485APOS 1 d485apos.txt PEA #16(FORM N-6) AGL PLATINUM INVESTOR SURVIVOR II VUL Registration Nos. 333-65170 811-08561 As filed with the Securities and Exchange Commission on August 22, 2007 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-effective Amendment No. [__] Post-Effective Amendment No. [16] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. [103] AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R (Exact Name of Registrant) AMERICAN GENERAL LIFE INSURANCE COMPANY (Name of Depositor) 2727-A Allen Parkway Houston, Texas 77019-2191 (Address of Depositor's Principal Executive Offices) (Zip Code) (713) 831-8470 (Depositor's Telephone Number, Including Area Code) AMERICAN HOME ASSURANCE COMPANY (Name of Guarantor) 70 Pine Street New York, New York 10270 (212) 770-7000 (Guarantor's Telephone Number, Including Area Code) Lauren W. Jones, Esq. Deputy General Counsel American General Life Companies, LLC 2929 Allen Parkway Houston, Texas 77019 (Name and Address of Agent for Service for Depositor, Registrant and Guarantor) Approximate Date of Proposed Public Offering: Continuous. It is proposed that this filing will become effective (check appropriate box) [_]immediately upon filing pursuant to paragraph (b) [_]on (date) pursuant to paragraph (b) [X]60 days after filing pursuant to paragraph (a)(1) [_]on (date) pursuant to paragraph (a)(1) of Rule 485. If appropriate, check the following box: [_]This post-effective amendment designates a new effective date for a previously filed post-effective amendment. ================================================================================ PART A The Prospectus, dated May 1, 2007, is incorporated into Part A of this Post-Effective Amendment No. 16 by reference to the Registrant's Post-Effective Amendment No. 15, as filed on May 1, 2007 (File No. 333-65170). A supplement dated October 22, 2007 to the Prospectus is included in Part A of this Post-Effective Amendment No. 16. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R PLATINUM INVESTOR(R) SURVIVOR II LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES SUPPLEMENT DATED OCTOBER 22, 2007 TO PROSPECTUS DATED MAY 1, 2007 Effective October 22, 2007, American General Life Insurance Company ("AGL") is amending the prospectus for the purpose of introducing the Overloan Protection Rider. The Tables of Charges in the prospectus have been amended to reflect the charge for this rider. A description of this rider has been added to the prospectus. I. The Tables of Charges, on pages 11-16 of the prospectus, have been deleted in their entirety and replaced with the following: TABLES OF CHARGES The following tables describe the fees and expenses that are payable, when buying, owning and surrendering a Policy. No Policy owner will be charged more than the amount we show under the "Maximum Guaranteed Charge" columns. AGL may also make available to Policy owners other universal life insurance policies with different features and charges. Please ask your AGL representative about our other policies. The first table describes the fees and expenses that are payable at the time that you (1) buy a Policy, (2) surrender a Policy during the first 14 Policy years and the first 14 Policy years following an increase in the Policy's base coverage, (3) change a Policy's specified amount, or (4) transfer accumulation value between investment options. Transaction Fees When Charge is Maximum Guaranteed Charge Deducted Charge Current Charge ------ ------------------ ------------------ ------------------ Statutory Premium Upon receipt of 3.5%/1/ of each 3.5%/1/ of each Tax Charge each premium premium payment premium payment payment (tax charge back (tax charge back if you purchase if you purchase the Policy in the Policy in Oregon)/2/ Oregon)/2/ Premium Expense Upon receipt of 5% of the premium 5% of the premium Charge each premium payment remaining payment remaining payment after deduction of after deduction of the premium tax the premium tax charge charge Overloan At time rider is 5.0% of Policy's 3.5% of Policy's Protection Rider exercised accumulation value accumulation value One-Time Charge at time rider is at time rider is exercised exercised -------- /1/ Statutory premium tax rates vary by state. For example, the highest premium tax rate, 3.5%, is in the state of Nevada, while the lowest premium tax rate, 0.5%, is in the state of Illinois. Certain local jurisdictions may assess additional premium taxes. /2/ Instead of a premium tax charge, we assess a tax charge back of 2% of each premium payment for Policy owners residing in the state of Oregon. See "Tax charge back" on page 46. 1 Transaction Fees When Charge is Maximum Charge Deducted Guaranteed Charge Current Charge ------ -------------------- ----------------- ---------------- Surrender Charge Upon a partial $31.95 per $31.95 per Maximum Charge - for surrender or a full $1,000 of base $1,000 of base a 72 year old surrender of your coverage coverage female, preferred Policy during the non-tobacco and a 72 first 14 Policy year old female, years and during the preferred first 14 Policy non-tobacco with a years following an specified amount of increase in the $500,000, of which Policy's base $400,000 is base coverage/1/ coverage and $100,000 is supplemental coverage/1/ Minimum Charge - for Upon a partial $1.39 per $1,000 $1.39 per $1,000 a 90 year old male, surrender or a full of base coverage of base coverage standard tobacco and surrender of your a 20 year old Policy during the female, preferred first 14 Policy non-tobacco with a years and during the specified amount of first 14 Policy $500,000, of which years following an $400,000 is base increase in the coverage and Policy's base $100,000 is coverage/1/ supplemental coverage/1/ Example Charge - for Upon a partial $19.88 per $19.88 per a 60 year old male, surrender or a full $1,000 of base $1,000 of base preferred surrender of your coverage coverage non-tobacco and a 60 Policy during the year old female, first 14 Policy preferred years and during the non-tobacco with a first 14 Policy specified amount of years following an $500,000, of which increase in the $400,000 is base Policy's base coverage and coverage/1/ $100,000 is supplemental coverage/1/ Partial Surrender Upon a partial The lesser of $10 Processing Fee surrender of your $25 or 2% of the Policy partial surrender fee Transfer Fee Upon a transfer of $25 for each $25 for each accumulation value transfer/2/ transfer/2/ Policy Loan Interest Annually (in 4.75% of the 4.54% of the Charge advance, on your loan balance loan balance Policy anniversary) Policy Owner Upon each request $25 $0 Additional for a Policy Illustration Charge illustration after the first in a Policy year -------- /1/ The Surrender Charge will vary based on the contingent insures' sex, ages, premium classes, Policy year and amount of base coverage. The surrender charge attributable to an increase in the Policy's base coverage applies only to the increase in base coverage. See "Base Coverage and Supplemental Coverage" on page 27. The Surrender Charges shown in the table may not be typical of the charges you will pay. Page 4C of your Policy will indicate the guaranteed Surrender Charges applicable to your Policy. More detailed information concerning your Surrender Charge is available on request from our Administrative Center shown under "Contact Information" on page 5 of this prospectus. /2/ The first 12 transfers in a Policy year are free of charge. 2 The next table describes the fees and expenses that you will pay periodically during the time that you own the Policy, not including Fund fees and expenses. Periodic Charges (other than Fund fees and expenses) When Charge is Maximum Charge Deducted Guaranteed Charge Current Charge ------ -------------------- ----------------- ----------------- Flat Monthly Charge Monthly, at the $10 $10 beginning of each Policy month Cost of Insurance Charge/1/ Maximum Charge for Monthly, at the $4.56 per $1,000 $0.28 per $1,000 the first Policy beginning of each of net amount at of net amount at year - for a 90 year Policy month risk risk attributable old male, standard attributable to to base tobacco, and a 90 base coverage; coverage; and year old male, and $0.28 per $1,000 standard tobacco, $4.56 per $1,000 of net amount at with a Specified of net amount at risk attributable Amount of $500,000, risk to supplemental of which $400,000 is attributable to coverage base coverage and supplemental $100,000 is coverage supplemental coverage Minimum Charge for Monthly, at the $0.01 per $1,000 $0.01 per $1,000 the first Policy beginning of each of net amount at of net amount at year - for a 20 year Policy month risk/2/ risk attributable old female, attributable to to base preferred base coverage; coverage; and non-tobacco, and a and 20 year old female, preferred $0.01 per $1,000 $0.01 per $1,000 non-tobacco, with a of net amount at of net amount at Specified Amount of risk risk attributable $500,000, of which attributable to to supplemental $400,000 is base supplemental coverage coverage and coverage $100,000 is supplemental coverage Example Charge for Monthly, at the $0.01 per $1,000 $0.01 per $1,000 the first Policy beginning of each of net amount at of net amount at year - for a 60 year Policy month risk risk attributable old male, preferred attributable to to base non-tobacco, and a base coverage; coverage; and 60 year old female, and preferred non-tobacco, with a $0.01 per $1,000 $0.01 per $1,000 Specified Amount of of net amount at of net amount at $500,000, of which risk risk attributable $400,000 is base attributable to to supplemental coverage and supplemental coverage $100,000 is coverage supplemental coverage -------- /1/ The Cost of Insurance Charge will vary based on the contingent insures' sex, ages, premium classes, Policy year and specified amount. See "Base Coverage and Supplemental Coverage" on page 27. The Cost of Insurance Charges shown in the table may not be typical of the charges you will pay. Page 4B of your Policy will indicate the maximum guaranteed Cost of Insurance Charge applicable to your Policy. More detailed information concerning your Cost of Insurance Charge is available free of charge on request from our Administrative Center shown under "Contact Information" on page 5 of this prospectus. Policy illustrations, which show the impact of cost of insurance charges on Policy values, are free until you purchase a Policy. Thereafter, we reserve the right to charge $25 for each illustration after the first in each Policy year. /2/ The net amount at risk is the difference between the current death benefit under your Policy and your accumulation value under the Policy. 3 Periodic Charges (other than Fund fees and expenses) When Charge is Maximum Charge Deducted Guaranteed Charge Current Charge ------ -------------------- ----------------- ---------------- Monthly Expense Charge (per $1,000 of base coverage)/1/ Maximum Charge - for Monthly, at the $2.12 for each $2.12 for each a 90 year old male, beginning of each $1,000 of base $1,000 of base standard tobacco and Policy month. This coverage coverage a 90 year old male, charge is imposed standard tobacco during the first 4 with a specified Policy years and the amount of $500,000, first 4 Policy years of which $400,000 is following an base coverage and increase in base $100,000 is coverage/2/ supplemental coverage Minimum Charge - for Monthly, at the $0.09 for each $0.09 for each a 20 year old beginning of each $1,000 of base $1,000 of base female, preferred Policy month. This coverage coverage non-tobacco and a 20 charge is imposed year old female, during the first 4 preferred Policy years and the non-tobacco with a first 4 Policy years specified amount of following an $500,000, of which increase in base $400,000 is base coverage/2/ coverage and $100,000 is supplemental coverage Example Charge - for Monthly, at the $0.58 for each $0.58 for each a 60 year old male, beginning of each $1,000 of base $1,000 of base preferred Policy month. This coverage coverage non-tobacco and a 60 charge is imposed year old female, during the first 4 preferred Policy years and the non-tobacco with a first 4 Policy years specified amount of following an $500,000, of which increase in base $400,000 is base coverage/2/ coverage and $100,000 is supplemental coverage Daily Charge (mortality and expense risk fee) Policy years Daily annual effective annual effective 1-15/3,4/ rate rate of 0.75%/4/ of 0.75%/4/ -------- /1/ The monthly expense charge is applied only against each $1,000 of base coverage, and not against the Policy's supplemental coverage. The monthly expense charge per $1,000 of base coverage will vary based on the amount of base coverage and each of the contingent insured's sex, age and premium class. See "Base Coverage and Supplemental Coverage" on page 27. The monthly expense charge per $1,000 of base coverage shown in the table may not be typical of the charges you will pay. Page 4 of your Policy will indicate the initial monthly expense charge per $1,000 of base coverage applicable to your Policy. More detailed information concerning your Monthly Charge per $1,000 of base coverage is available on request from our Administrative Center, shown under "Contact Information" on page 5 of this prospectus, or your insurance representative. There is no additional charge for any illustrations which may show various amounts of base and supplemental coverage. /2/ The charge assessed during the first 4 Policy years following an increase in base coverage is only upon the amount of the increase in base coverage. /3/ After the 15/th/ Policy year, the daily charge will be as follows: Policy years 16-30..........annual effective rate of 0.50% Policy years 31+............annual effective rate of 0.15% These reductions in the amount of the daily charge are guaranteed. /4/ All percentages are calculated as a percent of accumulation value invested in the variable investment options. 4 The next table describes the fees and expenses that you will pay periodically, if you choose an optional benefit rider during the time that you own the Policy. Periodic Charges (optional benefit riders only) Optional Benefit When Charge is Maximum Rider Charges Deducted Guaranteed Charge Current Charge ---------------- -------------------- ----------------- ---------------- Single Life Annually Renewable Term Insurance Maximum Charge - for Monthly, at the $7.31 for each $4.61 for each a 75 year old male, beginning of each $1,000 of $1,000 of standard tobacco Policy month coverage coverage Minimum Charge - for Monthly, at the $0.08 for each $0.07 for each a 20 year old beginning of each $1,000 of $1,000 of female, preferred Policy month coverage coverage non-tobacco Example Charge - for Monthly, at the $0.71 for each $0.55 for each a 60 year old beginning of each $1,000 of $1,000 of female, preferred Policy month coverage coverage non-tobacco Maturity Extension Monthly, at the $10 $0 Accumulation Value beginning of the Version Policy month which follows your original maturity date Maturity Extension Death Benefit Version/1/ Initial Charge Monthly beginning 9 $1 per $1,000 of $0.03 per $1,000 years before your net amount at of net amount at original maturity risk risk date attributable to attributable to the Policy the Policy (without any (without any riders) riders) Administrative Charge Monthly, at the $10 $0 beginning of the Policy month which follows your original maturity date -------- /1/ Please ask your insurance representative if this version of the Maturity Extension Rider is available at the time you apply for a Policy. 5 The next table describes the Fund fees and expenses that you will pay periodically during the time that you own the Policy. The table shows the maximum and minimum Total Annual Fund Operating Expenses before contractual waiver or reimbursement for any of the Funds for the fiscal year ended December 31, 2006. Current and future expenses for the Funds may be higher or lower than those shown. Annual Fund Fees and Expenses (expenses that are deducted from the Fund assets) Charge Maximum Minimum ------ ------- ------- Total Annual Fund Operating Expenses for all of the Funds (expenses that are deducted from portfolio assets include management fees, distribution (12b-1) fees, and other expenses)/1/................................................. 1.28% 0.24% Details concerning each Fund's specific fees and expenses are contained in the Funds' prospectuses. -------- /1/ Currently 14 of the Funds have contractual reimbursements or fee waivers. These reimbursements or waivers expire on April 30, 2008. The impact of contractual reimbursements or fee waivers is as follows: Charge Maximum Minimum ------ ------- ------- Total Annual Fund Operating Expenses for all of the Funds After Contractual Reimbursement or Fee Waiver................ 1.18% 0.24% 6 II. The following description of the Overloan Protection has been added to the "Additional Benefit Riders and Options" section of the prospectus: Overloan Protection Rider. This rider guarantees that your Policy will not lapse due to interest charges on outstanding Policy loans. This rider allows you to retain the death benefit coverage under your Policy and discontinue paying premiums. If you are currently applying for a Policy we will issue this rider automatically when your Policy is issued. If your Policy was issued without the rider, you may select this rider at any time. There is a one- time charge for this rider, currently equal to 3.5% of your Policy's accumulation value when the rider is exercised. This charge will never be greater than 5% of the accumulation value. There is no charge if the rider is never exercised. You can request to exercise the rider when: . The sum of outstanding Policy loans equals or exceeds 94% of the cash value; and . The Policy has been in force at least until the later of: (a) the Policy anniversary nearest the younger contingent insured's age 75; or (b) the 15th Policy anniversary. The exercise date of the rider is the monthly deduction day on or next following the date we receive your written request and all requirements for exercising the rider are satisfied. Here are the requirements: . There must be sufficient cash surrender value to cover the one-time charge; . Death benefit Option 1 must be in force (death benefit Option 1 is equal to the specified amount on the date of the insured person's death); . The Policy must not be a modified endowment contract; . The sum of all partial surrenders taken to date must equal or exceed the sum of all premiums paid; . The sum of all outstanding policy loans must equal or exceed the sum of the specified amount plus the death benefit amount of any term insurance rider issued on the lives of the Policy's contingent insureds; and . There can be no riders in force that require charges after the exercise date, other than the maturity extension rider or term riders (a term rider cannot require a change in its death benefit amount that is scheduled to take effect after the exercise date). On the exercise date the portion of your accumulation value not offset by your outstanding Policy loans will be transferred to, or will remain in, the Fixed Account. The following conditions apply beginning with the exercise date: . Interest will continue to be credited to your accumulation value and charged against outstanding loans; 7 . All future monthly deductions will be waived, including those for the maturity extension rider and any term rider; . No additional premiums will be accepted; . The Policy cannot become a modified endowment contract; . No new policy loans or partial surrenders will be allowed; . Policy loans can be repaid; . No changes will be allowed in the specified amount or choice of death benefit Option; . No transfers or allocations of accumulation value from the Fixed Account will be allowed; and . The Policy's death benefit will be the applicable Death Benefit Corridor Rate times the greater of the accumulation value and the outstanding total Policy loan amount. The rider will terminate on the earlier of the following dates: . Upon your written request to terminate the rider; or . Upon termination of the Policy. 8 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R PLATINUM INVESTOR(R) SURVIVOR II FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES ISSUED BY AMERICAN GENERAL LIFE INSURANCE COMPANY VUL ADMINISTRATION DEPARTMENT P.O. BOX 4880, HOUSTON, TEXAS 77210-4880 TELEPHONE: 1-800-340-2765; 1-713-831-3443; HEARING IMPAIRED: 1-888-436-5258 STATEMENT OF ADDITIONAL INFORMATION DATED OCTOBER 22, 2007 This Statement of Additional Information ("SAI") is not a prospectus. It should be read in conjunction with the prospectus for American General Life Insurance Company Separate Account VL-R (the "Separate Account" or "Separate Account VL-R") dated October 22, 2007, describing the Platinum Investor Survivor II flexible premium variable universal life insurance policies (the "Policy" or "Policies"). The prospectus sets forth information that a prospective investor should know before investing. For a copy of the prospectus, and any prospectus supplements, contact American General Life Insurance Company ("AGL") at the address or telephone numbers given above. Each term used in this SAI that is defined in the related prospectus has the same meaning as the prospectus' definition. TABLE OF CONTENTS GENERAL INFORMATION........................................................ 3 AGL..................................................................... 3 Separate Account VL-R................................................... 3 American Home Assurance Company......................................... 3 SERVICES................................................................... 4 DISTRIBUTION OF THE POLICIES............................................... 4 PERFORMANCE INFORMATION.................................................... 6 ADDITIONAL INFORMATION ABOUT THE POLICIES.................................. 6 Gender neutral policies............................................. 6 Cost of insurance rates............................................. 6 Certain arrangements................................................ 6 More About the Fixed Account............................................ 7 Our general account................................................. 7 How we declare interest............................................. 7 Adjustments to Death Benefit............................................ 7 Suicide............................................................. 7 Wrong age or gender................................................. 7 Death during grace period........................................... 8 ACTUARIAL EXPERT........................................................... 8 MATERIAL CONFLICTS......................................................... 8 FINANCIAL STATEMENTS....................................................... 9 Separate Account Financial Statements................................... 9 AGL Financial Statements................................................ 9 American Home Financial Statements...................................... 9 INDEX TO FINANCIAL STATEMENTS.............................................. 9 Separate Account VL-R Financial Statements.............................. 10 AGL Consolidated Financial Statements................................... 10 American Home Financial Statements...................................... 10 2 GENERAL INFORMATION 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 International Group, Inc. ("AIG"). AIG, a Delaware corporation, is a holding company which through its subsidiaries is engaged in a broad range of insurance and insurance-related activities, financial services and asset management in the United States and internationally. AIG American General is a marketing name of AGL and its affiliates. The commitments under the Policies are AGL's, and AIG has no legal obligation to back those commitments. 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 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 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 Securities and Exchange Commission ("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 68 separate "divisions," 58 of which are available under the Policies offered by the prospectus as variable "investment options" (14 of these 58 investment options are not available to all Policy owners). All of these 58 divisions and the remaining 10 divisions are offered under other AGL policies. We hold the Fund shares in which we invest your accumulation value for an investment option in the division that corresponds to that investment option. One or more of the Funds may sell its shares to other funds. The assets in Separate Account VL-R are our property. The assets in the Separate Account may not be used to pay any liabilities of AGL other than those arising from the Policies. AGL is obligated to pay all amounts under the Policies due the Policy owners. We act as custodian for the Separate Account's assets. American Home Assurance Company All references in this SAI to American Home Assurance Company ("American Home") apply only to Policies with a date of issue of December 29, 2006 or earlier. American Home is a stock property-casualty insurance company incorporated under the laws of the State of New York on February 7, 1899. American Home's principal executive 3 office is located at 70 Pine Street, New York, New York 10270. American Home is licensed in all 50 states of the United States and the District of Columbia, as well as certain foreign jurisdictions, and engages in a broad range of insurance and reinsurance activities. American Home is an indirect wholly owned subsidiary of AIG and an affiliate of AGL. SERVICES AGL and American General Life Companies, LLC ("AGLC"), are parties to a services agreement. AGL and AGLC are each indirect wholly-owned subsidiaries of AIG and therefore affiliates of one another. AGLC is a Delaware limited liability company established on August 30, 2002. Prior to that date, AGLC was a Delaware business trust. Its address is 2727-A Allen Parkway, Houston, Texas 77019-2191. Under the services agreement, AGLC provides shared services to AGL and certain other life insurance companies under the AIG holding company system at cost. Those services include data processing systems, customer services, product development, actuarial, internal auditing, accounting and legal services. During 2006, 2005 and 2004, AGL paid AGLC for these services $340,329,330, $317,771,939 and $329,659,308, respectively. We have not designed the Policies for professional market timing organizations or other entities or individuals using programmed and frequent transfers involving large amounts. We currently have no contractual agreements or any other formal or informal arrangements with any entity or individual permitting such transfers and receive no compensation for any such contract or arrangement. DISTRIBUTION OF THE POLICIES American General Equity Services Corporation ("AGESC"), 2727-A Allen Parkway, 2-G7, Houston, Texas 77019, a Delaware corporation and a direct wholly-owned subsidiary of AGL, is the principal underwriter and distributor of the Policies for the Separate Account under a Distribution Agreement between AGESC and AGL. AGESC also acts as principal underwriter for AGL's other separate accounts and for the separate accounts of certain AGL affiliates. AGESC is a registered broker-dealer under the Securities Exchange Act of 1934, as amended and a member of the Financial Industry Regulatory Authority ("FINRA"). AGESC, as the principal underwriter and distributor, is not paid any fees on the Policies. The Policies are offered on a continuous basis. We and AGESC 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 FINRA. 4 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: . 90% 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 2 through 10; . 3% of the premiums in excess of the target amount received in each of Policy years 1 through 10; . 0.20% of the Policy's accumulation value (reduced by any outstanding loans) in the investment options in each of Policy years 2 through 30; and . 0.10% of the Policy's accumulation value (reduced by any outstanding loans) in the investment options in each Policy year after Policy year 30. The greater the percentage of supplemental coverage the owner selects when applying for a Policy or on future increases to the specified amount, the less compensation we would pay either for the sale of the Policy or for any additional premiums received during the first 10 Policy years (we do not pay compensation for premiums we receive after the 10th Policy year). We will pay the maximum level of compensation if the owner chooses 100% base coverage. At our discretion, we may pay additional first Policy year commissions to any broker-dealer or bank for sales conducted by a particular registered representative of that broker-dealer or bank. We may pay up to a total of 115% of the premiums we receive in the first Policy year. 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. 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 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 in your Policy. 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 affiliated broker-dealers 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 5 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. 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 Fund 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 also may present the yield or total return of the investment option in which a division invests. 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. ADDITIONAL INFORMATION ABOUT THE POLICIES 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 Policies 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. If so, we attribute your accumulation value proportionately to each increment of specified amount to compute our net amount at risk. Certain arrangements. Most of the advisers or administrators of the Funds make certain payments to us, on a quarterly basis, for certain administrative, Policy, and policy owner support 6 expenses. These amounts will be reasonable for the services performed and are not designed to result in a profit. Currently, these payments range from 0.15% to 0.35% of the market value of the assets invested in the underlying Fund as of a certain date, usually paid at the end of each calendar quarter. Except for the PIMCO Variable Insurance Trust, these amounts will not be paid by the Funds or Policy owners. More About the Fixed Account 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 Account. Because of applicable exemptions, no interest in this option has been registered under the Securities Act of 1933, as amended. Neither our general account nor our Fixed 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 Fixed Account. 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 Fixed Account, but it will always be at an effective annual 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 fixed Account. Any charges, partial surrenders, or loans that we take from any accumulation value that you have in our fixed Account will be taken from each portion in reverse chronological order based on the date that accumulation value was allocated to this option. Adjustments to Death Benefit Suicide. If either contingent insured commits suicide during the first two Policy years, we will limit the proceeds payable 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. 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. 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. 7 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. ACTUARIAL EXPERT Actuarial matters have been examined by Wayne A. Barnard who is Senior Vice President 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. MATERIAL CONFLICTS We are required to track events to identify any material conflicts from using investment portfolios for both variable life and variable annuity separate accounts. The boards of the Funds, AGL, and other insurance companies participating in the Funds have this same duty. There may be a material conflict if: . state insurance law or federal income tax law changes; . investment management of an investment portfolio changes; or . voting instructions given by owners of variable life insurance Policies and variable annuity contracts differ. The investment portfolios may sell shares to certain qualified pension and retirement plans qualifying under Code Section 401. These include cash or deferred arrangements under Code Section 401(k). One or more of the investment portfolios may sell its shares to other investment portfolios. Therefore, there is a possibility that a material conflict may arise between the interests of owners in general, or certain classes of owners, and these retirement plans or participants in these retirement plans. If there is a material conflict, we have the duty to determine appropriate action, including removing the portfolios involved from our variable investment options. We may take other action to protect Policy owners. This could mean delays or interruptions of the variable operations. When state insurance regulatory authorities require us, we may ignore instructions relating to changes in an investment portfolio's adviser or its investment policies. If we do ignore voting instructions, we give you a summary of our actions in the next semi-annual report to owners. 8 FINANCIAL STATEMENTS PricewaterhouseCoopers LLP ("PwC"), located at 1201 Louisiana Street, Suite 2900, Houston, Texas 77002 is the independent registered public accounting firm for AGL. AIG uses PwC as its corporate-wide auditing firm. Separate Account Financial Statements The statement of net assets as of December 31, 2006 and the related statement of operations for the year then ended and statements of changes in net assets for the two years ended December 31, 2006 of the Separate Account, appearing herein, have been audited by PwC, an independent registered public accounting firm, on the authority of such firm as experts in accounting and auditing, as set forth in their report appearing elsewhere herein. AGL Financial Statements The consolidated balance sheets of AGL as of December 31, 2006 and 2005 and the related statements of income, shareholder's equity, comprehensive income and cash flows for the three years ended December 31, 2006, appearing herein, have been audited by PwC, an independent registered public accounting firm, on the authority of such firm as experts in accounting and auditing, as set forth in their report appearing elsewhere herein. American Home Financial Statements The statutory statement of admitted assets, liabilities, capital and surplus of American Home as of December 31, 2006 and 2005, and the related statutory statements of income and changes in capital and surplus and of cash flow for the two years ended December 31, 2006, appearing herein, have been audited by PwC, an independent registered public accounting firm, on the authority of such firm as experts in accounting and auditing, as set forth in their report appearing elsewhere herein. INDEX TO FINANCIAL STATEMENTS You should consider the financial statements of AGL that we include in this SAI as bearing on the ability of AGL to meet its obligations under the Policies. You should only consider the financial statements of American Home that we include in this SAI as bearing on the ability of American Home to meet its obligations under Policies with a date of issue of December 29, 2006 or earlier, as guarantor, to meet its obligations under a guarantee agreement that guarantees the insurance obligations of those certain Policies. 9 I. Separate Account VL-R Financial Statements Page -------- Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm..................................................... VL-R -1 Statement of Net Assets as of December 31, 2006....................... VL-R - 2 Statement of Operations for the year ended December 31, 2006.......... VL-R - 4 Statement of Changes in Net Assets for the years ended December 31, 2006 and 2005....................................................... VL-R - 6 Notes to Financial Statements......................................... VL-R -24 II. AGL Consolidated Financial Statements Page -------- Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm..................................................... F - 1 Consolidated Balance Sheets as of December 31, 2006 and 2005.......... F - 2 Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004 (restated)...................................... F - 4 Consolidated Statements of Shareholder's Equity for the years ended December 31, 2006, 2005 and 2004 (restated)......................... F - 5 Consolidated Statements of Comprehensive Income for the years ended December 31, 2006, 2005 and 2004 (restated)......................... F - 6 Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 (restated)......................... F - 7 Notes to Consolidated Financial Statements............................ F - 9 III. American Home Financial Statements Page -------- Report of PricewaterhouseCoopers LLP, Independent Auditors............ 2 Statements of Admitted Assets (Statutory Basis) as of December 31, 2006 and 2005....................................................... 3 Statements of Liabilities, Capital and Surplus (Statutory Basis) as of December 31, 2006 and 2005....................................... 4 Statements of Income and Changes in Capital and Surplus (Statutory Basis) for the years ended December 31, 2006 and 2005............... 5 Statements of Cash Flow (Statutory Basis) for the years ended December 31, 2006 and 2005.......................................... 6 Notes to Statutory Basis Financial Statements......................... 7 10 [logo of AIG American General] Variable Universal Life Insurance Separate Account VL-R 2006 Annual Report December 31, 2006 American General Life Insurance Company A member company of American International Group, Inc. [LETTERHEAD] PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP 1201 Louisiana Suite 2900 Houston, TX 77002-5678 Telephone (713) 356-4000 Facsimile (713) 356-4717 Report of Independent Registered Public Accounting Firm To the Board of Directors of American General Life Insurance Company and Policy Owners of American General Life Insurance Company Separate Account VL-R In our opinion, the accompanying statement of net assets, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the Divisions of American General Life Insurance Company Separate Account VL-R (the "Separate Account") listed in Note A at December 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Separate Account's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2006 by correspondence with the investment companies, provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP April 6, 2007 VL-R - 1 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF NET ASSETS December 31, 2006
Investment Due from (to) American securities - at General Life Insurance Divisions fair value Company Net Assets ------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Core Equity Fund - Series I $13,342,365 $(1) $13,342,364 AIM V.I. International Growth Fund - Series I 11,904,546 -- 11,904,546 AIM V.I. Premier Equity Fund - Series I -- -- -- Alger American Leveraged AllCap Portfolio - Class O Shares 2,286,824 1 2,286,825 Alger American MidCap Growth Portfolio - Class O Shares 1,869,371 1 1,869,372 American Century VP Value Fund - Class I 17,612,918 (2) 17,612,916 Credit Suisse Small Cap Core I Portfolio 1,830,404 -- 1,830,404 Dreyfus IP MidCap Stock Portfolio - Initial shares 5,228,009 (2) 5,228,007 Dreyfus VIF Developing Leaders Portfolio - Initial shares 11,745,504 1 11,745,505 Dreyfus VIF Quality Bond Portfolio - Initial shares 8,682,661 -- 8,682,661 DWS Equity 500 Index Fund VIP - Class A -- -- -- Fidelity VIP Asset Manager Portfolio - Service Class 2 5,659,244 (1) 5,659,243 Fidelity VIP Contrafund Portfolio - Service Class 2 32,001,369 -- 32,001,369 Fidelity VIP Equity-Income Portfolio - Service Class 2 21,085,399 -- 21,085,399 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 10,491 1 10,492 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 54,891 -- 54,891 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 64,516 -- 64,516 Fidelity VIP Growth Portfolio - Service Class 2 13,810,806 1 13,810,807 Fidelity VIP Mid Cap Portfolio - Service Class 2 6,384,993 -- 6,384,993 Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 8,478,085 (1) 8,478,084 Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund - Class 2 108,582 -- 108,582 Franklin Templeton - Franklin U.S. Government Fund - Class 2 9,397,224 1 9,397,225 Franklin Templeton - Mutual Shares Securities Fund - Class 2 16,532,351 (1) 16,532,350 Franklin Templeton - Templeton Foreign Securities Fund - Class 2 13,623,735 (2) 13,623,733 Goldman Sachs Capital Growth Fund 7,172,977 -- 7,172,977 Janus Aspen Series International Growth Portfolio - Service Shares 11,982,836 (1) 11,982,835 Janus Aspen Series Mid Cap Growth Portfolio - Service Shares 3,385,583 2 3,385,585 Janus Aspen Series Worldwide Growth Portfolio - Service Shares 4,430,625 (1) 4,430,624 JPMorgan Mid Cap Value Portfolio 3,498,962 (1) 3,498,961 JPMorgan Small Company Portfolio 2,730,571 -- 2,730,571 MFS VIT Capital Opportunities Series - Initial Class 4,520,899 (1) 4,520,898 MFS VIT Emerging Growth Series - Initial Class 12,087,435 (1) 12,087,434 MFS VIT New Discovery Series - Initial Class 4,151,964 (2) 4,151,962 MFS VIT Research Series - Initial Class 2,381,244 -- 2,381,244 MFS VIT Total Return Series - Initial Class 775,099 -- 775,099 Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I 4,591,606 -- 4,591,606 Neuberger Berman AMT Partners Portfolio - Class I 111,195 -- 111,195 Oppenheimer Balanced Fund/VA - Non-Service Shares 1,365,870 (4) 1,365,866 Oppenheimer Global Securities Fund/VA - Non-Service Shares 4,043,502 (3) 4,043,499 Oppenheimer High Income Fund/VA - Non-Service Shares 110,446 -- 110,446 PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 255,133 (1) 255,132 PIMCO VIT Real Return Portfolio - Administrative Class 11,744,030 2 11,744,032 PIMCO VIT Short-Term Portfolio - Administrative Class 4,984,783 (4) 4,984,779 PIMCO VIT Total Return Portfolio - Administrative Class 22,661,080 (2) 22,661,078 Pioneer Fund VCT Portfolio - Class I 3,299,217 (1) 3,299,216 Pioneer Growth Opportunities VCT Portfolio - Class I 4,992,391 1 4,992,392 Pioneer Mid Cap Value VCT Portfolio - Class I 75,605 -- 75,605 Putnam VT Diversified Income Fund - Class IB 11,517,002 (2) 11,517,000 Putnam VT Growth and Income Fund - Class IB 21,393,752 (2) 21,393,750 Putnam VT International Growth and Income Fund - Class IB 8,841,468 -- 8,841,468 Putnam VT Small Cap Value Fund - Class IB 416,127 -- 416,127 Putnam VT Vista Fund - Class IB 176,650 -- 176,650 Putnam VT Voyager Fund - Class IB 421,428 -- 421,428
See accompanying notes VL-R - 2 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF NET ASSETS - CONTINUED December 31, 2006
Investment Due from (to) American securities - at General Life Insurance Divisions fair value Company Net Assets ------------------------------------------------------------------------------------------------------- SunAmerica - Aggressive Growth Portfolio - Class 1 $ 1,130,347 $-- $ 1,130,347 SunAmerica - SunAmerica Balanced Portfolio - Class 1 1,226,451 (1) 1,226,450 UIF Equity Growth Portfolio - Class I 4,054,191 (1) 4,054,190 UIF High Yield Portfolio - Class I 1,465,250 (2) 1,465,248 VALIC Company I - International Equities Fund 2,742,348 (8) 2,742,340 VALIC Company I - Mid Cap Index Fund 17,663,091 (1) 17,663,090 VALIC Company I - Money Market I Fund 30,597,846 -- 30,597,846 VALIC Company I - Nasdaq-100 Index Fund 4,186,473 1 4,186,474 VALIC Company I - Science & Technology Fund 1,228,492 1 1,228,493 VALIC Company I - Small Cap Index Fund 6,676,702 -- 6,676,702 VALIC Company I - Stock Index Fund 35,624,313 (1) 35,624,312 Van Kampen LIT Government Portfolio - Class I 135,776 -- 135,776 Van Kampen LIT Growth and Income Portfolio - Class I 12,098,136 -- 12,098,136 Van Kampen LIT Strategic Growth Portfolio - Class I 57,242 -- 57,242 Vanguard VIF High Yield Bond Portfolio 5,181,038 (1) 5,181,037 Vanguard VIF REIT Index Portfolio 17,122,271 -- 17,122,271
See accompanying notes VL-R - 3 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF OPERATIONS For the Year Ended December 31, 2006
