay the estate of the payee: 1. Under Options 1 and 3, the value, as of the date We receive Written notification of death, of the remaining payments for the specified period discounted at the rate of interest, compounded annually, that was used in determining the amount of the monthly payment; 2. Under Options 2 and 4, the balance of any proceeds remaining unpaid with accrued interest, if any. WITHDRAWAL OF PROCEEDS UNDER OPTIONS 1 OR 2. If provided in the Payment Contract, a payee will have the right to withdraw the entire unpaid balance under Options 1 or 2. Under Option 1, the amount will be the value of the remaining payments for the specified period discounted at the rate of interest used in determining monthly income. Under Option 2, the amount will be the entire unpaid balance. WITHDRAWAL OF PROCEEDS UNDER OPTION 4. A payee will have the right to withdraw proceeds left under Option 4 subject to the following rules: 1. The amount to be withdrawn must be $500 or more; and 2. A partial withdrawal must leave a balance on deposit of $1,000 or more. WITHDRAWALS MAY BE DEFERRED. We may defer payment of any withdrawal for up to 6 months from the date We receive a Written withdrawal request. 01206 Page 25 ASSIGNMENT. Payment Contracts may not be assigned. CHANGE IN PAYMENT. The right to make any change in payment is available only if the Payment Contract provides for a change in payment. CLAIMS OF CREDITORS. To the extent permitted by law, proceeds will not be subject to any claims of a Beneficiary's creditors. GENERAL PROVISIONS ASSIGNING YOUR POLICY. Prior to the death of the last surviving Contingent Insured, You may assign this policy as security for an obligation. We will not be bound by an assignment unless it is received In Writing at the Home Office. Two copies of the assignment must be submitted. We will retain one copy and return the other. We will not be responsible for the validity of any assignment. INCONTESTABILITY. We rely on the statements made in the application for the policy and applications for any reinstatements or increases in Specified Amount. These statements, in the absence of fraud, are considered representations and not warranties. No statement may be used in defense of a claim under the policy unless it is in such applications. We cannot contest this policy after it has been in force during the last surviving Contingent Insured's lifetime for 2 years from the Date of Issue. However, We can contest an increase in Specified Amount before such increase has been in effect during the last surviving Contingent Insured's lifetime for 2 years. Additionally, if this policy is reinstated, We cannot contest the reinstated policy after it has been in force during the last surviving Contingent Insured's lifetime for 2 years from the date of reinstatement. However, We can contest a reinstatement or an increase in Specified Amount based solely on the information provided in the application for such reinstatement or increase. These 2 year limitations do not apply to any Disability or Accidental Death Benefit, or to the nonpayment of premium. SUICIDE EXCLUSION. If either Contingent Insured takes his or her own life, while sane or insane, within 2 years from the Date of Issue, We will refund all premiums paid, less any policy loans, and less any partial cash surrenders paid, and this policy will be terminated as of the Date of Issue. If there are any increases in the Specified Amount (See the section entitled "Changing Your Insurance Policy") a new 2-year period shall apply to each increase beginning on the date of each increase. If death due to suicide occurs during the 2-year period following an increase, but after the policy has been in force for 2 years or more, We will refund the costs of insurance that were deducted for the increase, and that increase will be terminated. The Initial Specified Amount, and any increases in Specified Amount that have been in force for 2 years or more, will remain in force on the life of the last surviving Contingent Insured. 01206 Page 26 When the laws of the state in which this policy is delivered require less than these 2 year periods, the periods will be as stated in such laws. AGE OR GENDER INCORRECTLY STATED. If the age or gender of a Contingent Insured has been misstated to Us, We will adjust the excess of the Death Benefit Amount over the Accumulation Value on the date of death to that which would have been purchased by the Monthly Deduction for the policy month of death at the correct cost of insurance rate. By age, We mean age nearest birthday as of the Date of Issue. STATUTORY BASIS OF POLICY VALUES. The Cash Values of the policy are not less than the minimum values required by the law of the state where this policy is delivered. The calculation of the Cash Values includes a charge for the cost of insurance, as shown in the Table of Guaranteed Monthly Cost of Insurance Rates and for the General Account interest at the annual effective rate of 4.0%. Calculation of minimum Cash Values, nonforfeiture benefits and Guaranteed Cost of Insurance Rates are based on the 1980 Male or Female, Smoker or Nonsmoker Commissioners Standard Ordinary Mortality Table for the appropriate gender and age nearest birthday. A detailed statement of the method of computing values has been filed with the state insurance department where required. NO DIVIDENDS. This policy will not pay dividends. It will not participate in any of Our surplus or earnings. ANNUAL REPORT. We will send to You at least once a year, without charge, an annual report which will show a summary of all transactions since the last report, including: 1. Premiums paid; 2. Transfers; 3. Expense charges deducted; 4. The cost of insurance deducted; 5. Partial surrender benefits deducted including partial surrender fees; 6. The amount of any outstanding policy loan; 7. Separate Account Unit Values; 8. The current Cash Surrender Value and Accumulation Values; and 9. The Death Benefit Amount. WHEN THIS POLICY TERMINATES. This policy will terminate if: 1. You request that this policy be terminated; 2. The last surviving Contingent Insured dies; 01206 Page 27 3. Premiums are refunded due to suicide of either Contingent Insured; 4. The policy matures; or 5. The Grace Period ends; and a. There is not sufficient Cash Surrender Value to cover a Monthly Deduction; or b. The necessary Monthly Guarantee Premiums to keep the policy in force have not been paid. REINSTATEMENT. "Reinstating" means placing Your policy in force after it has terminated at the end of the Grace Period. We will reinstate this policy if We receive: 1. Your Written request within 5 years after the end of the Grace Period and before the Maturity Date; 2. Current evidence of insurability satisfactory to Us for each Contingent Insured who was living on the date the policy terminated; 3. Payment of enough premium to keep the policy in force for 2 months; and 4. Payment or reinstatement of any indebtedness. The reinstated policy will be in force from the Monthly Deduction Day on or following the date We approve the reinstatement application. The original surrender charge schedule will apply to a reinstated policy. The Accumulation Value at the time of reinstatement will be: 1. The Surrender Charge deducted at the time of lapse (such charge not being greater than the Accumulation Value at the time of lapse before the Surrender Charge was applied); plus 2. The Net Premium allocated in accordance with the premium allocation percentages at time of lapse unless the reinstatement application provides otherwise, using Unit Values as of the date of reinstatement; plus 3. Any loan, repaid or reinstated; less 4. The Monthly Deduction for one month. The dollar amount of any Surrender Charge reinstated will be the same as the dollar amount of Surrender Charge at the time of lapse, and will be applied to the funds from which the Surrender Charge was deducted at the time of lapse using Unit Values as of the date of reinstatement. EXCHANGE OPTION At any time while both Contingent Insureds are living this policy may be exchanged for two individual policies covering the Contingent Insureds separately subject to the following: 1. The total amount of coverage under the new policies will be an amount equal to: 01206 Page 28 a) The Death Benefit Amount in effect on the effective date of exchange; less b) The amount of any policy loan. Except as stated in number 10, the Death Benefit Amount of this policy may be split into two individual policies in any proportion, the total of which does not exceed the Death Benefit Amount of this policy. 2. After repayment of any loan against the Cash Surrender Value of this policy, the remaining Cash Surrender Value will be transferred to the new policies in the same ratio as the division of the Death Benefit Amount; 3. The new policies will be issued on any flexible premium adjustable whole life or level premium whole life or endowment plan regularly issued by the Company on the date of exchange; 4. Except as stated in number 10, evidence of insurability satisfactory to the Company must be furnished (This option is not available unless both Contingent Insureds are found to be insurable.); 5. The new policies will be issued as of the date of exchange at the then attained age of each Contingent Insured; 6. The plan of insurance selected will be subject to Our standard minimum amount requirement for such plan; 7. If, on or after the Date of Issue of this policy: a) A rider providing waiver of monthly deduction or waiver of premium coverage is made available, and is added to this policy; and b) Monthly deductions or premiums for this policy are being waived as provided in such a rider, then, neither monthly deductions nor premiums for the new policies will be waived and We will not include a waiver benefit in the new policies; 8. The Suicide Exclusion and Incontestability provisions of the new policies will run from the Date of Issue of the new policies; 9. This policy will terminate on the Date of Issue of the new policies; 10. We will not require evidence of insurability at the time this option is elected if: a) The Contingent Insureds divorce and a period of at least 24 months has elapsed since the date the divorce decree was finalized; or b) The Federal unlimited marital deduction is repealed, or there is a reduction of at least 50% of the tax rate in the maximum Federal estate bracket. In these cases the amount of coverage under each new policy will be 50% of an amount equal to: 01206 Page 29 a) The Death Benefit Amount in effect on the effective date of exchange; less b) The amount of any policy loan. After repayment of any loan against the Cash Surrender Value of this policy, 50% of any remaining Cash Surrender Value will be transferred to each of the new policies. To apply for an exchange, the Owner must submit: 1. Applications for the new policies (including evidence of insurability satisfactory to Us); 2. Payment of the first premium for each new policy; and 3. This policy for cancellation. This Exchange Option is not available if the premium class of either Contingent Insured was "Uninsurable" on the Date of Issue. There may be income tax consequences if You exercise the Exchange Option. Consult with Your tax advisor before exercising he right. 01206 Page 30 TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