A B A+B=C D E F C+D+E+F Net change Increase Mortality and in unrealized (decrease) in Dividends expense risk Net Capital gain appreciation net assets from and investment Net realized distributions (depreciation) resulting mutual administrative income gain (loss) on from mutual of from Divisions funds charges (loss) investments funds investments operations ---------------------------------------------------------------------------------------------------------------------------- AIM V.I. Core Equity Fund - Series I $ 71,044 $ (61,355) $ 9,689 $ 23,101 $ -- $ 1,035,524 $1,068,314 AIM V.I. International Growth Fund - Series I 113,939 (70,278) 43,661 834,180 -- 1,524,936 2,402,777 AIM V.I. Premier Equity Fund - Series I 135,522 (30,354) 105,168 1,344,830 -- (774,690) 675,308 Alger American Leveraged AllCap Portfolio - Class O Shares -- (11,375) (11,375) 29,495 -- 256,959 275,079 Alger American MidCap Growth Portfolio - Class O Shares -- (11,700) (11,700) 45,760 233,346 (116,555) 150,851 American Century VP Value Fund - Class I 212,660 (112,507) 100,153 465,305 1,341,492 777,086 2,684,036 Credit Suisse Small Cap Core I Portfolio -- (12,061) (12,061) 38,702 -- 12,446 39,087 Dreyfus IP MidCap Stock Portfolio - Initial shares 18,430 (34,748) (16,318) 76,012 785,785 (516,371) 329,108 Dreyfus VIF Developing Leaders Portfolio - Initial shares 47,323 (82,945) (35,622) 198,431 978,648 (834,177) 307,280 Dreyfus VIF Quality Bond Portfolio - Initial shares 383,019 (59,610) 323,409 (27,971) -- (6,009) 289,429 DWS Equity 500 Index Fund VIP - Class A -- -- -- -- -- -- -- Fidelity VIP Asset Manager Portfolio - Service Class 2 131,826 (38,247) 93,579 87,138 -- 161,458 342,175 Fidelity VIP Contrafund Portfolio - Service Class 2 287,905 (192,377) 95,528 1,566,138 2,505,870 (1,339,399) 2,828,137 Fidelity VIP Equity-Income Portfolio - Service Class 2 557,250 (128,654) 428,596 652,056 2,313,819 (88,746) 3,305,725 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 140 (27) 113 18 93 521 745 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 788 (79) 709 53 744 518 2,024 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 844 (70) 774 199 661 222 1,856 Fidelity VIP Growth Portfolio - Service Class 2 20,635 (91,482) (70,847) 204,881 -- 630,876 764,910 Fidelity VIP Mid Cap Portfolio - Service Class 2 9,887 (42,424) (32,537) 294,963 659,262 (375,386) 546,302 Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 35,558 (40,562) (5,004) 111,683 198,975 578,082 883,736 Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund - Class 2 -- (804) (804) 6,506 -- 3,158 8,860 Franklin Templeton - Franklin U.S. Government Fund - Class 2 409,315 (75,338) 333,977 (224,502) -- 190,212 299,687 Franklin Templeton - Mutual Shares Securities Fund - Class 2 169,027 (91,100) 77,927 335,389 430,467 1,310,423 2,154,206 Franklin Templeton - Templeton Foreign Securities Fund - Class 2 155,732 (87,155) 68,577 763,949 -- 1,507,480 2,340,006 Goldman Sachs Capital Growth Fund 8,848 (38,903) (30,055) 436,754 -- 251,412 658,111 Janus Aspen Series International Growth Portfolio - Service Shares 159,742 (54,587) 105,155 688,113 -- 2,171,821 2,965,089 Janus Aspen Series Mid Cap Growth Portfolio - Service Shares -- (21,547) (21,547) 259,677 -- 128,325 366,455 Janus Aspen Series Worldwide Growth Portfolio - Service Shares 66,179 (28,331) 37,848 137,455 -- 483,941 659,244 JPMorgan Mid Cap Value Portfolio 23,185 (24,827) (1,642) 201,881 93,681 255,664 549,584 JPMorgan Small Company Portfolio -- (15,814) (15,814) 56,457 58,942 209,632 309,217 MFS VIT Capital Opportunities Series - Initial Class 19,178 (29,504) (10,326) 88,619 -- 447,816 526,109 MFS VIT Emerging Growth Series - Initial Class -- (87,148) (87,148) 319,599 -- 579,361 811,812 MFS VIT New Discovery Series - Initial Class -- (27,484) (27,484) 116,523 69,343 305,617 463,999 MFS VIT Research Series - Initial Class 10,484 (15,101) (4,617) 59,542 -- 154,953 209,878 MFS VIT Total Return Series - Initial Class 19,291 (5,941) 13,350 11,625 25,854 29,002 79,831 Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I -- (28,615) (28,615) 176,053 -- 389,383 536,821 Neuberger Berman AMT Partners Portfolio - Class I 779 (812) (33) 5,175 12,005 (5,263) 11,884 Oppenheimer Balanced Fund/VA - Non-Service Shares 21,624 (7,674) 13,950 (199) 47,536 55,219 116,506 Oppenheimer Global Securities Fund/ VA - Non-Service Shares 27,561 (21,278) 6,283 131,058 143,963 239,263 520,567 Oppenheimer High Income Fund/VA - Non-Service Shares 7,928 (798) 7,130 290 -- 1,415 8,835 PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 7,451 (890) 6,561 (143) 1,003 (16,727) (9,306) PIMCO VIT Real Return Portfolio - Administrative Class 523,982 (85,397) 438,585 9,390 313,163 (741,458) 19,680
See accompanying notes VL-R - 4 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF OPERATIONS - CONTINUED For the Year Ended December 31, 2006
A B A+B=C D E F C+D+E+F Net change Increase Mortality and in unrealized (decrease) in expense risk Capital gain appreciation net assets Dividends and Net Net realized distributions (depreciation) resulting from mutual administrative investment gain (loss) on from mutual of from Divisions funds charges income (loss) investments funds investments operations --------------------------------------------------------------------------------------------------------------------------------- PIMCO VIT Short-Term Portfolio - Administrative Class $ 209,350 $ (33,585) $ 175,765 $ (4,282) $ -- $ (784) $ 170,699 PIMCO VIT Total Return Portfolio - Administrative Class 827,282 (130,445) 696,837 (380,288) 119,901 140,867 577,317 Pioneer Fund VCT Portfolio - Class I 43,052 (23,311) 19,741 66,362 -- 384,974 471,077 Pioneer Growth Opportunities VCT Portfolio - Class I -- (36,577) (36,577) 79,869 -- 189,546 232,838 Pioneer Mid Cap Value VCT Portfolio - Class I 15 (94) (79) (3) 373 2,601 2,892 Putnam VT Diversified Income Fund - Class IB 509,849 (46,223) 463,626 33,585 -- 68,663 565,874 Putnam VT Growth and Income Fund - Class IB 301,826 (116,303) 185,523 575,010 470,152 1,620,179 2,850,864 Putnam VT International Growth and Income Fund - Class IB 74,730 (48,355) 26,375 360,192 -- 1,246,217 1,632,784 Putnam VT Small Cap Value Fund - Class IB 1,285 (2,972) (1,687) 27,091 39,335 (3,385) 61,354 Putnam VT Vista Fund - Class IB -- (793) (793) 1,593 -- 4,353 5,153 Putnam VT Voyager Fund - Class IB 433 (2,913) (2,480) 1,614 -- 18,494 17,628 SunAmerica - Aggressive Growth Portfolio - Class 1 1,098 (7,282) (6,184) 51,285 -- 79,785 124,886 SunAmerica - SunAmerica Balanced Portfolio - Class 1 31,488 (7,534) 23,954 13,228 -- 70,343 107,525 UIF Equity Growth Portfolio - Class I -- (29,592) (29,592) 82,391 -- 77,386 130,185 UIF High Yield Portfolio - Class I 132,730 (11,568) 121,162 (30,482) -- 34,803 125,483 VALIC Company I - International Equities Fund 39,995 (17,898) 22,097 237,928 151,425 105,700 517,150 VALIC Company I - Mid Cap Index Fund 83,758 (121,436) (37,678) 791,315 1,166,529 (412,652) 1,507,514 VALIC Company I - Money Market I Fund 1,544,069 (237,806) 1,306,263 -- -- -- 1,306,263 VALIC Company I - Nasdaq-100 Index Fund 3,186 (29,185) (25,999) 338,983 -- (113,006) 199,978 VALIC Company I - Science & Technology Fund -- (8,670) (8,670) 62,771 -- 663 54,764 VALIC Company I - Small Cap Index Fund 23,429 (42,826) (19,397) 502,152 314,368 178,372 975,495 VALIC Company I - Stock Index Fund 290,415 (250,176) 40,239 2,049,336 1,124,134 1,619,156 4,832,865 Van Kampen LIT Government Portfolio - Class I 6,936 (1,103) 5,833 (1,883) -- (464) 3,486 Van Kampen LIT Growth and Income Portfolio - Class I 110,749 (71,802) 38,947 520,871 613,913 360,307 1,534,038 Van Kampen LIT Strategic Growth Portfolio - Class I -- (421) (421) 471 -- 1,308 1,358 Vanguard VIF High Yield Bond Portfolio 384,088 (36,393) 347,695 (72,435) -- 108,539 383,799 Vanguard VIF REIT Index Portfolio 281,108 (98,945) 182,163 908,031 890,176 2,179,220 4,159,590
See accompanying notes VL-R - 5 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS For the Years Ended December 31, 2006 and 2005
Divisions -------------------------------------------------------------- AIM V.I. Alger American AIM V.I. Core International AIM V.I. Premier Leveraged AllCap Equity Fund - Growth Fund Equity Fund - Portfolio -Class O Series I - Series I Series I Shares ------------- ------------- ---------------- ------------------ For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 9,689 $ 43,661 $ 105,168 $ (11,375) Net realized gain (loss) on investments 23,101 834,180 1,344,830 29,495 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 1,035,524 1,524,936 (774,690) 256,959 ----------- ----------- ------------ ---------- Increase (decrease) in net assets resulting from operations 1,068,314 2,402,777 675,308 275,079 ----------- ----------- ------------ ---------- PRINCIPAL TRANSACTIONS: Net premiums 1,320,405 1,531,993 651,935 530,629 Net transfers from (to) other Divisions or fixed rate option 12,882,196 1,945,861 (13,314,453) 616,919 Internal rollovers 190 2,416 -- 2,615 Cost of insurance and other charges (956,724) (819,984) (477,989) (145,783) Administrative charges (53,941) (66,896) (25,861) (26,555) Policy loans (217,297) (217,456) (58,474) (12,093) Death benefits (94,289) (109,287) (1,256) -- Withdrawals (606,490) (596,985) (276,220) (6,097) ----------- ----------- ------------ ---------- Increase (decrease) in net assets resulting from principal transactions 12,274,050 1,669,662 (13,502,318) 959,635 ----------- ----------- ------------ ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 13,342,364 4,072,439 (12,827,010) 1,234,714 NET ASSETS: Beginning of year -- 7,832,107 12,827,010 1,052,111 ----------- ----------- ------------ ---------- End of year $13,342,364 $11,904,546 $ -- $2,286,825 =========== =========== ============ ========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ -- $ (492) $ 16,824 $ (5,297) Net realized gain (loss) on investments -- 654,292 (557,531) 11,644 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments -- 435,814 1,124,376 104,855 ----------- ----------- ------------ ---------- Increase (decrease) in net assets resulting from operations -- 1,089,614 583,669 111,202 ----------- ----------- ------------ ---------- PRINCIPAL TRANSACTIONS: Net premiums -- 1,183,506 2,235,554 258,009 Net transfers from (to) other Divisions or fixed rate option -- (778,668) (810,424) 272,618 Internal rollovers -- 374 3,625 238 Cost of insurance and other charges -- (661,674) (1,498,715) (96,966) Administrative charges -- (48,372) (88,424) (11,836) Policy loans -- (127,316) (115,095) (2,006) Death benefits -- (111,066) (42,057) -- Withdrawals -- (277,444) (593,378) (24,484) ----------- ----------- ------------ ---------- Increase (decrease) in net assets resulting from principal transactions -- (820,660) (908,914) 395,573 ----------- ----------- ------------ ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- 268,954 (325,245) 506,775 NET ASSETS: Beginning of year -- 7,563,153 13,152,255 545,336 ----------- ----------- ------------ ---------- End of year $ -- $ 7,832,107 $ 12,827,010 $1,052,111 =========== =========== ============ ==========
See accompanying notes VL-R - 6 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ------------------------------------------------------------------------ Alger American Dreyfus IP MidCap Growth American Century Credit Suisse MidCap Stock Portfolio - Class O VP Value Fund - Small Cap Core I Portfolio - Initial Shares Class I Portfolio shares ------------------- ---------------- ---------------- ------------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (11,700) $ 100,153 $ (12,061) $ (16,318) Net realized gain (loss) on investments 45,760 465,305 38,702 76,012 Capital gain distributions from mutual funds 233,346 1,341,492 -- 785,785 Net change in unrealized appreciation (depreciation) of investments (116,555) 777,086 12,446 (516,371) ---------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations 150,851 2,684,036 39,087 329,108 ---------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 424,590 2,696,932 332,665 928,653 Net transfers from (to) other Divisions or fixed rate option 92,821 (315,229) 226,847 23,078 Internal rollovers 1,861 3,970 -- 1,603 Cost of insurance and other charges (196,063) (1,498,073) (200,231) (495,316) Administrative charges (21,727) (132,163) (16,371) (45,433) Policy loans (27,097) (100,103) (16,342) (25,963) Death benefits -- (48,479) (2) (1,952) Withdrawals (24,696) (630,156) (50,269) (106,741) ---------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions 249,689 (23,301) 276,297 277,929 ---------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 400,540 2,660,735 315,384 607,037 NET ASSETS: Beginning of year 1,468,832 14,952,181 1,515,020 4,620,970 ---------- ----------- ---------- ---------- End of year $1,869,372 $17,612,916 $1,830,404 $5,228,007 ========== =========== ========== ========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (8,405) $ 19,091 $ (11,549) $ (29,791) Net realized gain (loss) on investments 18,798 996,629 175,481 229,730 Capital gain distributions from mutual funds 43,700 1,369,370 -- 17,580 Net change in unrealized appreciation (depreciation) of investments 63,287 (1,811,913) (228,024) 156,882 ---------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations 117,380 573,177 (64,092) 374,401 ---------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 410,486 2,460,436 404,228 973,084 Net transfers from (to) other Divisions or fixed rate option 146,854 127,934 (421,651) 129,977 Internal rollovers 378 1,431 729 420 Cost of insurance and other charges (170,632) (1,398,994) (206,072) (526,854) Administrative charges (20,444) (118,425) (19,048) (46,131) Policy loans 1,738 (69,003) (8,049) (44,088) Death benefits -- (549,247) (1,085) (1,389) Withdrawals (10,163) (549,781) (63,733) (85,220) ---------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions 358,217 (95,649) (314,681) 399,799 ---------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 475,597 477,528 (378,773) 774,200 NET ASSETS: Beginning of year 993,235 14,474,653 1,893,793 3,846,770 ---------- ----------- ---------- ---------- End of year $1,468,832 $14,952,181 $1,515,020 $4,620,970 ========== =========== ========== ==========
See accompanying notes VL-R - 7 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions -------------------------------------------------------- Dreyfus VIF Dreyfus VIF Developing Leaders Quality Bond DWS Equity 500 Portfolio - Initial Portfolio - Initial Index Fund VIP - shares shares Class A ------------------- ------------------- ---------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (35,622) $ 323,409 $ -- Net realized gain (loss) on investments 198,431 (27,971) -- Capital gain distributions from mutual funds 978,648 -- -- Net change in unrealized appreciation (depreciation) of investments (834,177) (6,009) -- ----------- ---------- -------- Increase (decrease) in net assets resulting from operations 307,280 289,429 -- ----------- ---------- -------- PRINCIPAL TRANSACTIONS: Net premiums 1,969,882 1,449,497 -- Net transfers from (to) other Divisions or fixed rate option (387,563) 15,458 -- Internal rollovers 10,323 9,234 -- Cost of insurance and other charges (1,170,266) (851,992) -- Administrative charges (87,392) (71,782) -- Policy loans (128,184) (52,220) -- Death benefits (49,652) (1,602) -- Withdrawals (588,301) (197,858) -- ----------- ---------- -------- Increase (decrease) in net assets resulting from principal transactions (431,153) 298,735 -- ----------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS (123,873) 588,164 -- NET ASSETS: Beginning of year 11,869,378 8,094,497 -- ----------- ---------- -------- End of year $11,745,505 $8,682,661 $ -- =========== ========== ======== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (80,352) $ 234,531 $ 175 Net realized gain (loss) on investments 290,620 (2,766) 1,229 Capital gain distributions from mutual funds -- -- -- Net change in unrealized appreciation (depreciation) of investments 366,961 (87,917) (1,251) ----------- ---------- -------- Increase (decrease) in net assets resulting from operations 577,229 143,848 153 ----------- ---------- -------- PRINCIPAL TRANSACTIONS: Net premiums 2,191,420 1,331,559 1,301 Net transfers from (to) other Divisions or fixed rate option (982,230) (41,809) (78) Internal rollovers 6,331 1,222 -- Cost of insurance and other charges (1,242,885) (864,751) (1,538) Administrative charges (95,051) (63,234) -- Policy loans (74,740) (24,444) -- Death benefits (65,697) (62,982) -- Withdrawals (365,104) (390,022) (18,687) ----------- ---------- -------- Increase (decrease) in net assets resulting from principal transactions (627,956) (114,461) (19,002) ----------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS (50,727) 29,387 (18,849) NET ASSETS: Beginning of year 11,920,105 8,065,110 18,849 ----------- ---------- -------- End of year $11,869,378 $8,094,497 $ -- =========== ========== ========
------------ Fidelity VIP Asset Manager Portfolio - Service Class 2 ------------ For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 93,579 Net realized gain (loss) on investments 87,138 Capital gain distributions from mutual funds -- Net change in unrealized appreciation (depreciation) of investments 161,458 ---------- Increase (decrease) in net assets resulting from operations 342,175 ---------- PRINCIPAL TRANSACTIONS: Net premiums 780,955 Net transfers from (to) other Divisions or fixed rate option 123,800 Internal rollovers 13,162 Cost of insurance and other charges (511,833) Administrative charges (39,787) Policy loans (57,185) Death benefits (2,268) Withdrawals (181,052) ---------- Increase (decrease) in net assets resulting from principal transactions 125,792 ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 467,967 NET ASSETS: Beginning of year 5,191,276 ---------- End of year $5,659,243 ========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ 85,707 Net realized gain (loss) on investments 50,901 Capital gain distributions from mutual funds 1,654 Net change in unrealized appreciation (depreciation) of investments 13,179 ---------- Increase (decrease) in net assets resulting from operations 151,441 ---------- PRINCIPAL TRANSACTIONS: Net premiums 950,956 Net transfers from (to) other Divisions or fixed rate option (44,224) Internal rollovers 13,267 Cost of insurance and other charges (532,397) Administrative charges (47,340) Policy loans (42,449) Death benefits (5,109) Withdrawals (93,365) ---------- Increase (decrease) in net assets resulting from principal transactions 199,339 ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 350,780 NET ASSETS: Beginning of year 4,840,496 ---------- End of year $5,191,276 ==========
See accompanying notes VL-R - 8 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ----------------------------------------------------------- Fidelity VIP Fidelity VIP Fidelity VIP Contrafund Equity-Income Freedom 2020 Portfolio - Service Portfolio - Service Portfolio - Service Class 2 Class 2 Class 2 ------------------- ------------------- ------------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 95,528 $ 428,596 $ 113 Net realized gain (loss) on investments 1,566,138 652,056 18 Capital gain distributions from mutual funds 2,505,870 2,313,819 93 Net change in unrealized appreciation (depreciation) of investments (1,339,399) (88,746) 521 ----------- ----------- ------- Increase (decrease) in net assets resulting from operations 2,828,137 3,305,725 745 ----------- ----------- ------- PRINCIPAL TRANSACTIONS: Net premiums 4,923,210 3,099,899 2,737 Net transfers from (to) other Divisions or fixed rate option 2,435,931 641,299 8,494 Internal rollovers 62,573 18,534 -- Cost of insurance and other charges (2,112,995) (1,683,145) (1,347) Administrative charges (237,749) (155,094) (137) Policy loans (394,731) (348,669) -- Death benefits (147) (21,750) -- Withdrawals (881,154) (996,983) -- ----------- ----------- ------- Increase (decrease) in net assets resulting from principal transactions 3,794,938 554,091 9,747 ----------- ----------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS 6,623,075 3,859,816 10,492 NET ASSETS: Beginning of year 25,378,294 17,225,583 -- ----------- ----------- ------- End of year $32,001,369 $21,085,399 $10,492 =========== =========== ======= For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (121,727) $ 123,740 $ -- Net realized gain (loss) on investments 1,411,273 658,380 -- Capital gain distributions from mutual funds 3,507 577,829 -- Net change in unrealized appreciation (depreciation) of investments 1,931,073 (639,565) -- ----------- ----------- ------- Increase (decrease) in net assets resulting from operations 3,224,126 720,384 -- ----------- ----------- ------- PRINCIPAL TRANSACTIONS: Net premiums 4,561,396 3,326,778 -- Net transfers from (to) other Divisions or fixed rate option 3,526,648 (1,458,726) -- Internal rollovers 27,494 13,926 -- Cost of insurance and other charges (1,757,809) (1,647,752) -- Administrative charges (218,613) (161,430) -- Policy loans (16,997) (126,201) -- Death benefits (23,657) (174,144) -- Withdrawals (564,870) (593,421) -- ----------- ----------- ------- Increase (decrease) in net assets resulting from principal transactions 5,533,592 (820,970) -- ----------- ----------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS 8,757,718 (100,586) -- NET ASSETS: Beginning of year 16,620,576 17,326,169 -- ----------- ----------- ------- End of year $25,378,294 $17,225,583 $ -- =========== =========== =======
------------------- Fidelity VIP Freedom 2025 Portfolio - Service Class 2 ------------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 709 Net realized gain (loss) on investments 53 Capital gain distributions from mutual funds 744 Net change in unrealized appreciation (depreciation) of investments 518 ------- Increase (decrease) in net assets resulting from operations 2,024 ------- PRINCIPAL TRANSACTIONS: Net premiums 12,431 Net transfers from (to) other Divisions or fixed rate option 43,130 Internal rollovers 398 Cost of insurance and other charges (2,470) Administrative charges (622) Policy loans -- Death benefits -- Withdrawals -- ------- Increase (decrease) in net assets resulting from principal transactions 52,867 ------- TOTAL INCREASE (DECREASE) IN NET ASSETS 54,891 NET ASSETS: Beginning of year -- ------- End of year $54,891 ======= For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ -- Net realized gain (loss) on investments -- Capital gain distributions from mutual funds -- Net change in unrealized appreciation (depreciation) of investments -- ------- Increase (decrease) in net assets resulting from operations -- ------- PRINCIPAL TRANSACTIONS: Net premiums -- Net transfers from (to) other Divisions or fixed rate option -- Internal rollovers -- Cost of insurance and other charges -- Administrative charges -- Policy loans -- Death benefits -- Withdrawals -- ------- Increase (decrease) in net assets resulting from principal transactions -- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- NET ASSETS: Beginning of year -- ------- End of year $ -- =======
See accompanying notes VL-R - 9 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions --------------------------------------------------------------------------- Fidelity VIP Franklin Templeton - Freedom 2030 Fidelity VIP Fidelity VIP Mid Franklin Small Cap Portfolio - Service Growth Portfolio - Cap Portfolio - Value Securities Class 2 Service Class 2 Service Class 2 Fund - Class 2 ------------------- ------------------ ---------------- -------------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 774 $ (70,847) $ (32,537) $ (5,004) Net realized gain (loss) on investments 199 204,881 294,963 111,683 Capital gain distributions from mutual funds 661 -- 659,262 198,975 Net change in unrealized appreciation (depreciation) of investments 222 630,876 (375,386) 578,082 ------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations 1,856 764,910 546,302 883,736 ------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 14,163 2,823,425 1,813,879 1,387,979 Net transfers from (to) other Divisions or fixed rate option 53,451 (65,672) (167,074) 2,276,973 Internal rollovers -- 45,852 6,514 19,070 Cost of insurance and other charges (4,256) (1,458,192) (551,666) (360,580) Administrative charges (698) (143,780) (94,728) (72,730) Policy loans -- (130,916) (36,108) (19,981) Death benefits -- (2,075) (34,180) (150) Withdrawals -- (356,477) (115,302) (98,655) ------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions 62,660 712,165 821,335 3,131,926 ------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 64,516 1,477,075 1,367,637 4,015,662 NET ASSETS: Beginning of year -- 12,333,732 5,017,356 4,462,422 ------- ----------- ---------- ---------- End of year $64,516 $13,810,807 $6,384,993 $8,478,084 ======= =========== ========== ========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ -- $ (48,195) $ (21,364) $ 7,388 Net realized gain (loss) on investments -- 105,974 209,437 172,698 Capital gain distributions from mutual funds -- -- 22,730 24,208 Net change in unrealized appreciation (depreciation) of investments -- 459,808 421,937 137,721 ------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations -- 517,587 632,740 342,015 ------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums -- 2,893,700 999,954 861,667 Net transfers from (to) other Divisions or fixed rate option -- (531,785) 2,773,447 2,573,741 Internal rollovers -- 29,543 4,046 7,008 Cost of insurance and other charges -- (1,454,858) (272,523) (235,830) Administrative charges -- (142,954) (52,402) (43,216) Policy loans -- 246 (16,411) (7,493) Death benefits -- (40,342) (232) -- Withdrawals -- (427,987) (170,063) (210,695) ------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions -- 325,563 3,265,816 2,945,182 ------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- 843,150 3,898,556 3,287,197 NET ASSETS: Beginning of year -- 11,490,582 1,118,800 1,175,225 ------- ----------- ---------- ---------- End of year $ -- $12,333,732 $5,017,356 $4,462,422 ======= =========== ========== ==========
See accompanying notes VL-R - 10 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions -------------------------------------------------------------------- Franklin Templeton Franklin Franklin Franklin - Franklin Small- Templeton - Templeton - Templeton - Mid Cap Growth Franklin U.S. Mutual Shares Templeton Foreign Securities Fund - Government Securities Fund - Securities Fund - Class 2 Fund - Class 2 Class 2 Class 2 ------------------ -------------- ----------------- ----------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (804) $ 333,977 $ 77,927 $ 68,577 Net realized gain (loss) on investments 6,506 (224,502) 335,389 763,949 Capital gain distributions from mutual funds -- -- 430,467 -- Net change in unrealized appreciation (depreciation) of investments 3,158 190,212 1,310,423 1,507,480 -------- ----------- ----------- ----------- Increase (decrease) in net assets resulting from operations 8,860 299,687 2,154,206 2,340,006 -------- ----------- ----------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 1,443 763,320 1,545,202 929,895 Net transfers from (to) other Divisions or fixed rate option 3,860 (1,008,803) 4,614,713 233,690 Internal rollovers -- 1,038 1,845 13,144 Cost of insurance and other charges (2,602) (1,044,809) (803,603) (854,453) Administrative charges -- (37,501) (71,880) (44,477) Policy loans (431) (11,394) (17,718) (58,675) Death benefits -- (1,616) (2,661) (2,843) Withdrawals (35,641) (2,936,287) (263,351) (302,716) -------- ----------- ----------- ----------- Increase (decrease) in net assets resulting from principal transactions (33,371) (4,276,052) 5,002,547 (86,435) -------- ----------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (24,511) (3,976,365) 7,156,753 2,253,571 NET ASSETS: Beginning of year 133,093 13,373,590 9,375,597 11,370,162 -------- ----------- ----------- ----------- End of year $108,582 $ 9,397,225 $16,532,350 $13,623,733 ======== =========== =========== =========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (948) $ 497,209 $ 17,206 $ 48,568 Net realized gain (loss) on investments 5,021 (166,043) 287,343 1,007,998 Capital gain distributions from mutual funds -- -- 29,378 -- Net change in unrealized appreciation (depreciation) of investments (2,476) (101,939) 502,245 (119,732) -------- ----------- ----------- ----------- Increase (decrease) in net assets resulting from operations 1,597 229,227 836,172 936,834 -------- ----------- ----------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 2,467 1,420,202 795,119 995,513 Net transfers from (to) other Divisions or fixed rate option (19,154) 1,559,827 791,478 (816,806) Internal rollovers -- 1,141 1,480 5,557 Cost of insurance and other charges (3,492) (1,043,709) (658,282) (747,421) Administrative charges -- (67,924) (36,414) (43,849) Policy loans 14 (2,004) (51,983) (10,786) Death benefits -- -- (1,036) (528) Withdrawals (5,715) (198,021) (25,552) (214,760) -------- ----------- ----------- ----------- Increase (decrease) in net assets resulting from principal transactions (25,880) 1,669,512 814,810 (833,080) -------- ----------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (24,283) 1,898,739 1,650,982 103,754 NET ASSETS: Beginning of year 157,376 11,474,851 7,724,615 11,266,408 -------- ----------- ----------- ----------- End of year $133,093 $13,373,590 $ 9,375,597 $11,370,162 ======== =========== =========== ===========
See accompanying notes VL-R - 11 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions --------------------------------------------------------------------- Janus Aspen Series Janus Aspen Janus Aspen Goldman International Series Mid Cap Series Worldwide Sachs Capital Growth Portfolio - Growth Portfolio - Growth Portfolio - Growth Fund Service Shares Service Shares Service Shares ------------- ------------------ ------------------ ------------------ For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (30,055) $ 105,155 $ (21,547) $ 37,848 Net realized gain (loss) on investments 436,754 688,113 259,677 137,455 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 251,412 2,171,821 128,325 483,941 ----------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations 658,111 2,965,089 366,455 659,244 ----------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums -- 1,159,684 572,813 722,944 Net transfers from (to) other Divisions or fixed rate option (1,476,643) 3,835,895 7,654 (201,972) Internal rollovers -- 3,541 8,440 4,876 Cost of insurance and other charges (387,609) (764,047) (335,512) (412,870) Administrative charges (223) (57,976) (28,857) (37,481) Policy loans (301) (63,516) (31,596) (62,349) Death benefits -- (145) -- (16,309) Withdrawals (6,220) (149,200) (133,652) (217,347) ----------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (1,870,996) 3,964,236 59,290 (220,508) ----------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (1,212,885) 6,929,325 425,745 438,736 NET ASSETS: Beginning of year 8,385,862 5,053,510 2,959,840 3,991,888 ----------- ----------- ---------- ---------- End of year $ 7,172,977 $11,982,835 $3,385,585 $4,430,624 =========== =========== ========== ========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (27,283) $ 16,613 $ (18,171) $ 20,669 Net realized gain (loss) on investments 42,554 194,184 155,275 45,943 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 173,821 931,398 141,206 116,444 ----------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations 189,092 1,142,195 278,310 183,056 ----------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums -- 767,401 599,159 808,795 Net transfers from (to) other Divisions or fixed rate option (3,745) 443,444 (95,324) (414,321) Internal rollovers -- 429 998 113 Cost of insurance and other charges (487,695) (414,703) (337,320) (450,910) Administrative charges (254) (37,448) (29,512) (41,289) Policy loans (770) (45,570) (26,991) (15,340) Death benefits -- (27,549) (859) (41,202) Withdrawals (5,871) (55,587) (72,511) (56,087) ----------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (498,335) 630,417 37,640 (210,241) ----------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (309,243) 1,772,612 315,950 (27,185) NET ASSETS: Beginning of year 8,695,105 3,280,898 2,643,890 4,019,073 ----------- ----------- ---------- ---------- End of year $ 8,385,862 $ 5,053,510 $2,959,840 $3,991,888 =========== =========== ========== ==========
See accompanying notes VL-R - 12 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ------------------------------------------------------------ MFS VIT Capital JPMorgan Mid JPMorgan Small Opportunities MFS VIT Emerging Cap Value Company Series - Initial Growth Series - Portfolio Portfolio Class Initial Class ------------ -------------- ---------------- ---------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (1,642) $ (15,814) $ (10,326) $ (87,148) Net realized gain (loss) on investments 201,881 56,457 88,619 319,599 Capital gain distributions from mutual funds 93,681 58,942 -- -- Net change in unrealized appreciation (depreciation) of investments 255,664 209,632 447,816 579,361 ----------- ---------- ---------- ----------- Increase (decrease) in net assets resulting from operations 549,584 309,217 526,109 811,812 ----------- ---------- ---------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 445,024 413,486 825,232 1,987,547 Net transfers from (to) other Divisions or fixed rate option (1,271,831) 332,503 (275,950) (752,983) Internal rollovers 3,174 3,038 42,045 34,328 Cost of insurance and other charges (103,499) (214,204) (518,563) (1,341,963) Administrative charges (22,428) (19,993) (42,869) (80,358) Policy loans (17,157) (25,021) (54,329) (187,732) Death benefits 81 (4) (2,276) (96,755) Withdrawals (108,604) (75,361) (177,009) (853,221) ----------- ---------- ---------- ----------- Increase (decrease) in net assets resulting from principal transactions (1,075,240) 414,444 (203,719) (1,291,137) ----------- ---------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (525,656) 723,661 322,390 (479,325) NET ASSETS: Beginning of year 4,024,617 2,006,910 4,198,508 12,566,759 ----------- ---------- ---------- ----------- End of year $ 3,498,961 $2,730,571 $4,520,898 $12,087,434 =========== ========== ========== =========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (17,579) $ (12,471) $ 2,387 $ (84,977) Net realized gain (loss) on investments 127,740 174,256 48,971 (166,785) Capital gain distributions from mutual funds 48,776 224,360 -- -- Net change in unrealized appreciation (depreciation) of investments 151,024 (351,009) (11,883) 1,097,176 ----------- ---------- ---------- ----------- Increase (decrease) in net assets resulting from operations 309,961 35,136 39,475 845,414 ----------- ---------- ---------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 1,398,718 403,127 932,038 2,391,642 Net transfers from (to) other Divisions or fixed rate option 2,162,817 133,716 (164,810) (3,094,605) Internal rollovers 3,145 2,027 10,963 11,006 Cost of insurance and other charges (125,059) (185,057) (565,568) (1,434,224) Administrative charges (70,067) (18,817) (46,832) (92,031) Policy loans (7,165) (62,970) (60,052) (195,043) Death benefits -- (508) (1,523) (7,641) Withdrawals (157,382) (84,886) (162,933) (526,105) ----------- ---------- ---------- ----------- Increase (decrease) in net assets resulting from principal transactions 3,205,007 186,632 (58,717) (2,947,001) ----------- ---------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 3,514,968 221,768 (19,242) (2,101,587) NET ASSETS: Beginning of year 509,649 1,785,142 4,217,750 14,668,346 ----------- ---------- ---------- ----------- End of year $ 4,024,617 $2,006,910 $4,198,508 $12,566,759 =========== ========== ========== ===========
See accompanying notes VL-R - 13 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ----------------------------------------------------------------------- Neuberger MFS VIT New MFS VIT MFS VIT Total Berman AMT Mid- Discovery Series - Research Series - Return Series - Cap Growth Initial Class Initial Class Initial Class Portfolio - Class I ------------------ ----------------- --------------- ------------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (27,484) $ (4,617) $ 13,350 $ (28,615) Net realized gain (loss) on investments 116,523 59,542 11,625 176,053 Capital gain distributions from mutual funds 69,343 -- 25,854 -- Net change in unrealized appreciation (depreciation) of investments 305,617 154,953 29,002 389,383 ---------- ---------- --------- ---------- Increase (decrease) in net assets resulting from operations 463,999 209,878 79,831 536,821 ---------- ---------- --------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 689,882 441,240 10,697 728,925 Net transfers from (to) other Divisions or fixed rate option (26,023) (1,925) (1,385) 300,319 Internal rollovers 11,647 1,895 -- 37,607 Cost of insurance and other charges (508,787) (246,752) (42,538) (397,340) Administrative charges (34,172) (22,315) -- (37,627) Policy loans (40,268) (30,978) (7,202) (28,773) Death benefits (4) (3) -- (1,842) Withdrawals (113,603) (47,513) (84,421) (97,962) ---------- ---------- --------- ---------- Increase (decrease) in net assets resulting from principal transactions (21,328) 93,649 (124,849) 503,307 ---------- ---------- --------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 442,671 303,527 (45,018) 1,040,128 NET ASSETS: Beginning of year 3,709,291 2,077,717 820,117 3,551,478 ---------- ---------- --------- ---------- End of year $4,151,962 $2,381,244 $ 775,099 $4,591,606 ========== ========== ========= ========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (23,805) $ (4,442) $ 11,796 $ (21,203) Net realized gain (loss) on investments 51,074 27,693 19,227 54,328 Capital gain distributions from mutual funds -- -- 35,945 -- Net change in unrealized appreciation (depreciation) of investments 136,775 110,300 (48,408) 367,089 ---------- ---------- --------- ---------- Increase (decrease) in net assets resulting from operations 164,044 133,551 18,560 400,214 ---------- ---------- --------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 774,724 437,282 20,560 825,349 Net transfers from (to) other Divisions or fixed rate option (62,450) 125,983 (97,689) 22,256 Internal rollovers 3,097 5,775 -- 11,930 Cost of insurance and other charges (476,648) (280,355) 7,733 (369,103) Administrative charges (37,543) (21,889) -- (41,047) Policy loans (28,181) (14,977) (1,228) (20,571) Death benefits (1,019) (31,179) -- (18,592) Withdrawals (79,535) (58,262) (40,753) (66,956) ---------- ---------- --------- ---------- Increase (decrease) in net assets resulting from principal transactions 92,445 162,378 (111,377) 343,266 ---------- ---------- --------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 256,489 295,929 (92,817) 743,480 NET ASSETS: Beginning of year 3,452,802 1,781,788 912,934 2,807,998 ---------- ---------- --------- ---------- End of year $3,709,291 $2,077,717 $ 820,117 $3,551,478 ========== ========== ========= ==========
See accompanying notes VL-R - 14 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ------------------------------------------------------------------ Oppenheimer Oppenheimer Oppenheimer Neuberger Berman Balanced Global Securities High Income AMT Partners Fund/VA -Non- Fund/VA - Non- Fund/VA -Non- Portfolio - Class I Service Shares Service Shares Service Shares ------------------- -------------- ----------------- -------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (33) $ 13,950 $ 6,283 $ 7,130 Net realized gain (loss) on investments 5,175 (199) 131,058 290 Capital gain distributions from mutual funds 12,005 47,536 143,963 -- Net change in unrealized appreciation (depreciation) of investments (5,263) 55,219 239,263 1,415 -------- ---------- ---------- -------- Increase (decrease) in net assets resulting from operations 11,884 116,506 520,567 8,835 -------- ---------- ---------- -------- PRINCIPAL TRANSACTIONS: Net premiums 1,480 312,959 933,531 4,297 Net transfers from (to) other Divisions or fixed rate option 2,288 208,785 655,581 32 Internal rollovers -- 3,148 3,958 -- Cost of insurance and other charges (3,285) (152,299) (379,298) (3,662) Administrative charges -- (15,881) (47,436) -- Policy loans (1,833) (6,912) (41,231) (1,833) Death benefits -- -- -- -- Withdrawals (10,133) (48,568) (42,931) (2,588) -------- ---------- ---------- -------- Increase (decrease) in net assets resulting from principal transactions (11,483) 301,232 1,082,174 (3,754) -------- ---------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 401 417,738 1,602,741 5,081 NET ASSETS: Beginning of year 110,794 948,128 2,440,758 105,365 -------- ---------- ---------- -------- End of year $111,195 $1,365,866 $4,043,499 $110,446 ======== ========== ========== ======== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (16) $ 6,133 $ 2,604 $ 5,432 Net realized gain (loss) on investments 25,275 15,116 50,058 (160) Capital gain distributions from mutual funds 18 24,155 -- -- Net change in unrealized appreciation (depreciation) of investments (10,112) (16,437) 230,580 (3,466) -------- ---------- ---------- -------- Increase (decrease) in net assets resulting from operations 15,165 28,967 283,242 1,806 -------- ---------- ---------- -------- PRINCIPAL TRANSACTIONS: Net premiums 1,001 252,321 589,574 4,142 Net transfers from (to) other Divisions or fixed rate option 2,457 179,811 786,680 12,897 Internal rollovers -- 350 5,682 -- Cost of insurance and other charges (2,608) (94,980) (236,212) (3,749) Administrative charges -- (12,637) (28,854) -- Policy loans (1,863) (63,217) 30,370 (1,368) Death benefits -- -- (14) -- Withdrawals (41,001) (2,539) (75,359) (8,526) -------- ---------- ---------- -------- Increase (decrease) in net assets resulting from principal transactions (42,014) 259,109 1,071,867 3,396 -------- ---------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS (26,849) 288,076 1,355,109 5,202 NET ASSETS: Beginning of year 137,643 660,052 1,085,649 100,163 -------- ---------- ---------- -------- End of year $110,794 $ 948,128 $2,440,758 $105,365 ======== ========== ========== ========
See accompanying notes VL-R - 15 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ------------------------------------------------------------------------ PIMCO VIT PIMCO VIT PIMCO VIT Real Short-Term PIMCO VIT Total CommodityRealReturn Return Portfolio - Portfolio - Return Portfolio - Strategy Portfolio - Administrative Administrative Administrative Administrative Class Class Class Class -------------------- ------------------ -------------- ------------------ For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 6,561 $ 438,585 $ 175,765 $ 696,837 Net realized gain (loss) on investments (143) 9,390 (4,282) (380,288) Capital gain distributions from mutual funds 1,003 313,163 -- 119,901 Net change in unrealized appreciation (depreciation) of investments (16,727) (741,458) (784) 140,867 -------- ----------- ----------- ----------- Increase (decrease) in net assets resulting from operations (9,306) 19,680 170,699 577,317 -------- ----------- ----------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 4,357 2,325,664 776,516 3,674,492 Net transfers from (to) other Divisions or fixed rate option 266,099 (837,509) 30,265 (3,145,448) Internal rollovers -- 2,625 3,158 12,412 Cost of insurance and other charges (5,113) (1,381,218) (534,511) (1,466,627) Administrative charges (228) (114,774) (38,393) (175,128) Policy loans -- (231,220) (118,749) (240,984) Death benefits -- (14,069) (2,098) (2,805) Withdrawals (677) (370,689) (156,789) (791,659) -------- ----------- ----------- ----------- Increase (decrease) in net assets resulting from principal transactions 264,438 (621,190) (40,601) (2,135,747) -------- ----------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 255,132 (601,510) 130,098 (1,558,430) NET ASSETS: Beginning of year -- 12,345,542 4,854,681 24,219,508 -------- ----------- ----------- ----------- End of year $255,132 $11,744,032 $ 4,984,779 $22,661,078 ======== =========== =========== =========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ -- $ 250,042 $ 102,437 $ 590,036 Net realized gain (loss) on investments -- 381,521 (2,282) 173,741 Capital gain distributions from mutual funds -- 134,036 -- 367,262 Net change in unrealized appreciation (depreciation) of investments -- (600,970) (11,994) (743,369) -------- ----------- ----------- ----------- Increase (decrease) in net assets resulting from operations -- 164,629 88,161 387,670 -------- ----------- ----------- ----------- PRINCIPAL TRANSACTIONS: Net premiums -- 2,122,820 805,130 5,654,495 Net transfers from (to) other Divisions or fixed rate option -- (1,005,059) (1,085,070) 9,067,641 Internal rollovers -- 1,960 910 4,869 Cost of insurance and other charges -- (1,293,910) (506,287) (1,354,946) Administrative charges -- (101,343) (36,829) (274,581) Policy loans -- (141,900) (37,853) (70,849) Death benefits -- (2,376) (233,520) (122,685) Withdrawals -- (440,954) (137,362) (933,205) -------- ----------- ----------- ----------- Increase (decrease) in net assets resulting from principal transactions -- (860,762) (1,230,881) 11,970,739 -------- ----------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- (696,133) (1,142,720) 12,358,409 NET ASSETS: Beginning of year -- 13,041,675 5,997,401 11,861,099 -------- ----------- ----------- ----------- End of year $ -- $12,345,542 $ 4,854,681 $24,219,508 ======== =========== =========== ===========