OPTION 1 TABLE INSTALLMENTS FOR A SPECIFIED PERIOD ------------------------------------------------------------------------------------------------------------------------- Number Amount of Number Amount of Number Amount of Number Amount of of Years Monthly of Years Monthly of Years Monthly of Years Monthly Payable Installments Payable Installments Payable Installments Payable Installments ------------------------------------------------------------------------------------------------------------------------- 1 $84.47 11 $8.86 21 $5.32 31 $4.10 2 42.86 12 8.24 22 5.15 32 4.02 3 28.99 13 7.71 23 4.99 33 3.95 4 22.06 14 7.26 24 4.84 34 3.88 5 17.91 15 6.87 25 4.71 35 3.82 6 15.14 16 6.53 26 4.59 36 3.76 7 13.16 17 6.23 27 4.47 37 3.70 8 11.68 18 5.96 28 4.37 38 3.65 9 10.53 19 5.73 29 4.27 39 3.60 10 9.61 20 5.51 30 4.18 40 3.55 ------------------------------------------------------------------------------------------------------------------------- OPTION 3 TABLE INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD ------------------------------------------------------------------------------------------------------------------------- AGE OF PAYEE GUARANTEED PERIOD AGE OF PAYEE GUARANTEED PERIOD ------------------------------------------------------------------------------------------------------------------------- Female 10 Years 15 Years 20 Years Female 10 Years 15 Years 20 Years ------------------------------------------------------------------------------------------------------------------------- 10 $2.77 $2.77 $2.77 50 $3.73 $3.72 $3.69 11 2.78 2.78 2.78 51 3.78 3.77 3.74 12 2.79 2.79 2.79 52 3.84 3.82 3.79 13 2.80 2.80 2.80 53 3.90 3.88 3.84 14 2.81 2.81 2.81 54 3.96 3.93 3.89 15 2.82 2.82 2.82 55 4.03 4.00 3.95 16 2.83 2.83 2.83 56 4.09 4.06 4.01 17 2.85 2.85 2.84 57 4.17 4.13 4.07 18 2.86 2.86 2.86 58 4.24 4.20 4.13 19 2.87 2.87 2.87 59 4.32 4.27 4.19 20 2.89 2.88 2.88 60 4.41 4.35 4.26 21 2.90 2.90 2.90 61 4.50 4.43 4.33 22 2.91 2.91 2.91 62 4.59 4.52 4.40 23 2.93 2.93 2.93 63 4.69 4.60 4.47 24 2.95 2.94 2.94 64 4.80 4.70 4.54 25 2.96 2.96 2.96 65 4.91 4.79 4.61 26 2.98 2.98 2.98 66 5.03 4.89 4.68 27 3.00 3.00 2.99 67 5.15 4.99 4.75 28 3.02 3.02 3.01 68 5.28 5.10 4.83 29 3.04 3.03 3.03 69 5.42 5.21 4.90 30 3.06 3.05 3.05 70 5.57 5.32 4.96 31 3.08 3.08 3.07 71 5.72 5.43 5.03 32 3.10 3.10 3.09 72 5.88 5.54 5.09 33 3.12 3.12 3.12 73 6.05 5.66 5.15 34 3.15 3.15 3.14 74 6.23 5.77 5.20 35 3.17 3.17 3.17 75 6.41 5.88 5.25 36 3.20 3.20 3.19 76 6.60 5.99 5.29 37 3.23 3.22 3.22 77 6.79 6.09 5.33 38 3.26 3.25 3.25 78 6.99 6.18 5.36 39 3.29 3.28 3.28 79 7.19 6.27 5.39 40 3.32 3.31 3.31 80 7.39 6.36 5.42 41 3.35 3.35 3.34 81 7.58 6.43 5.44 42 3.39 3.38 3.37 82 7.78 6.50 5.45 43 3.42 3.42 3.40 83 7.96 6.56 5.47 44 3.46 3.45 3.44 84 8.14 6.62 5.48 45 3.50 3.49 3.48 85 8.31 6.66 5.49 46 3.54 3.53 3.52 86 8.47 6.70 5.50 47 3.59 3.58 3.56 87 8.62 6.74 5.50 48 3.63 3.62 3.60 88 8.75 6.77 5.51 49 3.68 3.67 3.64 89 8.88 6.79 5.51 90 8.99 6.81 5.51 ------------------------------------------------------------------------------------------------------------------------- Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly installments for two or more specified periods for a given age are the same, the specified period of longer duration will apply. -------------------------------------------------------------------------------------------------------------------------
01206 Page 31 TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
OPTION 1 TABLE INSTALLMENTS FOR A SPECIFIED PERIOD ------------------------------------------------------------------------------------------------------------------------- Number Amount of Number Amount of Number Amount of Number Amount of of Years Monthly of Years Monthly of Years Monthly of Years Monthly Payable Installments Payable Installments Payable Installments Payable Installments ------------------------------------------------------------------------------------------------------------------------- 1 $84.47 11 $8.86 21 $5.32 31 $4.10 2 42.86 12 8.24 22 5.15 32 4.02 3 28.99 13 7.71 23 4.99 33 3.95 4 22.06 14 7.26 24 4.84 34 3.88 5 17.91 15 6.87 25 4.71 35 3.82 6 15.14 16 6.53 26 4.59 36 3.76 7 13.16 17 6.23 27 4.47 37 3.70 8 11.68 18 5.96 28 4.37 38 3.65 9 10.53 19 5.73 29 4.27 39 3.60 10 9.61 20 5.51 30 4.18 40 3.55 ------------------------------------------------------------------------------------------------------------------------- OPTION 3 TABLE INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD ------------------------------------------------------------------------------------------------------------------------ AGE OF PAYEE GUARANTEED PERIOD AGE OF PAYEE GUARANTEED PERIOD ------------------------------------------------------------------------------------------------------------------------- Male 10 Years 15 Years 20 Years Male 10 Years 15 Years 20 Years ------------------------------------------------------------------------------------------------------------------------- 10 $2.81 $2.80 $2.80 50 $3.87 $3.85 $3.81 11 2.82 2.81 2.81 51 3.93 3.90 3.86 12 2.83 2.83 2.82 52 3.99 3.96 3.91 13 2.84 2.84 2.83 53 4.06 4.02 3.96 14 2.85 2.85 2.85 54 4.12 4.08 4.02 15 2.86 2.86 2.86 55 4.19 4.15 4.07 16 2.88 2.87 2.87 56 4.27 4.22 4.13 17 2.89 2.89 2.89 57 4.35 4.29 4.19 18 2.90 2.90 2.90 58 4.43 4.36 4.25 19 2.92 2.92 2.91 59 4.52 4.44 4.32 20 2.93 2.93 2.93 60 4.61 4.52 4.38 21 2.95 2.95 2.94 61 4.71 4.60 4.45 22 2.97 2.96 2.96 62 4.81 4.69 4.51 23 2.98 2.98 2.98 63 4.92 4.78 4.58 24 3.00 3.00 2.99 64 5.03 4.87 4.64 25 3.02 3.02 3.01 65 5.15 4.96 4.71 26 3.04 3.03 3.03 66 5.27 5.06 4.78 27 3.06 3.05 3.05 67 5.40 5.16 4.84 28 3.08 3.07 3.07 68 5.53 5.26 4.90 29 3.10 3.10 3.09 69 5.67 5.36 4.96 30 3.12 3.12 3.11 70 5.82 5.46 5.02 31 3.14 3.14 3.14 71 5.97 5.56 5.08 32 3.17 3.17 3.16 72 6.12 5.66 5.13 33 3.19 3.19 3.19 73 6.28 5.76 5.18 34 3.22 3.22 3.21 74 6.44 5.88 5.22 35 3.25 3.25 3.24 75 6.61 5.96 5.26 36 3.28 3.27 3.27 76 6.78 6.05 5.30 37 3.31 3.31 3.30 77 6.95 6.14 5.34 38 3.34 3.34 3.33 78 7.13 6.22 5.37 39 3.38 3.37 3.36 79 7.30 6.30 5.39 40 3.41 3.41 3.39 80 7.48 6.37 5.42 41 3.45 3.44 3.43 81 7.65 6.44 5.44 42 3.49 3.48 3.46 82 7.82 6.50 5.45 43 3.53 3.52 3.50 83 7.99 6.56 5.47 44 3.57 3.56 3.54 84 8.15 6.61 5.48 45 3.62 3.60 3.58 85 8.30 6.66 5.49 46 3.66 3.65 3.62 86 8.45 6.70 5.50 47 3.71 3.69 3.66 87 8.59 6.73 5.50 48 3.76 3.74 3.71 88 8.72 6.76 5.51 49 3.82 3.79 3.76 89 8.84 6.79 5.51 90 8.95 6.81 5.51 ------------------------------------------------------------------------------------------------------------------------ Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly installments for two or more specified periods for a given age are the same, the specified period of longer duration will apply. ------------------------------------------------------------------------------------------------------------------------
01206 Page 32 AMERICAN GENERAL LIFE INSURANCE COMPANY This is a JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. An adjustable Death Benefit is payable upon the LAST SURVIVING Contingent Insured's death prior to the Maturity Date. Investment results are reflected in policy benefits. ACCUMULATION VALUES are flexible and will be based on the amount and frequency of premiums paid and the investment results of the Separate Account. NONPARTICIPATING - NOT ELIGIBLE FOR DIVIDENDS. For Information, Service or to make a Complaint Contact Your Registered Representative, or Our VUL Administration. 2727-A ALLEN PARKWAY P.O. BOX 4880 HOUSTON, TEXAS 77210-4880 1-888-325-9315 01206 EX-8.A(II) 5 dex8aii.txt AIM FORM OF AMENDMENT 4 TO PARTICIPATION AGREEMENT EXHIBIT (8)(a)(ii) AMENDMENT NO. 4 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 1, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation, American General Life Insurance Company ("Life Company"), a Texas Life Insurance Company and American General Securities Incorporated ("AGSI"), and collectively (the "Parties"), is hereby amended as follows. All capitalized terms not otherwise defined in this Amendment, shall have the same meaning as described in the Agreement. WHEREAS, the Parties desire to amend the Agreement to add to Schedule A of the Agreement the contracts of the Life Company relating to the Life Company's Platinum Investor III Flexible Premium Variable Life Insurance Policy, Form No. 00600 and also Platinum Investor Survivor II Flexible Premium Variable Life Insurance Policy, Form No. 01206; WHEREAS, American General Distributors, Inc. ("AGDI") is a Delaware corporation and is registered as a broker-dealer under the 1934 Act and under any appropriate regulatory requirements of state law, and is a member in good standing of the NASD, and is an affiliate of AGSI and Life Company; WHEREAS, Life Company and AGDI have entered into a Distribution Agreement, dated November 1, 2000, which sets forth AGDI's duties as distributor of the Contracts and replaces the Distribution Agreement between Life Company and AGSI; and WHEREAS, AGSI desires that AGDI replace AGSI as a party to the Agreement. NOW, THEREFORE, in consideration of their mutual promises, the Parties agree as follows: 1. Effective on the date of the Distribution Agreement between AGL and AGDI, indicated herein, AGDI will replace AGSI as a party to the Agreement. All the duties and responsibilities of AGSI shall become the duties and responsibilities of AGDI. 2. Except as amended herein, the Agreement is hereby ratified and confirmed in all respects. 3. Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: 1 of 3 SCHEDULE A
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE POLICIES UTILIZING SOME OR THE SEPARATE ACCOUNTS ALL OF THE FUNDS ---------------------------------------------------------------------------------------------------------------- AIM V.I. International Equity Fund American General Life . Platinum Investor I Flexible Premium AIM V.I. Value Fund Insurance Company Variable Life Insurance Policy Separate Account VL-R - Policy Form No. 97600 Established: May 1, 1997 . Platinum Investor II Flexible Premium Variable Life Insurance Policy - Policy Form No. 97610 . Corporate America - Variable Flexible Premium Variable Life Insurance - Policy Form No. 99301 . Platinum Investor Survivor Last Survivor Flexible Premium Variable Life Insurance Policy - Policy Form No. 99206 . Platinum Investor Survivor II Last Survivor Flexible Premium Variable Life Insurance Policy - Policy Form No. 01206 . Platinum Investor III Flexible Premium Variable Life Insurance Policy - Policy Form No. 00600 AIM V.I. Value Fund . Legacy Plus Flexible Premium Variable Life Insurance Policy - Policy Form No. 98615 AIM V.I. Capital Appreciation Fund . The One VUL Solution Flexible Premium AIM V.I. Government Securities Fund Variable Life Insurance Policy AIM V.I. High Yield Fund - Policy Form No. 99615 AIM V.I. International Equity Fund AIM V.I. International Equity Fund . Legacy Plus Flexible Premium Variable Life Insurance Policy - Policy Form No. 99616
2 of 3 AIM V.I. International Equity Fund American General Life . Platinum Investor Variable Annuity AIM V.I. Value Fund Insurance Company - Policy Form No. 98020 Separate Account D Established: November 19, 1973
Effective Date: November 1, 2000 AIM VARIABLE INSURANCE FUNDS, INC. Attest: By: ---------------------------- ------------------------------- Name: Nancy L. Martin Name: Robert H. Graham Title: Assistant Secretary Title: President (SEAL) A I M DISTRIBUTORS, INC. Attest: By: ---------------------------- ------------------------------- Name: Nancy L. Martin Name: Michael J. Cemo Title: Assistant Secretary Title: President (SEAL) AMERICAN GENERAL LIFE INSURANCE COMPANY Attest: By: ---------------------------- ----------------------------- Name: Name: ---------------------------- ----------------------------- Title: Title: ---------------------------- ----------------------------- (SEAL) AMERICAN GENERAL DISTRIBUTORS, INC. Attest: By: ---------------------------- ----------------------------- Name: Name: ---------------------------- ----------------------------- Title: Title: ---------------------------- ----------------------------- (SEAL) 3 of 3 EX-8.D(III) 6 dex8diii.txt MFS FORM OF AMENDMENT 6 TO PARTICIPATION AGREEMENT EXHIBIT (8)(d)(iii) AMENDMENT NO. 6 TO PARTICIPATION AGREEMENT Pursuant to the Participation Agreement, made and entered into as of the 13th day of April, 1998, and as amended on October 2, 2000, by and among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company, the parties do hereby agree to an amended Schedule A as attached hereto. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the Participation Agreement to be executed in its name and on its behalf by its duly authorized representative. The Amendment shall take effect on October 1, 2001. AMERICAN GENERAL LIFE INSURANCE COMPANY By its authorized officer, By: ------------------------------------------- Title: MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer, By: ------------------------------------------- Title: MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, By: ------------------------------------------- Title: As of October 1, 2001 SCHEDULE A ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES ----------------------------------------------------------------------------------------------------------------- American General Life Insurance Company Platinum Investor I Flexible Premium MFS Emerging Growth Series Separate Account VL-R Life Insurance Policy MFS Research Series (May 1, 1997) Policy Form No. 97600 MFS Capital Opportunities Series MFS New Discovery Series Platinum Investor II Flexible Premium Life Insurance Policy Policy Form No. 97610 Corporate America-Variable Life Insurance Policy Policy Form No. 99301 Platinum Investor Survivor Variable Life Insurance Policy Policy Form No. 99206 Platinum Investor Survivor II Variable Life Insurance Policy Policy Form No. 01206 Platinum Investor III Flexible Premium Life Insurance Policy Policy Form No. 00600 Legacy Plus Variable MFS Emerging Growth Series Life Insurance Policy Policy Form No. 98615 The One VUL Solution MFS Growth With Income Series Variable Life Insurance Policy Policy Form No. 99615 AG Legacy Plus MFS Emerging Growth Series Variable Life Insurance Policy MFS New Discovery Series Policy Form No. 99616 American General Life Insurance Company Platinum Investor Variable Annuity MFS Emerging Growth Series Separate Account D Policy Form No. 98020 MFS Research Series (November 19, 1973) MFS Capital Opportunities Series MFS New Discovery Series