See accompanying notes VL-R - 16 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions -------------------------------------------------------------------- Pioneer Growth Pioneer Fund Opportunities Pioneer Mid Cap Putnam VT VCT Portfolio - VCT Portfolio - Value VCT Diversified Income Class I Class I Portfolio -Class I Fund - Class IB --------------- --------------- ------------------ ------------------ For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 19,741 $ (36,577) $ (79) $ 463,626 Net realized gain (loss) on investments 66,362 79,869 (3) 33,585 Capital gain distributions from mutual funds -- -- 373 -- Net change in unrealized appreciation (depreciation) of investments 384,974 189,546 2,601 68,663 ---------- ---------- ------- ----------- Increase (decrease) in net assets resulting from operations 471,077 232,838 2,892 565,874 ---------- ---------- ------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 295,848 544,505 7,736 1,561,190 Net transfers from (to) other Divisions or fixed rate option (222,509) (98,613) 67,239 (367,345) Internal rollovers 877 3,903 796 8,507 Cost of insurance and other charges (247,435) (441,521) (2,497) (383,769) Administrative charges (10,650) (22,070) (386) (108,472) Policy loans (44,157) (128,459) -- (91,865) Death benefits -- -- -- (662) Withdrawals (176,627) (373,505) (175) (120,411) ---------- ---------- ------- ----------- Increase (decrease) in net assets resulting from principal transactions (404,653) (515,760) 72,713 497,173 ---------- ---------- ------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 66,424 (282,922) 75,605 1,063,047 NET ASSETS: Beginning of year 3,232,792 5,275,314 -- 10,453,953 ---------- ---------- ------- ----------- End of year $3,299,216 $4,992,392 $75,605 $11,517,000 ========== ========== ======= =========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ 20,353 $ (37,450) $ -- $ 521,219 Net realized gain (loss) on investments 15,216 23,981 -- 7,959 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 134,215 306,944 -- (309,930) ---------- ---------- ------- ----------- Increase (decrease) in net assets resulting from operations 169,784 293,475 -- 219,248 ---------- ---------- ------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 365,758 664,335 -- 1,577,522 Net transfers from (to) other Divisions or fixed rate option (112,948) (422,997) -- 1,659,872 Internal rollovers -- -- -- -- Cost of insurance and other charges (282,610) (474,531) -- (313,379) Administrative charges (12,434) (25,096) -- (116,359) Policy loans (37,689) (17,998) -- 31,448 Death benefits (1,969) (3,554) -- (4,347) Withdrawals (200,441) (371,013) -- (133,390) ---------- ---------- ------- ----------- Increase (decrease) in net assets resulting from principal transactions (282,333) (650,854) -- 2,701,367 ---------- ---------- ------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (112,549) (357,379) -- 2,920,615 NET ASSETS: Beginning of year 3,345,341 5,632,693 -- 7,533,338 ---------- ---------- ------- ----------- End of year $3,232,792 $5,275,314 $ -- $10,453,953 ========== ========== ======= ===========
See accompanying notes VL-R - 17 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions --------------------------------------------------------------- Putnam VT Putnam VT Growth and International Growth Putnam VT Small Putnam VT Income Fund - and Income Fund - Cap Value Fund - Vista Fund - Class IB Class IB Class IB Class IB ------------- -------------------- ---------------- ------------ For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 185,523 $ 26,375 $ (1,687) $ (793) Net realized gain (loss) on investments 575,010 360,192 27,091 1,593 Capital gain distributions from mutual funds 470,152 -- 39,335 -- Net change in unrealized appreciation (depreciation) of investments 1,620,179 1,246,217 (3,385) 4,353 ----------- ---------- --------- -------- Increase (decrease) in net assets resulting from operations 2,850,864 1,632,784 61,354 5,153 ----------- ---------- --------- -------- PRINCIPAL TRANSACTIONS: Net premiums 3,097,607 1,001,601 10,065 4,056 Net transfers from (to) other Divisions or fixed rate option (1,274,051) 1,400,544 (4,847) 68,594 Internal rollovers 7,117 692 -- -- Cost of insurance and other charges (1,478,341) (550,278) (10,178) (1,956) Administrative charges (180,468) (45,171) -- -- Policy loans (125,493) (46,551) (3,066) (2,219) Death benefits (18,989) (677) -- -- Withdrawals (881,436) (259,387) (53,908) (2,230) ----------- ---------- --------- -------- Increase (decrease) in net assets resulting from principal transactions (854,054) 1,500,773 (61,934) 66,245 ----------- ---------- --------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,996,810 3,133,557 (580) 71,398 NET ASSETS: Beginning of year 19,396,940 5,707,911 416,707 105,252 ----------- ---------- --------- -------- End of year $21,393,750 $8,841,468 $ 416,127 $176,650 =========== ========== ========= ======== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ 174,489 $ 16,006 $ (2,329) $ (800) Net realized gain (loss) on investments 56,535 832,150 40,626 6,358 Capital gain distributions from mutual funds -- -- 27,814 -- Net change in unrealized appreciation (depreciation) of investments 554,254 (174,121) (44,028) 7,457 ----------- ---------- --------- -------- Increase (decrease) in net assets resulting from operations 785,278 674,035 22,083 13,015 ----------- ---------- --------- -------- PRINCIPAL TRANSACTIONS: Net premiums 3,438,858 1,014,354 13,055 3,465 Net transfers from (to) other Divisions or fixed rate option (560,471) (410,506) (84,872) 39,842 Internal rollovers 8,146 1,917 -- -- Cost of insurance and other charges (1,521,031) (484,971) (11,302) (1,946) Administrative charges (202,586) (45,536) -- -- Policy loans (14,161) (29,252) 899 178 Death benefits (125,411) (35,218) -- -- Withdrawals (495,300) (462,336) (20,216) (33,521) ----------- ---------- --------- -------- Increase (decrease) in net assets resulting from principal transactions 528,044 (451,548) (102,436) 8,018 ----------- ---------- --------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,313,322 222,487 (80,353) 21,033 NET ASSETS: Beginning of year 18,083,618 5,485,424 497,060 84,219 ----------- ---------- --------- -------- End of year $19,396,940 $5,707,911 $ 416,707 $105,252 =========== ========== ========= ========
See accompanying notes VL-R - 18 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ------------------------------------------------------------------------- SunAmerica - Putnam VT SunAmerica - SunAmerica UIF Equity Voyager Fund - Aggressive Growth Balanced Portfolio - Growth Portfolio - Class IB Portfolio - Class 1 Class 1 Class I -------------- ------------------- -------------------- ------------------ For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (2,480) $ (6,184) $ 23,954 $ (29,592) Net realized gain (loss) on investments 1,614 51,285 13,228 82,391 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 18,494 79,785 70,343 77,386 -------- ---------- ---------- ---------- Increase (decrease) in net assets resulting from operations 17,628 124,886 107,525 130,185 -------- ---------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 10,826 238,909 369,551 620,892 Net transfers from (to) other Divisions or fixed rate option 21,569 (26,077) 2,227 (52,164) Internal rollovers -- 519 7,959 424 Cost of insurance and other charges (18,043) (134,489) (188,400) (400,159) Administrative charges -- (11,792) (18,655) (20,791) Policy loans (1,507) (27,421) (2,569) (72,970) Death benefits -- -- (550) -- Withdrawals (8,987) (17,230) (15,280) (378,243) -------- ---------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions 3,858 22,419 154,283 (303,011) -------- ---------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 21,486 147,305 261,808 (172,826) NET ASSETS: Beginning of year 399,942 983,042 964,642 4,227,016 -------- ---------- ---------- ---------- End of year $421,428 $1,130,347 $1,226,450 $4,054,190 ======== ========== ========== ========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (607) $ (5,020) $ 16,832 $ (8,456) Net realized gain (loss) on investments (1,756) 16,108 12,207 (86,301) Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 24,381 42,956 (15,953) 634,286 -------- ---------- ---------- ---------- Increase (decrease) in net assets resulting from operations 22,018 54,044 13,086 539,529 -------- ---------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 9,781 225,240 358,484 694,494 Net transfers from (to) other Divisions or fixed rate option 75,160 326,503 56,742 (94,748) Internal rollovers -- 213 39 1,000 Cost of insurance and other charges (18,351) (112,221) (166,972) (417,067) Administrative charges -- (10,762) (17,676) (22,342) Policy loans (1,170) (65) (2,910) (17,586) Death benefits -- (662) (1,000) (149) Withdrawals (17,859) (14,442) (9,313) (171,302) -------- ---------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions 47,561 413,804 217,394 (27,700) -------- ---------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 69,579 467,848 230,480 511,829 NET ASSETS: Beginning of year 330,363 515,194 734,162 3,715,187 -------- ---------- ---------- ---------- End of year $399,942 $ 983,042 $ 964,642 $4,227,016 ======== ========== ========== ==========
See accompanying notes VL-R - 19 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ------------------------------------------------------------------- VALIC Company I VALIC Company I VALIC Company I UIF High Yield - International - Mid Cap Index - Money Market I Portfolio - Class I Equities Fund Fund Fund ------------------- --------------- --------------- ---------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 121,162 $ 22,097 $ (37,678) $ 1,306,263 Net realized gain (loss) on investments (30,482) 237,928 791,315 -- Capital gain distributions from mutual funds -- 151,425 1,166,529 -- Net change in unrealized appreciation (depreciation) of investments 34,803 105,700 (412,652) -- ---------- ---------- ----------- ------------ Increase (decrease) in net assets resulting from operations 125,483 517,150 1,507,514 1,306,263 ---------- ---------- ----------- ------------ PRINCIPAL TRANSACTIONS: Net premiums 193,931 322,747 2,179,176 18,366,775 Net transfers from (to) other Divisions or fixed rate option (794,194) (30,669) 213,027 (8,470,372) Internal rollovers -- 190 4,909 878,353 Cost of insurance and other charges (148,896) (204,734) (1,271,719) (3,635,797) Administrative charges (7,659) (14,717) (95,675) (966,049) Policy loans (14,213) (20,113) (404,072) 440,035 Death benefits (4) 80 (183,264) (356,317) Withdrawals (68,240) (176,741) (942,529) (1,520,238) ---------- ---------- ----------- ------------ Increase (decrease) in net assets resulting from principal transactions (839,275) (123,957) (500,147) 4,736,390 ---------- ---------- ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS (713,792) 393,193 1,007,367 6,042,653 NET ASSETS: Beginning of year 2,179,040 2,349,147 16,655,723 24,555,193 ---------- ---------- ----------- ------------ End of year $1,465,248 $2,742,340 $17,663,090 $ 30,597,846 ========== ========== =========== ============ For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ 153,902 $ 21,987 $ 48,106 $ 607,594 Net realized gain (loss) on investments 5,396 78,643 588,951 -- Capital gain distributions from mutual funds -- -- 621,832 -- Net change in unrealized appreciation (depreciation) of investments (157,984) 218,823 427,603 -- ---------- ---------- ----------- ------------ Increase (decrease) in net assets resulting from operations 1,314 319,453 1,686,492 607,594 ---------- ---------- ----------- ------------ PRINCIPAL TRANSACTIONS: Net premiums 206,936 351,191 2,272,779 17,116,521 Net transfers from (to) other Divisions or fixed rate option 586,384 70,268 (745,112) (19,178,710) Internal rollovers -- -- 5,120 1,098,428 Cost of insurance and other charges (241,844) (188,014) (1,247,061) (4,883,470) Administrative charges (7,889) (15,612) (96,609) (783,880) Policy loans (3,334) (11,642) (83,694) (371,088) Death benefits -- -- (13,524) (430,069) Withdrawals (100,226) (99,036) (585,039) (3,166,246) ---------- ---------- ----------- ------------ Increase (decrease) in net assets resulting from principal transactions 440,027 107,155 (493,140) (10,598,514) ---------- ---------- ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 441,341 426,608 1,193,352 (9,990,920) NET ASSETS: Beginning of year 1,737,699 1,922,539 15,462,371 34,546,113 ---------- ---------- ----------- ------------ End of year $2,179,040 $2,349,147 $16,655,723 $ 24,555,193 ========== ========== =========== ============
See accompanying notes VL-R - 20 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ---------------------------------------------------------------- VALIC Company I VALIC Company I VALIC Company I VALIC Company I - Nasdaq-100 - Science & - Small Cap Index - Stock Index Index Fund Technology Fund Fund Fund --------------- --------------- ----------------- --------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ (25,999) $ (8,670) $ (19,397) $ 40,239 Net realized gain (loss) on investments 338,983 62,771 502,152 2,049,336 Capital gain distributions from mutual funds -- -- 314,368 1,124,134 Net change in unrealized appreciation (depreciation) of investments (113,006) 663 178,372 1,619,156 ---------- ---------- ---------- ----------- Increase (decrease) in net assets resulting from operations 199,978 54,764 975,495 4,832,865 ---------- ---------- ---------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 839,415 208,938 1,052,712 3,466,697 Net transfers from (to) other Divisions or fixed rate option (540,461) 57,549 167,695 (2,312,966) Internal rollovers 410 -- 796 12,768 Cost of insurance and other charges (407,935) (221,201) (455,189) (3,020,872) Administrative charges (40,714) (10,104) (50,348) (145,917) Policy loans 7,684 (22,518) (265,086) (701,571) Death benefits -- -- (1,657) (47,112) Withdrawals (123,606) (95,020) (406,828) (3,740,973) ---------- ---------- ---------- ----------- Increase (decrease) in net assets resulting from principal transactions (265,207) (82,356) 42,095 (6,489,946) ---------- ---------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (65,229) (27,592) 1,017,590 (1,657,081) NET ASSETS: Beginning of year 4,251,703 1,256,085 5,659,112 37,281,393 ---------- ---------- ---------- ----------- End of year $4,186,474 $1,228,493 $6,676,702 $35,624,312 ========== ========== ========== =========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ (21,652) $ (7,801) $ 12,758 $ 304,763 Net realized gain (loss) on investments 115,488 18,618 204,788 586,994 Capital gain distributions from mutual funds -- -- 174,783 768,036 Net change in unrealized appreciation (depreciation) of investments (59,210) 12,012 (197,125) (277,470) ---------- ---------- ---------- ----------- Increase (decrease) in net assets resulting from operations 34,626 22,829 195,204 1,382,323 ---------- ---------- ---------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 927,826 221,668 975,307 4,361,641 Net transfers from (to) other Divisions or fixed rate option 164,340 8,209 297,440 (1,341,502) Internal rollovers 94 221 5,569 3,312 Cost of insurance and other charges (422,008) (195,541) (397,032) (3,220,274) Administrative charges (44,965) (10,996) (46,314) (184,068) Policy loans 115 (6,853) (31,584) (582,095) Death benefits (989) -- (59,325) (70,939) Withdrawals (68,250) (21,524) (220,122) (1,946,452) ---------- ---------- ---------- ----------- Increase (decrease) in net assets resulting from principal transactions 556,163 (4,816) 523,939 (2,980,377) ---------- ---------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 590,789 18,013 719,143 (1,598,054) NET ASSETS: Beginning of year 3,660,914 1,238,072 4,939,969 38,879,447 ---------- ---------- ---------- ----------- End of year $4,251,703 $1,256,085 $5,659,112 $37,281,393 ========== ========== ========== ===========
See accompanying notes VL-R - 21 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005
Divisions ------------------------------------------------------------------------- Van Kampen LIT Van Kampen LIT Growth and Van Kampen LIT Vanguard VIF Government Income Portfolio - Strategic Growth High Yield Bond Portfolio - Class I Class I Portfolio - Class I Portfolio ------------------- ------------------ ------------------- --------------- For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 5,833 $ 38,947 $ (421) $ 347,695 Net realized gain (loss) on investments (1,883) 520,871 471 (72,435) Capital gain distributions from mutual funds -- 613,913 -- -- Net change in unrealized appreciation (depreciation) of investments (464) 360,307 1,308 108,539 -------- ----------- ------- ----------- Increase (decrease) in net assets resulting from operations 3,486 1,534,038 1,358 383,799 -------- ----------- ------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 3,641 1,923,721 4,380 1,061,834 Net transfers from (to) other Divisions or fixed rate option 438 (109,336) (259) (308,335) Internal rollovers -- 1,421 -- 13,671 Cost of insurance and other charges (27,771) (727,324) (2,615) (590,885) Administrative charges -- (90,147) -- (54,057) Policy loans (1,013) (58,688) (3,361) (81,623) Death benefits -- -- -- (1,818) Withdrawals (3,261) (414,854) (203) (470,628) -------- ----------- ------- ----------- Increase (decrease) in net assets resulting from principal transactions (27,966) 524,793 (2,058) (431,841) -------- ----------- ------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (24,480) 2,058,831 (700) (48,042) NET ASSETS: Beginning of year 160,256 10,039,305 57,942 5,229,079 -------- ----------- ------- ----------- End of year $135,776 $12,098,136 $57,242 $ 5,181,037 ======== =========== ======= =========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ 5,663 $ 29,313 $ (265) $ 347,062 Net realized gain (loss) on investments (1,549) 677,302 (422) 174,975 Capital gain distributions from mutual funds -- 198,372 -- -- Net change in unrealized appreciation (depreciation) of investments 601 (91,197) 4,451 (428,929) -------- ----------- ------- ----------- Increase (decrease) in net assets resulting from operations 4,715 813,790 3,764 93,108 -------- ----------- ------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 21,122 2,269,518 4,642 1,180,630 Net transfers from (to) other Divisions or fixed rate option 604 2,361,781 (143) (2,484,746) Internal rollovers -- 953 -- 4,044 Cost of insurance and other charges (26,599) (646,241) (2,594) (566,909) Administrative charges -- (108,511) -- (54,835) Policy loans 692 (67,443) 470 (30,986) Death benefits -- (3,873) -- (627) Withdrawals (18,386) (236,813) (5,161) (117,978) -------- ----------- ------- ----------- Increase (decrease) in net assets resulting from principal transactions (22,567) 3,569,371 (2,786) (2,071,407) -------- ----------- ------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (17,852) 4,383,161 978 (1,978,299) NET ASSETS: Beginning of year 178,108 5,656,144 56,964 7,207,378 -------- ----------- ------- ----------- End of year $160,256 $10,039,305 $57,942 $ 5,229,079 ======== =========== ======= ===========
See accompanying notes VL-R - 22 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENT OF CHANGES IN NET ASSETS - CONTINUED For the Years Ended December 31, 2006 and 2005 Divisions ------------ Vanguard VIF REIT Index Portfolio ------------ For the Year Ended December 31, 2006 OPERATIONS: Net investment income (loss) $ 182,163 Net realized gain (loss) on investments 908,031 Capital gain distributions from mutual funds 890,176 Net change in unrealized appreciation (depreciation) of investments 2,179,220 ----------- Increase (decrease) in net assets resulting from operations 4,159,590 ----------- PRINCIPAL TRANSACTIONS: Net premiums 2,466,113 Net transfers from (to) other Divisions or fixed rate option 736,702 Internal rollovers 15,446 Cost of insurance and other charges (1,236,493) Administrative charges (120,151) Policy loans (228,520) Death benefits (5,694) Withdrawals (717,209) ----------- Increase (decrease) in net assets resulting from principal transactions 910,194 ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 5,069,784 NET ASSETS: Beginning of year 12,052,487 ----------- End of year $17,122,271 =========== For the Year Ended December 31, 2005 OPERATIONS: Net investment income (loss) $ 208,129 Net realized gain (loss) on investments 988,405 Capital gain distributions from mutual funds 621,997 Net change in unrealized appreciation (depreciation) of investments (698,326) ----------- Increase (decrease) in net assets resulting from operations 1,120,205 ----------- PRINCIPAL TRANSACTIONS: Net premiums 2,272,609 Net transfers from (to) other Divisions or fixed rate option (403,002) Internal rollovers 837 Cost of insurance and other charges (995,647) Administrative charges (107,936) Policy loans (61,621) Death benefits (2,224) Withdrawals (373,730) ----------- Increase (decrease) in net assets resulting from principal transactions 329,286 ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,449,491 NET ASSETS: Beginning of year 10,602,996 ----------- End of year $12,052,487 =========== See accompanying notes VL-R - 23 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS Note A - Organization Separate Account VL-R (the "Separate Account") was established by resolution of the Board of Directors of American General Life Insurance Company (the "Company") on May 6, 1997 to fund variable universal life insurance policies issued by the Company. The following products are included in the Separate Account: AG Legacy Plus, Corporate America, Legacy Plus, Platinum Investor I, Platinum Investor II, Platinum Investor III, Platinum Investor IV, Platinum Investor FlexDirector, Platinum Investor PLUS, Platinum Investor Survivor, Platinum Investor Survivor II, Platinum Investor VIP and The One VUL Solution. Of the products listed, AG Legacy Plus, Legacy Plus, Platinum Investor I, Platinum Investor Survivor and The One VUL Solution are no longer offered for sale. The Company is an indirect, wholly-owned subsidiary of American International Group, Inc. The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust pursuant to the provisions of the Investment Company Act of 1940, as amended. The Separate Account is divided into "Divisions", which invest in independently managed mutual fund portfolios ("Funds"). The Funds available to policy owners through the various Divisions are as follows: AIM Variable Insurance Funds ("AIM V.I."): Franklin Templeton Variable Insurance Products Trust AIM V.I. Core Equity Fund - Series I (4) ("Franklin Templeton"): - continued: AIM V.I. International Growth Fund - Series I Franklin Templeton - Franklin U.S. Government Fund - Class 2 AIM V.I. Premier Equity Fund - Series I (4) Franklin Templeton - Mutual Shares Securities Fund - Class 2 Franklin Templeton - Templeton Foreign Securities Fund - Class 2 The Alger American Fund: Alger American Leveraged AllCap Portfolio - Goldman Sachs Variable Insurance Trust Class O Shares ("Goldman Sachs"): Alger American MidCap Growth Portfolio - Class Goldman Sachs Capital Growth Fund O Shares American Century Variable Portfolios, Inc. ("American Century VP"): Janus Aspen Series: American Century VP Value Fund - Class I Janus Aspen Series International Growth Portfolio - Service Shares Janus Aspen Series Mid Cap Growth Portfolio - Service Shares Credit Suisse Trust ("Credit Suisse"): Janus Aspen Series Worldwide Growth Portfolio - Service Shares (7) Credit Suisse Small Cap Core I Portfolio (15) J.P. Morgan Series Trust II ("JPMorgan"): Dreyfus Investment Portfolios ("Dreyfus IP"): JPMorgan Mid Cap Value Portfolio (8) Dreyfus IP MidCap Stock Portfolio - Initial JPMorgan Small Company Portfolio shares (5) Dreyfus Variable Investment Fund MFS(R) Variable Insurance Trust/SM ("Dreyfus VIF"): /("MFS(R) VIT"): Dreyfus VIF Developing Leaders Portfolio - MFS(R) VIT Capital Opportunities Initial shares (5) Series - Initial Class (9) Dreyfus VIF Quality Bond Portfolio - Initial MFS(R) VIT Emerging Growth Series - shares (5) Initial Class (9) MFS(R) VIT New Discovery Series - Initial Class DWS Investments VIT Funds: (2) MFS(R) VIT Research Series - Initial Class DWS Equity 500 Index Fund VIP - Class A (3) MFS(R) VIT Total Return Series - Initial Class Fidelity(R) Variable Insurance Products Neuberger Berman Advisers Management ("Fidelity(R) VIP"): Trust ("Neuberger Berman AMT"): Fidelity(R) VIP Asset Manager/SM/ Portfolio - Service Class 2 Fidelity(R) VIP Contrafund(R) Portfolio - Neuberger Berman AMT Mid-Cap Growth Service Class 2 Portfolio - Class I Fidelity(R) VIP Equity-Income Portfolio - Neuberger Berman AMT Partners Service Class 2 Portfolio - Class I Fidelity(R) VIP Freedom 2020 Portfolio - Service Class 2 (6) Fidelity(R) VIP Freedom 2025 Portfolio - Oppenheimer Variable Account Funds Service Class 2 (6) ("Oppenheimer"): Fidelity(R) VIP Freedom 2030 Portfolio - Oppenheimer Balanced Fund/VA - Service Class 2 (6) Non-Service Shares Fidelity(R) VIP Growth Portfolio - Service Oppenheimer Global Securities Class 2 Fund/VA - Non-Service Shares Fidelity(R) VIP Mid Cap Portfolio - Service Oppenheimer High Income Fund/VA - Class 2 Non-Service Shares Franklin Templeton Variable Insurance Products Trust ("Franklin Templeton"): Franklin Templeton - Franklin Small Cap Value PIMCO Variable Insurance Trust ("PIMCO Securities Fund - Class 2 VIT"): Franklin Templeton - Franklin Small-Mid Cap PIMCO VIT CommodityRealReturn Growth Securities Fund - Class 2 (1) Strategy Portfolio - Administrative Class (10) PIMCO VIT Real Return Portfolio - Administrative Class PIMCO VIT Short-Term Portfolio - Administrative Class
VL-R - 24 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note A - Organization - Continued PIMCO Variable Insurance Trust ("PIMCO The Universal Institutional Funds, VIT"): - continued: Inc. ("UIF"): PIMCO VIT Total Return Portfolio - UIF Equity Growth Portfolio - Administrative Class Class I (13) UIF High Yield Portfolio - Class I (13) Pioneer Variable Contracts Trust ("Pioneer"): Pioneer Fund VCT Portfolio - Class I VALIC Company I: Pioneer Growth Opportunities VCT VALIC Company I - International Portfolio - Class I Equities Fund Pioneer Mid Cap Value VCT Portfolio VALIC Company I - Mid Cap Index - Class I (11) Fund VALIC Company I - Money Market I Fund Putnam Variable Trust ("Putnam VT"): VALIC Company I - Nasdaq-100(R) Index Fund Putnam VT Diversified Income Fund - VALIC Company I - Science & Class IB Technology Fund Putnam VT Growth and Income Fund - VALIC Company I - Small Cap Index Class IB (12) Fund Putnam VT International Growth and VALIC Company I - Stock Index Fund Income Fund - Class IB Putnam VT Small Cap Value Fund - Class IB Putnam VT Vista Fund - Class IB Van Kampen Life Investment Trust Putnam VT Voyager Fund - Class IB ("Van Kampen LIT"): Van Kampen LIT Government Portfolio - Class I SunAmerica Series Trust ("SunAmerica"): Van Kampen LIT Growth and Income Portfolio - Class I SunAmerica - Aggressive Growth Van Kampen LIT Strategic Growth Portfolio - Class 1 Portfolio - Class I (14) SunAmerica - SunAmerica Balanced Portfolio - Class 1 Vanguard(R) Variable Insurance Fund ("Vanguard(R) VIF"): Vanguard(R) VIF High Yield Bond Portfolio Vanguard(R) VIF REIT Index Portfolio -------- (1) Effective May 1, 2005, Franklin Templeton - Franklin Small Cap Fund - Class 2 changed its name to Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund - Class 2. (2) Effective February 6, 2006, Scudder Investments VIT Funds changed its name to DWS Investments VIT Funds. (3) Effective February 6, 2006, Scudder VIT Equity 500 Index Fund - Class A changed its name to DWS Equity 500 Index Fund VIP - Class A. (4) Effective May 1, 2006, AIM V.I. Premier Equity Fund - Series I merged into AIM V.I. Core Equity Fund - Series I. AIM V.I. Core Equity Fund - Series I is no longer offered as an investment option for policies with an issue date of May 1, 2006 or later. This restriction is not applicable to Platinum Investor I, Platinum Investor Survivor, and Corporate America. (5) Effective May 1, 2006, Dreyfus IP MidCap Stock Portfolio - Initial shares, Dreyfus VIF Developing Leaders Portfolio - Initial shares and Dreyfus VIF Quality Bond Portfolio - Initial shares are no longer offered as investment options for policies with an issue date of May 1, 2006 or later. This restriction is not applicable to Platinum Investor I, Platinum Investor Survivor, and Corporate America. (6) Effective May 1, 2006, Fidelity VIP Freedom 2020 Portfolio - Service Class 2, Fidelity VIP Freedom 2025 Portfolio - Service Class 2 and Fidelity VIP Freedom 2030 Portfolio - Service Class 2 became available as investment options. (7) Effective May 1, 2006, Janus Aspen Series Worldwide Growth Portfolio - Service Shares is no longer offered as an investment option for policies with an issue date of May 1, 2006 or later. This restriction is not applicable to Platinum Investor I, Platinum Investor Survivor, and Corporate America. (8) Effective May 1, 2006, JPMorgan Mid Cap Value Portfolio is no longer offered as an investment option for policies with an issue date of May 1, 2006 or later and is not available for new investments in existing policies. (9) Effective May 1, 2006, MFS VIT Capital Opportunities Series - Initial Class and MFS VIT Emerging Growth Series - Initial Class are no longer offered as investment options for policies with an issue date of May 1, 2006 or later. This restriction is not applicable to Platinum Investor I, Platinum Investor Survivor, and Corporate America. (10)Effective May 1, 2006, PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class became available as an investment option. (11)Effective May 1, 2006, Pioneer Mid Cap Value VCT Portfolio - Class 1 became available as an investment option. (12)Effective May 1, 2006, Putnam VT Growth and Income Fund - Class IB is no longer offered as an investment option for policies with an issue date of May 1, 2006 or later. This restriction is not applicable to Platinum Investor I, Platinum Investor Survivor, and Corporate America. VL-R - 25 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note A - Organization - Continued (13)Effective May 1, 2006, UIF Equity Growth Portfolio - Class I and UIF High Yield Portfolio - Class I are no longer offered as investment options for policies with an issue date of May 1, 2006 or later. (14)Effective August 15, 2006, Van Kampen LIT Emerging Growth Portfolio - Class I changed its name to Van Kampen LIT Strategic Growth Portfolio - Class I. (15)Effective December 1, 2006, Credit Suisse Small Cap Growth Portfolio changed its name to Credit Suisse Small Cap Core I Portfolio. AIG SunAmerica Asset Management Corp., an affiliate of the Company, serves as the investment advisor to SunAmerica Series Trust. The Variable Annuity Life Insurance Company, an affiliate of the Company, serves as the investment advisor to VALIC Company I. In addition to the Divisions above, policy owners may allocate funds to a fixed account that is part of the Company's general account. Policy owners should refer to the prospectus and prospectus supplements for a complete description of the available Funds and the fixed account. The assets of the Separate Account are segregated from the Company's other assets. The operations of the Separate Account are part of the Company. Net premiums from the policies are allocated to the Divisions and invested in the Funds in accordance with policy owner instructions. The premiums are recorded as principal transactions in the Statement of Changes in Net Assets. Note B - Summary of Significant Accounting Policies and Basis of Presentation The accompanying financial statements of the Separate Account have been prepared on the basis of accounting principles generally accepted in the United States of America ("GAAP"). The accounting principles followed by the Separate Account and the methods of applying those principles are presented below. Changes in presentation - Certain items have been reclassified to conform to the current period's presentation. Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the year. Actual results could differ from those estimates. Security valuation - The investments in shares of the Funds are stated at the net asset value of the respective portfolio as determined by the fund, which value their securities at fair value. Security transactions and related investment income - Security transactions which represent purchases and sales of investments are accounted for on the trade date at fair value. Realized gains and losses from security transactions are determined on the basis of first-in first-out. Dividend income and distributions of capital gains are recorded on the ex-dividend date and reinvested upon receipt. Policy loans - When a policy loan is made, the loan amount is transferred to the Company from the policy owner's selected investment Division(s), and held as collateral. Interest on this collateral amount is credited to the policy. Loan repayments are invested in the policy owner's selected investment Division(s), after they are first used to repay all loans taken from the declared fixed interest account option. Federal income taxes - The Company is taxed as a life insurance company under the Internal Revenue Code and includes the operations of the Separate Account in determining its federal income tax liability. As a result, the Separate Account is not taxed as a "Regulated Investment Company" under subchapter M of the Internal Revenue Code. Under existing federal income tax law, the investment income and capital gains from sales of investments realized by the Separate Account are not taxable. Therefore, no federal income tax provision has been made. VL-R - 26 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note B - Summary of Significant Accounting Policies and Basis of Presentation - Continued Accumulation unit--This is a measuring unit used to calculate the policy owner's interest. Such units are valued on each day that the New York Stock Exchange ("NYSE") is open for business to reflect investment performance and the prorated daily deduction for mortality and expense risk charges. Internal rollovers - A policy owner with an eligible Company life insurance policy may elect to replace their existing policy with another insurance policy offered by the Company. Internal rollovers are included in the Statement of Changes in Net Assets under principal transactions. Note C - Policy Charges Deductions from premium payments - Certain jurisdictions require that a deduction be made from each premium payment for premium taxes. The amount of such deduction currently ranges from 0% to 3.5%. For Corporate America policies, the Company deducts from each premium payment a charge to cover costs associated with the issuance of the policy, administrative services the Company performs and a premium tax that is applicable to the Company in the state or other jurisdiction of the policy owner. The amount the Company deducts in policy year 1 through 7 is 9% up to the "target premium" and 5% on any premium amounts in excess of the target premium. The amount the Company deducts in year 8 and thereafter is 5% of all premium payments. The target premium is an amount of premium that is approximately equal to the seven-pay premium, which is the maximum amount of premium that may be paid without the policy becoming a modified endowment contract. For other policies offered through the Separate Account (except for Corporate America, AG Legacy Plus, and Legacy Plus), the following premium expense charge may be deducted from each after-tax premium payment, prior to allocation to the Separate Account. Current Premium Policies Expense Charge -------- --------------- Platinum Investor I and II 2.50% Platinum Investor III 5.00% Platinum Investor IV 5.00% Platinum Investor FlexDirector 5.00% Platinum Investor PLUS 5.00% Platinum Investor Survivor 6.50% Platinum Investor Survivor II 5.00% Platinum Investor VIP 5.00% Mortality and expense risk and administrative charges--Deductions for administrative expenses and mortality and expense risks assumed by the Company are assessed through the daily unit value calculation and paid to the Company from the daily net asset value of the Divisions. A summary of these charges by policy follows:
First Reduction in Second Reduction in Mortality and Mortality and Mortality and Expense Risk and Expense Risk and After Expense Risk and Administrative Charges Administrative Policy Administrative After Policy Policies Current Annual Rate Charges Rate Year Charges Rate Year -------- ---------------------- ------------------ ------ ------------------- ------------ AG Legacy Plus 0.75% 0.10% 10 0.25% 20 Corporate America 0.35% 0.10% 10 0.10% 20 Corporate America (reduced surrender charge) 0.65% 0.25% 10 0.25% 20 Legacy Plus 0.75% 0.25% 10 0.25% 20 Platinum Investor I and II 0.75% 0.25% 10 0.25% 20 Platinum Investor III 0.70% 0.25% 10 0.35% 20 Platinum Investor IV 0.70% 0.35% 10 0.35% 20 Platinum Investor FlexDirector 0.70% 0.25% 10 0.35% 20 Platinum Investor PLUS 0.70% 0.25% 10 0.35% 20 Platinum Investor Survivor 0.40% 0.20% 10 0.10% 30 Platinum Investor Survivor II 0.75% 0.25% 15 0.35% 30 Platinum Investor VIP 0.70% 0.35% 10 0.20% 20
VL-R - 27 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note C - Policy Charges - Continued Guaranteed Minimum Withdrawal Benefit (GMWB) Rider charge - Daily charges for the GMWB rider are assessed through the daily unit value calculation on all policies that have elected this option and are equivalent, on an annual basis, to 0.75% of the value of the policy, which may be increased to a maximum of 1.50%. These charges are included as part of the mortality and expense risk and administrative charges line of the Statement of Operations. Monthly administrative and expense charges - Monthly administrative charges are paid to the Company for the administrative services provided under the current policies. The Company may charge a maximum fee of $12 for the monthly administrative charge. The Company may deduct an additional monthly expense charge for expenses associated with acquisition, administrative and underwriting of your policy. The monthly expense charge is applied only against each $1,000 of base coverage. This charge varies according to the ages, gender and the premium classes of both of the contingent insurers, as well as the amount of coverage. The monthly administrative and expense charges are paid by redemption of units outstanding. Monthly administrative and expense charges are included with cost of insurance in the Statement of Changes in Net Assets under principal transactions. Cost of insurance charge - Since determination of both the insurance rate and the Company's net amount at risk depends upon several factors, the cost of insurance deduction may vary from month to month. Policy accumulation value, specified amount of insurance and certain characteristics of the insured person are among the variables included in the calculation for the monthly cost of insurance deduction. The cost of insurance charges are paid by redemption of units outstanding. Cost of insurance charges are included in the Statement of Changes in Net Assets under principal transactions. Optional rider charges - Monthly charges are deducted if the policy owner selects additional benefit riders. The charges for any rider selected will vary by policy within a range based on either the personal characteristics of the insured person or the specific coverage chosen under the rider. The rider charges are paid by redemption of units outstanding. Optional rider charges are included with cost of insurance in the Statement of Changes in Net Assets under principal transactions. Transfer charges - The Company reserves the right to charge a $25 transfer fee for each transfer in excess of 12 during the policy year. Transfer requests are subject to the Company's published rules concerning market timing. A policy owner who violates these rules will for a period of time (typically six months), have certain restrictions placed on transfers. The transfer charges are paid by redemption of units outstanding. Transfer charges are included with net transfers from (to) other divisions or fixed rate option in the Statement of Changes in Net Assets under principal transactions. Surrender charge - A surrender charge may be applicable to certain withdrawal amounts and is payable to the Company. The amount of the surrender charge depends on the age and other insurance characteristics of the insured person. For partial surrender, the Company may charge a maximum transaction fee per policy equal to the lesser of 2% of the amount withdrawn or $25. Currently, a $10 transaction fee per policy is charged for each partial surrender. The surrender and partial withdrawal charges are paid by redemption of units outstanding. Surrender and partial withdrawal charges are included with withdrawals in the Statement of Changes in Net Assets under principal transactions. Policy loan - A loan may be requested against the policy while the policy has a net cash surrender value. The daily interest charge on the loan is paid to the Company for the expenses of administering and providing policy loans. The interest charge is collected through any loan repayment from the policyholder. VL-R - 28 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note D - Security Purchases and Sales For the year ended December 31, 2006, the aggregate cost of purchases and proceeds from the sales of investments were:
Cost of Proceeds from Divisions Purchases Sales ------------------------------------------------------------------------------------------------------ AIM V.I. Core Equity Fund - Series I $13,754,113 $ 1,470,373 AIM V.I. International Growth Fund - Series I 3,668,435 1,955,112 AIM V.I. Premier Equity Fund - Series I 438,465 13,835,616 Alger American Leveraged AllCap Portfolio - Class O Shares 1,068,056 119,796 Alger American MidCap Growth Portfolio - Class O Shares 915,316 443,982 American Century VP Value Fund - Class I 3,854,413 2,436,069 Credit Suisse Small Cap Core I Portfolio 542,454 278,220 Dreyfus IP MidCap Stock Portfolio - Initial shares 1,575,180 527,782 Dreyfus VIF Developing Leaders Portfolio - Initial shares 2,162,160 1,650,287 Dreyfus VIF Quality Bond Portfolio - Initial shares 1,514,794 892,652 Fidelity VIP Asset Manager Portfolio - Service Class 2 917,305 697,934 Fidelity VIP Contrafund Portfolio - Service Class 2 11,046,726 4,650,392 Fidelity VIP Equity-Income Portfolio - Service Class 2 5,867,516 2,571,011 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 10,203 252 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 55,529 1,209 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 70,012 5,917 Fidelity VIP Growth Portfolio - Service Class 2 1,912,329 1,271,013 Fidelity VIP Mid Cap Portfolio - Service Class 2 4,648,499 3,200,439 Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 4,127,748 801,848 Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund - Class 2 5,035 39,210 Franklin Templeton - Franklin U.S. Government Fund - Class 2 1,507,464 5,449,540 Franklin Templeton - Mutual Shares Securities Fund - Class 2 6,803,466 1,292,524 Franklin Templeton - Templeton Foreign Securities Fund - Class 2 1,908,782 1,926,639 Goldman Sachs Capital Growth Fund 909,743 2,810,795 Janus Aspen Series International Growth Portfolio - Service Shares 5,406,891 1,337,500 Janus Aspen Series Mid Cap Growth Portfolio - Service Shares 719,012 681,270 Janus Aspen Series Worldwide Growth Portfolio - Service Shares 444,980 627,640 JPMorgan Mid Cap Value Portfolio 781,080 1,764,280 JPMorgan Small Company Portfolio 952,517 494,944 MFS VIT Capital Opportunities Series - Initial Class 479,673 693,717 MFS VIT Emerging Growth Series - Initial Class 872,175 2,250,460 MFS VIT New Discovery Series - Initial Class 470,492 449,957 MFS VIT Research Series - Initial Class 369,071 280,040 MFS VIT Total Return Series - Initial Class 54,024 139,670 Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I 1,014,534 539,841 Neuberger Berman AMT Partners Portfolio - Class I 16,027 15,538 Oppenheimer Balanced Fund/VA - Non-Service Shares 539,948 177,227 Oppenheimer Global Securities Fund/VA - Non-Service Shares 1,789,734 557,311 Oppenheimer High Income Fund/VA - Non-Service Shares 10,378 7,002 PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 287,627 15,624 PIMCO VIT Real Return Portfolio - Administrative Class 2,799,741 2,669,182 PIMCO VIT Short-Term Portfolio - Administrative Class 990,992 855,904 PIMCO VIT Total Return Portfolio - Administrative Class 12,835,463 14,154,468 Pioneer Fund VCT Portfolio - Class I 187,491 572,404 Pioneer Growth Opportunities VCT Portfolio - Class I 250,630 802,970 Pioneer Mid Cap Value VCT Portfolio - Class I 73,447 439 Putnam VT Diversified Income Fund - Class IB 4,151,909 3,191,109 Putnam VT Growth and Income Fund - Class IB 3,197,556 3,395,934 Putnam VT International Growth and Income Fund - Class IB 2,458,963 931,816 Putnam VT Small Cap Value Fund - Class IB 49,310 73,595 Putnam VT Vista Fund - Class IB 71,695 6,243
VL-R - 29 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note D - Security Purchases and Sales - Continued For the year ended December 31, 2006, the aggregate cost of purchases and proceeds from the sales of investments were: Cost of Proceeds from Divisions Purchases Sales ------------------------------------------------------------------------------ Putnam VT Voyager Fund - Class IB $ 32,363 $ 30,984 SunAmerica - Aggressive Growth Portfolio - Class 1 180,118 163,883 SunAmerica - SunAmerica Balanced Portfolio - Class 1 286,225 107,988 UIF Equity Growth Portfolio - Class I 492,180 824,782 UIF High Yield Portfolio - Class I 416,369 1,134,482 VALIC Company I - International Equities Fund 616,200 566,631 VALIC Company I - Mid Cap Index Fund 3,425,713 2,797,009 VALIC Company I - Money Market I Fund 33,509,692 27,467,039 VALIC Company I - Nasdaq-100 Index Fund 701,340 992,547 VALIC Company I - Science & Technology Fund 211,835 302,863 VALIC Company I - Small Cap Index Fund 1,647,935 1,310,871 VALIC Company I - Stock Index Fund 3,914,926 9,240,499 Van Kampen LIT Government Portfolio - Class I 9,229 31,361 Van Kampen LIT Growth and Income Portfolio - Class I 3,783,364 2,605,710 Van Kampen LIT Strategic Growth Portfolio - Class I 3,643 6,122 Vanguard VIF High Yield Bond Portfolio 1,473,733 1,557,877 Vanguard VIF REIT Index Portfolio 4,480,475 2,497,942 VL-R - 30 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note E - Investments The following is a summary of fund shares owned as of December 31, 2006.