EX-8.E(IV) 7 dex8eiv.txt MAS FORM OF AMENDMENT 8 TO PARTICIPATION AGREEMENT EXHIBIT (8)(e)(iv) AMENDMENT NUMBER 8 TO PARTICIPATION AGREEMENT AMONG MORGAN STANLEY UNIVERSAL FUNDS, INC., VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., MORGAN STANLEY ASSET MANAGEMENT INC., MILLER ANDERSON & SHERRERD, LLP, AMERICAN GENERAL LIFE INSURANCE COMPANY, AND AMERICAN GENERAL DISTRIBUTORS, INC. This Amendment No. 8 ("Amendment") executed as of October 1, 2001 to the Participation Agreement (the "AGLI Agreement") dated as of January 24, 1997, as amended, among The Universal Institutional Funds, Inc. (formerly Morgan Stanley Universal Funds, Inc.) (the "Fund"), Van Kampen Funds Inc. (formerly Van Kampen American Capital Distributors, Inc.) ("VK Funds"), Morgan Stanley Dean Witter Investment Management Inc. (formerly Morgan Stanley Asset Management Inc.) ("MSDW Investment Management"), Miller Anderson & Sherrerd, LLP ("MAS"), American General Life Insurance Company (the "Company"), and American General Distributors, Inc. ("AGDI"). All capitalized terms not otherwise defined in this Amendment, shall have the same meaning as described in the Agreement. WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule B of the Agreement the Contracts of the Company relating to the Platinum Investor Survivor II Variable Life Insurance Policies ("Platinum Investor Survivor II Policies"), and (ii) to the extent the Agreement relates to Platinum Investor Survivor II Policies, amend the provisions of Article III of the Agreement as described below; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Schedule B to the Agreement, a revised copy of which is attached hereto, is hereby amended and restated to add Platinum Investor Survivor II Policies. 2. To the extent the Agreement relates to Platinum Investor Survivor II Policies, Article III of the Agreement is hereby deleted and replaced with the following: "ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting 3.1. The Fund or its designee shall provide the Company with as many printed copies of the Fund's current prospectus and statement of additional information as the Company may reasonably request. If requested by the Company, in lieu of providing printed copies the Fund shall provide camera-ready film or computer diskettes containing the Fund's prospectus and statement of additional information, and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus and/or statement of additional information for the Fund is amended during the year) to have the prospectus for the Contracts and the Fund's prospectus printed together in one document or separately. The Company may elect to print the Fund's prospectus and/or its statement of additional information in combination with other fund companies' prospectuses and statements of additional information. 3.2(a). Except as otherwise provided in this Section 3.2., all expenses of preparing, setting in type and printing and distributing Fund prospectuses and statements of additional information shall be the expense of the Company. For prospectuses and statements of additional information provided by the Company to its existing owners of Contracts who own shares of the Fund in order to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of setting in type, printing and distributing shall be borne by the Fund. If the Company chooses to receive camera-ready film or computer diskettes in lieu of receiving printed copies of the Fund's prospectus and/or statement of additional information, the Fund shall bear the cost of typesetting to provide the Fund's prospectus and/or statement of additional information to the Company in the format in which the Fund is accustomed to formatting prospectuses and statements of additional information, respectively, and the Company shall bear the expense of adjusting or changing the format to conform with any of its prospectuses and/or statements of additional information. In such event, the Fund will reimburse the Company in an amount equal to the product of x and y where x is the number of such prospectuses distributed to Participants who own shares of the Fund, and y is the Fund's per unit cost of printing the Fund's prospectuses. The same procedures shall be followed with respect to the Fund's statement of additional information. The Fund shall not pay any costs of typesetting, printing and distributing the Fund's prospectus and/or statement of additional information to prospective Participants. 3.2(b). The Fund, at its expense, shall provide the Company with copies of its proxy statements, reports to shareholders, and other communications (except for prospectuses and statements of additional information, which are covered in Section 3.2(a) above) to shareholders in such quantity as the Company shall reasonably require for distributing to Participants. The Fund shall not pay any costs of distributing such proxy-related material, reports to shareholders, and other communications to prospective Participants. 3.2(c). The Company agrees to provide the Fund or its designee with such information as may be reasonably requested by the Fund to assure that the Fund's expenses do not include the cost of typesetting, printing or distributing any of the foregoing documents other than those actually distributed to existing Participants. 3.2(d). The Fund shall pay no fee or other compensation to the Company under this Agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing. 3.2(e). All expenses, including expenses to be borne by the Fund pursuant to Section 3.2 hereof, incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with applicable state laws prior to their sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares. 3.3. The Fund's statement of additional information shall be obtainable from the Fund, the Underwriter, the Company or such other person as the Fund may designate. 3.4. If and to the extent required by law the Company shall distribute all proxy material furnished by the Fund to Contract Owners to whom voting privileges are required to be extended and shall: (i) solicit voting instructions from Contract owners: (ii) vote the Fund shares in accordance with instructions received from Contract owners: and (iii) vote Fund shares for which no instructions have been received in the same proportion as Fund shares of such Portfolio for which instructions have been received, so long as and to the extent that the Securities and Exchange Commission continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. 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 Fund and the Company shall follow the procedures, and shall have the corresponding responsibilities, for the handling of proxy and voting instruction solicitations, as set forth in Schedule C attached hereto and incorporated herein by reference. Participating Insurance Companies shall be responsible for ensuring that each of their separate accounts participating in the Fund calculates voting privileges in a manner consistent with the standards set forth on Schedule C, which standards will also be provided to the other Participating Insurance Companies. 3.5. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Fund will either provide for annual meetings (except insofar as the Securities and Exchange Commission may interpret Section 16 not to require such meetings) or 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 Securities and Exchange Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of directors and with whatever rules the Commission may promulgate with respect thereto." 3. Except as amended hereby the Agreement is hereby ratified and confirmed in all respects. IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 8 as of the date first written above. AMERICAN GENERAL LIFE INSURANCE COMPANY AMERICAN GENERAL DISTRIBUTORS, INC. on behalf of itself and each of its Accounts named in Schedule B to the Agreement, as amended from time to time By: By: ----------------------------------- ----------------------------------- MORGAN STANLEY DEAN WITTER INVESTMENT THE UNIVERSAL INSTITUTIONAL FUNDS, INC. MANAGEMENT INC. (FORMERLY MORGAN STANLEY (FORMERLY MORGAN STANLEY UNIVERSAL ASSET MANAGEMENT INC.) FUNDS, INC.) By: By: ----------------------------------- -----------------------------------
VAN KAMPEN FUNDS INC. MILLER ANDERSON & SHERRERD, LLP (FORMERLY VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.) By: By: --------------------------- ------------------------------ SCHEDULE B SEPARATE ACCOUNTS AND CONTRACTS Name of Separate Account and Form Numbers and Names of Date Established by Board of Directors Contracts Funded by Separate Account -------------------------------------- ------------------------------------ American General Life Insurance Company Contract Form Numbers: Separate Account D 95020 Rev 896 Established: November 19, 1973 95021 Rev 896 Name of Contract: Generations Combination Fixed and Variable Annuity Contract Contract Form Numbers: 91010 91011 93020 93021 Name of Contract: Variety Plus Combination Fixed and Variable Annuity Contract Contract Form Numbers: 74010 74011 76010 76011 80010 80011 81010 81011 83010 83011 Name of Contract: None Contract Form Number: 98020 Name of Contract: Platinum Investor Variable Annuity American General Life Insurance Company Contract Form Numbers: Separate Account VL-R 97600 Established: May 6, 1997 97610 Name of Contract: Platinum I and Platinum II Flexible Premium Variable Life Insurance Policies Name of Separate Account and Form Numbers and Names of Date Established by Board of Directors Contracts Funded by Separate Account -------------------------------------- ------------------------------------ Contract Form Numbers: 98615 Name of Contract: Legacy Plus Flexible Premium Variable Life Insurance Policies Contract Form Number: 99301 Name of Contract: Corporate America Variable Life Insurance Policies Contract Form Number: 99206 Name of Contract: Platinum Investor Survivor Variable Life Insurance Policies Contract Form Number: 00600 Name of Contract: Platinum Investor III Flexible Premium Variable Life Insurance Policies Contract Form Number: 01206 Name of Contract: Platinum Investor Survivor II Flexible Premium Variable Life Insurance Policies EX-8.G(III) 8 dex8giii.txt SAFECO FORM OF AMENDMENT 5 TO PARTICIPATION AGRMT EXHIBIT (8)(g)(iii) FIFTH AMENDMENT TO PARTICIPATION AGREEMENT AMONG AMERICAN GENERAL LIFE INSURANCE COMPANY, AMERICAN GENERAL DISTRIBUTORS, INC, SAFECO RESOURCE SERIES TRUST, AND SAFECO SECURITIES, INC. THIS FIFTH AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as of October 1, 2001, amends the Participation Agreement dated as of April 1, 1998 (the "Agreement") among AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL") on its own behalf and on behalf of each separate account of AGL (each a "Separate Account") set forth on Schedule A of the Agreement attached hereto and incorporated herein (as same may be amended from time to time) ("Schedule A"), AMERICAN GENERAL DISTRIBUTORS, INC. ("AGDI"), SAFECO RESOURCE SERIES TRUST (the "Fund") and SAFECO SECURITIES, INC. (the "Distributor"), (collectively, the "Parties"). All capitalized terms not otherwise defined in this Amendment, shall have the same meaning as ascribed in the Agreement. WITNESSETH THAT: WHEREAS, the Parties desire to amend the Agreement to add to Schedule A of the Agreement the Contracts of the Company relating to the Company's Platinum Investor Survivor II Flexible Premium Variable Life Insurance Policies ("Platinum Investor Survivor II Policies"); NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties agree as follows: 1. The Agreement shall be amended to add the Platinum Investor Survivor II Policies to Schedule A in the form attached hereto and incorporated herein. 2. Except as amended hereby, the Agreement and all subsequent Amendments to the Agreement dated as of April 1, 1998 are hereby ratified in all respects. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed in its name and on its behalf by its duly authorized representative hereto as of the date specified above. Page 1 of 2 Pages AMERICAN GENERAL LIFE INSURANCE COMPANY, on behalf of itself and each of its Separate Accounts named in Schedule A hereto, as amended from time to time. By: ------------------------------ AMERICAN GENERAL DISTRIBUTORS, INC. By: ------------------------------ SAFECO RESOURCE SERIES TRUST By: ------------------------------ SAFECO SECURITIES, INC. By: ------------------------------ Page 2 of 2 Pages SCHEDULE A POLICIES AND SEPARATE ACCOUNTS (AS OF OCTOBER 1, 2001)
NAME OF SEPARATE ACCOUNTS AND REGISTRATION NUMBERS AND NAMES OF POLICIES FUNDED BY DATE ESTABLISHED BY BOARD OF DIRECTORS SEPARATE ACCOUNTS -------------------------------------- ---------------------------------------------------- Registration Nos. Name of Contract (if available) 1. American General Life Insurance Company 333-42567 Platinum Investor I and Separate Account VL-R 811-08561 Platinum Investor II Variable Life Insurance Policies (Contract Form Nos. 97600 and 97610) 333-80191 Corporate America-Variable 811-08561 Life Insurance Policies (Contract Form No. 99301) 333-90787 Platinum Investor Survivor 811-08561 Variable Life Insurance Policies (Contract Form No. 99206) 333-43264 Platinum Investor III 811-08561 Flexible Premium Variable Life Insurance Policy (Contract Form No. 00600) 333-65170 Platinum Investor Survivor II 811-08561 Flexible Premium Variable Life Insurance Policy (Contract Form No. 01206) 2. American General Life Insurance Company 333-70667 Platinum Investor Variable Separate Account D 811-02441 Annuity Contract (Contract Form No. 98202)
EX-8.H(IV) 9 dex8hiv.txt VAN KAMPEN FORM OF AMDMNT 5 TO PARTICIPATION AGRMT EXHIBIT (8)(h)(iv) AMENDMENT NUMBER 7 TO AMENDED AND RESTATED PARTICIPATION AGREEMENT AMONG VAN KAMPEN LIFE INVESTMENT TRUST, VAN KAMPEN FUNDS INC., VAN KAMPEN ASSET MANAGEMENT INC., AMERICAN GENERAL LIFE INSURANCE COMPANY, AND AMERICAN GENERAL DISTRIBUTORS, INC. This Amendment No. 7 ("Amendment No. 7") executed as of the 1st day of October, 2001 to the Amended and Restated Participation Agreement dated as of January 24, 1997, as amended (the "Agreement"), among Van Kampen Life Investment Trust (the "Fund"), Van Kampen Funds Inc., Van Kampen Asset Management Inc., American General Life Insurance Company (the "Company") and American General Distributors, Inc. ("AGDI"). All capitalized terms not otherwise defined in this Amendment, shall have the meaning as described in the Agreement. WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule A of the Agreement the Contracts of the Company relating to the Company's Platinum Investor Survivor II VUL, Form No. 01206 ("Platinum Investor Survivor II Policies"); and (ii) solely to the extent the Agreement relates to the Platinum Investor Survivor II Policies, amend the provisions of Article III of the Agreement as described below; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Schedule A to the Agreement, a revised copy of which is attached hereto, is hereby amended to add the Platinum Investor Survivor II Policies; and 2. Solely to the extent the Agreement relates to the Platinum Investor Survivor II Policies, Article III of the Agreement is hereby deleted and replaced with the following: "ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting 3.1. The Fund shall provide the Company with as many printed copies of the Fund's current prospectus and statement of additional information as the Company may reasonably request. If requested by the Company in lieu of providing printed copies the Fund shall provide camera-ready film or computer diskettes containing the Fund's prospectus and statement of additional information, and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus and/or statement of additional information for the Fund is amended during the year) to have the prospectus for the Contracts and the Fund's prospectus printed together in one document or separately. The Company may elect to print the Fund's prospectus and/or its statement of additional information in combination with other fund companies' prospectuses and statements of additional information. 3.2(a). Except as otherwise provided in this Section 3.2., all expenses of preparing, setting in type and printing and distributing Fund prospectuses and statements of additional information shall be the expense of the Company. For prospectuses and statements of additional information provided by the Company to its existing owners of Contracts in order to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of setting in type, printing and distributing shall be borne by the Fund. If the Company chooses to receive camera-ready film or computer diskettes in lieu of receiving printed copies of the Fund's prospectus and/or statement of additional information, the Fund shall bear the cost of typesetting to provide the Fund's prospectus and/or statement of additional information to the Company in the format in which the Fund is accustomed to formatting prospectuses and statements of additional information, respectively, and the Company shall bear the expense of adjusting or changing the format to conform with any of its prospectuses and/or statements of additional information. In such event, the Fund will reimburse the Company in an amount equal to the product of x and y where x is the number of such prospectuses distributed to owners of the Contracts, and y is the Fund's per unit cost of printing the Fund's prospectuses. The same procedures shall be followed with respect to the Fund's statement of additional information. The Fund shall not pay any costs of typesetting, printing and distributing the Fund's prospectus and/or statement of additional information to prospective Contract owners. 3.2(b). The Fund, at its expense, shall provide the Company with copies of its proxy statements, reports to shareholders, and other communications (except for prospectuses and statements of additional information, which are covered in Section 3.2(a) above) to shareholders in such quantity as the Company shall reasonably require for distributing to Contract owners. The Fund shall not pay any costs of distributing such proxy-related material, reports to shareholders, and other communications to prospective Contract owners. 3.2(c). The Company agrees to provide the Fund or its designee with such information as may be reasonably requested by the Fund to assure that the Fund's expenses do not include the cost of typesetting, printing or distributing any of the foregoing documents other than those actually distributed to existing Contract owners. 3.2(d) The Fund shall pay no fee or other compensation to the Company under this Agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing. 3.2(e) All expenses, including expenses to be borne by the Fund pursuant to Section 3.2 hereof, incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with applicable state laws prior to their sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares. 3.3. The Fund's statement of additional information shall be obtainable from the Fund, the Underwriter, the Company or such other person as the Fund may designate. 3.4. If and to the extent required by law the Company shall distribute all proxy material furnished by the Fund to Contract Owners to whom voting privileges are required to be extended and shall: (i) solicit voting instructions from Contract owners; (ii) vote the Fund shares in accordance with instructions received from Contract owners; and (iii) vote Fund shares for which no instructions have been received in the same proportion as Fund shares of such Portfolio for which instructions have been received, so long as and to the extent that the Securities and Exchange Commission continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. 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 Fund and the Company shall follow the procedures, and shall have the corresponding responsibilities, for the handling of proxy and voting instruction solicitations, as set forth in Schedule C attached hereto and incorporated herein by reference. Participating Insurance Companies shall be responsible for ensuring that each of their separate accounts participating in the Fund calculates voting privileges in a manner consistent with the standards set forth on Schedule C, which standards will also be provided to the other Participating Insurance Companies. 3.5. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Fund will either provide for annual meetings (except insofar as the Securities and Exchange Commission may interpret Section 16 not to require such meetings) or 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 Securities and Exchange Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of directors and with whatever rules the Commission may promulgate with respect thereto." 3. Except as amended hereby, the Agreement is hereby ratified and confirmed in all respects. IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 7 as of the date first written above. AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and each of its Accounts named in Schedule A to the Agreement, as amended from time to time By: --------------------------------------- AMERICAN GENERAL DISTRIBUTORS, INC. By: --------------------------------------- VAN KAMPEN LIFE INVESTMENT TRUST By: --------------------------------------- VAN KAMPEN FUNDS INC. By: --------------------------------------- VAN KAMPEN ASSET MANAGEMENT INC. By: --------------------------------------- SCHEDULE A SEPARATE ACCOUNTS AND CONTRACTS Name of Separate Account and Form Numbers and Names of Contracts Date Established by Board of Directors Funded by Separate Account -------------------------------------- -------------------------- American General Life Insurance Contract Form Nos.: Company Separate Account D 95020 Rev 896 Established: November 19, 1973 95021 Rev 896 Name of Contract: Generations Combination Fixed and Variable Annuity Contract Contract Form Nos.: 91010 91011 93020 93021 Name of Contract: Variety Plus Combination Fixed and Variable Annuity Contract Contract Form Nos.: 74010 74011 76010 76011 80010 80011 81010 81011 83010 83011 Name of Contract: None Contract Form Nos.: 98020 Name of Contract: Platinum Investor Variable Annuity Contract SCHEDULE A (CONTINUED) Name of Separate Account and Form Numbers and Names of Contracts Date Established by Board of Directors Funded by Separate Account -------------------------------------- --------------------------------- American General Life Insurance Contract Form Nos.: Company Separate Account VL-R 97600 Established: May 6, 1997 97610 Name of Contract: Platinum Investor I and Platinum Investor II Flexible Premium Variable Life Insurance Policies Contract Form Number: 99301 Name of Contract: Corporate America-Variable Life Insurance Policy Contract Form Number: 99206 Name of Contract: Platinum Investor Survivor VUL Contract Form Number: 01206 Name of Contract: Platinum Investor Survivor II VUL Contract Form Number: 99615 Name of Contract: The One VUL Solution Contract Form Number: 99616 Name of Contract: AG Legacy Plus VUL Contract Form Number: 00600 Name of Contract: Platinum Investor III Flexible Premium Variable Life Insurance Policy EX-8.P(II) 10 dex8pii.txt AYCO FORM OF AMENDMENT 1 TO PARTICIPATION AGMT EXHIBIT (8)(p)(ii) AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT Pursuant to the Participation Agreement, made and entered into as of the 20th day of November, 2000, by and among Ayco Series Trust, Mercer Allied Company, L.P. and American General Life Insurance Company, the parties do hereby agree to an amended Schedule B and Schedule C as attached hereto. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 1 to the Participation Agreement to be executed in its name and on its behalf by its duly authorized representative. This Amendment No. 1 shall take effect on October 1, 2001. AYCO SERIES TRUST By its authorized officer, By: ______________________________________ Title: ____________________________________ MERCER ALLIED COMPANY, L.P. By its authorized officer, By: ______________________________________ Title: ____________________________________ AMERICAN GENERAL LIFE INSURANCE COMPANY By its authorized officer, By: ______________________________________ Title: ____________________________________ Schedule B (As of October 1, 2001) Contracts Platinum Investor VA Platinum Investor I VUL and Platinum Investor II VUL Platinum Investor III VUL Platinum Investor Survivor VUL Platinum Investor Survivor II VUL Corporate America VUL Schedule C (As of October 1, 2001) Series of the Fund Ayco Growth Fund EX-8.Q(II) 11 dex8qii.txt FIDELITY FUND FORM OF ADMT 1 TO PARTICIPATION AGMT EXHIBIT (8)(q)(ii) AMENDMENT NO. 1 TO AMENDED AND RESTATED PARTICIPATION AGREEMENT American General Life Insurance Company, Variable Insurance Products Fund and Fidelity Distributors Corporation hereby amend the Amended and Restated Participation Agreement ("Agreement") dated October 2, 2000, by doing the following: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the Amended Schedule A attached hereto. IN WITNESS WHEREOF, the parties have hereto affixed their respective authorized signatures, intending that this Amendment No. 1 be effective as of October 1, 2001. AMERICAN GENERAL LIFE INSURANCE COMPANY By: --------------------------------------- Name: Title: VARIABLE INSURANCE PRODUCTS FUND By: --------------------------------------- Robert C. Pozen Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: --------------------------------------- Mike Kellogg Executive Vice President Schedule A Separate Accounts and Associated Contracts (As of October 1, 2001) Name of Separate Account and Policy Form Numbers