Net Asset Value Per Value of Shares Cost of Shares Divisions Shares Share at Fair Value Held --------- --------- --------- --------------- -------------- AIM V.I. Core Equity Fund - Series I 490,168 $27.22 $13,342,365 $12,306,841 AIM V.I. International Growth Fund - Series I 404,504 29.43 11,904,546 8,401,229 Alger American Leveraged AllCap Portfolio - Class O Shares 55,131 41.48 2,286,824 1,882,896 Alger American MidCap Growth Portfolio - Class O Shares 90,090 20.75 1,869,371 1,799,587 American Century VP Value Fund - Class I 2,015,208 8.74 17,612,918 15,762,759 Credit Suisse Small Cap Core I Portfolio 117,334 15.60 1,830,404 1,730,889 Dreyfus IP MidCap Stock Portfolio - Initial shares 300,633 17.39 5,228,009 4,844,882 Dreyfus VIF Developing Leaders Portfolio - Initial shares 279,455 42.03 11,745,504 10,182,093 Dreyfus VIF Quality Bond Portfolio - Initial shares 773,167 11.23 8,682,661 8,832,307 Fidelity VIP Asset Manager Portfolio - Service Class 2 365,821 15.47 5,659,244 5,076,535 Fidelity VIP Contrafund Portfolio - Service Class 2 1,028,652 31.11 32,001,369 28,009,575 Fidelity VIP Equity-Income Portfolio - Service Class 2 815,052 25.87 21,085,399 18,948,424 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 868 12.08 10,491 9,969 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 4,510 12.17 54,891 54,373 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 5,195 12.42 64,516 64,294 Fidelity VIP Growth Portfolio - Service Class 2 389,915 35.42 13,810,806 11,595,452 Fidelity VIP Mid Cap Portfolio - Service Class 2 186,423 34.25 6,384,993 6,152,027 Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 451,202 18.79 8,478,085 7,575,757 Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund -Class 2 4,907 22.13 108,582 84,994 Franklin Templeton - Franklin U.S. Government Fund - Class 2 750,577 12.52 9,397,224 9,538,682 Franklin Templeton - Mutual Shares Securities Fund - Class 2 807,638 20.47 16,532,351 12,861,981 Franklin Templeton - Templeton Foreign Securities Fund - Class 2 727,764 18.72 13,623,735 9,297,072 Goldman Sachs Capital Growth Fund 619,428 11.58 7,172,977 5,907,967 Janus Aspen Series International Growth Portfolio - Service Shares 236,768 50.61 11,982,836 8,176,386 Janus Aspen Series Mid Cap Growth Portfolio - Service Shares 105,175 32.19 3,385,583 2,430,835 Janus Aspen Series Worldwide Growth Portfolio - Service Shares 137,554 32.21 4,430,625 3,352,903 JPMorgan Mid Cap Value Portfolio 110,867 31.56 3,498,962 3,021,116 JPMorgan Small Company Portfolio 153,231 17.82 2,730,571 2,457,157 MFS VIT Capital Opportunities Series - Initial Class 291,483 15.51 4,520,899 3,462,595 MFS VIT Emerging Growth Series - Initial Class 585,632 20.64 12,087,435 9,366,635 MFS VIT New Discovery Series - Initial Class 238,345 17.42 4,151,964 3,200,845 MFS VIT Research Series - Initial Class 131,998 18.04 2,381,244 1,812,292 MFS VIT Total Return Series - Initial Class 35,409 21.89 775,099 663,979 Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I 197,404 23.26 4,591,606 3,330,612 Neuberger Berman AMT Partners Portfolio - Class I 5,255 21.16 111,195 98,856 Oppenheimer Balanced Fund/VA - Non-Service Shares 77,211 17.69 1,365,870 1,270,740 Oppenheimer Global Securities Fund/VA - Non-Service Shares 109,908 36.79 4,043,502 3,414,733 Oppenheimer High Income Fund/VA - Non-Service Shares 12,918 8.55 110,446 103,106 PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 22,558 11.31 255,133 271,860 PIMCO VIT Real Return Portfolio - Administrative Class 984,412 11.93 11,744,030 12,410,609 PIMCO VIT Short-Term Portfolio - Administrative Class 496,492 10.04 4,984,783 5,003,338 PIMCO VIT Total Return Portfolio - Administrative Class 2,239,237 10.12 22,661,080 23,033,709 Pioneer Fund VCT Portfolio - Class I 133,033 24.80 3,299,217 2,706,930 Pioneer Growth Opportunities VCT Portfolio - Class I 186,353 26.79 4,992,391 4,339,733 Pioneer Mid Cap Value VCT Portfolio - Class I 3,721 20.32 75,605 73,005 Putnam VT Diversified Income Fund - Class IB 1,311,731 8.78 11,517,002 11,363,021 Putnam VT Growth and Income Fund - Class IB 728,670 29.36 21,393,752 16,775,793 Putnam VT International Growth and Income Fund - Class IB 460,253 19.21 8,841,468 6,173,963 Putnam VT Small Cap Value Fund - Class IB 17,146 24.27 416,127 283,351
VL-R - 31 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note E - Investments - Continued The following is a summary of fund shares owned as of December 31, 2006.
Net Asset Value of Value Per Shares at Fair Cost of Shares Divisions Shares Share Value Held ------------------------------------------------------------------------------------------------------- Putnam VT Vista Fund - Class IB 12,017 $14.70 $ 176,650 $ 149,654 Putnam VT Voyager Fund - Class IB 14,015 30.07 421,428 350,942 SunAmerica - Aggressive Growth Portfolio - Class 1 90,143 12.54 1,130,347 917,577 SunAmerica - SunAmerica Balanced Portfolio - Class 1 81,828 14.99 1,226,451 1,116,431 UIF Equity Growth Portfolio - Class I 246,007 16.48 4,054,191 3,220,879 UIF High Yield Portfolio - Class I 108,057 13.56 1,465,250 1,436,415 VALIC Company I - International Equities Fund 265,474 10.33 2,742,348 2,021,162 VALIC Company I - Mid Cap Index Fund 758,724 23.28 17,663,091 14,631,213 VALIC Company I - Money Market I Fund 30,597,846 1.00 30,597,846 30,597,846 VALIC Company I - Nasdaq-100 Index Fund 861,414 4.86 4,186,473 3,489,072 VALIC Company I - Science & Technology Fund 98,358 12.49 1,228,492 1,065,826 VALIC Company I - Small Cap Index Fund 371,134 17.99 6,676,702 5,559,922 VALIC Company I - Stock Index Fund 972,014 36.65 35,624,313 29,578,327 Van Kampen LIT Government Portfolio - Class I 14,600 9.30 135,776 137,089 Van Kampen LIT Growth and Income Portfolio - Class I 549,915 22.00 12,098,136 10,698,165 Van Kampen LIT Strategic Growth Portfolio - Class I 1,987 28.81 57,242 42,746 Vanguard VIF High Yield Bond Portfolio 600,352 8.63 5,181,038 5,098,099 Vanguard VIF REIT Index Portfolio 685,439 24.98 17,122,271 12,843,752
VL-R - 32 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------------- AIM V.I. Core Equity Fund--Series I Corporate America 3,876 (118) 3,758 Corporate America (reduced surrender charge) 2,292 (7) 2,285 Platinum Investor I & II 831,187 (95,279) 735,908 Platinum Investor III 424,592 (49,325) 375,267 Platinum Investor IV 14,822 (2,389) 12,433 Platinum Investor FlexDirector 437 (13) 424 Platinum Investor PLUS 26,067 (2,608) 23,459 Platinum Investor Survivor 78,959 (14,120) 64,839 Platinum Investor Survivor II 10,165 (405) 9,760 AIM V.I. International Growth Fund - Series I AG Legacy Plus 1,148 (8,304) (7,156) Corporate America 26 (116) (90) Corporate America (reduced surrender charge) 5,321 (82) 5,239 Platinum Investor I & II 35,977 (47,093) (11,116) Platinum Investor III 144,343 (46,476) 97,867 Platinum Investor IV 26,015 (6,617) 19,398 Platinum Investor FlexDirector 848 (118) 730 Platinum Investor PLUS 4,163 (2,074) 2,089 Platinum Investor Survivor 14,974 (4,987) 9,987 Platinum Investor Survivor II 4,335 (389) 3,946 Platinum Investor VIP 18,692 (1,163) 17,529 Platinum Investor VIP (with GMWB rider) 262 (6) 256 AIM V.I. Premier Equity Fund - Series I Corporate America 46 (5,706) (5,660) Corporate America (reduced surrender charge) 5 (5) -- Platinum Investor I & II 26,206 (790,148) (763,942) Platinum Investor III 35,764 (519,375) (483,611) Platinum Investor IV 2,139 (8,346) (6,207) Platinum Investor FlexDirector 1 (390) (389) Platinum Investor PLUS 1,511 (20,843) (19,332) Platinum Investor Survivor 1,220 (109,571) (108,351) Platinum Investor Survivor II 571 (8,917) (8,346) Alger American Leveraged AllCap Portfolio - Class O Shares Platinum Investor I & II 5,295 (867) 4,428 Platinum Investor III 45,768 (5,285) 40,483 Platinum Investor IV 10,592 (2,174) 8,418 Platinum Investor FlexDirector -- (40) (40) Platinum Investor PLUS 3,168 (1,375) 1,793 Platinum Investor Survivor 126 (116) 10 Platinum Investor Survivor II 933 (20) 913 Platinum Investor VIP 8,682 (354) 8,328 Platinum Investor VIP (with GMWB rider) 180 (16) 164 Alger American MidCap Growth Portfolio - Class O Shares Corporate America (reduced surrender charge) 4,132 (109) 4,023 Platinum Investor I & II 136 (813) (677) Platinum Investor III 13,945 (18,725) (4,780) Platinum Investor IV 16,735 (2,908) 13,827 Platinum Investor FlexDirector 1,101 (922) 179 Platinum Investor PLUS 2,630 (1,859) 771 Platinum Investor Survivor 5,315 (285) 5,030
VL-R - 33 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ------------------------------------------------------------------------------------------------------------ Alger American MidCap Growth Portfolio - Class O Shares - Continued Platinum Investor Survivor II 846 (344) 502 Platinum Investor VIP 2,579 (349) 2,230 American Century VP Value Fund - Class I AG Legacy Plus 1,109 (4,555) (3,446) Corporate America 1 (1,269) (1,268) Corporate America (reduced surrender charge) 12,688 (347) 12,341 Platinum Investor I & II 14,262 (55,898) (41,636) Platinum Investor III 97,892 (87,348) 10,544 Platinum Investor IV 34,738 (10,632) 24,106 Platinum Investor FlexDirector 907 (23) 884 Platinum Investor PLUS 14,309 (10,325) 3,984 Platinum Investor Survivor 1,945 (3,619) (1,674) Platinum Investor Survivor II 10,211 (8,367) 1,844 Platinum Investor VIP 13,150 (821) 12,329 Platinum Investor VIP (with GMWB rider) 179 (17) 162 Credit Suisse Small Cap Core I Portfolio Platinum Investor I & II 5,259 (4,540) 719 Platinum Investor III 27,694 (21,601) 6,093 Platinum Investor IV 12,335 (1,884) 10,451 Platinum Investor FlexDirector 1,406 (820) 586 Platinum Investor PLUS 3,089 (2,396) 693 Platinum Investor Survivor 154 (164) (10) Platinum Investor Survivor II 608 (637) (29) Platinum Investor VIP 8,390 (212) 8,178 Dreyfus IP MidCap Stock Portfolio - Initial shares Platinum Investor I & II 10,303 (6,692) 3,611 Platinum Investor III 46,598 (38,092) 8,506 Platinum Investor IV 10,830 (2,903) 7,927 Platinum Investor FlexDirector 1 (2) (1) Platinum Investor PLUS 5,575 (3,613) 1,962 Platinum Investor Survivor 844 (3,534) (2,690) Platinum Investor Survivor II 3,001 (957) 2,044 Dreyfus VIF Developing Leaders Portfolio - Initial shares Corporate America 33 (440) (407) Corporate America (reduced surrender charge) 717 (12) 705 Platinum Investor I & II 35,156 (68,730) (33,574) Platinum Investor III 96,793 (94,319) 2,474 Platinum Investor IV 9,122 (3,493) 5,629 Platinum Investor FlexDirector 447 -- 447 Platinum Investor PLUS 10,248 (6,771) 3,477 Platinum Investor Survivor 4,101 (18,531) (14,430) Platinum Investor Survivor II 8,944 (4,662) 4,282 Dreyfus VIF Quality Bond Portfolio - Initial shares Corporate America 21 (86) (65) Corporate America (reduced surrender charge) 8,115 (295) 7,820 Platinum Investor I & II 11,692 (25,567) (13,875) Platinum Investor III 75,603 (49,625) 25,978 Platinum Investor IV 10,566 (3,255) 7,311 Platinum Investor FlexDirector 198 (25) 173 Platinum Investor PLUS 7,213 (4,893) 2,320
VL-R - 34 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) -------------------------------------------------------------------------------------------------------- Dreyfus VIF Quality Bond Portfolio - Initial shares - Continued Platinum Investor Survivor 939 (2,927) (1,988) Platinum Investor Survivor II 2,752 (3,280) (528) Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Legacy Plus 46 (1,929) (1,883) Platinum Investor I & II 1,923 (17,270) (15,347) Platinum Investor III 52,559 (42,046) 10,513 Platinum Investor IV 7,369 (2,430) 4,939 Platinum Investor FlexDirector 625 (66) 559 Platinum Investor PLUS 5,809 (4,044) 1,765 Platinum Investor Survivor 2,488 (1,379) 1,109 Platinum Investor Survivor II 13,185 (5,618) 7,567 Platinum Investor VIP 2,466 (197) 2,269 Fidelity VIP Contrafund Portfolio - Service Class 2 AG Legacy Plus 4,945 (4,089) 856 Corporate America -- (884) (884) Corporate America (reduced surrender charge) 14,712 (322) 14,390 Platinum Investor I & II 119,041 (35,038) 84,003 Platinum Investor III 229,530 (141,892) 87,638 Platinum Investor IV 75,078 (16,909) 58,169 Platinum Investor FlexDirector 2,710 (180) 2,530 Platinum Investor PLUS 27,727 (62,333) (34,606) Platinum Investor Survivor 32,122 (4,723) 27,399 Platinum Investor Survivor II 26,436 (6,446) 19,990 Platinum Investor VIP 38,997 (2,112) 36,885 Platinum Investor VIP (with GMWB rider) 467 (24) 443 Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Legacy Plus 2,385 (8,338) (5,953) Corporate America -- (613) (613) Corporate America (reduced surrender charge) 13,323 (1,637) 11,686 Platinum Investor I & II 19,277 (34,170) (14,893) Platinum Investor III 157,230 (170,479) (13,249) Platinum Investor IV 32,971 (7,953) 25,018 Platinum Investor FlexDirector 275 (174) 101 Platinum Investor PLUS 18,125 (12,148) 5,977 Platinum Investor Survivor 12,148 (13,813) (1,665) Platinum Investor Survivor II 23,457 (1,759) 21,698 Platinum Investor VIP 16,398 (471) 15,927 Platinum Investor VIP (with GMWB rider) 173 (16) 157 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 Platinum Investor III 714 (49) 665 Platinum Investor IV 132 (24) 108 Platinum Investor FlexDirector 6 (1) 5 Platinum Investor VIP 269 (58) 211 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 Platinum Investor III 2,144 -- 2,144 Platinum Investor IV 66 (16) 50 Platinum Investor VIP 3,146 (217) 2,929 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 Platinum Investor III 881 -- 881 Platinum Investor IV 88 (27) 61
VL-R - 35 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------------------------------- Fidelity VIP Freedom 2030 Portfolio - Service Class 2 - Continued Platinum Investor PLUS 953 (24) 929 Platinum Investor VIP 4,465 (351) 4,114 Fidelity VIP Growth Portfolio - Service Class 2 AG Legacy Plus 888 (3,450) (2,562) Corporate America (reduced surrender charge) 8,665 (203) 8,462 Platinum Investor I & II 13,114 (33,599) (20,485) Platinum Investor III 277,006 (231,913) 45,093 Platinum Investor IV 23,052 (7,502) 15,550 Platinum Investor FlexDirector 8,053 (1,496) 6,557 Platinum Investor PLUS 24,630 (16,534) 8,096 Platinum Investor Survivor 8,970 (5,090) 3,880 Platinum Investor Survivor II 10,005 (3,208) 6,797 Platinum Investor VIP 5,603 (550) 5,053 Platinum Investor VIP (with GMWB rider) 5 (1) 4 Fidelity VIP Mid Cap Portfolio - Service Class 2 Corporate America (reduced surrender charge) 12,307 (2,742) 9,565 Platinum Investor I & II 4,793 (1,460) 3,333 Platinum Investor III 44,278 (52,794) (8,516) Platinum Investor IV 48,807 (10,963) 37,844 Platinum Investor FlexDirector 304 (59) 245 Platinum Investor PLUS 7,422 (3,410) 4,012 Platinum Investor Survivor 746 (6,067) (5,321) Platinum Investor Survivor II 7,086 (4,083) 3,003 Platinum Investor VIP 23,031 (1,437) 21,594 Platinum Investor VIP (with GMWB rider) 195 (18) 177 Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 Corporate America (reduced surrender charge) 8,500 (222) 8,278 Platinum Investor I & II 2,361 (722) 1,639 Platinum Investor III 111,116 (9,600) 101,516 Platinum Investor IV 36,043 (6,903) 29,140 Platinum Investor FlexDirector 1,114 (122) 992 Platinum Investor PLUS 7,981 (6,338) 1,643 Platinum Investor Survivor 19,675 (773) 18,902 Platinum Investor Survivor II 8,314 (4,141) 4,173 Platinum Investor VIP 17,231 (605) 16,626 Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund - Class 2 AG Legacy Plus 697 (5,146) (4,449) Franklin Templeton - Franklin U.S. Government Fund - Class 2 Platinum Investor I & II 3,542 (7,923) (4,381) Platinum Investor III 38,023 (420,577) (382,554) Platinum Investor IV 33,839 (6,165) 27,674 Platinum Investor FlexDirector 861 (38) 823 Platinum Investor PLUS 5,265 (5,169) 96 Platinum Investor Survivor 179 (8,877) (8,698) Platinum Investor Survivor II 8,775 (9,331) (556) Platinum Investor VIP 3,373 (296) 3,077 Franklin Templeton - Mutual Shares Securities Fund - Class 2 Platinum Investor I & II 78,540 (19,320) 59,220 Platinum Investor III 260,222 (42,479) 217,743 Platinum Investor IV 32,572 (6,656) 25,916
VL-R - 36 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ----------------------------------------------------------------------------------------------------------------- Franklin Templeton - Mutual Shares Securities Fund - Class 2 - Continued Platinum Investor FlexDirector 2,792 (124) 2,668 Platinum Investor PLUS 8,925 (5,644) 3,281 Platinum Investor Survivor 34,493 (703) 33,790 Platinum Investor Survivor II 6,217 (785) 5,432 Platinum Investor VIP 9,719 (691) 9,028 Platinum Investor VIP (with GMWB rider) 1,049 (23) 1,026 Franklin Templeton - Templeton Foreign Securities Fund - Class 2 AG Legacy Plus 777 (5,685) (4,908) Platinum Investor I & II 14,573 (17,180) (2,607) Platinum Investor III 33,619 (68,707) (35,088) Platinum Investor IV 20,546 (4,555) 15,991 Platinum Investor FlexDirector 1,768 (205) 1,563 Platinum Investor PLUS 6,184 (4,475) 1,709 Platinum Investor Survivor 11,431 (2,417) 9,014 Platinum Investor Survivor II 6,484 (1,333) 5,151 Platinum Investor VIP 9,161 (452) 8,709 Platinum Investor VIP (with GMWB rider) 9 (2) 7 Goldman Sachs Capital Growth Fund Platinum Investor I & II -- (8,506) (8,506) Platinum Investor III -- (1,324) (1,324) Platinum Investor PLUS -- (2) (2) Platinum Investor Survivor -- (37,958) (37,958) Platinum Investor Survivor II -- (128,556) (128,556) Janus Aspen Series International Growth Portfolio - Service Shares Corporate America (reduced surrender charge) 3,778 (52) 3,726 Platinum Investor I & II 33,114 (20,901) 12,213 Platinum Investor III 204,899 (32,830) 172,069 Platinum Investor IV 23,365 (5,005) 18,360 Platinum Investor FlexDirector 852 (4,918) (4,066) Platinum Investor PLUS 30,861 (2,113) 28,748 Platinum Investor Survivor 24,177 (4,409) 19,768 Platinum Investor Survivor II 15,615 (660) 14,955 Platinum Investor VIP 14,565 (1,074) 13,491 Platinum Investor VIP (with GMWB rider) 168 (15) 153 Janus Aspen Series Mid Cap Growth Portfolio - Service Shares Corporate America -- (316) (316) Corporate America (reduced surrender charge) 2,200 (22) 2,178 Platinum Investor I & II 5,179 (23,277) (18,098) Platinum Investor III 72,359 (59,569) 12,790 Platinum Investor IV 4,086 (1,263) 2,823 Platinum Investor PLUS 4,036 (1,592) 2,444 Platinum Investor Survivor 2,214 (2,726) (512) Platinum Investor Survivor II 260 (2,420) (2,160) Platinum Investor VIP 2,310 (205) 2,105 Janus Aspen Series Worldwide Growth Portfolio - Service Shares Corporate America -- (358) (358) Corporate America (reduced surrender charge) 2,898 (1,396) 1,502 Platinum Investor I & II 3,814 (23,021) (19,207) Platinum Investor III 76,526 (90,684) (14,158) Platinum Investor IV 3,726 (1,195) 2,531
VL-R - 37 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ------------------------------------------------------------------------------------------------------------------- Janus Aspen Series Worldwide Growth Portfolio - Service Shares - Continued Platinum Investor PLUS 3,789 (2,455) 1,334 Platinum Investor Survivor 2,934 (8,616) (5,682) Platinum Investor Survivor II 588 (498) 90 JPMorgan Mid Cap Value Portfolio Platinum Investor I & II 34 (1,161) (1,127) Platinum Investor III 18,714 (68,844) (50,130) Platinum Investor IV 8,447 (2,241) 6,206 Platinum Investor PLUS 4,745 (6,882) (2,137) Platinum Investor Survivor 60 (5,978) (5,918) Platinum Investor Survivor II 163 (7,509) (7,346) JPMorgan Small Company Portfolio Platinum Investor I & II 2,497 (3,974) (1,477) Platinum Investor III 31,218 (13,674) 17,544 Platinum Investor IV 10,203 (2,438) 7,765 Platinum Investor FlexDirector 241 (59) 182 Platinum Investor PLUS 2,566 (1,744) 822 Platinum Investor Survivor 364 (155) 209 Platinum Investor Survivor II 629 (622) 7 Platinum Investor VIP 11,557 (437) 11,120 MFS VIT Capital Opportunities Series - Initial Class Corporate America -- (61) (61) Corporate America (reduced surrender charge) 1,921 (11) 1,910 Platinum Investor I & II 3,678 (26,585) (22,907) Platinum Investor III 86,140 (97,125) (10,985) Platinum Investor IV 4,024 (1,270) 2,754 Platinum Investor FlexDirector -- (11) (11) Platinum Investor PLUS 11,098 (8,150) 2,948 Platinum Investor Survivor 2,914 (11,617) (8,703) Platinum Investor Survivor II 1,134 (423) 711 MFS VIT Emerging Growth Series - Initial Class AG Legacy Plus 604 (2,402) (1,798) Corporate America (reduced surrender charge) 2,145 (38) 2,107 Platinum Investor I & II 77,151 (153,315) (76,164) Platinum Investor III 123,996 (195,000) (71,004) Platinum Investor IV 4,261 (1,573) 2,688 Platinum Investor FlexDirector 174 (46) 128 Platinum Investor PLUS 11,035 (7,133) 3,902 Platinum Investor Survivor 15,574 (30,459) (14,885) Platinum Investor Survivor II 718 (883) (165) MFS VIT New Discovery Series - Initial Class AG Legacy Plus 1,151 (2,253) (1,102) Corporate America -- (318) (318) Corporate America (reduced surrender charge) 1,984 (42) 1,942 Platinum Investor I & II 2,122 (21,895) (19,773) Platinum Investor III 57,469 (49,070) 8,399 Platinum Investor IV 4,289 (1,307) 2,982 Platinum Investor FlexDirector 2 (12) (10) Platinum Investor PLUS 5,064 (3,627) 1,437 Platinum Investor Survivor 1,338 (1,668) (330) Platinum Investor Survivor II 954 (247) 707
VL-R - 38 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------------- MFS VIT New Discovery Series - Initial Class - Continued Platinum Investor VIP 1,921 (118) 1,803 Platinum Investor VIP (with GMWB rider) 296 (8) 288 MFS VIT Research Series - Initial Class Platinum Investor I & II 2,144 (2,789) (645) Platinum Investor III 40,462 (38,885) 1,577 Platinum Investor IV 1,665 (702) 963 Platinum Investor FlexDirector 1 (7) (6) Platinum Investor PLUS 3,246 (1,275) 1,971 Platinum Investor Survivor 1,802 (1,838) (36) Platinum Investor Survivor II 3,803 (264) 3,539 Platinum Investor VIP 943 (40) 903 Platinum Investor VIP (with GMWB rider) 5 (1) 4 MFS VIT Total Return Series - Initial Class AG Legacy Plus 1,628 (20,854) (19,226) Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I Corporate America (reduced surrender charge) 2,748 (58) 2,690 Platinum Investor I & II 15,928 (4,892) 11,036 Platinum Investor III 63,107 (42,149) 20,958 Platinum Investor IV 11,715 (2,018) 9,697 Platinum Investor FlexDirector 188 (10) 178 Platinum Investor PLUS 9,445 (6,331) 3,114 Platinum Investor Survivor 5,519 (2,625) 2,894 Platinum Investor Survivor II 884 (638) 246 Platinum Investor VIP 4,433 (231) 4,202 Neuberger Berman AMT Partners Portfolio - Class I AG Legacy Plus 126 (953) (827) Oppenheimer Balanced Fund/VA - Non-Service Shares Platinum Investor I & II 19 (4,676) (4,657) Platinum Investor III 15,218 (5,980) 9,238 Platinum Investor IV 19,189 (5,146) 14,043 Platinum Investor FlexDirector 2,222 (219) 2,003 Platinum Investor PLUS 980 (880) 100 Platinum Investor Survivor 324 (471) (147) Platinum Investor Survivor II 295 (290) 5 Platinum Investor VIP 6,818 (426) 6,392 Oppenheimer Global Securities Fund/VA - Non-Service Shares Corporate America (reduced surrender charge) 6,715 (81) 6,634 Platinum Investor I & II 7,592 (1,781) 5,811 Platinum Investor III 32,223 (12,499) 19,724 Platinum Investor IV 20,330 (5,541) 14,789 Platinum Investor FlexDirector 577 (17) 560 Platinum Investor PLUS 4,768 (1,962) 2,806 Platinum Investor Survivor 2,890 (243) 2,647 Platinum Investor Survivor II 1,298 (325) 973 Platinum Investor VIP 15,438 (828) 14,610 Platinum Investor VIP (with GMWB rider) 189 (18) 171 Oppenheimer High Income Fund/VA - Non-Service Shares AG Legacy Plus 327 (616) (289)
VL-R - 39 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ---------------------------------------------------------------------------------------------------------------- PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class Platinum Investor I & II 21,833 (266) 21,567 Platinum Investor III 2,834 (114) 2,720 Platinum Investor IV 234 (51) 183 Platinum Investor PLUS 39 (1) 38 Platinum Investor Survivor II 193 (14) 179 Platinum Investor VIP 2,023 (138) 1,885 Platinum Investor VIP (with GMWB rider) 4 (1) 3 PIMCO VIT Real Return Portfolio - Administrative Class AG Legacy Plus 1,735 (11,623) (9,888) Corporate America -- (114) (114) Corporate America (reduced surrender charge) 10,633 (366) 10,267 Platinum Investor I & II 13,499 (69,614) (56,115) Platinum Investor III 97,016 (106,614) (9,598) Platinum Investor IV 39,397 (9,236) 30,161 Platinum Investor FlexDirector 546 (106) 440 Platinum Investor PLUS 10,934 (10,302) 632 Platinum Investor Survivor 8,274 (4,524) 3,750 Platinum Investor Survivor II 9,831 (6,878) 2,953 Platinum Investor VIP 3,781 (391) 3,390 PIMCO VIT Short-Term Portfolio - Administrative Class Corporate America -- (627) (627) Corporate America (reduced surrender charge) 857 (7) 850 Platinum Investor I & II 3,407 (10,327) (6,920) Platinum Investor III 38,784 (55,551) (16,767) Platinum Investor IV 15,643 (5,453) 10,190 Platinum Investor FlexDirector 2,259 (1,279) 980 Platinum Investor PLUS 6,068 (4,103) 1,965 Platinum Investor Survivor 582 (695) (113) Platinum Investor Survivor II 3,724 (925) 2,799 Platinum Investor VIP 6,777 (481) 6,296 Platinum Investor VIP (with GMWB rider) 5 (1) 4 PIMCO VIT Total Return Portfolio - Administrative Class AG Legacy Plus 1,416 (9,207) (7,791) Corporate America (reduced surrender charge) 13,761 (307) 13,454 Platinum Investor I & II 37,678 (23,678) 14,000 Platinum Investor III 170,473 (354,595) (184,122) Platinum Investor IV 54,007 (12,051) 41,956 Platinum Investor FlexDirector 3,537 (1,701) 1,836 Platinum Investor PLUS 17,527 (12,867) 4,660 Platinum Investor Survivor 2,787 (25,618) (22,831) Platinum Investor Survivor II 9,197 (38,683) (29,486) Platinum Investor VIP 14,410 (849) 13,561 Platinum Investor VIP (with GMWB rider) 411 (11) 400 Pioneer Fund VCT Portfolio - Class I Platinum Investor I & II 15,172 (29,952) (14,780) Platinum Investor III 8,674 (10,891) (2,217) Platinum Investor PLUS 121 (226) (105) Platinum Investor Survivor 839 (19,293) (18,454) Platinum Investor Survivor II 33 (13) 20
VL-R - 40 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) -------------------------------------------------------------------------------------------------- Pioneer Growth Opportunities VCT Portfolio - Class I Corporate America 24 (106) (82) Platinum Investor I & II 21,141 (67,105) (45,964) Platinum Investor III 23,140 (23,164) (24) Platinum Investor PLUS 1,068 (799) 269 Platinum Investor Survivor 2,141 (3,489) (1,348) Platinum Investor Survivor II 16 (12) 4 Pioneer Mid Cap Value VCT Portfolio - Class I Platinum Investor I & II 9 (5) 4 Platinum Investor III 3,743 (43) 3,700 Platinum Investor IV 136 (59) 77 Platinum Investor PLUS 30 (5) 25 Platinum Investor Survivor II 2,372 -- 2,372 Platinum Investor VIP 1,065 (132) 933 Putnam VT Diversified Income Fund - Class IB AG Legacy Plus 979 (1,824) (845) Corporate America 44,500 (43,016) 1,484 Corporate America (reduced surrender charge) 31,006 (496) 30,510 Platinum Investor I & II 77,173 (11,941) 65,232 Platinum Investor III 33,920 (105,329) (71,409) Platinum Investor IV 7,278 (1,761) 5,517 Platinum Investor FlexDirector -- (4) (4) Platinum Investor PLUS 2,507 (1,254) 1,253 Platinum Investor Survivor 9,469 (184) 9,285 Platinum Investor Survivor II 845 (306) 539 Platinum Investor VIP 4,366 (297) 4,069 Putnam VT Growth and Income Fund - Class IB Corporate America 51,176 (53,224) (2,048) Corporate America (reduced surrender charge) 32,845 (1,896) 30,949 Platinum Investor I & II 33,174 (102,936) (69,762) Platinum Investor III 113,175 (122,364) (9,189) Platinum Investor IV 22,373 (8,691) 13,682 Platinum Investor FlexDirector 1,028 (1,592) (564) Platinum Investor PLUS 9,637 (7,085) 2,552 Platinum Investor Survivor 3,041 (36,367) (33,326) Platinum Investor Survivor II 2,328 (770) 1,558 Putnam VT International Growth and Income Fund - Class IB Corporate America (reduced surrender charge) 3,327 (28) 3,299 Platinum Investor I & II 40,918 (16,483) 24,435 Platinum Investor III 72,423 (25,996) 46,427 Platinum Investor IV 16,964 (3,799) 13,165 Platinum Investor FlexDirector 473 (18) 455 Platinum Investor PLUS 4,478 (2,402) 2,076 Platinum Investor Survivor 3,380 (4,691) (1,311) Platinum Investor Survivor II 2,897 (246) 2,651 Platinum Investor VIP 8,934 (687) 8,247 Putnam VT Small Cap Value Fund - Class IB AG Legacy Plus 440 (3,256) (2,816) Putnam VT Vista Fund - Class IB AG Legacy Plus 10,890 (633) 10,257