of Contracts Date Established by Board of Directors Funded By Separate Account -------------------------------------- -------------------------------- American General Life Insurance Company 91010 Separate Account D (November 13, 1973) 91011 93020 93021 98020 American General Life Insurance Company 99301 Separate Account VL-R (May 6, 1997) 97600 97610 00600 99206 01206 American General Life Insurance Company 98075 Separate Account VL-U LIS (October 19, 1998) 98070 EX-8.R(II) 12 dex8rii.txt FIDELITY FUND II FORM OF ADMT 1 TO PARTICIP AGMT EXHIBIT (8)(r)(ii) AMENDMENT NO. 1 TO AMENDED AND RESTATED PARTICIPATION AGREEMENT American General Life Insurance Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation hereby amend the Amended and Restated Participation Agreement ("Agreement") dated October 2, 2000, by doing the following: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the Amended Schedule A attached hereto. IN WITNESS WHEREOF, the parties have hereto affixed their respective authorized signatures, intending that this Amendment No. 1 be effective as of October 1, 2001. AMERICAN GENERAL LIFE INSURANCE COMPANY By: ------------------------------------- Name: Title: VARIABLE INSURANCE PRODUCTS FUND II By: ------------------------------------- Robert C. Pozen Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: ------------------------------------- Mike Kellogg Executive Vice President Schedule A Separate Accounts and Associated Contracts (As of October 1, 2001) Name of Separate Account and Policy Form Numbers of Contracts Date Established by Board of Directors Funded By Separate Account -------------------------------------- -------------------------------- American General Life Insurance Company 91010 Separate Account D (November 13, 1973) 91011 93020 93021 98020 American General Life Insurance Company 99301 Separate Account VL-R (May 6, 1997) 97600 97610 00600 99206 01206 American General Life Insurance Company 98075 Separate Account VL-U LIS (October 19, 1998) 98070 EX-8.T(II) 13 dex8tii.txt JANUS FORM OF AMDMT 1 TO PARTICIPATION AGREEMENT EXHIBIT (8)(t)(ii) AMENDMENT NO. 1 TO FUND PARTICIPATION AGREEMENT This Amendment to the Fund Participation Agreement ("Agreement") dated October 2, 2000, between Janus Aspen Series, an open-end management investment company organized as a Delaware business trust (the "Trust"), Janus Distributors, Inc. ("Distributor"), a Colorado corporation, and American General Life Insurance Company, a Texas life insurance company (the "Company") is effective as of October 1, 2001. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule A of this Agreement shall be deleted and replaced with the attached Schedule A. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. AMERICAN GENERAL LIFE JANUS DISTRIBUTORS, INC. INSURANCE COMPANY By: By: ----------------------------- ------------------------- Name: Name: Bonnie M. Howe Title: Title: Vice President JANUS ASPEN SERIES By: ----------------------------- Name: Bonnie M. Howe Title: Vice President Schedule A Separate Accounts and Associated Contracts (As of October 1, 2001) Name of Separate Account and Date Contracts Funded Established by the Board of Directors. By Separate Account -------------------------------------- ------------------- American General Life Insurance Company Platinum Investor Variable Annuity Separate Account D American General Life Insurance Company Platinum Investor I & Platinum Separate Account VL-R Investor II VUL Platinum Investor III VUL Platinum Investor Survivor VUL Platinum Investor Survivor II VUL Corporate America - Variable VUL EX-8.X(II) 14 dex8xii.txt AYCO FORM OF AMDMT 1 TO ADMIN SERVICES AGMT EXHIBIT (8)(x)(ii) AMENDMENT NO. 1 TO ADMINISTRATIVE SERVICES AGREEMENT Pursuant to the Administrative Services Agreement, made and entered into as of the 20th day of November, 2000, by and among Ayco Series Trust, The Ayco Company, L.P. and American General Life Insurance Company, the parties do hereby agree to an amended Schedule One and Schedule Two as attached hereto. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 1 to the Administrative Services Agreement to be executed in its name and on its behalf by its duly authorized representative. This Amendment No. 1 shall take effect on October 1, 2001. AYCO SERIES TRUST By its authorized officer, By: ______________________________________ Title: ____________________________________ THE AYCO COMPANY, L.P. By its authorized officer, By: ______________________________________ Title: ____________________________________ AMERICAN GENERAL LIFE INSURANCE COMPANY By its authorized officer, By: ______________________________________ Title: ____________________________________ SCHEDULE ONE (AS OF OCTOBER 1, 2001) INVESTMENT COMPANY NAME: FUND NAME(S): ------------------------ ------------- Ayco Series Trust Ayco Growth Fund SCHEDULE TWO (AS OF OCTOBER 1, 2001) LIST OF CONTRACTS . Platinum Investor VA . Platinum Investor I VUL and Platinum Investor II VUL . Platinum Investor III VUL . Platinum Investor Survivor VUL . Platinum Investor Survivor II VUL . Corporate America VUL EX-10.D 15 dex10d.txt SERVICE REQUEST FORM EXHIBIT (10)(d) SERVICE REQUEST PLATINUM --------------------------- INVESTOR(SM) SURVIVOR II --------------------------- AMERICAN GENERAL LIFE -------------------------------------------------------------------------------------------------------------------- PLATINUM INVESTOR--FIXED OPTION Neuberger Berman Advisers Management Trust ------------------------------------------ . Division 18 - Declared Fixed Interest Account . Division 167 - Mid-Cap Growth PLATINUM INVESTOR--VARIABLE DIVISIONS North American Funds Variable Product Series I AIM Variable Insurance Funds ---------------------------------------------- ---------------------------- . Division 132 - International Equities . Division 130 - AIM V.I. International Equity . Division 133 - MidCap Index . Division 131 - AIM V.I. Value . Division 134 - Money Market American Century Variable Portfolios, Inc. ------------------------------------------ . Division 135 - Stock Index . Division 153 - VP Value . Division 136 - Nasdaq-100 Index Ayco Series Trust . Division 137 - Science and Technology ----------------- . Division 138 - Small Cap Index . Division 154 - Ayco Growth Fund PIMCO Variable Insurance Trust Credit Suisse Warburg Pincus Trust ------------------------------ ---------------------------------- . Division 168 - PIMCO Short-Term Bond . Division 173 - Small Company Growth . Division 169 - PIMCO Real Return Bond Dreyfus Investment Portfolios ----------------------------- . Division 170 - PIMCO Total Return Bond . Division 155 - MidCap Stock Putnam Variable Trust --------------------- Dreyfus Variable Investment Fund -------------------------------- . Division 144 - Putnam VT Diversified Income . Division 139 - Quality Bond . Division 145 - Putnam VT Growth and Income . Division 140 - Small Cap . Division 146 - Putnam VT International Growth and Income Fidelity Variable Insurance Products Fund SAFECO Resource Series Trust ----------------------------------------- ---------------------------- . Division 156 - VIP Equity-Income . Division 147 - Equity . Division 157 - VIP Growth . Division 148 - Growth Opportunities . Division 158 - VIP Contrafund The Universal Institutional Funds, Inc. --------------------------------------- . Division 159 - VIP Asset Manager . Division 142 - Equity Growth Janus Aspen Series - Service Shares ----------------------------------- . Division 143 - High Yield . Division 160 - International Growth Vanguard Variable Insurance Fund -------------------------------- . Division 161 - Worldwide Growth . Division 171 - High Yield Bond . Division 162 - Aggressive Growth . Division 172 - REIT Index J.P. Morgan Series Trust II --------------------------- Van Kampen Life Investment Trust -------------------------------- . Division 163 - J.P. Morgan Small Company . Division 149 - Strategic Stock MFS Variable Insurance Trust ---------------------------- . Division 141 - MFS Emerging Growth . Division 164 - MFS Research . Division 165 - MFS Capital Opportunities . Division 166 - MFS New Discovery AGLC0463
AMERICAN American General Life Insurance Company ("AGL") Complete and return this request to: GENERAL Member American General Financial Group Variable Universal Life Operations FINANCIAL GROUP Houston, Texas PO Box 4880 Houston, TX 77210-4880 (888) 325-9315 or (713) 831-3443 Fax: (877) 445-3098 VARIABLE UNIVERSAL LIFE INSURANCE SERVICE REQUEST Hearing Impaired/TDD: (888) 436-5258 ------------------------------------------------------------------------------------------------------------------------------------ [_] POLICY 1. | POLICY #:_________________________________ CONTINGENT INSURED:__________________________________ IDENTIFICATION | CONTINGENT INSURED: _________________________________ COMPLETE THIS SECTION FOR | ADDRESS:________________________________________________________________ New Address (yes) (no) ALL REQUESTS. | Primary Owner (if other than an insured):_______________________________ | Address:________________________________________________________________ New Address (yes) (no) | Primary Owner's S.S. No. or Tax I.D. No.______________ Phone Number:( )_____-________________ | Joint Owner (if applicable):___________________________________________________________________ | Address:________________________________________________________________ New Address (yes) (no) ----------------------------------------------------------------------------------------------------------------------------------- [_] NAME 2. | Change Name Of: (Circle One) Contingent Insured Owner Payor Beneficiary CHANGE | Complete this section if the name | Change Name From: (First, Middle, Last) Change Name To: (First, Middle, Last) of one of the Contingent Insureds,| __________________________________________________ __________________________________________ Owner, Payor or Beneficiary has | changed. (Please note, this does | Reason for Change: (Circle One) Marriage Divorce Correction Other (Attach copy of legal proof) not change the Contingent | Insureds, Owner, Payor or | Beneficiary designation) | ------------------------------------------------------------------------------------------------------------------------------------ [_] CHANGE IN 3. | INVESTMENT DIVISION PREM % DED % INVESTMENT DIVISION PREM % DED % ALLOCATION | (18) Declared Fixed Interest Neuberger Berman Advisers Management Trust PERCENTAGES | Account ______ ______ (167) Mid-Cap Growth ______ ______ Use this section to indicate | AIM Variable Insurance Funds how premiums or monthly | (130) AIM V.I. International North American Funds Variable Product Series I deductions are to be allocated. | Equity ______ ______ (132) International Equities ______ ______ Total allocation in each column | (131) AIM V.I. Value ______ ______ (133) MidCap Index ______ ______ must equal 100%; whole | (134) Money Market ______ ______ numbers only. | American Century Variable Portfolios (135) Stock Index ______ ______ | (153) VP Value ______ ______ (136) Nasdaq-100 Index ______ ______ | (137) Science and Technology ______ ______ | Ayco Series Trust (138) Small Cap Index ______ ______ | (154) Ayco Growth Fund ______ ______ | PIMCO Variable Insurance Trust | Credit Suisse Warburg Pincus Trust (168) PIMCO Short-Term Bond ______ ______ | (173) Small Company Growth ______ ______ (169) PIMCO Real Return Bond ______ ______ | (170) PIMCO Total Return Bond ______ ______ | Dreyfus Investment Portfolios | (155) Midcap Stock ______ ______ Putnam Variable Trust | (144) Putnam VT Diversified | Dreyfus Variable Investment Fund Income ______ ______ | (139) Quality Bond ______ ______ (145) Putnam VT Growth and | (140) Small Cap ______ ______ Income ______ ______ | (146) Putnam VT Int'l Growth and | Fidelity Variable Insurance Products Fund Income ______ ______ | (156) VIP Equity-Income ______ ______ | (157) VIP Growth ______ ______ SAFECO Resource Series Trust | (158) VIP Contrafund ______ ______ (147) Equity ______ ______ | (159) VIP Asset Manager ______ ______ (148) Growth Opportunities ______ ______ | | Janus Aspen Series - Service Shares The Universal Institutional Funds, Inc. | (160) International Growth ______ ______ (142) Equity Growth ______ ______ | (161) Worldwide Growth ______ ______ (143) High Yield ______ ______ | (162) Aggressive Growth ______ ______ | Vanguard Variable Insurance Fund | J.P. Morgan Series Trust II (171) High Yield Bond ______ ______ | (163) J.P. Morgan Small Company ______ ______ (172) REIT Index ______ ______ | | MFS Variable Insurance Trust Van Kampen Life Investment Trust | (141) MFS Emerging Growth ______ ______ (149) Strategic Stock ______ ______ | (164) MFS Research ______ ______ | (165) MFS Capital Opportunities ______ ______ Other:_______________________ ______ ______ | (166) MFS New Discovery ______ ______ 100% 100% ------------------------------------------------------------------------------------------------------------------------------------ AGLC0463 PAGE 2 OF 5
------------------------------------------------------------------------------------------------------------------------------------ [_] MODE OF 4. | Indicate frequency and premium amount desired: $______ Annual $_____ Semi-Annual $____ Quarterly PREMIUM | $_____ Monthly (Bank Draft Only) PAYMENT/BILLING | METHOD CHANGE | Indicate billing method desired: _____Direct Bill _____Pre-Authorized Bank Draft (attach a Use this section to change the | Bank Draft Authorization Form and "Void" Check) billing frequency and/or method | of premium payment. Note, | however, that AGL will not bill | Start Date: ________/ _______/ _________ you on a direct monthly basis. | Refer to your policy and its | related prospectus for further | information concerning minimum | premiums and billing options. | ----------------------------------------------------------------------------------------------------------------------------------- [_] LOST POLICY 5. | I/we hereby certify that the policy of insurance for the listed policy has been CERTIFICATE | ______LOST ______DESTROYED ______OTHER. Complete this section if applying | for a Certificate of Insurance or | Unless I/we have directed cancellation of the policy, I/we request that a: duplicate policy to replace a | lost or misplaced policy. If a | _______Certificate of Insurance at no charge full duplicate policy is being | requested, a check or money order | _______Full duplicate policy at a charge of $25 for $25 payable to AGL must be | submitted with this request. | be issued to me/us. If the original policy is located, I/we will return the Certificate | or duplicate policy to AGL for cancellation. ------------------------------------------------------------------------------------------------------------------------------------ [_] DOLLAR COST 6. | Designate the day of the month for transfers: _______(choose a day from 1-28) AVERAGING | Frequency of transfers (check one): _____Monthly _____Quarterly _____Semi-Annually _____Annually ($5,000 minimum initial | I want: $________________ ($100 minimum) taken from the Money Market Division and transferred to accumulation value) An amount may | the following Divisions: be deducted periodically from the | Money Market Division and placed | (18) Declared Fixed Interest Account ____ ____ Neuberger Berman Advisers Management Trust in one or more of the Divisions | (167) Mid-Cap Growth ____ ____ listed. The Declared Fixed | AIM Variable Insurance Funds North American Funds Variable Product Series I Interest Account is not available | (130) AIM V.I. International Equity ____ ____ (132) International Equities ____ ____ for Dollar Cost Averaging. Please | (131) AIM V.I. Value ____ ____ (133) Midcap Index ____ ____ refer to the prospectus for more | (134) Money Market ____ ____ information on the Dollar Cost | American Century Variable Portfolios (135) Stock Index ____ ____ Averaging Option. Note: Automatic | (153) VP Value ____ ____ (136) Nasdaq-100 Index ____ ____ Rebalancing is not available if | (137) Science & Technology ____ ____ the Dollar Cost Averaging Option | Ayco Series Trust (138) Small Cap Index ____ ____ is chosen. | (154) Ayco Growth Fund ____ ____ | PIMCO Variable Insurance Trust | Credit Suisse Warburg Pincus Trust (168) PIMCO Short-Term Bond ____ ____ | (173) Small Company Growth ____ ____ (169) PIMCO Real Return Bond ____ ____ | (170) PIMCO Total Return Bond ____ ____ | Dreyfus Investment Portfolios | (155) Midcap Stock ____ ____ Putnam Variable Trust | (144) Putnam VT Diversified Income ____ ____ | Dreyfus Variable Investment Fund (145) Putnam VT Growth and Income ____ ____ | (139) Quality Bond ____ ____ (146) Putnam VT Int'l Growth and Income____ ____ | (140) Small Cap ____ ____ | SAFECO Resource Series Trust | Fidelity Variable Insurance Products Fund (147) Equity ____ ____ | (156) VIP Equity-Income ____ ____ (148) Growth Opportunities ____ ____ | (157) VIP Growth ____ ____ | (158) VIP Contrafund ____ ____ The Universal Institutional Funds, Inc. | (159) VIP Asset Manager ____ ____ (142) Equity Growth ____ ____ | (143) High Yield ____ ____ | Janus Aspen Series - Service Shares | (160) International Growth ____ ____ Vanguard Variable Insurance Fund | (161) Worldwide Growth ____ ____ (171) High Yield Bond ____ ____ | (162) Aggressive Growth ____ ____ (172) REIT Index ____ ____ | | J.P. Morgan Series Trust II Van Kampen Life Investment Trust | (163) J.P. Morgan Small Company ____ ____ (149) Strategic Stock ____ ____ | Other ____ ____ | MFS Variable Insurance Trust 100% 100% | (141) MFS Emerging Growth ____ ____ | (164) MFS Research ____ ____ | (165) MFS Capital Opportunities ____ ____ | (166) MFS New Discovery ____ ____ | | _____ INITIAL HERE TO REVOKE DOLLAR COST AVERAGING ELECTION. ------------------------------------------------------------------------------------------------------------------------------------ AGLC0463 PAGE 3 OF 5
------------------------------------------------------------------------------------------------------------------------------------ [_] AUTOMATIC 7. | REBALANCING | Indicate frequency: ________Quarterly ________Semi-Annually ________Annually ($5,000 minimum accumulation | value) Use this section to apply | (Division Name or Number) (Division Name or Number) for or make changes to | Automatic Rebalancing of the | _______% : ___________________________________ _______% : ________________________________ variable divisions. Please refer | _______% : ___________________________________ _______% : ________________________________ to the prospectus for more | _______% : ___________________________________ _______% : ________________________________ information on the Automatic | _______% : ___________________________________ _______% : ________________________________ Rebalancing Option. | _______% : ___________________________________ _______% : ________________________________ Note: Dollar Cost Averaging is | _______% : ___________________________________ _______% : ________________________________ not available if the Automatic | _______% : ___________________________________ _______% : ________________________________ Rebalancing Option is chosen. | _______% : ___________________________________ _______% : ________________________________ | _______% : ___________________________________ _______% : ________________________________ | _______% : ___________________________________ _______% : ________________________________ | | | ________ INITIAL HERE TO REVOKE AUTOMATIC REBALANCING ELECTION. ----------------------------------------------------------------------------------------------------------------------------------- [_] TELEPHONE 8. | I(/we if Joint Owners) hereby authorize AGL to act on telephone instructions to transfer values PRIVILEGE | among the Variable Divisions and Declared Fixed Interest Account and to change allocations for AUTHORIZATION | future purchase payments and monthly deductions. Complete this section if you are | applying for or revoking current | Initial the designation you prefer: telephone privileges. | _________Policy Owner(s) only - If Joint Owners, either one acting independently. | | _________Policy Owner(s) or Agent/Registered Representative who is appointed to represent AGL | and the firm authorized to service my policy. | | AGL and any non-owner designated by this authorization will not be responsible for any claim, | loss or expense based upon telephone transfer or allocation instructions received and acted upon | in good faith, including losses due to telephone instruction communication errors. AGL's | liability for erroneous transfers or allocations, unless clearly contrary to instructions | received, will be limited to correction of the allocations on a current basis. If an error, | objection or other claim arises due to a telephone transaction, I will notify AGL in writing | within five working days from the receipt of the confirmation of the transaction from AGL. I | understand that this authorization is subject to the terms and provisions of my variable | universal life insurance policy and its related prospectus. This authorization will remain in | effect until my written notice of its revocation is received by AGL at the address printed on | the top of this service request form. | | _______INITIAL HERE TO REVOKE TELEPHONE PRIVILEGE AUTHORIZATION. ------------------------------------------------------------------------------------------------------------------------------------ [_] CORRECT AGE 9. | Name of Contingent Insured for whom this correction is submitted:_______________________________ Use this section to correct the | age of any person covered under | this policy. Proof of the correct | Correct DOB: _________/____________ /_____________ date of birth must accompany this | request. | ------------------------------------------------------------------------------------------------------------------------------------ [_] TRANSFER OF 10. | (Division Name or Number) (Division Name or Number) ACCUMULATED | VALUES | Transfer $_______ or _______% from ____________________________ to _____________________________ Use this section if you want to | move money between divisions. | Transfer $_______ or _______% from ____________________________ to _____________________________ The minimum amount for transfers | is $500.00. Withdrawals from the | Transfer $_______ or _______% from ____________________________ to _____________________________ Declared Fixed Interest Account to| a Variable Division may only be | Transfer $_______ or _______% from ____________________________ to _____________________________ made within the 60 days after a | contract anniversary. See transfer| Transfer $_______ or _______% from ____________________________ to _____________________________ limitations outlined in | prospectus. If a transfer causes | Transfer $_______ or _______% from ____________________________ to _____________________________ the balance in any division to | drop below $500, AGL reserves | Transfer $_______ or _______% from ____________________________ to _____________________________ the right to transfer | the remaining balance. Amounts | Transfer $_______ or _______% from ____________________________ to _____________________________ to be transferred should be | indicated in dollar or percentage | Transfer $_______ or _______% from ____________________________ to _____________________________ amounts, maintaining | consistency throughout. | Transfer $_______ or _______% from ____________________________ to _____________________________ ------------------------------------------------------------------------------------------------------------------------------------ AGLC0463 PAGE 4 OF 5
------------------------------------------------------------------------------------------------------------------------------------ [_] REQUEST FOR 11. | PARTIAL | ______I request a partial surrender of $_____ or _____% of the net cash surrender value. SURRENDER/ | ______I request a loan in the amount of $_____. POLICY LOAN | ______I request the maximum loan amount available from my policy. Use this section to apply for a | partial surrender from or policy | loan against policy values. For | Unless you direct otherwise below, proceeds are allocated according to the deduction allocation detailed information concerning | percentages in effect, if available; otherwise they are taken pro-rata from the Declared Fixed these two options please refer to | Interest Account and Variable Divisions in use. your policy and its related | prospectus. If applying for a | ________________________________________________________________________________________________ partial surrender, be sure to | complete the Notice of Withholding| ________________________________________________________________________________________________ section of this Service Request | in addition to this section. | ________________________________________________________________________________________________ | ------------------------------------------------------------------------------------------------------------------------------------ [_] NOTICE OF 12. | The taxable portion of the distribution you receive from your variable universal life insurance WITHHOLDING | policy is subject to federal income tax withholding unless you elect not to have withholding Complete this section if you have | apply. Withholding of state income tax may also be required by your state of residence. You may applied for a partial surrender | elect not to have withholding apply by checking the appropriate box below. If you elect not to in Section 11. | have withholding apply to your distribution or if you do not have enough income tax withheld, | you may be responsible for payment of estimated tax. You may incur penalties under the | estimated tax rules, if your withholding and estimated tax are not sufficient. | | Check one: ________I do want income tax withheld from this distribution. | | ________I do not want income tax withheld from this distribution. | | If no election is made, we are REQUIRED to withhold Federal Income Tax (if applicable). ------------------------------------------------------------------------------------------------------------------------------------ [_] AFFIRMATION/ 10. | CERTIFICATION: Under penalties of perjury, I certify: (1) that the number shown on this form is SIGNATURE | my correct taxpayer identification number and; (2) that I am not subject to backup withholding Complete this section for | under Section 3406(a)(1)(C) of the Internal Revenue Code. ALL requests. | | The Internal Revenue Service does not require your consent to any provision of this document | other than the certification required to avoid backup withholding. | | Dated at_______________this___________day of______________________________________,__________ | | X______________________________________________ X__________________________________________ | SIGNATURE OF OWNER SIGNATURE OF WITNESS | | X______________________________________________ X__________________________________________ | SIGNATURE OF JOINT OWNER SIGNATURE OF WITNESS | | X______________________________________________ X__________________________________________ | SIGNATURE OF ASSIGNEE SIGNATURE OF WITNESS | ------------------------------------------------------------------------------------------------------------------------------------ AGLC0463 PAGE 5 OF 5