VL-R - 41 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------- Putnam VT Voyager Fund - Class IB AG Legacy Plus 4,943 (4,486) 457 SunAmerica - Aggressive Growth Portfolio - Class 1 Platinum Investor I & II 286 (4,008) (3,722) Platinum Investor III 11,221 (9,174) 2,047 Platinum Investor IV 3,328 (1,667) 1,661 Platinum Investor PLUS 2,515 (1,710) 805 Platinum Investor Survivor -- (138) (138) Platinum Investor Survivor II 870 (153) 717 Platinum Investor VIP 869 (121) 748 SunAmerica - SunAmerica Balanced Portfolio - Class 1 Platinum Investor I & II 110 (105) 5 Platinum Investor III 20,129 (13,883) 6,246 Platinum Investor IV 5,231 (2,393) 2,838 Platinum Investor PLUS 5,384 (3,282) 2,102 Platinum Investor Survivor II 1,395 (306) 1,089 Platinum Investor VIP 1,923 (153) 1,770 UIF Equity Growth Portfolio - Class I Platinum Investor I & II 36,338 (65,895) (29,557) Platinum Investor III 20,827 (21,031) (204) Platinum Investor IV 2,950 (989) 1,961 Platinum Investor PLUS 1,190 (702) 488 Platinum Investor Survivor 4,840 (2,824) 2,016 Platinum Investor Survivor II 111 (32) 79 UIF High Yield Portfolio - Class I Platinum Investor I & II 7,251 (12,553) (5,302) Platinum Investor III 4,984 (6,867) (1,883) Platinum Investor IV 1,185 (282) 903 Platinum Investor FlexDirector 456 (295) 161 Platinum Investor PLUS 828 (587) 241 Platinum Investor Survivor 350 (73,074) (72,724) Platinum Investor Survivor II 3,336 (169) 3,167 VALIC Company I - International Equities Fund AG Legacy Plus 275 (6,044) (5,769) Platinum Investor I & II 5,019 (14,826) (9,807) Platinum Investor III 14,685 (17,446) (2,761) Platinum Investor IV 3,511 (1,220) 2,291 Platinum Investor FlexDirector 137 (47) 90 Platinum Investor PLUS 1,304 (1,556) (252) Platinum Investor Survivor 1,243 (985) 258 Platinum Investor Survivor II 502 (321) 181 Platinum Investor VIP 7,549 (260) 7,289 VALIC Company I - Mid Cap Index Fund AG Legacy Plus 1,280 (4,645) (3,365) Corporate America 32 (524) (492) Corporate America (reduced surrender charge) 2,420 (41) 2,379 Platinum Investor I & II 26,640 (52,625) (25,985) Platinum Investor III 76,591 (98,616) (22,025) Platinum Investor IV 18,226 (5,083) 13,143 Platinum Investor FlexDirector 458 (76) 382 Platinum Investor PLUS 6,678 (4,601) 2,077
VL-R - 42 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ----------------------------------------------------------------------------------------- VALIC Company I - Mid Cap Index Fund - Continued Platinum Investor Survivor 4,757 (6,336) (1,579) Platinum Investor Survivor II 8,664 (1,543) 7,121 Platinum Investor VIP 14,822 (611) 14,211 Platinum Investor VIP (with GMWB rider) 196 (19) 177 VALIC Company I - Money Market I Fund AG Legacy Plus 566 (12,440) (11,874) Corporate America (reduced surrender charge) 183,677 (150,792) 32,885 Platinum Investor I & II 137,205 (208,885) (71,680) Platinum Investor III 574,620 (135,605) 439,015 Platinum Investor IV 527,282 (531,198) (3,916) Platinum Investor FlexDirector 17,352 (17,335) 17 Platinum Investor PLUS 36,064 (40,019) (3,955) Platinum Investor Survivor 74,482 (43,514) 30,968 Platinum Investor Survivor II 112,952 (106,385) 6,567 Platinum Investor VIP 404,521 (352,052) 52,469 Platinum Investor VIP (with GMWB rider) 3,357 (2,916) 441 VALIC Company I - Nasdaq-100 Index Fund Platinum Investor I & II 13,996 (33,104) (19,108) Platinum Investor III 82,107 (172,472) (90,365) Platinum Investor IV 3,303 (1,103) 2,200 Platinum Investor FlexDirector 49 (26) 23 Platinum Investor PLUS 3,291 (2,433) 858 Platinum Investor Survivor 409 (3,526) (3,117) Platinum Investor Survivor II 23,550 (4,287) 19,263 Platinum Investor VIP 951 (71) 880 VALIC Company I - Science & Technology Fund Platinum Investor I & II 11,575 (28,989) (17,414) Platinum Investor III 33,351 (38,602) (5,251) Platinum Investor IV 2,052 (600) 1,452 Platinum Investor FlexDirector 54 (25) 29 Platinum Investor PLUS 1,178 (1,158) 20 Platinum Investor Survivor 1,880 (7,947) (6,067) Platinum Investor Survivor II 1,170 (97) 1,073 Platinum Investor VIP 361 (23) 338 VALIC Company I - Small Cap Index Fund Corporate America -- (211) (211) Corporate America (reduced surrender charge) 2,463 (20) 2,443 Platinum Investor I & II 7,231 (13,159) (5,928) Platinum Investor III 43,975 (61,944) (17,969) Platinum Investor IV 14,868 (2,950) 11,918 Platinum Investor FlexDirector 982 (116) 866 Platinum Investor PLUS 4,833 (2,870) 1,963 Platinum Investor Survivor 1,371 (1,786) (415) Platinum Investor Survivor II 4,868 (813) 4,055 Platinum Investor VIP 12,547 (434) 12,113 Platinum Investor VIP (with GMWB rider) 186 (17) 169 VALIC Company I - Stock Index Fund AG Legacy Plus 1,329 (9,845) (8,516) Corporate America 57 (256) (199) Corporate America (reduced surrender charge) 3,300 (133) 3,167
VL-R - 43 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------- VALIC Company I - Stock Index Fund - Continued Platinum Investor I & II 99,429 (233,607) (134,178) Platinum Investor III 161,236 (624,509) (463,273) Platinum Investor IV 35,862 (6,568) 29,294 Platinum Investor FlexDirector 2,625 (550) 2,075 Platinum Investor PLUS 13,928 (11,110) 2,818 Platinum Investor Survivor 10,232 (126,259) (116,027) Platinum Investor Survivor II 18,762 (3,182) 15,580 Platinum Investor VIP 7,401 (521) 6,880 Van Kampen LIT Government Portfolio - Class I AG Legacy Plus 275 (2,378) (2,103) Van Kampen LIT Growth and Income Portfolio - Class I Platinum Investor I & II 20,015 (94,692) (74,677) Platinum Investor III 109,768 (35,434) 74,334 Platinum Investor IV 25,003 (6,863) 18,140 Platinum Investor FlexDirector 554 (80) 474 Platinum Investor PLUS 7,277 (4,519) 2,758 Platinum Investor Survivor 9,817 (7,179) 2,638 Platinum Investor Survivor II 16,112 (8,180) 7,932 Platinum Investor VIP 7,407 (528) 6,879 Van Kampen LIT Strategic Growth Portfolio - Class I AG Legacy Plus 860 (1,228) (368) Vanguard VIF High Yield Bond Portfolio Corporate America (reduced surrender charge) 4,444 (33) 4,411 Platinum Investor I & II 2,634 (24,526) (21,892) Platinum Investor III 48,405 (88,907) (40,502) Platinum Investor IV 18,809 (4,902) 13,907 Platinum Investor FlexDirector 93 (19) 74 Platinum Investor PLUS 7,281 (6,885) 396 Platinum Investor Survivor 11,434 (2,314) 9,120 Platinum Investor Survivor II 3,828 (572) 3,256 Platinum Investor VIP 5,457 (443) 5,014 Platinum Investor VIP (with GMWB rider) 3 (1) 2 Vanguard VIF REIT Index Portfolio Corporate America -- (115) (115) Corporate America (reduced surrender charge) 5,655 (96) 5,559 Platinum Investor I & II 8,453 (21,641) (13,188) Platinum Investor III 50,371 (46,873) 3,498 Platinum Investor IV 38,700 (11,505) 27,195 Platinum Investor FlexDirector 1,212 (571) 641 Platinum Investor PLUS 32,546 (5,921) 26,625 Platinum Investor Survivor 739 (6,093) (5,354) Platinum Investor Survivor II 4,662 (2,398) 2,264 Platinum Investor VIP 19,550 (1,481) 18,069 Platinum Investor VIP (with GMWB rider) 539 (24) 515
VL-R - 44 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2006.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------------- AIM V.I. International Growth Fund - Series I AG Legacy Plus 9,348 (1,529) 7,819 Corporate America 37 (2,935) (2,898) Corporate America (reduced surrender charge) 1,228 (19) 1,209 Platinum Investor I & II 38,436 (56,918) (18,482) Platinum Investor III 52,170 (112,757) (60,587) Platinum Investor IV 12,470 (1,524) 10,946 Platinum Investor FlexDirector 95 (13) 82 Platinum Investor PLUS 7,492 (2,000) 5,492 Platinum Investor Survivor 5,150 (22,858) (17,708) Platinum Investor Survivor II 823 (15,625) (14,802) AIM V.I. Premier Equity Fund - Series I Corporate America 72 (247) (175) Platinum Investor I & II 100,946 (187,692) (86,746) Platinum Investor III 124,273 (140,038) (15,765) Platinum Investor IV 7,072 (865) 6,207 Platinum Investor FlexDirector 196 (11) 185 Platinum Investor PLUS 6,234 (3,606) 2,628 Platinum Investor Survivor 16,843 (24,564) (7,721) Platinum Investor Survivor II 2,313 (1,195) 1,118 Alger American Leveraged AllCap Portfolio - Class O Shares Platinum Investor I & II 7,531 (151) 7,380 Platinum Investor III 22,081 (6,643) 15,438 Platinum Investor IV 5,794 (408) 5,386 Platinum Investor FlexDirector 96 (9) 87 Platinum Investor PLUS 3,954 (1,761) 2,193 Platinum Investor Survivor 144 (136) 8 Platinum Investor Survivor II 66 (1) 65 Alger American MidCap Growth Portfolio - Class O Shares Corporate America (reduced surrender charge) 1,175 (2) 1,173 Platinum Investor I & II 250 (335) (85) Platinum Investor III 24,332 (8,737) 15,595 Platinum Investor IV 4,959 (676) 4,283 Platinum Investor FlexDirector 1,234 (326) 908 Platinum Investor PLUS 3,093 (1,696) 1,397 Platinum Investor Survivor 844 (144) 700 Platinum Investor Survivor II 1,484 (236) 1,248 American Century VP Value Fund - Class I AG Legacy Plus 1,816 (6,571) (4,755) Corporate America 152 (627) (475) Corporate America (reduced surrender charge) 7,835 (281) 7,554 Platinum Investor I & II 65,135 (34,272) 30,863 Platinum Investor III 105,581 (129,287) (23,706) Platinum Investor IV 26,500 (2,312) 24,188 Platinum Investor FlexDirector 35 (19) 16
VL-R - 45 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) -------------------------------------------------------------------------------------------------- American Century VP Value Fund - Class I - Continued Platinum Investor PLUS 24,553 (10,023) 14,530 Platinum Investor Survivor 2,869 (12,940) (10,071) Platinum Investor Survivor II 7,307 (45,673) (38,366) Credit Suisse Small Cap Growth Portfolio Platinum Investor I & II 5,374 (37,671) (32,297) Platinum Investor III 35,401 (52,803) (17,402) Platinum Investor IV 3,114 (398) 2,716 Platinum Investor FlexDirector 1,093 (101) 992 Platinum Investor PLUS 4,861 (2,485) 2,376 Platinum Investor Survivor 543 (173) 370 Platinum Investor Survivor II 723 (211) 512 Dreyfus IP MidCap Stock Portfolio - Initial shares Platinum Investor I & II 15,309 (11,330) 3,979 Platinum Investor III 55,819 (33,968) 21,851 Platinum Investor IV 5,274 (625) 4,649 Platinum Investor FlexDirector 2 (2) -- Platinum Investor PLUS 7,675 (3,490) 4,185 Platinum Investor Survivor 1,728 (4,780) (3,052) Platinum Investor Survivor II 4,012 (784) 3,228 Dreyfus VIF Developing Leaders Portfolio - Initial shares Corporate America 65 (5,678) (5,613) Corporate America (reduced surrender charge) 833 (4) 829 Platinum Investor I & II 44,487 (67,776) (23,289) Platinum Investor III 116,261 (113,424) 2,837 Platinum Investor IV 5,731 (906) 4,825 Platinum Investor FlexDirector 503 -- 503 Platinum Investor PLUS 11,797 (6,828) 4,969 Platinum Investor Survivor 4,497 (8,068) (3,571) Platinum Investor Survivor II 3,040 (30,390) (27,350) Dreyfus VIF Quality Bond Portfolio - Initial shares Corporate America 23 (4,442) (4,419) Corporate America (reduced surrender charge) 4,205 (48) 4,157 Platinum Investor I & II 15,154 (30,975) (15,821) Platinum Investor III 75,734 (70,094) 5,640 Platinum Investor IV 7,852 (699) 7,153 Platinum Investor PLUS 8,391 (4,518) 3,873 Platinum Investor Survivor 2,158 (9,432) (7,274) Platinum Investor Survivor II 3,876 (1,288) 2,588 Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Legacy Plus 118 (2,972) (2,854) Platinum Investor I & II 2,350 (34,154) (31,804) Platinum Investor III 79,181 (39,978) 39,203 Platinum Investor IV 3,759 (458) 3,301 Platinum Investor FlexDirector 741 (12) 729
VL-R - 46 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ----------------------------------------------------------------------------------------------------------- Fidelity VIP Asset Manager Portfolio - Service Class 2 - Continued Platinum Investor PLUS 10,968 (4,043) 6,925 Platinum Investor Survivor 1,462 (723) 739 Platinum Investor Survivor II 3,750 (1,538) 2,212 Fidelity VIP Contrafund Portfolio - Service Class 2 AG Legacy Plus 2,298 (3,083) (785) Corporate America 105 (1,453) (1,348) Corporate America (reduced surrender charge) 4,508 (300) 4,208 Platinum Investor I & II 88,166 (34,119) 54,047 Platinum Investor III 397,278 (128,791) 268,487 Platinum Investor IV 38,296 (3,476) 34,820 Platinum Investor FlexDirector 5,263 (28) 5,235 Platinum Investor PLUS 85,504 (15,581) 69,923 Platinum Investor Survivor 17,558 (4,999) 12,559 Platinum Investor Survivor II 34,928 (8,314) 26,614 Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Legacy Plus 3,219 (9,652) (6,433) Corporate America 171 (14,885) (14,714) Corporate America (reduced surrender charge) 13,226 (305) 12,921 Platinum Investor I & II 34,960 (107,166) (72,206) Platinum Investor III 191,278 (219,541) (28,263) Platinum Investor IV 22,978 (2,312) 20,666 Platinum Investor FlexDirector 729 (66) 663 Platinum Investor PLUS 31,194 (12,995) 18,199 Platinum Investor Survivor 13,160 (32,981) (19,821) Platinum Investor Survivor II 13,470 (4,129) 9,341 Fidelity VIP Growth Portfolio - Service Class 2 AG Legacy Plus 984 (3,159) (2,175) Corporate America -- (5,424) (5,424) Corporate America (reduced surrender charge) 8,144 (98) 8,046 Platinum Investor I & II 27,833 (144,346) (116,513) Platinum Investor III 296,802 (191,916) 104,886 Platinum Investor IV 20,027 (2,310) 17,717 Platinum Investor FlexDirector 1,782 (4,398) (2,616) Platinum Investor PLUS 38,244 (17,765) 20,479 Platinum Investor Survivor 7,605 (16,974) (9,369) Platinum Investor Survivor II 6,304 (3,763) 2,541 Fidelity VIP Mid Cap Portfolio - Service Class 2 Corporate America (reduced surrender charge) 12,827 (165) 12,662 Platinum Investor I & II 222 (6,998) (6,776) Platinum Investor III 164,804 (14,515) 150,289 Platinum Investor IV 17,797 (1,901) 15,896 Platinum Investor FlexDirector 268 (33) 235 Platinum Investor PLUS 6,212 (2,292) 3,920
VL-R - 47 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio - Service Class 2 - Continued Platinum Investor Survivor 12,066 (214) 11,852 Platinum Investor Survivor II 9,925 (4,438) 5,487 Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 Corporate America (reduced surrender charge) 2,772 (27) 2,745 Platinum Investor I & II 2,789 (696) 2,093 Platinum Investor III 156,031 (16,334) 139,697 Platinum Investor IV 17,337 (1,360) 15,977 Platinum Investor FlexDirector 161 (39) 122 Platinum Investor PLUS 12,527 (2,882) 9,645 Platinum Investor Survivor 10,876 (632) 10,244 Platinum Investor Survivor II 12,531 (4,745) 7,786 Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund - Class 2 AG Legacy Plus 355 (4,550) (4,195) Franklin Templeton - Franklin U.S. Government Fund - Class 2 Platinum Investor I & II 18,671 (6,949) 11,722 Platinum Investor III 197,373 (87,246) 110,127 Platinum Investor IV 5,264 (699) 4,565 Platinum Investor PLUS 6,395 (4,605) 1,790 Platinum Investor Survivor 9,007 (49) 8,958 Platinum Investor Survivor II 18,858 (8,439) 10,419 Franklin Templeton - Mutual Shares Securities Fund - Class 2 Platinum Investor I & II 52,199 (6,755) 45,444 Platinum Investor III 52,326 (39,950) 12,376 Platinum Investor IV 10,709 (1,134) 9,575 Platinum Investor FlexDirector 3,326 (12) 3,314 Platinum Investor PLUS 16,740 (5,462) 11,278 Platinum Investor Survivor 992 (112) 880 Platinum Investor Survivor II 1,210 (14,738) (13,528) Franklin Templeton - Templeton Foreign Securities Fund - Class 2 AG Legacy Plus 1,356 (3,036) (1,680) Platinum Investor I & II 16,838 (48,205) (31,367) Platinum Investor III 42,328 (94,391) (52,063) Platinum Investor IV 15,235 (1,456) 13,779 Platinum Investor FlexDirector 1,460 (55) 1,405 Platinum Investor PLUS 16,047 (4,151) 11,896 Platinum Investor Survivor 639 (14,440) (13,801) Platinum Investor Survivor II 7,990 (3,275) 4,715 Goldman Sachs Capital Growth Fund Platinum Investor I & II -- (713) (713) Platinum Investor III -- (1,680) (1,680) Platinum Investor PLUS -- (1) (1) Platinum Investor Survivor -- (35,970) (35,970) Platinum Investor Survivor II -- (15,231) (15,231)
VL-R - 48 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ----------------------------------------------------------------------------------------------------------- Janus Aspen Series International Growth Portfolio - Service Shares Corporate America -- (3,189) (3,189) Platinum Investor I & II 15,049 (13,519) 1,530 Platinum Investor III 62,954 (32,705) 30,249 Platinum Investor IV 11,141 (1,087) 10,054 Platinum Investor FlexDirector 2,666 (1,241) 1,425 Platinum Investor PLUS 15,668 (1,965) 13,703 Platinum Investor Survivor 9,075 (3,507) 5,568 Platinum Investor Survivor II 2,179 (490) 1,689 Janus Aspen Series Mid Cap Growth Portfolio - Service Shares Corporate America 38 (208) (170) Platinum Investor I & II 29,597 (6,527) 23,070 Platinum Investor III 87,693 (100,095) (12,402) Platinum Investor IV 1,966 (279) 1,687 Platinum Investor PLUS 3,831 (1,802) 2,029 Platinum Investor Survivor 2,782 (20,228) (17,446) Platinum Investor Survivor II 968 (224) 744 Janus Aspen Series Worldwide Growth Portfolio - Service Shares Corporate America 38 (6,684) (6,646) Corporate America (reduced surrender charge) 4,208 (58) 4,150 Platinum Investor I & II 4,346 (20,792) (16,446) Platinum Investor III 92,425 (85,480) 6,945 Platinum Investor IV 5,402 (357) 5,045 Platinum Investor PLUS 5,345 (2,785) 2,560 Platinum Investor Survivor 4,564 (15,712) (11,148) Platinum Investor Survivor II 2,669 (18,374) (15,705) JPMorgan Mid Cap Value Portfolio Platinum Investor I & II 5,014 (160) 4,854 Platinum Investor III 180,868 (7,200) 173,668 Platinum Investor IV 11,049 (941) 10,108 Platinum Investor PLUS 5,746 (1,408) 4,338 Platinum Investor Survivor 15,786 (132) 15,654 Platinum Investor Survivor II 17,743 (7,811) 9,932 JPMorgan Small Company Portfolio Platinum Investor I & II 15,581 (6,935) 8,646 Platinum Investor III 25,543 (29,113) (3,570) Platinum Investor IV 4,213 (662) 3,551 Platinum Investor FlexDirector 78 (19) 59 Platinum Investor PLUS 5,533 (2,006) 3,527 Platinum Investor Survivor 148 (305) (157) Platinum Investor Survivor II 2,196 (402) 1,794 MFS VIT Capital Opportunities Series - Initial Class Corporate America 64 (3) 61 Platinum Investor I & II 4,027 (15,030) (11,003) Platinum Investor III 101,212 (114,625) (13,413)
VL-R - 49 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------------------- MFS VIT Capital Opportunities Series - Initial Class - Continued Platinum Investor IV 3,535 (374) 3,161 Platinum Investor FlexDirector 177 (7) 170 Platinum Investor PLUS 15,014 (6,376) 8,638 Platinum Investor Survivor 5,300 (10,021) (4,721) Platinum Investor Survivor II 822 (538) 284 MFS VIT Emerging Growth Series - Initial Class AG Legacy Plus 1,562 (1,202) 360 Corporate America -- (1,040) (1,040) Corporate America (reduced surrender charge) 795 (27) 768 Platinum Investor I & II 111,738 (185,234) (73,496) Platinum Investor III 155,992 (501,772) (345,780) Platinum Investor IV 4,748 (343) 4,405 Platinum Investor FlexDirector 178 (44) 134 Platinum Investor PLUS 14,712 (6,799) 7,913 Platinum Investor Survivor 19,049 (71,595) (52,546) Platinum Investor Survivor II 885 (29,287) (28,402) MFS VIT New Discovery Series - Initial Class AG Legacy Plus 5,728 (1,942) 3,786 Corporate America 30 (249) (219) Platinum Investor I & II 4,995 (23,768) (18,773) Platinum Investor III 71,845 (55,538) 16,307 Platinum Investor IV 4,159 (329) 3,830 Platinum Investor FlexDirector 166 (13) 153 Platinum Investor PLUS 6,686 (3,412) 3,274 Platinum Investor Survivor 2,612 (1,305) 1,307 Platinum Investor Survivor II 1,300 (982) 318 MFS VIT Research Series - Initial Class Corporate America -- (3,158) (3,158) Corporate America (reduced surrender charge) 134 (134) -- Platinum Investor I & II 2,995 (8,893) (5,898) Platinum Investor III 51,776 (31,226) 20,550 Platinum Investor IV 2,669 (161) 2,508 Platinum Investor FlexDirector 101 (5) 96 Platinum Investor PLUS 3,891 (1,172) 2,719 Platinum Investor Survivor 2,542 (2,344) 198 Platinum Investor Survivor II 1,823 (526) 1,297 MFS VIT Total Return Series - Initial Class AG Legacy Plus 3,325 (20,877) (17,552) Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I Corporate America -- (1,789) (1,789) Corporate America (reduced surrender charge) 730 (6) 724 Platinum Investor I & II 8,930 (9,237) (307) Platinum Investor III 74,065 (49,732) 24,333 Platinum Investor IV 4,611 (381) 4,230
VL-R - 50 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I - Continued Platinum Investor FlexDirector 377 (7) 370 Platinum Investor PLUS 16,081 (6,033) 10,048 Platinum Investor Survivor 8,668 (8,724) (56) Platinum Investor Survivor II 3,277 (992) 2,285 Neuberger Berman AMT Partners Portfolio - Class I AG Legacy Plus 86 (3,886) (3,800) Oppenheimer Balanced Fund/VA - Non-Service Shares Platinum Investor I & II 9,959 (271) 9,688 Platinum Investor III 15,213 (5,339) 9,874 Platinum Investor IV 14,336 (755) 13,581 Platinum Investor FlexDirector 44 (11) 33 Platinum Investor PLUS 7,526 (17,692) (10,166) Platinum Investor Survivor 350 (350) -- Platinum Investor Survivor II 420 (264) 156 Oppenheimer Global Securities Fund/VA - Non-Service Shares Platinum Investor I & II 11,767 (4,553) 7,214 Platinum Investor III 48,944 (10,387) 38,557 Platinum Investor IV 16,002 (1,447) 14,555 Platinum Investor FlexDirector 13 (5) 8 Platinum Investor PLUS 5,004 (1,820) 3,184 Platinum Investor Survivor 2,543 (136) 2,407 Platinum Investor Survivor II 3,188 (155) 3,033 Oppenheimer High Income Fund/VA - Non-Service Shares AG Legacy Plus 1,259 (972) 287 PIMCO VIT Real Return Portfolio - Administrative Class AG Legacy Plus 3,229 (11,422) (8,193) Corporate America -- (100) (100) Corporate America (reduced surrender charge) 5,166 (76) 5,090 Platinum Investor I & II 66,209 (16,080) 50,129 Platinum Investor III 96,677 (186,538) (89,861) Platinum Investor IV 14,468 (1,053) 13,415 Platinum Investor FlexDirector 290 (36) 254 Platinum Investor PLUS 12,622 (8,420) 4,202 Platinum Investor Survivor 1,601 (17,047) (15,446) Platinum Investor Survivor II 5,802 (16,513) (10,711) PIMCO VIT Short-Term Portfolio - Administrative Class Corporate America 62 (20,734) (20,672) Platinum Investor I & II 12,114 (129,917) (117,803) Platinum Investor III 48,383 (36,378) 12,005 Platinum Investor IV 13,656 (1,441) 12,215 Platinum Investor FlexDirector 2,624 (479) 2,145 Platinum Investor PLUS 16,275 (3,001) 13,274 Platinum Investor Survivor 701 (8,720) (8,019) Platinum Investor Survivor II 2,014 (2,941) (927)
VL-R - 51 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ------------------------------------------------------------------------------------------------ PIMCO VIT Total Return Portfolio - Administrative Class AG Legacy Plus 8,772 (6,331) 2,441 Corporate America -- (8,965) (8,965) Corporate America (reduced surrender charge) 4,365 (41) 4,324 Platinum Investor I & II 79,462 (23,513) 55,949 Platinum Investor III 834,665 (94,490) 740,175 Platinum Investor IV 24,985 (2,450) 22,535 Platinum Investor FlexDirector 3,410 (540) 2,870 Platinum Investor PLUS 31,264 (11,354) 19,910 Platinum Investor Survivor 54,723 (3,630) 51,093 Platinum Investor Survivor II 74,195 (38,428) 35,767 Pioneer Fund VCT Portfolio - Class I Platinum Investor I & II 23,363 (48,647) (25,284) Platinum Investor III 9,657 (10,996) (1,339) Platinum Investor PLUS 208 (158) 50 Platinum Investor Survivor 1,432 (2,322) (890) Platinum Investor Survivor II 231 (61) 170 Pioneer Growth Opportunities VCT Portfolio - Class I Corporate America 29 (101) (72) Platinum Investor I & II 32,721 (71,344) (38,623) Platinum Investor III 27,707 (30,394) (2,687) Platinum Investor PLUS 1,271 (598) 673 Platinum Investor Survivor 885 (3,881) (2,996) Platinum Investor Survivor II 46 (19,774) (19,728) Putnam VT Diversified Income Fund - Class IB AG Legacy Plus 1,325 (870) 455 Corporate America 63,105 (6,026) 57,079 Corporate America (reduced surrender charge) 8,421 (134) 8,287 Platinum Investor I & II 21,713 (12,226) 9,487 Platinum Investor III 114,367 (11,568) 102,799 Platinum Investor IV 4,383 (333) 4,050 Platinum Investor FlexDirector 65 (4) 61 Platinum Investor PLUS 3,012 (1,326) 1,686 Platinum Investor Survivor 8,330 (180) 8,150 Platinum Investor Survivor II 963 (468) 495 Putnam VT Growth and Income Fund - Class IB Corporate America 76,130 (18,293) 57,837 Corporate America (reduced surrender charge) 13,633 (540) 13,093 Platinum Investor I & II 43,814 (127,798) (83,984) Platinum Investor III 136,054 (100,872) 35,182 Platinum Investor IV 20,946 (2,683) 18,263 Platinum Investor FlexDirector 2,502 (172) 2,330 Platinum Investor PLUS 13,340 (6,110) 7,230 Platinum Investor Survivor 7,950 (10,687) (2,737) Platinum Investor Survivor II 2,586 (1,433) 1,153
VL-R - 52 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) -------------------------------------------------------------------------------------------------- Putnam VT International Growth and Income Fund - Class IB Corporate America -- (2,293) (2,293) Corporate America (reduced surrender charge) 246 -- 246 Platinum Investor I & II 17,282 (46,769) (29,487) Platinum Investor III 51,765 (66,315) (14,550) Platinum Investor IV 10,019 (1,061) 8,958 Platinum Investor FlexDirector 95 (20) 75 Platinum Investor PLUS 5,934 (2,182) 3,752 Platinum Investor Survivor 5,090 (8,106) (3,016) Platinum Investor Survivor II 1,528 (626) 902 Putnam VT Small Cap Value Fund - Class IB AG Legacy Plus 644 (5,935) (5,291) Putnam VT Vista Fund - Class IB AG Legacy Plus 7,876 (6,018) 1,858 Putnam VT Voyager Fund - Class IB AG Legacy Plus 15,173 (6,332) 8,841 Scudder VIT Equity 500 Index Fund - Class A Legacy Plus 129 (1,986) (1,857) SunAmerica - Aggressive Growth Portfolio - Class 1 Platinum Investor I & II 15,054 (844) 14,210 Platinum Investor III 22,228 (7,666) 14,562 Platinum Investor IV 3,920 (467) 3,453 Platinum Investor PLUS 3,564 (1,344) 2,220 Platinum Investor Survivor 27 (158) (131) Platinum Investor Survivor II 267 (68) 199 SunAmerica - SunAmerica Balanced Portfolio - Class 1 Platinum Investor I & II 617 (139) 478 Platinum Investor III 24,132 (12,167) 11,965 Platinum Investor IV 4,648 (585) 4,063 Platinum Investor PLUS 7,119 (3,335) 3,784 Platinum Investor Survivor II 587 (296) 291 UIF Equity Growth Portfolio - Class I Platinum Investor I & II 49,612 (60,437) (10,825) Platinum Investor III 19,799 (10,289) 9,510 Platinum Investor IV 1,392 (228) 1,164 Platinum Investor PLUS 1,462 (701) 761 Platinum Investor Survivor 2,112 (3,844) (1,732) Platinum Investor Survivor II 167 (50) 117 UIF High Yield Portfolio - Class I Platinum Investor I & II 8,255 (20,756) (12,501) Platinum Investor III 5,820 (5,914) (94) Platinum Investor IV 876 (78) 798 Platinum Investor FlexDirector 736 (39) 697 Platinum Investor PLUS 1,511 (541) 970
VL-R - 53 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ----------------------------------------------------------------------------------------- UIF High Yield Portfolio - Class I - Continued Platinum Investor Survivor 59,726 (10,922) 48,804 Platinum Investor Survivor II 1,590 (366) 1,224 VALIC Company I - International Equities Fund AG Legacy Plus 424 (5,603) (5,179) Platinum Investor I & II 15,348 (12,417) 2,931 Platinum Investor III 19,650 (15,712) 3,938 Platinum Investor IV 2,379 (408) 1,971 Platinum Investor FlexDirector 304 (48) 256 Platinum Investor PLUS 4,950 (990) 3,960 Platinum Investor Survivor 2,294 (1,608) 686 Platinum Investor Survivor II 443 (424) 19 VALIC Company I - Mid Cap Index Fund AG Legacy Plus 1,620 (3,284) (1,664) Corporate America 174 (210) (36) Corporate America (reduced surrender charge) 1,419 (24) 1,395 Platinum Investor I & II 35,368 (55,580) (20,212) Platinum Investor III 85,114 (80,111) 5,003 Platinum Investor IV 11,392 (1,227) 10,165 Platinum Investor FlexDirector 55 (18) 37 Platinum Investor PLUS 13,840 (9,920) 3,920 Platinum Investor Survivor 5,080 (10,350) (5,270) Platinum Investor Survivor II 2,987 (21,626) (18,639) VALIC Company I - Money Market I Fund AG Legacy Plus (6,171) (17,613) (23,784) Corporate America -- (6,349) (6,349) Corporate America (reduced surrender charge) 42,570 (63,906) (21,336) Legacy Plus 63 (1,149) (1,086) Platinum Investor I & II 191,702 (385,744) (194,042) Platinum Investor III 651,771 (1,134,793) (483,022) Platinum Investor IV 461,751 (427,201) 34,550 Platinum Investor FlexDirector 17,563 (22,449) (4,886) Platinum Investor PLUS 172,233 (242,213) (69,980) Platinum Investor Survivor 22,562 (217,068) (194,506) Platinum Investor Survivor II 110,826 (121,464) (10,638) VALIC Company I - Nasdaq-100 Index Fund Platinum Investor I & II 26,851 (14,601) 12,250 Platinum Investor III 97,983 (77,914) 20,069 Platinum Investor IV 1,746 (268) 1,478 Platinum Investor FlexDirector 54 (30) 24 Platinum Investor PLUS 6,744 (2,251) 4,493 Platinum Investor Survivor 9,425 (26,728) (17,303) Platinum Investor Survivor II 44,630 (3,616) 41,014
VL-R - 54 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------------------------------------------------------------------------------------------- VALIC Company I - Science & Technology Fund Platinum Investor I & II 5,360 (23,221) (17,861) Platinum Investor III 40,684 (33,471) 7,213 Platinum Investor IV 1,582 (130) 1,452 Platinum Investor FlexDirector 57 (31) 26 Platinum Investor PLUS 1,402 (1,131) 271 Platinum Investor Survivor 3,503 (2,128) 1,375 Platinum Investor Survivor II 659 (197) 462 VALIC Company I - Small Cap Index Fund Corporate America 74 (4,279) (4,205) Platinum Investor I & II 32,495 (7,861) 24,634 Platinum Investor III 49,159 (32,246) 16,913 Platinum Investor IV 9,595 (720) 8,875 Platinum Investor FlexDirector 93 (39) 54 Platinum Investor PLUS 9,790 (6,896) 2,894 Platinum Investor Survivor 1,563 (10,153) (8,590) Platinum Investor Survivor II 1,935 (601) 1,334 VALIC Company I - Stock Index Fund AG Legacy Plus 18,710 (4,408) 14,302 Corporate America 73 (7,950) (7,877) Corporate America (reduced surrender charge) 5,046 (202) 4,844 Platinum Investor I & II 113,856 (246,853) (132,997) Platinum Investor III 252,515 (453,138) (200,623) Platinum Investor IV 16,848 (1,417) 15,431 Platinum Investor FlexDirector 8,440 (265) 8,175 Platinum Investor PLUS 53,614 (9,776) 43,838 Platinum Investor Survivor 19,675 (78,975) (59,300) Platinum Investor Survivor II 3,899 (12,104) (8,205) Van Kampen LIT Emerging Growth Portfolio - Class I AG Legacy Plus 1,050 (1,655) (605) Van Kampen LIT Government Portfolio - Class I AG Legacy Plus 1,709 (3,427) (1,718) Van Kampen LIT Growth and Income Portfolio - Class I Platinum Investor I & II 82,381 (17,783) 64,598 Platinum Investor III 217,277 (32,656) 184,621 Platinum Investor IV 20,371 (1,711) 18,660 Platinum Investor FlexDirector 602 (19) 583 Platinum Investor PLUS 8,687 (3,750) 4,937 Platinum Investor Survivor 20,449 (4,933) 15,516 Platinum Investor Survivor II 19,828 (9,788) 10,040 Vanguard VIF High Yield Bond Portfolio Corporate America (reduced surrender charge) 1,611 (7) 1,604 Platinum Investor I & II 15,203 (31,164) (15,961) Platinum Investor III 55,322 (128,470) (73,148) Platinum Investor IV 11,730 (1,247) 10,483