EX-10.F 16 dex10f.txt SUPPLEMENTAL APPLICATION EXHIBIT (10)(f) AMERICAN |GENERAL |FINANCIAL GROUP
PLATINUM INVESTOR SURVIVOR II JOINT AND LAST SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE SUPPLEMENTAL APPLICATION AMERICAN GENERAL LIFE INSURANCE COMPANY, ("AGL") Home Office: Houston, Texas Member of American General Financial Group. American General Financial Group is the marketing name for American General Corporation and its subsidiaries. (This supplement must accompany the appropriate application for life insurance.) ----------------------------------------------------------------------------------------------------------------------------------- Applicant Information - Supplement to the application on the lives of ----------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------ ----------------------------------------- -------------------------------------- Name of Proposed Contingent Insured Name of Other Proposed Contingent Insured Date of application for life insurance ----------------------------------------------------------------------------------------------------------------------------------- Initial Allocation Percentages ----------------------------------------------------------------------------------------------------------------------------------- Investment Options In the "Premium Allocation" column, indicate how each premium received is to be allocated. In the "Deduction Allocation" column, indicate which investment options are to be used for the deduction of monthly charges. Total allocations in each column must equal 100%. Use whole percentages only. PREMIUM DEDUCTION PREMIUM DEDUCTION ALLOCATION ALLOCATION ALLOCATION ALLOCATION ---------- ---------- ---------- ---------- AGL Declared Fixed Interest Account (18) _____% _____% NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST Mid-Cap Growth Division (167) _____% ____% AIM VARIABLE INSURANCE FUNDS AIM V.I. International Equity Division (130)_____% _____% NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES I AIM V.I. Value Division (131) _____% _____% International Equities Division (132) _____% _____% MidCap Index Division (133) _____% _____% AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. Money Market Division (134) _____% _____% VP Value Division (153) _____% _____% Nasdaq-100 Index Division (136) _____% _____% Science & Technology Division (137) _____% _____% AYCO SERIES TRUST Small Cap Index Division (138) _____% _____% Ayco Growth Fund Division (154) _____% _____% Stock Index Division (135) _____% _____% CREDIT SUISSE WARBURG PINCUS TRUST PIMCO VARIABLE INSURANCE TRUST Small Company Growth Division (173) _____% _____% PIMCO Real Return Bond Division (169) _____% _____% PIMCO Short-Term Bond Division (168) _____% _____% DREYFUS INVESTMENT PORTFOLIOS PIMCO Total Return Bond Division (170) _____% _____% MidCap Stock Division (155) _____% _____% PUTNAM VARIABLE TRUST DREYFUS VARIABLE INVESTMENT FUND Putnam VT Diversified Income Division (144) _____% _____% Quality Bond Division (139) _____% _____% Putnam VT Growth and Income Division (145) _____% _____% Small Cap Division (140) _____% _____% Putnam VT Int'I Growth and Income Division (146) _____% _____% FIDELITY VARIABLE INSURANCE PRODUCTS FUND SAFECO RESOURCE SERIES TRUST VIP Asset Manager Division (159) _____% _____% Equity Division (147) _____% _____% VIP Contrafund Division (158) _____% _____% Growth Opportunities Division (148) _____% _____% VIP Equity-Income Division (156) _____% _____% VIP Growth Division (157) _____% _____% THE UNIVERSAL INSTITUTIONAL FUNDS, INC. Equity Growth Division (142) _____% _____% JANUS ASPEN SERIES - SERVICE SHARES High Yield Division (143) _____% _____% Aggressive Growth Division (162) _____% _____% International Growth Division (160) _____% _____% VANGUARD VARIABLE INSURANCE FUND Worldwide Growth Division (161) _____% _____% High Yield Bond Division (171) _____% _____% REIT Index Division (172) _____% _____% J.P. MORGAN SERIES TRUST II J.P. Morgan Small Company Division (163) _____% _____% VAN KAMPEN LIFE INVESTMENT TRUST Strategic Stock Division (149) _____% _____% MFS VARIABLE INSURANCE TRUST MFS Capital Opportunities Division (165) _____% _____% OTHER:_____________________________ _____% _____% MFS Emerging Growth Division (141) _____% _____% 100% 100% MFS New Discovery Division (166) _____% _____% MFS Research Division (164) _____% _____% ------------------------------------------------------------------------------------------------------------------------------------ AGLC 0461-2001 Page 1 of 4
------------------------------------------------------------------------------------------------------------------------------------ Dollar Cost Averaging ------------------------------------------------------------------------------------------------------------------------------------ Dollar Cost ($5,000 MINIMUM BEGINNING ACCUMULATION VALUE) An amount can be systematically transferred from the [Money Market Averaging Division] and transferred to one or more of the investment options below. The [AGL Declared Fixed Interest Account] is not available for Dollar Cost Averaging. Please refer to the prospectus for more information on the Dollar Cost Averaging option. Day of the month for transfers: _____________________ (Choose a day of the month between 1-28.) Frequency of transfers: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually Transfer $ ________________________________ ($100 MINIMUM, WHOLE DOLLARS ONLY) AIM VARIABLE INSURANCE FUNDS NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST AIM V.I. International Equity Division (130)$__________ Mid-Cap Growth Division (167) $__________ AIM V.I. Value Division (131) $__________ NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES I AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. International Equities Division (132) $__________ VP Value Division (153) $__________ MidCap Index Division (133) $__________ Nasdaq-100 Index Division (136) $__________ AYCO SERIES TRUST Science & Technology Division (137) $__________ Ayco Growth Fund Division (154) $__________ Small Cap Index Division (138) $__________ Stock Index Division (135) $__________ CREDIT SUISSE WARBURG PINCUS TRUST Small Company Growth Division (173) $__________ PIMCO VARIABLE INSURANCE TRUST PIMCO Real Return Bond Division (169) $__________ DREYFUS INVESTMENT PORTFOLIOS PIMCO Short-Term Bond Division (168) $__________ MidCap Stock Division (155) $__________ PIMCO Total Return Bond Division (170) $__________ DREYFUS VARIABLE INVESTMENT FUND PUTNAM VARIABLE TRUST Quality Bond Division (139) $__________ Putnam VT Diversified Income Division (144) $__________ Small Cap Division (140) $__________ Putnam VT Growth and Income Division (145) $__________ Putnam VT Int'I Growth and Income Division (146) $__________ FIDELITY VARIABLE INSURANCE PRODUCTS FUND VIP Asset Manager Division (159) $__________ SAFECO RESOURCE SERIES TRUST VIP Contrafund Division (158) $__________ Equity Division (147) $__________ VIP Equity-Income Division (156) $__________ Growth Opportunities Division (148) $__________ VIP Growth Division (157) $__________ THE UNIVERSAL INSTITUTIONAL FUNDS, INC. JANUS ASPEN SERIES - SERVICE SHARES Equity Growth Division (142) $__________ Aggressive Growth Division (162) $__________ High Yield Division (143) $__________ International Growth Division (160) $__________ Worldwide Growth Division (161) $__________ VANGUARD VARIABLE INSURANCE FUND High Yield Bond Division (171) $__________ J.P. MORGAN SERIES TRUST II REIT Index Division (172) $__________ J.P Morgan Small Company Division (163) $__________ VAN KAMPEN LIFE INVESTMENT TRUST MFS VARIABLE INSURANCE TRUST Strategic Stock Division (149) $__________ MFS Capital Opportunities Division (165) $__________ MFS Emerging Growth Division (141) $__________ OTHER _______________________________ $__________ MFS New Discovery Division (166) $__________ MFS Research Division (164) $__________ ------------------------------------------------------------------------------------------------------------------------------------ Automatic Rebalancing ------------------------------------------------------------------------------------------------------------------------------------ Automatic ($5,000 MINIMUM BEGINNING ACCUMULATION VALUE) Variable division assets will be automatically rebalanced based on the Rebalancing premium percentages designated on Page 1 of this form. If the AGL Declared Fixed Interest Account has been designated for premium allocation, the rebalancing will be based on the proportion allocated to the variable divisions. Please refer to the prospectus for more information on the Automatic Rebalancing option. CHECK HERE FOR AUTOMATIC REBALANCING FREQUENCY: [_] Quarterly [_] Semiannually [_] Annually ---------------------------------------------- ------------- ---------------- ----------- NOTE: Automatic Rebalancing is not available if the Dollar Cost Averaging option has been chosen. ------------------------------------------------------------------------------------------------------------------------------------ Modified Endowment Contract ------------------------------------------------------------------------------------------------------------------------------------ Contract If any premium payment causes the policy to be classified as a modified endowment contract under Section 7702A of the Internal Revenue Code, there may be potentially adverse tax consequences. Such consequences include: (1) withdrawals or loans being taxed to the extent of gain; and (2) a 10% penalty tax on the taxable amount. In order to avoid modified endowment status, I request any excess premium that could cause such status to be refunded. [_] YES [_] NO ------------------------------------------------------------------------------------------------------------------------------------ AGLC 0461-2001 Page 2 of 4