VL-R - 55 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note F - Summary of Changes in Units - Continued Summary of Changes in Units for the year ended December 31, 2005.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) ------------------------------------------------------------------------------------------- Vanguard VIF High Yield Bond Portfolio - Continued Platinum Investor FlexDirector 35 (20) 15 Platinum Investor PLUS 11,067 (5,297) 5,770 Platinum Investor Survivor 5,661 (75,416) (69,755) Platinum Investor Survivor II 1,543 (19,516) (17,973) Vanguard VIF REIT Index Portfolio Corporate America 102 (27) 75 Corporate America (reduced surrender charge) 1,010 (4) 1,006 Platinum Investor I & II 26,831 (9,552) 17,279 Platinum Investor III 66,201 (79,745) (13,544) Platinum Investor IV 28,204 (2,942) 25,262 Platinum Investor FlexDirector 1,593 (87) 1,506 Platinum Investor PLUS 15,837 (17,997) (2,160) Platinum Investor Survivor 2,218 (7,228) (5,010) Platinum Investor Survivor II 3,803 (2,763) 1,040
VL-R - 56 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------ AIM V.I. Core Equity Fund - Series I Corporate America 3,758 $10.89 $ 40,922 0.88% 0.35% 8.90% Corporate America (reduced surrender charge) 2,285 10.87 24,835 0.88% 0.65% 8.69% Platinum Investor I & II 735,908 10.86 7,992,901 1.07% 0.75% 8.61% Platinum Investor III 375,267 10.86 4,077,242 1.07% 0.70% 8.65% Platinum Investor IV 12,433 10.86 135,088 1.06% 0.70% 8.65% Platinum Investor FlexDirector 424 10.86 4,603 1.07% 0.70% 8.65% Platinum Investor PLUS 23,459 10.86 254,879 1.06% 0.70% 8.65% Platinum Investor Survivor 64,839 10.89 705,893 1.06% 0.40% 8.87% Platinum Investor Survivor II 9,760 10.86 106,001 1.07% 0.75% 8.61% AIM V.I. International Growth Fund - Series I AG Legacy Plus 25,612 11.98 306,732 0.93% 0.75% 27.28% Corporate America 4,241 11.69 49,559 1.26% 0.35% 27.79% Corporate America (reduced surrender charge) 7,127 17.41 124,105 1.26% 0.65% 27.41% Platinum Investor I & II 292,495 16.57 4,847,867 1.14% 0.75% 27.28% Platinum Investor III 340,444 13.93 4,743,020 1.18% 0.70% 27.34% Platinum Investor IV 30,344 14.81 449,267 1.40% 0.70% 27.34% Platinum Investor FlexDirector 812 17.09 13,875 1.70% 0.70% 27.34% Platinum Investor PLUS 17,467 19.27 336,677 1.09% 0.70% 27.34% Platinum Investor Survivor 59,983 11.66 699,501 1.12% 0.40% 27.72% Platinum Investor Survivor II 6,039 20.17 121,810 1.13% 0.75% 27.28% Platinum Investor VIP 17,529 11.93 209,100 1.12% 0.70% 19.29% Platinum Investor VIP (with GMWB rider) 256 11.87 3,033 1.12% 1.45% 18.70% AIM V.I. Premier Equity Fund - Series I Corporate America -- -- -- 2.82% 0.35% 5.45% Platinum Investor I & II -- -- -- 2.09% 0.75% 5.31% Platinum Investor III -- -- -- 2.12% 0.70% 5.33% Platinum Investor IV -- -- -- 3.12% 0.70% 5.33% Platinum Investor FlexDirector -- -- -- 2.17% 0.70% 5.33% Platinum Investor PLUS -- -- -- 2.18% 0.70% 5.33% Platinum Investor Survivor -- -- -- 2.13% 0.40% 5.44% Platinum Investor Survivor II -- -- -- 2.26% 0.75% 5.31% Alger American Leveraged AllCap Portfolio - Class O Shares Platinum Investor I & II 11,906 17.40 207,102 0.00% 0.75% 18.38% Platinum Investor III 88,630 17.43 1,544,555 0.00% 0.70% 18.43% Platinum Investor IV 13,804 13.72 189,390 0.00% 0.70% 18.43% Platinum Investor FlexDirector 47 13.73 649 0.00% 0.70% 18.43% Platinum Investor PLUS 13,020 17.43 226,897 0.00% 0.70% 18.43% Platinum Investor Survivor 168 17.62 2,958 0.00% 0.40% 18.79% Platinum Investor Survivor II 1,106 17.40 19,245 0.00% 0.75% 18.38% Platinum Investor VIP 8,328 11.31 94,186 0.00% 0.70% 13.10% Platinum Investor VIP (with GMWB rider) 164 11.25 1,843 0.00% 1.45% 12.53% Alger American MidCap Growth Portfolio - Class O Shares Corporate America (reduced surrender charge) 5,196 13.61 70,695 0.00% 0.65% 9.43% Platinum Investor I & II 8,117 18.15 147,281 0.00% 0.75% 9.32% Platinum Investor III 55,215 18.18 1,003,756 0.00% 0.70% 9.37% Platinum Investor IV 18,110 12.03 217,883 0.00% 0.70% 9.37% Platinum Investor FlexDirector 6,774 12.69 85,956 0.00% 0.70% 9.37% Platinum Investor PLUS 8,924 18.18 162,222 0.00% 0.70% 9.37%
VL-R - 57 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- Alger American MidCap Growth Portfolio - Class O Shares - Continued Platinum Investor Survivor 5,975 $18.38 $ 109,826 0.00% 0.40% 9.70% Platinum Investor Survivor II 2,680 18.15 48,637 0.00% 0.75% 9.32% Platinum Investor VIP 2,230 10.37 23,116 0.00% 0.70% 3.67% American Century VP Value Fund - Class I AG Legacy Plus 25,927 20.67 535,799 1.31% 0.75% 17.77% Corporate America 1,247 19.13 23,856 0.93% 0.35% 18.24% Corporate America (reduced surrender charge) 19,895 13.22 262,932 0.93% 0.65% 17.89% Platinum Investor I & II 221,804 18.67 4,140,787 1.39% 0.75% 17.77% Platinum Investor III 513,640 18.58 9,542,265 1.30% 0.70% 17.83% Platinum Investor IV 48,294 12.22 589,984 1.00% 0.70% 17.83% Platinum Investor FlexDirector 931 13.30 12,382 0.12% 0.70% 17.83% Platinum Investor PLUS 58,246 15.74 916,725 1.29% 0.70% 17.83% Platinum Investor Survivor 20,805 19.08 396,872 1.36% 0.40% 18.18% Platinum Investor Survivor II 63,728 16.44 1,048,012 1.30% 0.75% 17.77% Platinum Investor VIP 12,329 11.47 141,453 0.00% 0.70% 14.73% Platinum Investor VIP (with GMWB rider) 162 11.42 1,849 0.00% 1.45% 14.16% Credit Suisse Small Cap Core I Portfolio * Platinum Investor I & II 39,132 8.22 321,493 0.00% 0.75% 3.99% Platinum Investor III 128,637 8.06 1,036,204 0.00% 0.70% 4.04% Platinum Investor IV 13,167 10.29 135,520 0.00% 0.70% 4.04% Platinum Investor FlexDirector 6,301 10.19 64,198 0.00% 0.70% 4.04% Platinum Investor PLUS 11,493 12.86 147,782 0.00% 0.70% 4.04% Platinum Investor Survivor 3,159 8.39 26,520 0.00% 0.40% 4.35% Platinum Investor Survivor II 1,758 12.17 21,405 0.00% 0.75% 3.99% Platinum Investor VIP 8,178 9.45 77,282 0.00% 0.70% -5.50% Dreyfus IP MidCap Stock Portfolio - Initial shares Platinum Investor I & II 81,102 14.09 1,142,564 0.38% 0.75% 6.95% Platinum Investor III 234,893 13.87 3,258,099 0.37% 0.70% 7.00% Platinum Investor IV 12,576 11.64 146,421 0.39% 0.70% 7.00% Platinum Investor FlexDirector 0 12.60 4 0.61% 0.70% 7.00% Platinum Investor PLUS 22,807 14.57 332,244 0.37% 0.70% 7.00% Platinum Investor Survivor 12,083 14.40 173,935 0.40% 0.40% 7.32% Platinum Investor Survivor II 10,961 15.94 174,740 0.37% 0.75% 6.95% Dreyfus VIF Developing Leaders Portfolio - Initial shares Corporate America 5,204 12.56 65,345 0.38% 0.35% 3.41% Corporate America (reduced surrender charge) 1,534 11.74 18,015 0.38% 0.65% 3.10% Platinum Investor I & II 318,961 15.05 4,800,994 0.41% 0.75% 3.00% Platinum Investor III 450,710 11.61 5,231,878 0.40% 0.70% 3.05% Platinum Investor IV 10,454 11.05 115,502 0.32% 0.70% 3.05% Platinum Investor FlexDirector 950 11.00 10,459 0.51% 0.70% 3.05% Platinum Investor PLUS 35,521 12.53 445,116 0.38% 0.70% 3.05% Platinum Investor Survivor 45,846 12.53 574,469 0.44% 0.40% 3.36% Platinum Investor Survivor II 35,559 13.60 483,727 0.37% 0.75% 3.00% Dreyfus VIF Quality Bond Portfolio - Initial shares Corporate America 2,421 14.17 34,295 4.77% 0.35% 3.87% Corporate America (reduced surrender charge) 11,977 10.78 129,065 4.77% 0.65% 3.56% Platinum Investor I & II 281,631 14.03 3,950,746 4.49% 0.75% 3.46% Platinum Investor III 285,395 13.30 3,795,577 4.64% 0.70% 3.51% Platinum Investor IV 14,464 10.45 151,092 4.89% 0.70% 3.51%
VL-R - 58 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- Dreyfus VIF Quality Bond Portfolio - Initial shares - Continued Platinum Investor FlexDirector 173 $10.74 $ 1,861 6.82% 0.70% 3.69% Platinum Investor PLUS 23,919 11.79 282,019 4.53% 0.70% 3.51% Platinum Investor Survivor 16,209 14.14 229,150 4.47% 0.40% 3.82% Platinum Investor Survivor II 9,205 11.83 108,856 4.56% 0.75% 3.46% Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Legacy Plus 15,921 11.71 186,460 2.58% 0.75% 6.34% Platinum Investor I & II 156,694 11.15 1,746,813 2.56% 0.75% 6.34% Platinum Investor III 258,611 11.14 2,879,764 2.41% 0.70% 6.39% Platinum Investor IV 8,240 10.96 90,298 1.57% 0.70% 6.39% Platinum Investor FlexDirector 1,288 11.14 14,349 1.75% 0.70% 6.39% Platinum Investor PLUS 26,410 12.73 336,198 2.45% 0.70% 6.39% Platinum Investor Survivor 11,229 11.39 127,904 2.30% 0.40% 6.71% Platinum Investor Survivor II 20,438 12.42 253,780 1.90% 0.75% 6.34% Platinum Investor VIP 2,269 10.43 23,677 0.00% 0.70% 4.33% Fidelity VIP Contrafund Portfolio - Service Class 2 AG Legacy Plus 42,199 15.88 670,065 0.92% 0.75% 10.60% Corporate America 1,580 14.27 22,543 1.11% 0.35% 11.04% Corporate America (reduced surrender charge) 18,598 14.13 262,724 1.11% 0.65% 10.71% Platinum Investor I & II 517,717 13.92 7,207,050 1.00% 0.75% 10.60% Platinum Investor III 1,262,624 13.75 17,364,615 1.00% 0.70% 10.66% Platinum Investor IV 92,989 12.68 1,179,075 1.11% 0.70% 10.66% Platinum Investor FlexDirector 8,086 14.04 113,515 1.06% 0.70% 10.66% Platinum Investor PLUS 107,304 16.46 1,765,960 0.98% 0.70% 10.66% Platinum Investor Survivor 116,730 14.22 1,660,381 1.02% 0.40% 10.99% Platinum Investor Survivor II 78,211 17.33 1,355,621 1.02% 0.75% 10.60% Platinum Investor VIP 36,885 10.71 395,099 0.98% 0.70% 7.12% Platinum Investor VIP (with GMWB rider) 443 10.66 4,721 0.98% 1.45% 6.58% Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Legacy Plus 51,368 13.75 706,254 2.94% 0.75% 19.04% Corporate America 4,106 14.25 58,490 2.91% 0.35% 19.51% Corporate America (reduced surrender charge) 25,321 13.51 342,065 2.91% 0.65% 19.15% Platinum Investor I & II 283,801 13.90 3,944,532 2.90% 0.75% 19.04% Platinum Investor III 836,470 13.93 11,653,724 2.92% 0.70% 19.09% Platinum Investor IV 45,684 12.47 569,724 2.93% 0.70% 19.09% Platinum Investor FlexDirector 1,384 13.26 18,364 2.91% 0.70% 19.09% Platinum Investor PLUS 78,094 15.00 1,171,538 2.93% 0.70% 19.09% Platinum Investor Survivor 85,837 14.20 1,219,038 2.92% 0.40% 19.45% Platinum Investor Survivor II 80,050 15.20 1,217,117 2.88% 0.75% 19.04% Platinum Investor VIP 15,927 11.48 182,759 1.32% 0.70% 14.75% Platinum Investor VIP (with GMWB rider) 157 11.42 1,794 1.32% 1.45% 14.18% Fidelity VIP Freedom 2020 Portfolio - Service Class 2 Platinum Investor III 665 10.56 7,019 2.70% 0.70% 5.55% Platinum Investor IV 108 10.56 1,140 2.52% 0.70% 5.55% Platinum Investor FlexDirector 5 10.56 50 1.92% 0.70% 5.55% Platinum Investor VIP 211 10.80 2,283 2.65% 0.70% 8.02% Fidelity VIP Freedom 2025 Portfolio - Service Class 2 Platinum Investor III 2,144 10.56 22,639 2.88% 0.70% 5.60% Platinum Investor IV 50 10.56 530 2.53% 0.70% 5.60% Platinum Investor VIP 2,929 10.83 31,722 2.87% 0.70% 8.31%
VL-R - 59 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Freedom 2030 Portfolio - Service Class 2 Platinum Investor III 881 $10.56 $ 9,304 2.61% 0.70% 5.64% Platinum Investor IV 61 10.56 648 2.75% 0.70% 5.64% Platinum Investor PLUS 929 10.56 9,811 2.63% 0.70% 5.64% Platinum Investor VIP 4,114 10.88 44,753 2.61% 0.70% 8.78% Fidelity VIP Growth Portfolio - Service Class 2 AG Legacy Plus 23,993 8.99 215,778 0.17% 0.75% 5.78% Corporate America (reduced surrender charge) 16,761 11.88 199,165 0.12% 0.65% 5.88% Platinum Investor I & II 208,946 7.52 1,572,153 0.17% 0.75% 5.78% Platinum Investor III 1,189,561 7.46 8,878,331 0.16% 0.70% 5.83% Platinum Investor IV 33,267 11.24 373,966 0.12% 0.70% 5.83% Platinum Investor FlexDirector 11,345 10.81 122,619 0.07% 0.70% 5.83% Platinum Investor PLUS 111,405 12.01 1,338,133 0.16% 0.70% 5.83% Platinum Investor Survivor 70,637 7.69 543,075 0.16% 0.40% 6.15% Platinum Investor Survivor II 48,295 10.67 515,279 0.15% 0.75% 5.78% Platinum Investor VIP 5,053 10.34 52,266 0.00% 0.70% 3.44% Platinum Investor VIP (with GMWB rider) 4 10.29 42 0.00% 1.45% 2.92% Fidelity VIP Mid Cap Portfolio - Service Class 2 Corporate America (reduced surrender charge) 22,227 15.07 334,918 0.11% 0.65% 11.68% Platinum Investor I & II 13,301 22.63 301,019 0.09% 0.75% 11.57% Platinum Investor III 180,244 22.67 4,086,599 0.20% 0.70% 11.62% Platinum Investor IV 53,740 12.88 691,998 0.10% 0.70% 11.62% Platinum Investor FlexDirector 768 15.16 11,634 0.14% 0.70% 11.62% Platinum Investor PLUS 14,277 22.67 323,706 0.15% 0.70% 11.62% Platinum Investor Survivor 8,347 22.92 191,340 0.22% 0.40% 11.96% Platinum Investor Survivor II 9,479 22.63 214,514 0.14% 0.75% 11.57% Platinum Investor VIP 21,594 10.53 227,412 0.00% 0.70% 5.31% Platinum Investor VIP (with GMWB rider) 177 10.48 1,853 0.00% 1.45% 4.79% Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 Corporate America (reduced surrender charge) 11,486 14.18 162,829 0.69% 0.65% 16.23% Platinum Investor I & II 16,237 20.43 331,726 0.67% 0.75% 16.11% Platinum Investor III 282,124 20.47 5,774,559 0.53% 0.70% 16.17% Platinum Investor IV 45,117 12.42 560,143 0.74% 0.70% 16.17% Platinum Investor FlexDirector 1,289 14.63 18,857 0.22% 0.70% 16.17% Platinum Investor PLUS 23,719 20.47 485,483 0.67% 0.70% 16.17% Platinum Investor Survivor 34,379 20.69 711,439 0.45% 0.40% 16.52% Platinum Investor Survivor II 12,461 20.43 254,585 0.54% 0.75% 16.11% Platinum Investor VIP 16,626 10.73 178,463 0.01% 0.70% 7.34% Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund - Class 2 AG Legacy Plus 13,801 7.87 108,582 0.00% 0.75% 7.88% Franklin Templeton - Franklin U.S. Government Fund - Class 2 Platinum Investor I & II 24,202 11.95 289,196 3.18% 0.75% 3.24% Platinum Investor III 673,395 11.98 8,066,647 3.52% 0.70% 3.29% Platinum Investor IV 32,239 10.44 336,569 6.10% 0.70% 3.29% Platinum Investor FlexDirector 823 10.67 8,781 4.60% 0.70% 3.38% Platinum Investor PLUS 40,170 11.59 465,468 4.20% 0.70% 3.29% Platinum Investor Survivor 893 12.16 10,857 0.77% 0.40% 3.60% Platinum Investor Survivor II 15,730 11.95 187,966 5.44% 0.75% 3.24% Platinum Investor VIP 3,077 10.32 31,741 0.00% 0.70% 3.16%
VL-R - 60 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------------- Franklin Templeton - Mutual Shares Securities Fund - Class 2 Platinum Investor I & II 159,272 $15.68 $ 2,497,778 1.24% 0.75% 17.50% Platinum Investor III 769,387 15.72 12,095,950 1.34% 0.70% 17.56% Platinum Investor IV 35,491 12.86 456,520 1.32% 0.70% 17.56% Platinum Investor FlexDirector 6,294 13.85 87,153 1.59% 0.70% 17.56% Platinum Investor PLUS 34,198 15.46 528,663 1.29% 0.70% 17.56% Platinum Investor Survivor 36,447 15.96 581,636 0.79% 0.40% 17.91% Platinum Investor Survivor II 10,882 15.68 170,655 1.17% 0.75% 17.50% Platinum Investor VIP 9,028 11.34 102,414 0.00% 0.70% 13.44% Platinum Investor VIP (with GMWB rider) 1,026 11.29 11,581 0.00% 1.45% 12.87% Franklin Templeton - Templeton Foreign Securities Fund - Class 2 AG Legacy Plus 12,189 13.08 159,389 1.20% 0.75% 20.54% Platinum Investor I & II 90,007 16.36 1,472,909 1.25% 0.75% 20.54% Platinum Investor III 597,923 16.41 9,809,047 1.24% 0.70% 20.60% Platinum Investor IV 29,770 13.10 389,863 1.37% 0.70% 20.60% Platinum Investor FlexDirector 3,405 14.65 49,879 1.58% 0.70% 20.60% Platinum Investor PLUS 27,887 15.86 442,340 1.23% 0.70% 20.60% Platinum Investor Survivor 14,765 16.65 245,867 1.89% 0.40% 20.96% Platinum Investor Survivor II 58,266 16.36 953,477 1.16% 0.75% 20.54% Platinum Investor VIP 8,709 11.58 100,882 0.07% 0.70% 15.83% Platinum Investor VIP (with GMWB rider) 7 11.53 80 0.07% 1.45% 15.26% Goldman Sachs Capital Growth Fund Platinum Investor I & II 4,775 10.19 48,659 0.07% 0.75% 7.75% Platinum Investor III 11,374 10.22 116,245 0.12% 0.70% 7.80% Platinum Investor PLUS 110 12.49 1,375 0.13% 0.70% 7.80% Platinum Investor Survivor 629,846 10.41 6,555,947 0.12% 0.40% 8.13% Platinum Investor Survivor II 41,634 10.83 450,751 0.05% 0.75% 7.75% Janus Aspen Series International Growth Portfolio - Service Shares Corporate America (reduced surrender charge) 3,726 22.30 83,075 2.40% 0.65% 37.16% Platinum Investor I & II 129,467 15.04 1,947,003 1.93% 0.75% 45.54% Platinum Investor III 431,775 14.95 6,455,480 1.87% 0.70% 45.61% Platinum Investor IV 28,414 18.79 534,018 1.97% 0.70% 45.61% Platinum Investor FlexDirector 10,143 20.74 210,403 1.56% 0.70% 45.61% Platinum Investor PLUS 50,064 23.96 1,199,523 2.05% 0.70% 45.61% Platinum Investor Survivor 57,117 15.37 877,687 1.93% 0.40% 46.05% Platinum Investor Survivor II 21,071 23.64 498,180 1.32% 0.75% 45.54% Platinum Investor VIP 13,491 13.01 175,488 1.00% 0.70% 30.08% Platinum Investor VIP (with GMWB rider) 153 12.94 1,978 1.00% 1.45% 29.43% Janus Aspen Series Mid Cap Growth Portfolio - Service Shares Corporate America -- 6.81 -- 0.00% 0.35% 12.91% Corporate America (reduced surrender charge) 2,178 14.46 31,494 0.00% 0.65% 9.49% Platinum Investor I & II 57,097 6.64 379,113 0.00% 0.75% 12.46% Platinum Investor III 402,798 6.48 2,611,910 0.00% 0.70% 12.52% Platinum Investor IV 4,510 12.58 56,753 0.00% 0.70% 12.52% Platinum Investor PLUS 13,069 16.94 221,438 0.00% 0.70% 12.52% Platinum Investor Survivor 8,380 6.78 56,855 0.00% 0.40% 12.85% Platinum Investor Survivor II 372 15.11 5,620 0.00% 0.75% 12.46% Platinum Investor VIP 2,105 10.64 22,402 0.00% 0.70% 6.42%
VL-R - 61 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------- Janus Aspen Series Worldwide Growth Portfolio - Service Shares Corporate America 2,356 $ 8.17 $ 19,239 1.57% 0.35% 17.53% Corporate America (reduced surrender charge) 5,652 13.55 76,560 1.57% 0.65% 17.17% Platinum Investor I & II 89,477 7.97 712,859 1.47% 0.75% 17.06% Platinum Investor III 360,131 7.91 2,847,552 1.58% 0.70% 17.12% Platinum Investor IV 7,576 12.34 93,519 1.86% 0.70% 17.12% Platinum Investor PLUS 16,370 12.63 206,702 1.61% 0.70% 17.12% Platinum Investor Survivor 20,259 8.14 164,922 1.65% 0.40% 17.47% Platinum Investor Survivor II 25,600 12.08 309,271 1.59% 0.75% 17.06% JPMorgan Mid Cap Value Portfolio Platinum Investor I & II 5,703 18.68 106,542 0.57% 0.75% 15.97% Platinum Investor III 150,607 18.71 2,818,547 0.59% 0.70% 16.03% Platinum Investor IV 16,314 12.40 202,340 0.93% 0.70% 16.03% Platinum Investor PLUS 6,734 18.71 126,028 0.70% 0.70% 16.03% Platinum Investor Survivor 9,943 18.92 188,141 0.58% 0.40% 16.37% Platinum Investor Survivor II 3,071 18.68 57,363 0.94% 0.75% 15.97% JPMorgan Small Company Portfolio Platinum Investor I & II 48,036 13.37 642,235 0.00% 0.75% 14.15% Platinum Investor III 118,040 13.17 1,554,596 0.00% 0.70% 14.21% Platinum Investor IV 11,316 11.97 135,411 0.00% 0.70% 14.21% Platinum Investor FlexDirector 241 14.21 3,426 0.00% 0.70% 14.21% Platinum Investor PLUS 10,278 16.40 168,543 0.00% 0.70% 14.21% Platinum Investor Survivor 1,887 13.66 25,780 0.00% 0.40% 14.55% Platinum Investor Survivor II 4,947 17.18 84,995 0.00% 0.75% 14.15% Platinum Investor VIP 11,120 10.39 115,585 0.00% 0.70% 3.95% MFS VIT Capital Opportunities Series - Initial Class Corporate America -- 7.80 -- 0.00% 0.35% 13.40% Corporate America (reduced surrender charge) 1,910 12.62 24,108 0.00% 0.65% 10.44% Platinum Investor I & II 80,028 7.61 608,843 0.47% 0.75% 12.95% Platinum Investor III 391,046 7.69 3,005,410 0.43% 0.70% 13.01% Platinum Investor IV 5,915 11.70 69,193 0.45% 0.70% 13.01% Platinum Investor FlexDirector 332 12.07 4,004 0.44% 0.70% 13.01% Platinum Investor PLUS 44,725 12.95 578,981 0.43% 0.70% 13.01% Platinum Investor Survivor 23,342 7.77 181,455 0.51% 0.40% 13.35% Platinum Investor Survivor II 4,151 11.78 48,904 0.41% 0.75% 12.95% MFS VIT Emerging Growth Series - Initial Class AG Legacy Plus 8,181 12.45 101,831 0.00% 0.75% 7.09% Corporate America (reduced surrender charge) 3,795 13.23 50,218 0.00% 0.65% 7.20% Platinum Investor I & II 557,011 12.12 6,750,035 0.00% 0.75% 7.09% Platinum Investor III 608,177 6.42 3,906,235 0.00% 0.70% 7.14% Platinum Investor IV 7,093 11.93 84,654 0.00% 0.70% 7.14% Platinum Investor FlexDirector 459 12.23 5,608 0.00% 0.70% 7.14% Platinum Investor PLUS 41,485 13.52 561,079 0.00% 0.70% 7.14% Platinum Investor Survivor 101,337 5.78 585,434 0.00% 0.40% 7.46% Platinum Investor Survivor II 3,643 11.62 42,340 0.00% 0.75% 7.09% MFS VIT New Discovery Series - Initial Class AG Legacy Plus 18,891 9.19 173,554 0.00% 0.75% 12.37% Corporate America 2,179 10.09 21,981 0.00% 0.35% 12.82% Corporate America (reduced surrender charge) 1,942 13.48 26,187 0.00% 0.65% 3.76% Platinum Investor I & II 50,346 9.84 495,454 0.00% 0.75% 12.37%
VL-R - 62 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------ MFS VIT New Discovery Series - Initial Class - Continued Platinum Investor III 290,883 $ 9.65 $2,806,891 0.00% 0.70% 12.43% Platinum Investor IV 6,812 12.10 82,438 0.00% 0.70% 12.43% Platinum Investor FlexDirector 399 11.70 4,665 0.00% 0.70% 12.43% Platinum Investor PLUS 21,631 13.11 283,573 0.00% 0.70% 12.43% Platinum Investor Survivor 11,457 10.06 115,209 0.00% 0.40% 12.76% Platinum Investor Survivor II 9,508 12.62 119,995 0.00% 0.75% 12.37% Platinum Investor VIP 1,803 10.53 18,992 0.00% 0.70% 5.34% Platinum Investor VIP (with GMWB rider) 288 10.48 3,023 0.00% 1.45% 4.82% MFS VIT Research Series - Initial Class Platinum Investor I & II 41,679 8.79 366,566 0.49% 0.75% 9.65% Platinum Investor III 181,505 8.77 1,591,741 0.47% 0.70% 9.71% Platinum Investor IV 3,471 11.71 40,642 0.48% 0.70% 9.71% Platinum Investor FlexDirector 196 12.64 2,480 0.50% 0.70% 9.71% Platinum Investor PLUS 10,838 13.86 150,226 0.49% 0.70% 9.71% Platinum Investor Survivor 9,854 8.99 88,558 0.53% 0.40% 10.04% Platinum Investor Survivor II 10,176 12.90 131,265 0.39% 0.75% 9.65% Platinum Investor VIP 903 10.77 9,723 0.00% 0.70% 7.72% Platinum Investor VIP (with GMWB rider) 4 10.72 43 0.00% 1.45% 7.19% MFS VIT Total Return Series - Initial Class AG Legacy Plus 109,796 7.06 775,099 2.42% 0.75% 11.06% Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I Corporate America (reduced surrender charge) 3,647 14.62 53,308 0.00% 0.65% 13.95% Platinum Investor I & II 70,356 8.22 578,080 0.00% 0.75% 13.84% Platinum Investor III 333,481 8.09 2,696,892 0.00% 0.70% 13.90% Platinum Investor IV 13,927 12.87 179,221 0.00% 0.70% 13.90% Platinum Investor FlexDirector 714 14.23 10,164 0.00% 0.70% 13.90% Platinum Investor PLUS 41,810 15.08 630,433 0.00% 0.70% 13.90% Platinum Investor Survivor 30,403 8.40 255,255 0.00% 0.40% 14.24% Platinum Investor Survivor II 10,380 13.82 143,498 0.00% 0.75% 13.84% Platinum Investor VIP 4,202 10.65 44,755 0.00% 0.70% 6.51% Neuberger Berman AMT Partners Portfolio - Class I AG Legacy Plus 7,514 14.80 111,195 0.70% 0.75% 11.40% Oppenheimer Balanced Fund/VA - Non-Service Shares Platinum Investor I & II 7,426 14.76 109,608 2.53% 0.75% 10.32% Platinum Investor III 48,802 14.79 721,678 1.94% 0.70% 10.37% Platinum Investor IV 27,624 11.30 312,121 1.57% 0.70% 10.37% Platinum Investor FlexDirector 2,036 12.06 24,542 0.05% 0.70% 10.37% Platinum Investor PLUS 4,373 14.79 64,665 2.05% 0.70% 10.37% Platinum Investor Survivor 286 14.95 4,271 2.46% 0.40% 10.70% Platinum Investor Survivor II 4,031 14.76 59,494 2.01% 0.75% 10.32% Platinum Investor VIP 6,392 10.87 69,487 0.00% 0.70% 8.71% Oppenheimer Global Securities Fund/VA - Non-Service Shares Corporate America (reduced surrender charge) 6,634 15.54 103,066 0.06% 0.65% 11.20% Platinum Investor I & II 17,823 22.29 397,267 0.77% 0.75% 16.81% Platinum Investor III 109,609 22.33 2,447,539 0.93% 0.70% 16.87% Platinum Investor IV 29,344 13.56 397,860 0.77% 0.70% 16.87% Platinum Investor FlexDirector 570 14.82 8,452 0.04% 0.70% 16.87% Platinum Investor PLUS 11,603 22.33 259,082 0.91% 0.70% 16.87% Platinum Investor Survivor 7,429 22.58 167,710 0.76% 0.40% 17.22%
VL-R - 63 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) -------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Global Securities Fund/VA - Non-Service Shares - Continued Platinum Investor Survivor II 4,384 $22.29 $ 97,708 0.87% 0.75% 16.81% Platinum Investor VIP 14,610 11.15 162,922 0.00% 0.70% 11.52% Platinum Investor VIP (with GMWB rider) 171 11.10 1,893 0.00% 1.45% 10.96% Oppenheimer High Income Fund/VA - Non-Service Shares AG Legacy Plus 8,002 13.80 110,446 7.35% 0.75% 8.61% PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class Platinum Investor I & II 21,567 9.56 206,126 5.92% 0.75% -4.43% Platinum Investor III 2,720 9.56 26,007 5.87% 0.70% -4.39% Platinum Investor IV 183 9.56 1,753 5.14% 0.70% -4.39% Platinum Investor PLUS 38 9.56 361 4.69% 0.70% -4.39% Platinum Investor Survivor II 179 9.56 1,712 5.24% 0.75% -4.43% Platinum Investor VIP 1,885 10.16 19,142 5.06% 0.70% 1.55% Platinum Investor VIP (with GMWB rider) 3 10.10 31 5.06% 1.45% 1.05% PIMCO VIT Real Return Portfolio - Administrative Class AG Legacy Plus 29,743 14.18 421,867 4.71% 0.75% -0.05% Corporate America 2,113 15.84 33,458 4.57% 0.35% 0.35% Corporate America (reduced surrender charge) 16,110 10.46 168,582 4.57% 0.65% 0.05% Platinum Investor I & II 113,865 15.45 1,759,230 4.83% 0.75% -0.05% Platinum Investor III 462,472 15.53 7,182,052 4.16% 0.70% 0.00% Platinum Investor IV 43,576 10.03 437,184 5.05% 0.70% 0.00% Platinum Investor FlexDirector 992 10.52 10,435 5.15% 0.70% 0.00% Platinum Investor PLUS 35,349 13.11 463,456 4.18% 0.70% 0.00% Platinum Investor Survivor 54,072 15.79 853,623 4.34% 0.40% 0.30% Platinum Investor Survivor II 28,648 13.27 380,231 4.41% 0.75% -0.05% Platinum Investor VIP 3,390 10.00 33,914 2.47% 0.70% 0.04% PIMCO VIT Short-Term Portfolio - Administrative Class Corporate America 666 11.99 7,987 4.04% 0.35% 3.91% Corporate America (reduced surrender charge) 850 10.59 8,993 4.04% 0.65% 2.53% Platinum Investor I & II 95,302 11.70 1,115,337 4.29% 0.75% 3.50% Platinum Investor III 206,087 11.73 2,417,253 4.19% 0.70% 3.55% Platinum Investor IV 22,405 10.52 235,808 4.69% 0.70% 3.55% Platinum Investor FlexDirector 7,184 10.59 76,050 4.47% 0.70% 3.55% Platinum Investor PLUS 29,401 10.92 320,971 4.35% 0.70% 3.55% Platinum Investor Survivor 31,994 11.96 382,585 4.32% 0.40% 3.86% Platinum Investor Survivor II 32,237 11.01 354,789 4.39% 0.75% 3.50% Platinum Investor VIP 6,296 10.32 64,966 1.78% 0.70% 3.19% Platinum Investor VIP (with GMWB rider) 4 10.27 40 1.78% 1.45% 2.68% PIMCO VIT Total Return Portfolio - Administrative Class AG Legacy Plus 33,244 13.02 432,989 4.66% 0.75% 3.07% Corporate America (reduced surrender charge) 17,778 10.59 188,244 4.80% 0.65% 3.17% Platinum Investor I & II 318,679 13.65 4,349,723 3.92% 0.75% 3.07% Platinum Investor III 1,024,392 13.74 14,071,624 3.25% 0.70% 3.12% Platinum Investor IV 64,491 10.43 672,919 4.86% 0.70% 3.12% Platinum Investor FlexDirector 11,001 10.74 118,186 4.42% 0.70% 3.12% Platinum Investor PLUS 71,700 11.97 858,520 4.46% 0.70% 3.12% Platinum Investor Survivor 75,028 13.95 1,046,388 3.28% 0.40% 3.43% Platinum Investor Survivor II 64,509 12.07 778,824 4.37% 0.75% 3.07% Platinum Investor VIP 13,561 10.29 139,563 1.99% 0.70% 2.91% Platinum Investor VIP (with GMWB rider) 400 10.24 4,098 1.99% 1.45% 2.40%
VL-R - 64 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- Pioneer Fund VCT Portfolio - Class I Platinum Investor I & II 202,285 $12.47 $2,521,852 1.34% 0.75% 15.76% Platinum Investor III 51,887 12.48 647,531 1.33% 0.70% 15.82% Platinum Investor PLUS 943 12.48 11,766 1.31% 0.70% 15.82% Platinum Investor Survivor 8,828 12.56 110,856 1.04% 0.40% 16.17% Platinum Investor Survivor II 578 12.47 7,211 1.37% 0.75% 15.76% Pioneer Growth Opportunities VCT Portfolio - Class I Corporate America 3,320 11.50 38,192 0.00% 0.35% 5.23% Platinum Investor I & II 263,245 11.41 3,003,742 0.00% 0.75% 4.81% Platinum Investor III 135,222 11.42 1,544,521 0.00% 0.70% 4.86% Platinum Investor PLUS 5,921 11.42 67,627 0.00% 0.70% 4.86% Platinum Investor Survivor 9,975 11.49 114,644 0.00% 0.40% 5.18% Platinum Investor Survivor II 19,602 11.41 223,666 0.00% 0.75% 4.81% Pioneer Mid Cap Value VCT Portfolio - Class I Platinum Investor I & II 4 10.60 42 0.00% 0.75% 6.00% Platinum Investor III 3,700 10.60 39,237 0.00% 0.70% 6.04% Platinum Investor IV 77 10.60 814 0.00% 0.70% 6.04% Platinum Investor PLUS 25 10.60 265 0.00% 0.70% 6.04% Platinum Investor Survivor II 2,372 10.60 25,140 0.00% 0.75% 6.00% Platinum Investor VIP 933 10.83 10,107 0.30% 0.70% 8.29% Putnam VT Diversified Income Fund - Class IB AG Legacy Plus 12,568 14.80 186,024 5.84% 0.75% 5.50% Corporate America 454,666 15.24 6,928,517 5.28% 0.35% 5.92% Corporate America (reduced surrender charge) 38,797 11.22 435,342 5.28% 0.65% 5.61% Platinum Investor I & II 135,182 14.30 1,932,575 3.34% 0.75% 5.50% Platinum Investor III 93,931 15.33 1,440,078 3.61% 0.70% 5.55% Platinum Investor IV 9,567 10.67 102,088 5.38% 0.70% 5.55% Platinum Investor FlexDirector 122 11.48 1,396 5.67% 0.70% 5.55% Platinum Investor PLUS 9,089 14.21 129,141 5.26% 0.70% 5.55% Platinum Investor Survivor 18,717 15.21 284,612 0.28% 0.40% 5.87% Platinum Investor Survivor II 2,371 14.58 34,570 6.07% 0.75% 5.50% Platinum Investor VIP 4,069 10.48 42,657 0.00% 0.70% 4.83% Putnam VT Growth and Income Fund - Class IB Corporate America 555,630 13.63 7,571,940 1.40% 0.35% 15.51% Corporate America (reduced surrender charge) 44,042 12.96 570,814 1.40% 0.65% 15.16% Platinum Investor I & II 338,156 14.01 4,736,505 1.56% 0.75% 15.05% Platinum Investor III 550,344 12.66 6,969,006 1.51% 0.70% 15.10% Platinum Investor IV 31,945 11.96 382,007 1.28% 0.70% 15.10% Platinum Investor FlexDirector 10,914 12.69 138,516 1.35% 0.70% 15.10% Platinum Investor PLUS 36,439 14.17 516,420 1.42% 0.70% 15.10% Platinum Investor Survivor 30,051 13.60 408,642 1.75% 0.40% 15.45% Platinum Investor Survivor II 7,192 13.89 99,900 1.52% 0.75% 15.05% Putnam VT International Growth and Income Fund - Class IB Corporate America (reduced surrender charge) 3,545 16.49 58,445 0.68% 0.65% 26.40% Platinum Investor I & II 199,621 18.41 3,675,650 1.06% 0.75% 26.28% Platinum Investor III 223,141 16.32 3,640,803 1.00% 0.70% 26.34% Platinum Investor IV 22,123 14.30 316,258 0.83% 0.70% 26.34% Platinum Investor FlexDirector 642 16.19 10,399 0.49% 0.70% 26.34% Platinum Investor PLUS 14,565 19.17 279,276 1.10% 0.70% 26.34% Platinum Investor Survivor 33,285 15.95 530,826 1.18% 0.40% 26.72%