------------------------------------------------------------------------------------------------------------------------------------ Death Benefit Compliance Test ------------------------------------------------------------------------------------------------------------------------------------ [_] Guideline Premium Test [_] Cash Value Accumulation Test ------------------------------------------------------------------------------------------------------------------------------------ Specified Amount ------------------------------------------------------------------------------------------------------------------------------------ Base Coverage $______________________plus Supplemental Coverage $ _________________________ = Total Specified Amount $ _____________ ------------------------------------------------------------------------------------------------------------------------------------ Telephone Authorization ------------------------------------------------------------------------------------------------------------------------------------ I (or we, if Joint Owners), hereby authorize American General Life Insurance Company ("AGL") to act on telephone instructions to transfer values among the variable divisions and the AGL Declared Fixed Interest Account and to change allocations for future premium payments and monthly deductions given by: Initial appropriate [ ] Policy Owner(s)- if Joint Owners, either of us acting independently. box here: [ ] Policy Owner(s) or the Agent/Registered Representative who is appointed to represent AGL and the firm authorized to service my policy. AGL and any person designated by this authorization will not be responsible for any claim, loss or expense based upon telephone instructions received and acted on in good faith, including losses due to telephone instruction communication errors. AGL's liability for erroneous transfers and allocations, unless clearly contrary to instructions received, will be limited to correction of the allocations on a current basis. If an error, objection or other claim arises due to a telephone transaction, I will notify AGL in writing within five working days from receipt of confirmation of the transaction from AGL. I understand that this authorization is subject to the terms and provisions of my variable universal life insurance policy and its related prospectus. This authorization will remain in effect until my written notice of its revocation is received by AGL at its home office. ------------------------------------------------------------------------------------------------------------------------------------ Suitability ------------------------------------------------------------------------------------------------------------------------------------ All questions must 1. Have you, the Proposed Insured(s) or Owner(s) (if different), received the variable universal life be answered. insurance policy prospectus and the prospectuses describing the investment options? [_] yes [_] no (IF "YES," PLEASE FURNISH THE PROSPECTUS DATES.) Variable Universal Life Insurance Policy Prospectus: __________ Supplements (if any): __________ 2. Do you understand and acknowledge: a. THAT THE POLICY APPLIED FOR IS VARIABLE, EMPLOYS THE USE OF SEGREGATED ACCOUNTS WHICH MEANS THAT YOU NEED TO RECEIVE AND UNDERSTAND CURRENT PROSPECTUSES FOR THE POLICY AND THE UNDERLYING ACCOUNTS? [_] yes [_] no b. THAT ANY BENEFITS, VALUES OR PAYMENTS BASED ON PERFORMANCE OF THE SEGREGATED ACCOUNTS MAY VARY: AND [_] yes [_] no (1) ARE NOT GUARANTEED BY THE COMPANY, ANY OTHER INSURANCE COMPANY, THE U.S. GOVERNMENT OR ANY STATE GOVERNMENT? [_] yes [_] no (2) ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, FEDERAL OR STATE? [_] yes [_] no c. THAT IN ESSENCE, ALL RISK IS BORNE BY THE OWNER EXCEPT FOR FUNDS PLACED IN THE AGL DECLARED FIXED INTEREST ACCOUNT? [_] yes [_] no d. THAT THE POLICY IS DESIGNED TO PROVIDE LIFE INSURANCE COVERAGE AND TO ALLOW FOR THE ACCUMULATION OF VALUES IN THE SEGREGATED ACCOUNTS? [_] yes [_] no e. THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT? [_] yes [_] no f. THE POLICY VALUES MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, THE AGL DECLARED FIXED INTEREST ACCOUNT ACCUMULATION, AND CERTAIN EXPENSE DEDUCTIONS? [_] yes [_] no 3. Do you believe the Policy you selected meets your insurance and investment objectives and your anticipated financial needs? [_] yes [_] no ------------------------------------------------------------------------------------------------------------------------------------ AGLC 0461-2001 Page 3 of 4
------------------------------------------------------------------------------------------------------------------------------------ Acknowledgements ------------------------------------------------------------------------------------------------------------------------------------ The following states require the applicants to acknowledge the information below that pertains to their specific State. Check the appropriate box for your application state, and sign and date the Your Signature section below. [_] FLORIDA Any person who knowingly and with intent to injure, defraud or deceive any insurer files a statement of claim or an application any false, incomplete or misleading information is guilty of a felony of the third degree. [_] MAINE It is a crime to knowingly provide false, incomplete or misleading information to an insurance company for the purpose of defrauding the company. Penalties may include imprisonment, fines or denial of insurance benefit. [_] NEW MEXICO Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents false information in an application for insurance is guilty of a crime and may be subject to civil fines and criminal penalties. ------------------------------------------------------------------------------------------------------------------------------------ Your Signature ------------------------------------------------------------------------------------------------------------------------------------ Signatures Signed at (city, state) ----------------------------------------------------------------------------------------------------------------------- Print name of Broker/Dealer ----------------------------------------------------------------------------------------------------------------------- X Registered Representative State license # Date ----------------------------------------------------------------------------------------------------------------------- X Proposed Contingent Insured Date ---------------------------------------------------------------------------------------------------------------------- X Other Proposed Contingent Insured Date ---------------------------------------------------------------------------------------------------------------------- X Owner Date ---------------------------------------------------------------------------------------------------------------------- (If different from Proposed Contingent Insured) X Additional Owner Date ---------------------------------------------------------------------------------------------------------------------- (If different from Proposed Contingent Insured) ----------------------------------------------------------------------------------------------------------------------------------- AGLC 0461-2001 Page 4 of 4
EX-2.A 17 dex2a.txt OPINION AND CONSENT - LEGAL LETTER Other Exhibits-Exhibit 2(a) AMERICAN GENERAL FINANCIAL GROUP 2929 ALLEN PARKWAY (A40-04), HOUSTON, TEXAS 77019 Pauletta P. Cohn Deputy General Counsel Direct Line (713) 831-1230 FAX (713) 620-3878 E-mail: pauletta_cohn@agfg.com October 10, 2001 American General Life Insurance Company 2727-A Allen Parkway Houston, TX 77019 Dear Ladies and Gentlemen: As Deputy General Counsel of American General Life Companies, I have acted as counsel to American General Life Insurance Company (the "Company") in connection with the filing of Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6, File Nos. 333-65170 and 811-08561 ("Registration Statement"), for the Company's Separate Account VL-R ("Separate Account VL-R") with the Securities and Exchange Commission. The Registration Statement relates to the proposed issuance by the Company of Platinum Investor/SM/ Survivor II (Policy Form No. 01206) last survivor flexible premium variable life insurance policies (the "Policies"). Net premiums received under the Policies are allocated by the Company to Separate Account VL-R to the extent directed by owners of the Policies. Net premiums under other policies that may be issued by the Company may also be allocated to Separate Account VL-R. The Policies are designed to provide retirement protection and are to be offered in the manner described in the prospectus and the prospectus supplements included in the Registration Statement. The Policies will be sold only in jurisdictions authorizing such sales. In connection with rendering this opinion, I have examined and am familiar with originals or copies, certified or otherwise identified to my satisfaction, of the corporate records of the Company and all such other documents as I have deemed necessary or appropriate as a basis for the opinion expressed herein and have assumed that prior to the issuance or sale of any Policies, the Registration Statement, as finally amended, will be effective. Based on and subject to the foregoing and the limitations, qualifications, exceptions and assumptions set forth herein, I am of the opinion that: 1. The Company is a corporation duly organized and validly existing under the laws of the State of Texas. AMERICAN GENERAL LIFE COMPANIES 2929 Allen Parkway . Houston, TX 77019 American General Life Insurance Company October 10, 2001 Page 2 2. Separate Account VL-R was duly established and is maintained by the Company pursuant to the laws of the State of Texas, under which income, gains and losses, whether or not realized, from assets allocated to Separate Account VL-R, are, in accordance with the Policies, credited to or charged against Separate Account VL-R without regard to other income, gains or losses of the Company. 3. Assets allocated to Separate Account VL-R will be owned by the Company. The Company is not a trustee with respect thereto. The Policies provide that the portion of the assets of Separate Account VL-R equal to the reserves and other Policy liabilities with respect to Separate Account VL-R will not be chargeable with liabilities arising out of any other business the Company may conduct. The Company reserves the right to transfer assets of Separate Account VL-R in excess of such reserves and other Policy liabilities to the general account of the Company. 4. When issued and sold as described above, the Policies (including any units of Separate Account VL-R duly credited thereunder) will be duly authorized and will constitute validly issued and binding obligations of the Company in accordance with their terms. I am admitted to the bar in the State of Texas, and I do not express any opinion as to the laws of any other jurisprudence. This opinion is being furnished in accordance with the requirements of Item 601(b)(5), Regulation S-K of the Securities Act of 1933 and I hereby consent to the use of this opinion as an exhibit to the Registration Statement. Sincerely, /s/ PAULETTA P. COHN --------------------- EX-2.B 18 dex2b.txt OPINION AND CONSENT - ACTUARY Other Exhibits-Exhibit 2(b) AMERICAN GENERAL FINANCIAL GROUP ROBERT M. BEUERLEIN, FSA, MAAA Senior Vice President & Chief Actuary AGLD & Chief Actuary October 10, 2001 American General Life Insurance Company 2727-A Allen Parkway Houston, Texas 77019 Dear Ladies and Gentlemen: This opinion is furnished in connection with the Registration Statement on Form S-6, File No. 333-65170 ("Registration Statement") of Separate Account VL-R ("Separate Account VL-R") of American General Life Insurance Company ("AGL") covering an indefinite number of units of interest in Separate Account VL-R under Platinum Investor Survivor II (policy form No. 01206) flexible premium variable life insurance policies ("Policies"). Net premiums received under the Policies may be allocated to Separate Account VL-R as described in the prospectus included in the Registration Statement. I participated in the preparation of the Policies and I am familiar with their provisions. I am also familiar with the description contained in the prospectus. In my opinion: The Illustrations of Hypothetical Policy Benefits which appear in the prospectus (the "Illustrations") are consistent with the provisions of the Policies. The assumptions upon which these Illustrations are based, including the current charges and the .25% and .60% reductions in the daily charges after a specified number of years, are stated in the prospectus and are reasonable. The Policies have not been designed so as to make the relationship between premiums and benefits, as shown in the Illustrations, appear disproportionately more favorable to prospective purchasers of Policies for preferred risk (the best premium class offered by AGL) non- tobacco user males age 55, than to prospective purchasers of Policies for males and females at other ages within this premium class or any other premium class. The particular Illustrations shown were not selected for the purpose of making the relationship appear more favorable. 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 "Actuarial Expert" in the prospectus. /s/ ROBERT M. BEUERLEIN ------------------------ Robert M. Beuerlein Senior Vice President & Chief Actuary AMERICAN GENERAL LIFE COMPANIES Member American General Financial Group 2727-A Allen Pkwy. . Houston, TX 77019 . 713/831-2738 . Fax 713.831.8016 . rbeuerlein@aglife.com EX-6 19 dex6.txt ERNST & YOUNG CONSENT Other Exhibits-Exhibit 6 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Accounting and Auditing Experts" and to the use of our report dated February 5, 2001, with respect to the financial statements of American General Life Insurance Company included in this Pre-Effective Amendment No. 1 to the Registration Statement (Form S-6, Nos. 333-65170 and 811-08561) of American General Life Insurance Company Separate Account VL-R filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP ---------------------- Houston, Texas October 9, 2001