VL-R - 65 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------- Putnam VT International Growth and Income Fund - Class IB - Continued Platinum Investor Survivor II 11,104 $20.82 $ 231,128 0.98% 0.75% 26.28% Platinum Investor VIP 8,247 11.97 98,683 0.00% 0.70% 19.66% Putnam VT Small Cap Value Fund - Class IB AG Legacy Plus 16,985 24.50 416,127 0.31% 0.75% 16.42% Putnam VT Vista Fund - Class IB AG Legacy Plus 27,252 6.48 176,650 0.00% 0.75% 4.67% Putnam VT Voyager Fund - Class IB AG Legacy Plus 66,699 6.32 421,428 0.11% 0.75% 4.65% SunAmerica - Aggressive Growth Portfolio - Class 1 Platinum Investor I & II 17,757 14.05 249,429 0.10% 0.75% 12.45% Platinum Investor III 45,746 14.08 644,074 0.11% 0.70% 12.50% Platinum Investor IV 5,114 11.95 61,097 0.11% 0.70% 12.50% Platinum Investor PLUS 9,223 14.95 137,898 0.11% 0.70% 12.50% Platinum Investor Survivor 750 14.28 10,708 0.10% 0.40% 12.84% Platinum Investor Survivor II 1,364 14.05 19,155 0.13% 0.75% 12.45% Platinum Investor VIP 748 10.68 7,986 0.15% 0.70% 6.75% SunAmerica - SunAmerica Balanced Portfolio - Class 1 Platinum Investor I & II 730 11.93 8,702 2.77% 0.75% 10.04% Platinum Investor III 70,947 11.96 848,269 2.85% 0.70% 10.10% Platinum Investor IV 6,901 11.14 76,869 3.41% 0.70% 10.10% Platinum Investor PLUS 19,626 12.33 242,055 2.84% 0.70% 10.10% Platinum Investor Survivor II 2,630 11.93 31,377 2.85% 0.75% 10.04% Platinum Investor VIP 1,770 10.84 19,178 2.71% 0.70% 8.38% UIF Equity Growth Portfolio - Class I Platinum Investor I & II 248,559 12.18 3,028,213 0.00% 0.75% 3.33% Platinum Investor III 88,608 8.19 725,418 0.00% 0.70% 3.38% Platinum Investor IV 3,125 12.27 38,349 0.00% 0.70% 3.38% Platinum Investor PLUS 5,404 13.04 70,451 0.00% 0.70% 3.38% Platinum Investor Survivor 23,805 7.85 186,981 0.00% 0.40% 3.69% Platinum Investor Survivor II 415 11.50 4,778 0.00% 0.75% 3.33% UIF High Yield Portfolio - Class I Platinum Investor I & II 76,001 12.04 915,380 8.16% 0.75% 7.81% Platinum Investor III 26,657 12.50 333,263 7.57% 0.70% 7.87% Platinum Investor IV 1,701 10.77 18,330 7.40% 0.70% 7.87% Platinum Investor FlexDirector 2,593 11.68 30,297 7.69% 0.70% 7.87% Platinum Investor PLUS 3,405 13.96 47,537 7.99% 0.70% 7.87% Platinum Investor Survivor 256 11.80 3,022 5.20% 0.40% 8.19% Platinum Investor Survivor II 8,625 13.61 117,419 6.10% 0.75% 7.81% VALIC Company I - International Equities Fund AG Legacy Plus 9,194 11.65 107,097 1.25% 0.75% 22.14% Platinum Investor I & II 63,701 14.94 951,862 1.50% 0.75% 22.14% Platinum Investor III 87,669 12.94 1,134,020 1.58% 0.70% 22.20% Platinum Investor IV 4,262 14.14 60,257 2.11% 0.70% 22.20% Platinum Investor FlexDirector 695 15.90 11,054 1.72% 0.70% 22.20% Platinum Investor PLUS 11,740 16.94 198,841 1.59% 0.70% 22.20% Platinum Investor Survivor 14,503 11.53 167,217 1.62% 0.40% 22.57% Platinum Investor Survivor II 1,507 17.59 26,517 1.71% 0.75% 22.14% Platinum Investor VIP 7,289 11.73 85,475 2.93% 0.70% 17.27%
VL-R - 66 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------- VALIC Company I - Mid Cap Index Fund AG Legacy Plus 19,582 $15.64 $ 306,276 0.46% 0.75% 9.15% Corporate America 5,475 17.12 93,748 0.54% 0.35% 9.59% Corporate America (reduced surrender charge) 4,478 13.72 61,432 0.54% 0.65% 9.26% Platinum Investor I & II 350,008 23.19 8,116,965 0.48% 0.75% 9.15% Platinum Investor III 413,935 15.25 6,312,099 0.48% 0.70% 9.21% Platinum Investor IV 23,308 12.18 283,853 0.65% 0.70% 9.21% Platinum Investor FlexDirector 419 13.22 5,539 0.88% 0.70% 9.21% Platinum Investor PLUS 43,892 15.70 689,091 0.51% 0.70% 9.21% Platinum Investor Survivor 61,023 17.09 1,042,738 0.49% 0.40% 9.54% Platinum Investor Survivor II 35,204 17.11 602,297 0.55% 0.75% 9.15% Platinum Investor VIP 14,211 10.36 147,222 0.87% 0.70% 3.59% Platinum Investor VIP (with GMWB rider) 177 10.31 1,830 0.87% 1.45% 3.08% VALIC Company I - Money Market I Fund AG Legacy Plus 16,295 11.14 181,446 3.96% 0.75% 3.84% Corporate America (reduced surrender charge) 38,636 10.63 410,658 5.40% 0.65% 3.94% Platinum Investor I & II 681,680 12.27 8,366,230 4.97% 0.75% 3.84% Platinum Investor III 1,178,024 11.06 13,032,151 6.84% 0.70% 3.89% Platinum Investor IV 30,634 10.59 324,280 6.05% 0.70% 3.89% Platinum Investor FlexDirector 17 10.61 179 907.96% 0.70% 3.89% Platinum Investor PLUS 34,418 10.63 365,827 3.91% 0.70% 3.89% Platinum Investor Survivor 192,818 11.65 2,245,828 5.41% 0.40% 4.20% Platinum Investor Survivor II 481,493 10.64 5,124,182 4.48% 0.75% 3.84% Platinum Investor VIP 52,469 10.34 542,527 2.99% 0.70% 3.40% Platinum Investor VIP (with GMWB rider) 441 10.29 4,538 2.99% 1.45% 2.88% VALIC Company I - Nasdaq-100 Index Fund Platinum Investor I & II 188,901 5.16 974,283 0.07% 0.75% 5.86% Platinum Investor III 410,245 5.07 2,081,367 0.07% 0.70% 5.92% Platinum Investor IV 3,678 11.26 41,405 0.11% 0.70% 5.92% Platinum Investor FlexDirector 95 11.48 1,092 0.09% 0.70% 5.92% Platinum Investor PLUS 17,060 14.55 248,157 0.08% 0.70% 5.92% Platinum Investor Survivor 9,147 5.27 48,208 0.07% 0.40% 6.23% Platinum Investor Survivor II 71,610 10.93 782,789 0.09% 0.75% 5.86% Platinum Investor VIP 880 10.42 9,173 0.15% 0.70% 4.20% VALIC Company I - Science & Technology Fund Platinum Investor I & II 57,061 4.26 242,800 0.00% 0.75% 5.06% Platinum Investor III 195,015 4.22 823,789 0.00% 0.70% 5.11% Platinum Investor IV 2,904 11.17 32,430 0.00% 0.70% 5.11% Platinum Investor FlexDirector 106 10.74 1,140 0.00% 0.70% 5.11% Platinum Investor PLUS 3,788 13.09 49,595 0.00% 0.70% 5.11% Platinum Investor Survivor 11,405 4.35 49,586 0.00% 0.40% 5.43% Platinum Investor Survivor II 2,616 9.82 25,682 0.00% 0.75% 5.06% Platinum Investor VIP 338 10.27 3,471 0.00% 0.70% 2.70% VALIC Company I - Small Cap Index Fund Corporate America -- 16.45 -- 0.65% 0.35% 17.65% Corporate America (reduced surrender charge) 2,443 13.88 33,899 0.65% 0.65% 1.02% Platinum Investor I & II 126,100 16.05 2,024,385 0.37% 0.75% 17.18% Platinum Investor III 213,978 15.82 3,385,593 0.36% 0.70% 17.24% Platinum Investor IV 20,793 12.46 259,100 0.50% 0.70% 17.24% Platinum Investor FlexDirector 952 13.32 12,683 0.66% 0.70% 17.24%
VL-R - 67 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ---------------------------------------------------------------------------------------------------------------------- VALIC Company I - Small Cap Index Fund - Continued Platinum Investor PLUS 28,524 $16.73 $ 477,336 0.39% 0.70% 17.24% Platinum Investor Survivor 11,854 16.40 194,454 0.38% 0.40% 17.59% Platinum Investor Survivor II 8,722 17.98 156,826 0.47% 0.75% 17.18% Platinum Investor VIP 12,113 10.78 130,611 0.69% 0.70% 7.83% Platinum Investor VIP (with GMWB rider) 169 10.73 1,815 0.69% 1.45% 7.29% VALIC Company I - Stock Index Fund AG Legacy Plus 76,604 9.92 760,082 0.83% 0.75% 14.55% Corporate America 6,614 10.02 66,268 0.98% 0.35% 15.01% Corporate America (reduced surrender charge) 8,011 12.89 103,293 0.98% 0.65% 14.66% Platinum Investor I & II 1,139,545 13.60 15,492,256 0.83% 0.75% 14.55% Platinum Investor III 1,326,823 10.30 13,664,729 0.75% 0.70% 14.61% Platinum Investor IV 44,725 11.95 534,307 1.23% 0.70% 14.61% Platinum Investor FlexDirector 10,337 12.55 129,718 0.96% 0.70% 14.61% Platinum Investor PLUS 109,880 14.11 1,550,729 0.88% 0.70% 14.61% Platinum Investor Survivor 261,843 10.00 2,617,693 0.72% 0.40% 14.95% Platinum Investor Survivor II 47,924 13.12 628,916 1.03% 0.75% 14.55% Platinum Investor VIP 6,880 11.09 76,321 1.53% 0.70% 10.94% Van Kampen LIT Government Portfolio - Class I AG Legacy Plus 9,986 13.60 135,776 4.69% 0.75% 2.57% Van Kampen LIT Growth and Income Portfolio - Class I Platinum Investor I & II 181,624 15.03 2,729,972 1.03% 0.75% 15.37% Platinum Investor III 501,127 15.07 7,549,952 0.98% 0.70% 15.43% Platinum Investor IV 36,800 12.54 461,468 0.87% 0.70% 15.43% Platinum Investor FlexDirector 1,089 13.65 14,856 1.41% 0.70% 15.43% Platinum Investor PLUS 23,855 15.35 366,194 1.06% 0.70% 15.43% Platinum Investor Survivor 34,840 15.28 532,301 0.90% 0.40% 15.77% Platinum Investor Survivor II 24,347 15.03 365,949 1.43% 0.75% 15.37% Platinum Investor VIP 6,879 11.26 77,444 0.00% 0.70% 12.58% Van Kampen LIT Strategic Growth Portfolio - Class I * AG Legacy Plus 11,018 5.20 57,242 0.00% 0.75% 2.09% Vanguard VIF High Yield Bond Portfolio Corporate America (reduced surrender charge) 6,015 11.33 68,129 3.16% 0.65% 7.57% Platinum Investor I & II 62,165 13.99 869,391 7.62% 0.75% 7.46% Platinum Investor III 216,582 14.11 3,055,522 7.69% 0.70% 7.52% Platinum Investor IV 24,390 10.90 265,743 5.81% 0.70% 7.52% Platinum Investor FlexDirector 121 11.69 1,416 9.62% 0.70% 7.52% Platinum Investor PLUS 28,223 13.57 382,889 7.12% 0.70% 7.52% Platinum Investor Survivor 25,443 14.29 363,576 6.34% 0.40% 7.84% Platinum Investor Survivor II 8,739 13.87 121,186 5.56% 0.75% 7.46% Platinum Investor VIP 5,014 10.60 53,164 0.00% 0.70% 6.03% Platinum Investor VIP (with GMWB rider) 2 10.55 21 0.00% 1.45% 5.50% Vanguard VIF REIT Index Portfolio Corporate America 668 33.12 22,132 1.09% 0.35% 34.46% Corporate America (reduced surrender charge) 6,565 17.25 113,228 1.09% 0.65% 34.06% Platinum Investor I & II 103,667 32.32 3,350,190 1.98% 0.75% 33.92% Platinum Investor III 293,212 32.36 9,488,562 1.95% 0.70% 33.99% Platinum Investor IV 52,457 15.48 811,986 1.70% 0.70% 33.99% Platinum Investor FlexDirector 5,996 18.01 107,994 2.01% 0.70% 33.99% Platinum Investor PLUS 64,510 24.34 1,570,440 1.80% 0.70% 33.99%
VL-R - 68 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2006 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ---------------------------------------------------------------------------------------------------------- Vanguard VIF REIT Index Portfolio - Continued Platinum Investor Survivor 20,454 $33.02 $675,402 2.23% 0.40% 34.39% Platinum Investor Survivor II 26,865 28.16 756,516 1.96% 0.75% 33.92% Platinum Investor VIP 18,069 12.15 219,598 0.00% 0.70% 21.54% Platinum Investor VIP (with GMWB rider) 515 12.09 6,223 0.00% 1.45% 20.93%
VL-R - 69 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------ AIM V.I. International Growth Fund - Series I AG Legacy Plus 32,768 $ 9.41 $ 308,334 0.74% 0.75% 17.05% Corporate America 4,331 9.15 39,611 0.62% 0.35% 17.52% Corporate America (reduced surrender charge) 1,888 13.67 25,808 0.62% 0.65% 17.17% Platinum Investor I & II 303,611 13.02 3,953,631 0.64% 0.75% 17.05% Platinum Investor III 242,577 10.94 2,653,921 0.57% 0.70% 17.11% Platinum Investor IV 10,946 11.63 127,267 1.11% 0.70% 16.27% Platinum Investor FlexDirector 82 13.42 1,100 1.25% 0.70% 17.11% Platinum Investor PLUS 15,378 15.14 232,771 0.78% 0.70% 17.11% Platinum Investor Survivor 49,996 9.13 456,490 0.57% 0.40% 17.46% Platinum Investor Survivor II 2,093 15.85 33,174 0.16% 0.75% 17.05% AIM V.I. Premier Equity Fund - Series I Corporate America 5,660 6.57 37,172 0.84% 0.35% 5.29% Platinum Investor I & II 763,942 10.42 7,961,692 0.81% 0.75% 4.87% Platinum Investor III 483,611 7.75 3,749,782 0.84% 0.70% 4.92% Platinum Investor IV 6,207 10.54 65,390 1.48% 0.70% 5.36% Platinum Investor FlexDirector 389 10.70 4,164 0.56% 0.70% 4.92% Platinum Investor PLUS 19,332 11.25 217,528 0.90% 0.70% 4.92% Platinum Investor Survivor 108,351 6.56 710,371 0.82% 0.40% 5.23% Platinum Investor Survivor II 8,346 9.69 80,911 0.91% 0.75% 4.87% Alger American Leveraged AllCap Portfolio - Class O Shares Platinum Investor I & II 7,478 14.69 109,883 0.00% 0.75% 13.59% Platinum Investor III 48,147 14.71 708,454 0.00% 0.70% 13.65% Platinum Investor IV 5,386 11.58 62,390 0.00% 0.70% 15.84% Platinum Investor FlexDirector 87 11.60 1,008 0.00% 0.70% 13.65% Platinum Investor PLUS 11,227 14.71 165,196 0.00% 0.70% 13.65% Platinum Investor Survivor 158 14.83 2,338 0.00% 0.40% 13.99% Platinum Investor Survivor II 193 14.69 2,842 0.00% 0.75% 13.59% Alger American MidCap Growth Portfolio - Class O Shares Corporate America (reduced surrender charge) 1,173 12.43 14,580 0.00% 0.65% 9.11% Platinum Investor I & II 8,794 16.60 145,966 0.00% 0.75% 9.01% Platinum Investor III 59,995 16.62 997,163 0.00% 0.70% 9.06% Platinum Investor IV 4,283 11.00 47,112 0.00% 0.70% 10.00% Platinum Investor FlexDirector 6,595 11.60 76,513 0.00% 0.70% 9.06% Platinum Investor PLUS 8,153 16.62 135,516 0.00% 0.70% 9.06% Platinum Investor Survivor 945 16.75 15,837 0.00% 0.40% 9.39% Platinum Investor Survivor II 2,178 16.60 36,145 0.00% 0.75% 9.01% American Century VP Value Fund - Class I AG Legacy Plus 29,373 17.55 515,430 0.91% 0.75% 4.25% Corporate America 2,515 16.18 40,705 0.53% 0.35% 4.67% Corporate America (reduced surrender charge) 7,554 11.21 84,683 0.53% 0.65% 4.35% Platinum Investor I & II 263,440 15.85 4,176,032 0.88% 0.75% 4.25% Platinum Investor III 503,096 15.77 7,932,245 0.77% 0.70% 4.30% Platinum Investor IV 24,188 10.37 250,785 0.00% 0.70% 3.68%
VL-R - 70 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- American Century VP Value Fund - Class I - Continued Platinum Investor FlexDirector 47 $11.29 $ 530 0.76% 0.70% 4.30% Platinum Investor PLUS 54,262 13.36 724,814 0.81% 0.70% 4.30% Platinum Investor Survivor 22,479 16.14 362,826 0.65% 0.40% 4.62% Platinum Investor Survivor II 61,884 13.96 864,131 0.88% 0.75% 4.25% Credit Suisse Small Cap Growth Portfolio Platinum Investor I & II 38,413 7.90 303,486 0.00% 0.75% -3.40% Platinum Investor III 122,544 7.74 948,802 0.00% 0.70% -3.36% Platinum Investor IV 2,716 9.89 26,872 0.00% 0.70% -1.07% Platinum Investor FlexDirector 5,715 9.79 55,969 0.00% 0.70% -3.36% Platinum Investor PLUS 10,800 12.36 133,478 0.00% 0.70% -3.36% Platinum Investor Survivor 3,169 8.04 25,490 0.00% 0.40% -3.07% Platinum Investor Survivor II 1,787 11.71 20,923 0.00% 0.75% -3.40% Dreyfus IP MidCap Stock Portfolio - Initial shares Platinum Investor I & II 77,491 13.17 1,020,785 0.04% 0.75% 8.36% Platinum Investor III 226,387 12.96 2,934,707 0.03% 0.70% 8.41% Platinum Investor IV 4,649 10.88 50,588 0.00% 0.70% 8.81% Platinum Investor FlexDirector 1 11.78 12 0.00% 0.70% 8.41% Platinum Investor PLUS 20,845 13.61 283,805 0.03% 0.70% 8.41% Platinum Investor Survivor 14,773 13.41 198,157 0.03% 0.40% 8.74% Platinum Investor Survivor II 8,917 14.91 132,916 0.03% 0.75% 8.36% Dreyfus VIF Developing Leaders Portfolio - Initial shares Corporate America 5,611 12.14 68,140 0.00% 0.35% 5.43% Corporate America (reduced surrender charge) 829 11.39 9,438 0.00% 0.65% 5.12% Platinum Investor I & II 352,535 14.61 5,151,944 0.00% 0.75% 5.01% Platinum Investor III 448,236 11.26 5,049,247 0.00% 0.70% 5.06% Platinum Investor IV 4,825 10.72 51,735 0.00% 0.70% 7.22% Platinum Investor FlexDirector 503 10.68 5,372 0.00% 0.70% 5.06% Platinum Investor PLUS 32,044 12.16 389,665 0.00% 0.70% 5.06% Platinum Investor Survivor 60,276 12.12 730,742 0.00% 0.40% 5.38% Platinum Investor Survivor II 31,277 13.21 413,095 0.00% 0.75% 5.01% Dreyfus VIF Quality Bond Portfolio - Initial shares Corporate America 2,486 13.64 33,915 3.56% 0.35% 2.12% Corporate America (reduced surrender charge) 4,157 10.41 43,253 3.56% 0.65% 1.82% Platinum Investor I & II 295,506 13.56 4,006,889 3.56% 0.75% 1.71% Platinum Investor III 259,417 12.85 3,333,169 3.74% 0.70% 1.77% Platinum Investor IV 7,153 10.09 72,187 2.51% 0.70% 0.92% Platinum Investor PLUS 21,599 11.39 246,034 3.61% 0.70% 1.77% Platinum Investor Survivor 18,197 13.62 247,796 3.28% 0.40% 2.07% Platinum Investor Survivor II 9,733 11.43 111,254 3.54% 0.75% 1.71% Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Legacy Plus 17,804 11.01 196,081 2.63% 0.75% 3.01% Platinum Investor I & II 172,041 10.48 1,803,598 2.65% 0.75% 3.01% Platinum Investor III 248,098 10.47 2,596,756 2.24% 0.70% 3.06%
VL-R - 71 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Asset Manager Portfolio - Service Class 2 - Continued Platinum Investor IV 3,301 $10.30 $ 34,007 0.00% 0.70% 3.01% Platinum Investor FlexDirector 729 10.47 7,634 0.00% 0.70% 3.06% Platinum Investor PLUS 24,645 11.97 294,879 2.20% 0.70% 3.06% Platinum Investor Survivor 10,120 10.67 108,029 2.38% 0.40% 3.37% Platinum Investor Survivor II 12,871 11.68 150,292 2.21% 0.75% 3.01% Fidelity VIP Contrafund Portfolio - Service Class 2 AG Legacy Plus 41,343 14.36 593,539 0.12% 0.75% 15.78% Corporate America 2,464 12.85 31,663 0.09% 0.35% 16.24% Corporate America (reduced surrender charge) 4,208 12.76 53,697 0.09% 0.65% 15.89% Platinum Investor I & II 433,714 12.59 5,458,933 0.13% 0.75% 15.78% Platinum Investor III 1,174,986 12.43 14,603,155 0.12% 0.70% 15.84% Platinum Investor IV 34,820 11.46 398,996 0.00% 0.70% 14.59% Platinum Investor FlexDirector 5,556 12.69 70,488 0.04% 0.70% 15.84% Platinum Investor PLUS 141,910 14.87 2,110,564 0.10% 0.70% 15.84% Platinum Investor Survivor 89,331 12.82 1,144,849 0.12% 0.40% 16.18% Platinum Investor Survivor II 58,221 15.67 912,410 0.12% 0.75% 15.78% Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Legacy Plus 57,321 11.55 662,077 1.48% 0.75% 4.78% Corporate America 4,719 11.92 56,248 1.58% 0.35% 5.20% Corporate America (reduced surrender charge) 13,635 11.34 154,584 1.58% 0.65% 4.89% Platinum Investor I & II 298,694 11.68 3,487,648 1.57% 0.75% 4.78% Platinum Investor III 849,719 11.70 9,940,258 1.25% 0.70% 4.84% Platinum Investor IV 20,666 10.47 216,404 0.00% 0.70% 4.72% Platinum Investor FlexDirector 1,283 11.14 14,285 0.78% 0.70% 4.84% Platinum Investor PLUS 72,117 12.60 908,410 1.23% 0.70% 4.84% Platinum Investor Survivor 87,502 11.89 1,040,329 1.61% 0.40% 5.15% Platinum Investor Survivor II 58,352 12.77 745,340 1.35% 0.75% 4.78% Fidelity VIP Growth Portfolio - Service Class 2 AG Legacy Plus 26,555 8.50 225,771 0.27% 0.75% 4.72% Corporate America -- 7.26 -- 0.22% 0.35% 5.13% Corporate America (reduced surrender charge) 8,299 11.22 93,130 0.22% 0.65% 4.82% Platinum Investor I & II 229,431 7.11 1,631,987 0.33% 0.75% 4.72% Platinum Investor III 1,144,468 7.05 8,071,149 0.25% 0.70% 4.77% Platinum Investor IV 17,717 10.62 188,184 0.00% 0.70% 6.22% Platinum Investor FlexDirector 4,788 10.21 48,901 0.33% 0.70% 4.77% Platinum Investor PLUS 103,309 11.35 1,172,519 0.24% 0.70% 4.77% Platinum Investor Survivor 66,757 7.24 483,521 0.28% 0.40% 5.08% Platinum Investor Survivor II 41,498 10.09 418,570 0.20% 0.75% 4.72% Fidelity VIP Mid Cap Portfolio - Service Class 2 Corporate America (reduced surrender charge) 12,662 13.49 170,834 0.00% 0.65% 17.25% Platinum Investor I & II 9,968 20.29 202,196 0.00% 0.75% 17.14% Platinum Investor III 188,760 20.31 3,834,116 0.00% 0.70% 17.19% Platinum Investor IV 15,896 11.54 183,376 0.00% 0.70% 15.36%
VL-R - 72 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Mid Cap Portfolio - Service Class 2 - Continued Platinum Investor FlexDirector 523 $13.58 $ 7,105 0.00% 0.70% 17.19% Platinum Investor PLUS 10,265 20.31 208,499 0.00% 0.70% 17.19% Platinum Investor Survivor 13,668 20.48 279,857 0.00% 0.40% 17.55% Platinum Investor Survivor II 6,476 20.29 131,373 0.00% 0.75% 17.14% Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 Corporate America (reduced surrender charge) 3,208 12.20 39,130 0.24% 0.65% 8.06% Platinum Investor I & II 14,598 17.60 256,872 1.00% 0.75% 7.96% Platinum Investor III 180,608 17.62 3,182,234 1.09% 0.70% 8.01% Platinum Investor IV 15,977 10.69 170,753 0.31% 0.70% 6.87% Platinum Investor FlexDirector 297 12.59 3,742 0.50% 0.70% 8.01% Platinum Investor PLUS 22,076 17.62 388,964 0.77% 0.70% 8.01% Platinum Investor Survivor 15,477 17.76 274,888 1.40% 0.40% 8.33% Platinum Investor Survivor II 8,288 17.60 145,839 2.06% 0.75% 7.96% Franklin Templeton -Franklin Small-Mid Cap Growth Securities Fund - Class 2 * AG Legacy Plus 18,250 7.29 133,093 0.00% 0.75% 4.01% Franklin Templeton - Franklin U.S. Government Fund - Class 2 Platinum Investor I & II 28,583 11.57 330,815 12.95% 0.75% 1.64% Platinum Investor III 1,055,949 11.60 12,246,014 4.54% 0.70% 1.69% Platinum Investor IV 4,565 10.11 46,137 1.46% 0.70% 1.07% Platinum Investor PLUS 40,074 11.22 449,553 4.28% 0.70% 1.69% Platinum Investor Survivor 9,591 11.74 112,573 10.64% 0.40% 2.00% Platinum Investor Survivor II 16,286 11.57 188,498 8.18% 0.75% 1.64% Franklin Templeton - Mutual Shares Securities Fund - Class 2 Platinum Investor I & II 100,052 13.35 1,335,396 1.14% 0.75% 9.73% Platinum Investor III 551,644 13.37 7,377,455 0.88% 0.70% 9.79% Platinum Investor IV 9,575 10.94 104,772 0.51% 0.70% 9.42% Platinum Investor FlexDirector 3,626 11.78 42,710 1.46% 0.70% 9.79% Platinum Investor PLUS 30,917 13.15 406,562 0.86% 0.70% 9.79% Platinum Investor Survivor 2,657 13.53 35,958 0.69% 0.40% 10.11% Platinum Investor Survivor II 5,450 13.35 72,744 1.41% 0.75% 9.73% Franklin Templeton - Templeton Foreign Securities Fund - Class 2 AG Legacy Plus 17,097 10.85 185,470 1.12% 0.75% 9.35% Platinum Investor I & II 92,614 13.58 1,257,319 1.17% 0.75% 9.35% Platinum Investor III 633,011 13.60 8,610,818 1.10% 0.70% 9.40% Platinum Investor IV 13,779 10.86 149,627 0.31% 0.70% 8.59% Platinum Investor FlexDirector 1,842 12.15 22,381 1.41% 0.70% 9.40% Platinum Investor PLUS 26,178 13.15 344,295 1.12% 0.70% 9.40% Platinum Investor Survivor 5,751 13.77 79,176 0.48% 0.40% 9.73% Platinum Investor Survivor II 53,115 13.58 721,076 0.99% 0.75% 9.35% Goldman Sachs Capital Growth Fund Platinum Investor I & II 13,281 9.46 125,593 0.15% 0.75% 2.17% Platinum Investor III 12,698 9.48 120,387 0.14% 0.70% 2.23% Platinum Investor PLUS 112 11.58 1,294 0.15% 0.70% 2.23%
VL-R - 73 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) -------------------------------------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund - Continued Platinum Investor Survivor 667,804 $ 9.63 $6,428,556 0.15% 0.40% 2.53% Platinum Investor Survivor II 170,190 10.05 1,710,032 0.14% 0.75% 2.17% Janus Aspen Series International Growth Portfolio - Service Shares Corporate America -- 10.55 -- 1.45% 0.35% 31.48% Platinum Investor I & II 117,254 10.33 1,211,612 1.05% 0.75% 30.96% Platinum Investor III 259,706 10.27 2,666,639 1.01% 0.70% 31.02% Platinum Investor IV 10,054 12.91 129,774 1.05% 0.70% 29.07% Platinum Investor FlexDirector 14,209 14.25 202,421 1.04% 0.70% 31.02% Platinum Investor PLUS 21,316 16.45 350,743 0.92% 0.70% 31.02% Platinum Investor Survivor 37,349 10.52 392,972 1.12% 0.40% 31.41% Platinum Investor Survivor II 6,116 16.24 99,349 1.05% 0.75% 30.96% Janus Aspen Series Mid Cap Growth Portfolio - Service Shares Corporate America 316 6.03 1,902 0.00% 0.35% 11.64% Platinum Investor I & II 75,195 5.90 443,960 0.00% 0.75% 11.19% Platinum Investor III 390,008 5.76 2,247,637 0.00% 0.70% 11.25% Platinum Investor IV 1,687 11.18 18,865 0.00% 0.70% 11.83% Platinum Investor PLUS 10,625 15.06 160,004 0.00% 0.70% 11.25% Platinum Investor Survivor 8,892 6.01 53,459 0.00% 0.40% 11.58% Platinum Investor Survivor II 2,532 13.44 34,013 0.00% 0.75% 11.19% Janus Aspen Series Worldwide Growth Portfolio - Service Shares Corporate America 2,714 6.95 18,860 1.51% 0.35% 5.20% Corporate America (reduced surrender charge) 4,150 11.56 47,979 1.51% 0.65% 4.89% Platinum Investor I & II 108,684 6.81 739,710 1.15% 0.75% 4.78% Platinum Investor III 374,289 6.75 2,526,992 1.19% 0.70% 4.83% Platinum Investor IV 5,045 10.54 53,177 1.27% 0.70% 5.40% Platinum Investor PLUS 15,036 10.78 162,111 1.26% 0.70% 4.83% Platinum Investor Survivor 25,941 6.93 179,779 1.23% 0.40% 5.15% Platinum Investor Survivor II 25,510 10.32 263,280 0.88% 0.75% 4.78% JPMorgan Mid Cap Value Portfolio Platinum Investor I & II 6,830 16.11 110,019 0.26% 0.75% 8.40% Platinum Investor III 200,737 16.13 3,237,786 0.29% 0.70% 8.45% Platinum Investor IV 10,108 10.69 108,048 0.01% 0.70% 6.90% Platinum Investor PLUS 8,871 16.13 143,086 0.17% 0.70% 8.45% Platinum Investor Survivor 15,861 16.26 257,881 0.34% 0.40% 8.78% Platinum Investor Survivor II 10,417 16.11 167,797 0.58% 0.75% 8.40% JPMorgan Small Company Portfolio Platinum Investor I & II 49,513 11.71 579,930 0.00% 0.75% 2.65% Platinum Investor III 100,496 11.53 1,158,901 0.00% 0.70% 2.70% Platinum Investor IV 3,551 10.48 37,209 0.00% 0.70% 4.78% Platinum Investor FlexDirector 59 12.44 739 0.00% 0.70% 2.70% Platinum Investor PLUS 9,456 14.36 135,771 0.00% 0.70% 2.70% Platinum Investor Survivor 1,678 11.93 20,009 0.00% 0.40% 3.00% Platinum Investor Survivor II 4,940 15.05 74,351 0.00% 0.75% 2.65%
VL-R - 74 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------ MFS VIT Capital Opportunities Series - Initial Class Corporate America 61 $ 6.88 $ 420 0.00% 0.35% 1.33% Platinum Investor I & II 102,935 6.74 693,317 0.73% 0.75% 0.93% Platinum Investor III 402,031 6.80 2,734,163 0.73% 0.70% 0.98% Platinum Investor IV 3,161 10.35 32,714 0.05% 0.70% 3.51% Platinum Investor FlexDirector 343 10.68 3,664 0.50% 0.70% 0.98% Platinum Investor PLUS 41,777 11.46 478,568 0.72% 0.70% 0.98% Platinum Investor Survivor 32,045 6.86 219,779 0.78% 0.40% 1.28% Platinum Investor Survivor II 3,440 10.43 35,883 0.73% 0.75% 0.93% MFS VIT Emerging Growth Series - Initial Class AG Legacy Plus 9,979 11.62 115,986 0.00% 0.75% 8.38% Corporate America -- 5.38 -- 0.00% 0.35% 8.81% Corporate America (reduced surrender charge) 1,688 12.34 20,834 0.00% 0.65% 8.48% Platinum Investor I & II 633,175 11.32 7,165,076 0.00% 0.75% 8.38% Platinum Investor III 679,181 5.99 4,071,476 0.00% 0.70% 8.43% Platinum Investor IV 4,405 11.14 49,067 0.00% 0.70% 11.38% Platinum Investor FlexDirector 331 11.41 3,773 0.00% 0.70% 8.43% Platinum Investor PLUS 37,583 12.62 474,425 0.00% 0.70% 8.43% Platinum Investor Survivor 116,222 5.38 624,792 0.00% 0.40% 8.76% Platinum Investor Survivor II 3,808 10.85 41,330 0.00% 0.75% 8.38% MFS VIT New Discovery Series - Initial Class AG Legacy Plus 19,993 8.18 163,457 0.00% 0.75% 4.46% Corporate America 2,497 8.94 22,327 0.00% 0.35% 4.88% Platinum Investor I & II 70,119 8.76 614,070 0.00% 0.75% 4.46% Platinum Investor III 282,484 8.58 2,424,535 0.00% 0.70% 4.51% Platinum Investor IV 3,830 10.76 41,230 0.00% 0.70% 7.64% Platinum Investor FlexDirector 409 10.40 4,250 0.00% 0.70% 4.51% Platinum Investor PLUS 20,194 11.66 235,469 0.00% 0.70% 4.51% Platinum Investor Survivor 11,787 8.92 105,111 0.00% 0.40% 4.83% Platinum Investor Survivor II 8,801 11.23 98,842 0.00% 0.75% 4.46% MFS VIT Research Series - Initial Class Corporate America -- 8.19 -- 0.99% 0.35% 7.42% Corporate America (reduced surrender charge) -- 12.05 -- 0.99% 0.65% 7.10% Platinum Investor I & II 42,324 8.02 339,466 0.46% 0.75% 7.00% Platinum Investor III 179,928 7.99 1,438,273 0.45% 0.70% 7.05% Platinum Investor IV 2,508 10.67 26,765 0.00% 0.70% 6.72% Platinum Investor FlexDirector 202 11.52 2,326 0.31% 0.70% 7.05% Platinum Investor PLUS 8,867 12.63 112,031 0.45% 0.70% 7.05% Platinum Investor Survivor 9,890 8.17 80,775 0.49% 0.40% 7.37% Platinum Investor Survivor II 6,637 11.76 78,081 0.41% 0.75% 7.00% MFS VIT Total Return Series - Initial Class AG Legacy Plus 129,022 6.36 820,117 2.12% 0.75% 2.05%
VL-R - 75 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I Corporate America -- $ 7.37 $ -- 0.00% 0.35% 13.34% Corporate America (reduced surrender charge) 957 12.83 12,280 0.00% 0.65% 13.01% Platinum Investor I & II 59,320 7.22 428,152 0.00% 0.75% 12.89% Platinum Investor III 312,523 7.10 2,219,037 0.00% 0.70% 12.95% Platinum Investor IV 4,230 11.30 47,791 0.00% 0.70% 12.98% Platinum Investor FlexDirector 536 12.49 6,690 0.00% 0.70% 12.95% Platinum Investor PLUS 38,696 13.24 512,286 0.00% 0.70% 12.95% Platinum Investor Survivor 27,509 7.35 202,176 0.00% 0.40% 13.29% Platinum Investor Survivor II 10,134 12.14 123,066 0.00% 0.75% 12.89% Neuberger Berman AMT Partners Portfolio - Class I AG Legacy Plus 8,341 13.28 110,794 0.63% 0.75% 17.17% Oppenheimer Balanced Fund/VA - Non-Service Shares Platinum Investor I & II 12,083 13.38 161,680 1.82% 0.75% 3.11% Platinum Investor III 39,564 13.40 530,087 1.64% 0.70% 3.17% Platinum Investor IV 13,581 10.24 139,032 0.00% 0.70% 2.37% Platinum Investor FlexDirector 33 10.92 355 0.00% 0.70% 3.17% Platinum Investor PLUS 4,273 13.40 57,255 0.64% 0.70% 3.17% Platinum Investor Survivor 433 13.51 5,853 15.63% 0.40% 3.48% Platinum Investor Survivor II 4,026 13.38 53,866 1.66% 0.75% 3.11% Oppenheimer Global Securities Fund/VA - Non-Service Shares Platinum Investor I & II 12,012 19.08 229,194 1.55% 0.75% 13.46% Platinum Investor III 89,885 19.11 1,717,343 0.82% 0.70% 13.51% Platinum Investor IV 14,555 11.60 168,845 0.00% 0.70% 16.01% Platinum Investor FlexDirector 10 12.68 132 0.32% 0.70% 13.51% Platinum Investor PLUS 8,797 19.11 168,068 0.81% 0.70% 13.51% Platinum Investor Survivor 4,782 19.26 92,101 0.64% 0.40% 13.85% Platinum Investor Survivor II 3,411 19.08 65,075 1.05% 0.75% 13.46% Oppenheimer High Income Fund/VA - Non-Service Shares AG Legacy Plus 8,291 12.71 105,365 6.07% 0.75% 1.55% PIMCO VIT Real Return Portfolio - Administrative Class AG Legacy Plus 39,631 14.19 562,357 2.58% 0.75% 1.33% Corporate America 2,227 15.78 35,144 2.82% 0.35% 1.74% Corporate America (reduced surrender charge) 5,843 10.46 61,112 2.82% 0.65% 1.43% Platinum Investor I & II 169,980 15.46 2,627,400 2.82% 0.75% 1.33% Platinum Investor III 472,070 15.53 7,330,772 2.58% 0.70% 1.38% Platinum Investor IV 13,415 10.03 134,583 2.25% 0.70% 0.32% Platinum Investor FlexDirector 552 10.52 5,813 2.37% 0.70% 1.38% Platinum Investor PLUS 34,717 13.11 455,156 2.82% 0.70% 1.38% Platinum Investor Survivor 50,322 15.74 792,015 2.53% 0.40% 1.69% Platinum Investor Survivor II 25,695 13.28 341,190 2.44% 0.75% 1.33% PIMCO VIT Short-Term Portfolio - Administrative Class Corporate America 1,293 11.54 14,927 2.65% 0.35% 2.14% Platinum Investor I & II 102,222 11.31 1,155,888 2.02% 0.75% 1.74%
VL-R - 76 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------------------- PIMCO VIT Short-Term Portfolio - Administrative Class - Continued Platinum Investor III 222,854 $11.33 $ 2,524,319 2.79% 0.70% 1.79% Platinum Investor IV 12,215 10.16 124,159 2.60% 0.70% 1.64% Platinum Investor FlexDirector 6,204 10.22 63,427 3.13% 0.70% 1.79% Platinum Investor PLUS 27,436 10.54 289,255 2.63% 0.70% 1.79% Platinum Investor Survivor 32,107 11.51 369,672 2.64% 0.40% 2.09% Platinum Investor Survivor II 29,438 10.63 313,034 2.73% 0.75% 1.74% PIMCO VIT Total Return Portfolio - Administrative Class AG Legacy Plus 41,035 12.64 518,568 3.37% 0.75% 1.69% Corporate America -- 13.52 -- 3.42% 0.35% 2.09% Corporate America (reduced surrender charge) 4,324 10.26 44,383 3.42% 0.65% 1.79% Platinum Investor I & II 304,679 13.24 4,034,932 3.53% 0.75% 1.69% Platinum Investor III 1,208,514 13.32 16,098,999 4.27% 0.70% 1.74% Platinum Investor IV 22,535 10.12 228,029 2.96% 0.70% 1.19% Platinum Investor FlexDirector 9,165 10.42 95,488 3.74% 0.70% 1.74% Platinum Investor PLUS 67,040 11.61 778,460 3.52% 0.70% 1.74% Platinum Investor Survivor 97,859 13.48 1,319,594 4.43% 0.40% 2.04% Platinum Investor Survivor II 93,995 11.71 1,101,055 4.68% 0.75% 1.69% Pioneer Fund VCT Portfolio - Class I Platinum Investor I & II 217,065 10.77 2,337,632 1.32% 0.75% 5.38% Platinum Investor III 54,104 10.77 582,964 1.29% 0.70% 5.43% Platinum Investor PLUS 1,048 10.77 11,287 1.32% 0.70% 5.43% Platinum Investor Survivor 27,282 10.81 294,897 1.32% 0.40% 5.75% Platinum Investor Survivor II 558 10.77 6,012 1.57% 0.75% 5.38% Pioneer Growth Opportunities VCT Portfolio - Class I Corporate America 3,402 10.93 37,194 0.00% 0.35% 6.31% Platinum Investor I & II 309,209 10.89 3,366,299 0.00% 0.75% 5.89% Platinum Investor III 135,246 10.89 1,473,170 0.00% 0.70% 5.94% Platinum Investor PLUS 5,652 10.89 61,565 0.00% 0.70% 5.94% Platinum Investor Survivor 11,323 10.93 123,729 0.00% 0.40% 6.26% Platinum Investor Survivor II 19,598 10.89 213,357 0.00% 0.75% 5.89% Putnam VT Diversified Income Fund - Class IB AG Legacy Plus 13,413 14.03 188,182 7.19% 0.75% 2.28% Corporate America 453,182 14.39 6,519,762 6.70% 0.35% 2.69% Corporate America (reduced surrender charge) 8,287 10.63 88,056 6.70% 0.65% 2.38% Platinum Investor I & II 69,950 13.55 947,869 6.86% 0.75% 2.28% Platinum Investor III 165,340 14.52 2,401,485 4.20% 0.70% 2.33% Platinum Investor IV 4,050 10.11 40,950 0.00% 0.70% 1.10% Platinum Investor FlexDirector 126 10.87 1,369 4.78% 0.70% 2.33% Platinum Investor PLUS 7,836 13.46 105,479 6.41% 0.70% 2.33% Platinum Investor Survivor 9,432 14.36 135,474 1.64% 0.40% 2.64% Platinum Investor Survivor II 1,832 13.82 25,327 8.15% 0.75% 2.28%
VL-R - 77 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- Putnam VT Growth and Income Fund - Class IB Corporate America 557,678 $11.80 $6,579,575 1.43% 0.35% 4.86% Corporate America (reduced surrender charge) 13,093 11.25 147,352 1.43% 0.65% 4.55% Platinum Investor I & II 407,918 12.17 4,966,360 1.59% 0.75% 4.44% Platinum Investor III 559,533 11.00 6,155,601 1.47% 0.70% 4.50% Platinum Investor IV 18,263 10.39 189,737 0.00% 0.70% 3.89% Platinum Investor FlexDirector 11,478 11.03 126,565 1.38% 0.70% 4.50% Platinum Investor PLUS 33,887 12.31 417,233 1.43% 0.70% 4.50% Platinum Investor Survivor 63,377 11.78 746,490 1.71% 0.40% 4.81% Platinum Investor Survivor II 5,634 12.07 68,027 1.72% 0.75% 4.44% Putnam VT International Growth and Income Fund - Class IB Corporate America -- 12.61 -- 1.54% 0.35% 13.70% Corporate America (reduced surrender charge) 246 13.04 3,212 1.54% 0.65% 13.36% Platinum Investor I & II 175,186 14.58 2,554,483 0.85% 0.75% 13.25% Platinum Investor III 176,714 12.91 2,282,174 1.21% 0.70% 13.31% Platinum Investor IV 8,958 11.32 101,365 0.00% 0.70% 13.15% Platinum Investor FlexDirector 187 12.81 2,390 0.55% 0.70% 13.31% Platinum Investor PLUS 12,489 15.18 189,541 0.70% 0.70% 13.31% Platinum Investor Survivor 34,596 12.59 435,400 0.87% 0.40% 13.65% Platinum Investor Survivor II 8,453 16.48 139,346 0.78% 0.75% 13.25% Putnam VT Small Cap Value Fund - Class IB AG Legacy Plus 19,801 21.04 416,707 0.19% 0.75% 6.23% Putnam VT Vista Fund - Class IB AG Legacy Plus 16,995 6.19 105,252 0.00% 0.75% 11.31% Putnam VT Voyager Fund - Class IB AG Legacy Plus 66,242 6.04 399,942 0.59% 0.75% 4.91% Scudder VIT Equity 500 Index Fund - Class A Legacy Plus -- 10.55 -- 2.93% 0.75% 3.90% SunAmerica - Aggressive Growth Portfolio - Class 1 Platinum Investor I & II 21,479 12.49 268,304 0.00% 0.75% 7.93% Platinum Investor III 43,699 12.51 546,865 0.00% 0.70% 7.98% Platinum Investor IV 3,453 10.62 36,675 0.00% 0.70% 6.20% Platinum Investor PLUS 8,418 13.29 111,874 0.00% 0.70% 7.98% Platinum Investor Survivor 888 12.65 11,239 0.00% 0.40% 8.30% Platinum Investor Survivor II 647 12.49 8,085 0.00% 0.75% 7.93% SunAmerica - SunAmerica Balanced Portfolio - Class 1 Platinum Investor I & II 725 10.84 7,860 3.86% 0.75% 1.14% Platinum Investor III 64,701 10.86 702,653 2.66% 0.70% 1.19% Platinum Investor IV 4,063 10.12 41,111 3.69% 0.70% 1.17% Platinum Investor PLUS 17,524 11.20 196,315 2.60% 0.70% 1.19% Platinum Investor Survivor II 1,541 10.84 16,703 2.73% 0.75% 1.14% UIF Equity Growth Portfolio - Class I Platinum Investor I & II 278,116 11.79 3,279,112 0.47% 0.75% 14.85% Platinum Investor III 88,812 7.92 703,309 0.46% 0.70% 14.90%
VL-R - 78 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------- UIF Equity Growth Portfolio - Class I - Continued Platinum Investor IV 1,164 $11.87 $ 13,815 0.31% 0.70% 18.72% Platinum Investor PLUS 4,916 12.61 61,991 0.46% 0.70% 14.90% Platinum Investor Survivor 21,789 7.58 165,054 0.46% 0.40% 15.25% Platinum Investor Survivor II 336 11.13 3,735 0.45% 0.75% 14.85% UIF High Yield Portfolio - Class I Platinum Investor I & II 81,303 11.17 908,279 7.18% 0.75% 0.30% Platinum Investor III 28,540 11.59 330,786 7.30% 0.70% 0.35% Platinum Investor IV 798 9.99 7,976 1.87% 0.70% -0.11% Platinum Investor FlexDirector 2,432 10.83 26,347 7.68% 0.70% 0.35% Platinum Investor PLUS 3,164 12.94 40,952 7.87% 0.70% 0.35% Platinum Investor Survivor 72,980 10.90 795,784 12.17% 0.40% 0.65% Platinum Investor Survivor II 5,458 12.63 68,916 6.29% 0.75% 0.30% VALIC Company I - International Equities Fund AG Legacy Plus 14,963 9.54 142,691 1.63% 0.75% 16.11% Platinum Investor I & II 73,508 12.23 899,274 1.66% 0.75% 16.11% Platinum Investor III 90,430 10.59 957,210 1.75% 0.70% 16.17% Platinum Investor IV 1,971 11.57 22,799 1.26% 0.70% 15.68% Platinum Investor FlexDirector 605 13.01 7,871 1.23% 0.70% 16.17% Platinum Investor PLUS 11,992 13.86 166,203 1.55% 0.70% 16.17% Platinum Investor Survivor 14,245 9.41 133,999 1.75% 0.40% 16.52% Platinum Investor Survivor II 1,326 14.40 19,100 1.73% 0.75% 16.11% VALIC Company I - Mid Cap Index Fund AG Legacy Plus 22,947 14.33 328,807 0.93% 0.75% 11.36% Corporate America 5,967 15.63 93,231 0.97% 0.35% 11.81% Corporate America (reduced surrender charge) 2,099 12.56 26,356 0.97% 0.65% 11.47% Platinum Investor I & II 375,993 21.25 7,988,267 0.98% 0.75% 11.36% Platinum Investor III 435,960 13.96 6,087,361 0.98% 0.70% 11.42% Platinum Investor IV 10,165 11.15 113,354 0.72% 0.70% 11.51% Platinum Investor FlexDirector 37 12.10 451 0.70% 0.70% 11.42% Platinum Investor PLUS 41,815 14.38 601,133 0.94% 0.70% 11.42% Platinum Investor Survivor 62,602 15.60 976,586 0.99% 0.40% 11.75% Platinum Investor Survivor II 28,083 15.67 440,177 0.94% 0.75% 11.36% VALIC Company I - Money Market I Fund AG Legacy Plus 28,169 10.72 302,068 3.28% 0.75% 1.96% Corporate America -- 11.20 -- 1.17% 0.35% 2.37% Corporate America (reduced surrender charge) 5,751 10.23 58,803 1.17% 0.65% 2.06% Legacy Plus -- 11.29 -- 3.50% 0.75% 1.96% Platinum Investor I & II 753,360 11.82 8,904,036 2.58% 0.75% 1.96% Platinum Investor III 739,009 10.65 7,869,198 2.87% 0.70% 2.01% Platinum Investor IV 34,550 10.19 352,032 3.79% 0.70% 1.89% Platinum Investor FlexDirector -- 10.22 -- 0.79% 0.70% 2.01% Platinum Investor PLUS 38,373 10.23 392,587 3.01% 0.70% 2.01%
VL-R - 79 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------- VALIC Company I - Money Market I Fund - Continued Platinum Investor Survivor 161,850 $11.18 $ 1,809,085 3.05% 0.40% 2.32% Platinum Investor Survivor II 474,926 10.25 4,867,384 2.82% 0.75% 1.96% VALIC Company I - Nasdaq-100 Index Fund Platinum Investor I & II 208,009 4.87 1,013,403 0.13% 0.75% 0.49% Platinum Investor III 500,610 4.79 2,397,938 0.13% 0.70% 0.54% Platinum Investor IV 1,478 10.63 15,709 0.08% 0.70% 6.28% Platinum Investor FlexDirector 72 10.84 785 0.10% 0.70% 0.54% Platinum Investor PLUS 16,202 13.73 222,513 0.14% 0.70% 0.54% Platinum Investor Survivor 12,264 4.96 60,838 0.08% 0.40% 0.84% Platinum Investor Survivor II 52,347 10.33 540,517 0.14% 0.75% 0.49% VALIC Company I - Science & Technology Fund Platinum Investor I & II 74,475 4.05 301,637 0.00% 0.75% 2.56% Platinum Investor III 200,266 4.02 804,835 0.00% 0.70% 2.61% Platinum Investor IV 1,452 10.62 15,422 0.00% 0.70% 6.23% Platinum Investor FlexDirector 77 10.22 786 0.00% 0.70% 2.61% Platinum Investor PLUS 3,768 12.46 46,935 0.00% 0.70% 2.61% Platinum Investor Survivor 17,472 4.12 72,057 0.00% 0.40% 2.92% Platinum Investor Survivor II 1,543 9.34 14,413 0.00% 0.75% 2.56% VALIC Company I - Small Cap Index Fund Corporate America 211 13.99 2,943 0.95% 0.35% 3.90% Platinum Investor I & II 132,028 13.70 1,808,759 0.88% 0.75% 3.49% Platinum Investor III 231,947 13.50 3,130,218 0.93% 0.70% 3.54% Platinum Investor IV 8,875 10.63 94,331 0.68% 0.70% 6.28% Platinum Investor FlexDirector 86 11.36 979 0.74% 0.70% 3.54% Platinum Investor PLUS 26,561 14.27 379,123 0.77% 0.70% 3.54% Platinum Investor Survivor 12,269 13.95 171,149 0.92% 0.40% 3.85% Platinum Investor Survivor II 4,667 15.34 71,610 1.03% 0.75% 3.49% VALIC Company I - Stock Index Fund AG Legacy Plus 85,120 8.66 737,309 1.38% 0.75% 3.78% Corporate America 6,813 8.71 59,349 1.48% 0.35% 4.20% Corporate America (reduced surrender charge) 4,844 11.25 54,477 1.48% 0.65% 3.88% Platinum Investor I & II 1,273,723 11.87 15,117,163 1.47% 0.75% 3.78% Platinum Investor III 1,790,096 8.99 16,086,446 1.49% 0.70% 3.83% Platinum Investor IV 15,431 10.42 160,853 1.03% 0.70% 4.24% Platinum Investor FlexDirector 8,262 10.95 90,468 1.38% 0.70% 3.83% Platinum Investor PLUS 107,062 12.31 1,318,403 1.54% 0.70% 3.83% Platinum Investor Survivor 377,870 8.70 3,286,369 1.46% 0.40% 4.14% Platinum Investor Survivor II 32,344 11.46 370,556 1.75% 0.75% 3.78% Van Kampen LIT Emerging Growth Portfolio - Class I AG Legacy Plus 11,386 5.09 57,942 0.25% 0.75% 7.13% Van Kampen LIT Government Portfolio - Class I AG Legacy Plus 12,089 13.26 160,256 4.10% 0.75% 2.77%
VL-R - 80 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the years ended December 31, 2005 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------ Van Kampen LIT Growth and Income Portfolio - Class I Platinum Investor I & II 256,301 $13.03 $3,339,226 0.86% 0.75% 9.17% Platinum Investor III 426,793 13.05 5,570,693 1.38% 0.70% 9.22% Platinum Investor IV 18,660 10.86 202,726 0.00% 0.70% 8.64% Platinum Investor FlexDirector 615 11.82 7,272 1.89% 0.70% 9.22% Platinum Investor PLUS 21,097 13.30 280,565 0.99% 0.70% 9.22% Platinum Investor Survivor 32,202 13.20 424,960 1.50% 0.40% 9.55% Platinum Investor Survivor II 16,415 13.03 213,863 0.59% 0.75% 9.17% Vanguard VIF High Yield Bond Portfolio Corporate America (reduced surrender charge) 1,604 10.53 16,886 0.00% 0.65% 2.09% Platinum Investor I & II 84,057 13.01 1,093,916 8.12% 0.75% 1.99% Platinum Investor III 257,084 13.12 3,373,341 5.78% 0.70% 2.04% Platinum Investor IV 10,483 10.13 106,234 0.00% 0.70% 1.34% Platinum Investor FlexDirector 47 10.88 515 4.15% 0.70% 2.04% Platinum Investor PLUS 27,827 12.62 351,119 6.71% 0.70% 2.04% Platinum Investor Survivor 16,323 13.25 216,306 3.51% 0.40% 2.34% Platinum Investor Survivor II 5,483 12.90 70,762 11.75% 0.75% 1.99% Vanguard VIF REIT Index Portfolio Corporate America 783 24.63 19,276 1.88% 0.35% 11.45% Corporate America (reduced surrender charge) 1,006 12.87 12,942 1.88% 0.65% 11.11% Platinum Investor I & II 116,855 24.13 2,819,784 2.52% 0.75% 11.00% Platinum Investor III 289,714 24.15 6,996,982 2.53% 0.70% 11.06% Platinum Investor IV 25,262 11.55 291,840 0.00% 0.70% 15.52% Platinum Investor FlexDirector 5,355 13.44 71,970 2.89% 0.70% 11.06% Platinum Investor PLUS 37,885 18.17 688,310 2.23% 0.70% 11.06% Platinum Investor Survivor 25,808 24.57 634,112 2.54% 0.40% 11.39% Platinum Investor Survivor II 24,601 21.03 517,271 2.76% 0.75% 11.00%
VL-R - 81 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------ AIM V.I. International Growth Fund - Series I AG Legacy Plus 24,949 $ 8.04 $ 200,562 0.74% 0.75% 23.08% Corporate America 7,229 7.78 56,259 0.70% 0.35% 23.57% Corporate America (reduced surrender charge) 679 11.67 7,918 0.70% 0.65% 16.65% Platinum Investor I & II 322,093 11.13 3,583,368 0.64% 0.75% 23.08% Platinum Investor III 303,164 9.34 2,832,247 0.86% 0.70% 23.14% Platinum Investor PLUS 9,886 12.93 127,771 0.84% 0.70% 23.14% Platinum Investor Survivor 67,704 7.77 526,286 0.75% 0.40% 23.51% Platinum Investor Survivor II 16,895 13.54 228,742 1.10% 0.75% 23.08% AIM V.I. Premier Equity Fund - Series I Corporate America 5,835 6.24 36,396 0.46% 0.35% 5.40% Platinum Investor I & II 850,688 9.94 8,454,221 0.46% 0.75% 4.98% Platinum Investor III 499,376 7.39 3,690,457 0.49% 0.70% 5.03% Platinum Investor FlexDirector 204 10.20 2,077 0.01% 0.70% 1.98% Platinum Investor PLUS 16,704 10.72 179,141 0.59% 0.70% 5.03% Platinum Investor Survivor 116,072 6.23 723,141 0.47% 0.40% 5.35% Platinum Investor Survivor II 7,228 9.24 66,822 0.59% 0.75% 4.98% Alger American Leveraged AllCap Portfolio - Class O Shares Platinum Investor I & II 98 12.94 1,274 0.00% 0.75% 7.38% Platinum Investor III 32,709 12.95 423,493 0.00% 0.70% 7.43% Platinum Investor PLUS 9,034 12.95 116,963 0.00% 0.70% 7.43% Platinum Investor Survivor 150 13.01 1,949 0.00% 0.40% 7.76% Platinum Investor Survivor II 128 12.94 1,657 0.00% 0.75% 7.38% Alger American MidCap Growth Portfolio - Class O Shares Platinum Investor I & II 8,879 15.23 135,202 0.00% 0.75% 12.20% Platinum Investor III 44,400 15.24 676,660 0.00% 0.70% 12.25% Platinum Investor FlexDirector 5,687 10.64 60,491 0.00% 0.70% 6.37% Platinum Investor PLUS 6,756 15.24 102,960 0.00% 0.70% 12.25% Platinum Investor Survivor 245 15.32 3,755 0.00% 0.40% 12.59% Platinum Investor Survivor II 930 15.23 14,167 0.00% 0.75% 12.20% American Century VP Value Fund - Class I AG Legacy Plus 34,128 16.83 574,449 0.90% 0.75% 13.48% Corporate America 2,990 15.46 46,225 1.19% 0.35% 13.93% Corporate America (reduced surrender charge) -- 10.74 -- 0.00% 0.65% 0.00% Platinum Investor I & II 232,577 15.21 3,536,470 0.95% 0.75% 13.48% Platinum Investor III 526,802 15.12 7,963,343 0.86% 0.70% 13.54% Platinum Investor FlexDirector 31 10.82 339 0.00% 0.70% 8.25% Platinum Investor PLUS 39,732 12.81 508,822 0.74% 0.70% 13.54% Platinum Investor Survivor 32,550 15.43 502,214 0.97% 0.40% 13.88% Platinum Investor Survivor II 100,250 13.39 1,342,791 0.80% 0.75% 13.48% Credit Suisse Small Cap Growth Portfolio Platinum Investor I & II 70,710 8.18 578,349 0.00% 0.75% 10.04% Platinum Investor III 139,946 8.01 1,121,164 0.00% 0.70% 10.10%
VL-R - 82 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- Credit Suisse Small Cap Growth Portfolio - Continued Platinum Investor FlexDirector 4,723 $10.13 $ 47,865 0.00% 0.70% 1.34% Platinum Investor PLUS 8,424 12.79 107,735 0.00% 0.70% 10.10% Platinum Investor Survivor 2,799 8.30 23,229 0.00% 0.40% 10.43% Platinum Investor Survivor II 1,275 12.12 15,451 0.00% 0.75% 10.04% Dreyfus IP MidCap Stock Portfolio - Initial shares Platinum Investor I & II 73,512 12.16 893,684 0.38% 0.75% 13.62% Platinum Investor III 204,536 11.96 2,445,717 0.42% 0.70% 13.68% Platinum Investor FlexDirector 1 10.87 16 0.63% 0.70% 8.66% Platinum Investor PLUS 16,660 12.56 209,222 0.45% 0.70% 13.68% Platinum Investor Survivor 17,825 12.34 219,877 0.38% 0.40% 14.02% Platinum Investor Survivor II 5,689 13.76 78,254 0.43% 0.75% 13.62% Dreyfus VIF Developing Leaders Portfolio - Initial shares Corporate America 11,224 11.52 129,279 0.19% 0.35% 10.95% Platinum Investor I & II 375,824 13.92 5,230,135 0.20% 0.75% 10.51% Platinum Investor III 445,399 10.72 4,775,432 0.21% 0.70% 10.56% Platinum Investor PLUS 27,075 11.57 313,377 0.25% 0.70% 10.56% Platinum Investor Survivor 63,847 11.50 734,526 0.21% 0.40% 10.90% Platinum Investor Survivor II 58,627 12.58 737,356 0.23% 0.75% 10.51% Dreyfus VIF Quality Bond Portfolio - Initial shares Corporate America 6,905 13.36 92,230 4.03% 0.35% 3.01% Platinum Investor I & II 311,327 13.33 4,150,241 4.03% 0.75% 2.60% Platinum Investor III 253,777 12.63 3,204,132 4.15% 0.70% 2.65% Platinum Investor PLUS 17,726 11.19 198,410 4.24% 0.70% 2.65% Platinum Investor Survivor 25,471 13.34 339,808 4.25% 0.40% 2.96% Platinum Investor Survivor II 7,145 11.24 80,289 4.21% 0.75% 2.60% Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Legacy Plus 20,658 10.69 220,876 2.06% 0.75% 4.39% Platinum Investor I & II 203,845 10.18 2,074,624 2.45% 0.75% 4.39% Platinum Investor III 208,895 10.16 2,121,544 2.09% 0.70% 4.44% Platinum Investor PLUS 17,720 11.61 205,736 1.51% 0.70% 4.44% Platinum Investor Survivor 9,381 10.33 96,879 2.46% 0.40% 4.76% Platinum Investor Survivor II 10,659 11.34 120,837 2.09% 0.75% 4.39% Fidelity VIP Contrafund Portfolio - Service Class 2 AG Legacy Plus 42,128 12.40 522,390 0.19% 0.75% 14.30% Corporate America 3,812 11.05 42,136 0.23% 0.35% 14.76% Platinum Investor I & II 379,667 10.87 4,127,445 0.18% 0.75% 14.30% Platinum Investor III 906,499 10.73 9,726,130 0.18% 0.70% 14.36% Platinum Investor FlexDirector 321 10.95 3,516 0.00% 0.70% 9.52% Platinum Investor PLUS 71,987 12.84 924,266 0.13% 0.70% 14.36% Platinum Investor Survivor 76,772 11.03 846,864 0.16% 0.40% 14.70% Platinum Investor Survivor II 31,607 13.54 427,829 0.10% 0.75% 14.30%
VL-R - 83 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Legacy Plus 63,754 $11.02 $ 702,770 1.29% 0.75% 10.40% Corporate America 19,433 11.33 220,183 1.33% 0.35% 10.84% Corporate America (reduced surrender charge) 714 10.81 7,720 1.33% 0.65% 8.09% Platinum Investor I & II 370,900 11.14 4,133,032 1.26% 0.75% 10.40% Platinum Investor III 877,982 11.16 9,797,110 1.24% 0.70% 10.46% Platinum Investor FlexDirector 620 10.62 6,583 0.00% 0.70% 6.24% Platinum Investor PLUS 53,918 12.02 647,840 1.03% 0.70% 10.46% Platinum Investor Survivor 107,323 11.31 1,213,488 1.21% 0.40% 10.79% Platinum Investor Survivor II 49,011 12.19 597,443 1.07% 0.75% 10.40% Fidelity VIP Growth Portfolio - Service Class 2 AG Legacy Plus 28,730 8.12 233,262 0.12% 0.75% 2.35% Corporate America 5,424 6.91 37,464 0.13% 0.35% 2.76% Corporate America (reduced surrender charge) 253 10.71 2,709 0.13% 0.65% 7.06% Platinum Investor I & II 345,944 6.79 2,349,941 0.13% 0.75% 2.35% Platinum Investor III 1,039,582 6.73 6,997,775 0.12% 0.70% 2.40% Platinum Investor FlexDirector 7,404 9.75 72,173 0.00% 0.70% -2.52% Platinum Investor PLUS 82,830 10.83 897,299 0.08% 0.70% 2.40% Platinum Investor Survivor 76,126 6.89 524,713 0.12% 0.40% 2.71% Platinum Investor Survivor II 38,957 9.63 375,246 0.12% 0.75% 2.35% Fidelity VIP Mid Cap Portfolio - Service Class 2 Platinum Investor I & II 16,744 17.32 289,966 0.00% 0.75% 23.73% Platinum Investor III 38,471 17.33 666,778 0.00% 0.70% 23.79% Platinum Investor FlexDirector 288 11.59 3,338 0.00% 0.70% 15.86% Platinum Investor PLUS 6,345 17.33 109,964 0.00% 0.70% 23.79% Platinum Investor Survivor 1,816 17.42 31,630 0.00% 0.40% 24.16% Platinum Investor Survivor II 989 17.32 17,124 0.00% 0.75% 23.73% Franklin Templeton - Franklin Small Cap Fund - Class 2 AG Legacy Plus 22,445 7.01 157,376 0.00% 0.75% 10.64% Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 Corporate America (reduced surrender charge) 463 11.29 5,231 0.00% 0.65% 12.87% Platinum Investor I & II 12,505 16.30 203,817 0.24% 0.75% 22.82% Platinum Investor III 40,911 16.31 667,374 0.17% 0.70% 22.88% Platinum Investor FlexDirector 175 11.66 2,046 0.00% 0.70% 16.59% Platinum Investor PLUS 12,431 16.31 202,794 0.12% 0.70% 22.88% Platinum Investor Survivor 5,233 16.39 85,788 0.09% 0.40% 23.25% Platinum Investor Survivor II 502 16.30 8,175 0.18% 0.75% 22.82% Franklin Templeton - Franklin U.S. Government Fund - Class 2 Platinum Investor I & II 16,861 11.39 191,999 3.63% 0.75% 2.70% Platinum Investor III 945,822 11.40 10,786,424 5.06% 0.70% 2.75% Platinum Investor PLUS 38,284 11.03 422,331 5.20% 0.70% 2.75% Platinum Investor Survivor 633 11.51 7,288 0.00% 0.40% 3.06% Platinum Investor Survivor II 5,867 11.39 66,809 4.55% 0.75% 2.70%
VL-R - 84 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------------- Franklin Templeton - Mutual Shares Securities Fund - Class 2 Platinum Investor I & II 54,608 $12.16 $ 664,214 0.92% 0.75% 11.79% Platinum Investor III 539,268 12.18 6,569,138 0.74% 0.70% 11.85% Platinum Investor FlexDirector 312 10.73 3,345 0.00% 0.70% 7.29% Platinum Investor PLUS 19,639 11.98 235,235 0.70% 0.70% 11.85% Platinum Investor Survivor 1,777 12.29 21,841 0.87% 0.40% 12.18% Platinum Investor Survivor II 18,978 12.16 230,842 0.74% 0.75% 11.79% Franklin Templeton - Templeton Foreign Securities Fund - Class 2 AG Legacy Plus 18,777 9.92 186,284 1.11% 0.75% 17.64% Platinum Investor I & II 123,981 12.42 1,539,261 1.04% 0.75% 17.64% Platinum Investor III 685,074 12.43 8,518,121 1.00% 0.70% 17.70% Platinum Investor FlexDirector 437 11.10 4,852 0.00% 0.70% 11.04% Platinum Investor PLUS 14,282 12.02 171,694 0.97% 0.70% 17.70% Platinum Investor Survivor 19,552 12.55 245,299 0.68% 0.40% 18.06% Platinum Investor Survivor II 48,400 12.42 600,897 0.90% 0.75% 17.64% Goldman Sachs Capital Growth Fund Platinum Investor I & II 13,994 9.26 129,523 0.69% 0.75% 8.27% Platinum Investor III 14,378 9.27 133,348 0.67% 0.70% 8.33% Platinum Investor PLUS 113 11.33 1,284 0.70% 0.70% 8.33% Platinum Investor Survivor 703,774 9.39 6,607,533 0.69% 0.40% 8.65% Platinum Investor Survivor II 185,421 9.83 1,823,417 0.68% 0.75% 8.27% Janus Aspen Series International Growth Portfolio - Service Shares Corporate America 3,189 8.02 25,585 0.82% 0.35% 18.27% Platinum Investor I & II 115,724 7.89 913,122 0.96% 0.75% 17.80% Platinum Investor III 229,457 7.84 1,798,205 0.86% 0.70% 17.86% Platinum Investor FlexDirector 12,784 10.87 139,004 0.67% 0.70% 8.73% Platinum Investor PLUS 7,613 12.56 95,613 0.87% 0.70% 17.86% Platinum Investor Survivor 31,781 8.01 254,455 0.78% 0.40% 18.21% Platinum Investor Survivor II 4,427 12.40 54,914 0.83% 0.75% 17.80% Janus Aspen Series Mid Cap Growth Portfolio - Service Shares Corporate America 486 5.40 2,624 0.00% 0.35% 20.05% Platinum Investor I & II 52,125 5.31 276,772 0.00% 0.75% 19.58% Platinum Investor III 402,410 5.18 2,084,632 0.00% 0.70% 19.63% Platinum Investor PLUS 8,596 13.54 116,353 0.00% 0.70% 19.63% Platinum Investor Survivor 26,338 5.39 141,904 0.00% 0.40% 19.99% Platinum Investor Survivor II 1,788 12.08 21,605 0.00% 0.75% 19.58% Janus Aspen Series Worldwide Growth Portfolio - Service Shares Corporate America 9,360 6.60 61,819 0.90% 0.35% 4.16% Platinum Investor I & II 125,130 6.50 812,781 0.89% 0.75% 3.75% Platinum Investor III 367,344 6.44 2,365,764 0.94% 0.70% 3.80% Platinum Investor PLUS 12,476 10.28 128,308 1.00% 0.70% 3.80% Platinum Investor Survivor 37,089 6.59 244,452 0.87% 0.40% 4.11% Platinum Investor Survivor II 41,215 9.85 405,949 0.92% 0.75% 3.75%
VL-R - 85 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) -------------------------------------------------------------------------------------------------------------------- JPMorgan Mid Cap Value Portfolio Platinum Investor I & II 1,976 $14.86 $ 29,370 0.28% 0.75% 20.15% Platinum Investor III 27,069 14.87 402,580 0.21% 0.70% 20.22% Platinum Investor PLUS 4,533 14.87 67,410 0.07% 0.70% 20.22% Platinum Investor Survivor 207 14.95 3,088 0.00% 0.40% 20.58% Platinum Investor Survivor II 485 14.86 7,201 0.24% 0.75% 20.15% JPMorgan Small Company Portfolio Platinum Investor I & II 40,867 11.41 466,324 0.00% 0.75% 26.22% Platinum Investor III 104,066 11.23 1,168,558 0.00% 0.70% 26.28% Platinum Investor PLUS 5,929 13.98 82,890 0.00% 0.70% 26.28% Platinum Investor Survivor 1,835 11.58 21,241 0.00% 0.40% 26.66% Platinum Investor Survivor II 3,146 14.66 46,129 0.00% 0.75% 26.22% MFS VIT Capital Opportunities Series - Initial Class Corporate America -- 6.79 -- 0.72% 0.35% 12.07% Platinum Investor I & II 113,938 6.67 760,376 0.35% 0.75% 11.62% Platinum Investor III 415,444 6.74 2,798,020 0.33% 0.70% 11.68% Platinum Investor FlexDirector 173 10.58 1,832 0.00% 0.70% 5.78% Platinum Investor PLUS 33,139 11.34 375,934 0.28% 0.70% 11.68% Platinum Investor Survivor 36,766 6.77 248,968 0.32% 0.40% 12.01% Platinum Investor Survivor II 3,156 10.33 32,620 0.39% 0.75% 11.62% MFS VIT Emerging Growth Series - Initial Class AG Legacy Plus 9,619 10.72 103,163 0.00% 0.75% 12.12% Corporate America 1,040 4.95 5,148 0.00% 0.35% 12.56% Corporate America (reduced surrender charge) 920 11.38 10,472 0.00% 0.65% 13.78% Platinum Investor I & II 706,671 10.44 7,378,706 0.00% 0.75% 12.12% Platinum Investor III 1,024,961 5.53 5,666,609 0.00% 0.70% 12.17% Platinum Investor FlexDirector 197 10.52 2,070 0.00% 0.70% 5.25% Platinum Investor PLUS 29,670 11.64 345,413 0.00% 0.70% 12.17% Platinum Investor Survivor 168,768 4.94 834,232 0.00% 0.40% 12.51% Platinum Investor Survivor II 32,210 10.01 322,533 0.00% 0.75% 12.12% MFS VIT New Discovery Series - Initial Class AG Legacy Plus 16,207 7.83 126,844 0.00% 0.75% 5.72% Corporate America 2,716 8.52 23,152 0.00% 0.35% 6.15% Platinum Investor I & II 88,892 8.38 745,230 0.00% 0.75% 5.72% Platinum Investor III 266,177 8.21 2,185,903 0.00% 0.70% 5.78% Platinum Investor FlexDirector 256 9.96 2,551 0.00% 0.70% -0.45% Platinum Investor PLUS 16,920 11.16 188,768 0.00% 0.70% 5.78% Platinum Investor Survivor 10,480 8.51 89,153 0.00% 0.40% 6.09% Platinum Investor Survivor II 8,483 10.75 91,201 0.00% 0.75% 5.72% MFS VIT Research Series - Initial Class Corporate America 3,158 7.62 24,069 1.02% 0.35% 15.45% Platinum Investor I & II 48,222 7.50 361,482 1.09% 0.75% 14.98% Platinum Investor III 159,378 7.47 1,190,107 0.98% 0.70% 15.04% Platinum Investor FlexDirector 106 10.76 1,145 0.00% 0.70% 7.60%
VL-R - 86 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------------------- MFS VIT Research Series - Initial Class - Continued Platinum Investor PLUS 6,148 $11.80 $ 72,553 0.87% 0.70% 15.04% Platinum Investor Survivor 9,692 7.61 73,719 1.08% 0.40% 15.39% Platinum Investor Survivor II 5,340 10.99 58,713 0.86% 0.75% 14.98% MFS VIT Total Return Series - Initial Class AG Legacy Plus 146,574 6.23 912,934 1.62% 0.75% 10.49% Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I Corporate America 1,789 6.50 11,630 0.00% 0.35% 15.90% Corporate America (reduced surrender charge) 233 11.35 2,641 0.00% 0.65% 13.51% Platinum Investor I & II 59,627 6.39 381,211 0.00% 0.75% 15.44% Platinum Investor III 288,190 6.29 1,811,647 0.00% 0.70% 15.50% Platinum Investor FlexDirector 166 11.06 1,834 0.00% 0.70% 10.58% Platinum Investor PLUS 28,648 11.72 335,784 0.00% 0.70% 15.50% Platinum Investor Survivor 27,565 6.49 178,820 0.00% 0.40% 15.84% Platinum Investor Survivor II 7,849 10.76 84,431 0.00% 0.75% 15.44% Neuberger Berman AMT Partners Portfolio - Class I AG Legacy Plus 12,141 11.34 137,643 0.01% 0.75% 18.09% Oppenheimer Balanced Fund/VA - Non-Service Shares * Platinum Investor I & II 2,395 12.98 31,076 1.98% 0.75% 9.28% Platinum Investor III 29,690 12.99 385,585 0.45% 0.70% 9.33% Platinum Investor PLUS 14,439 12.99 187,517 1.68% 0.70% 9.33% Platinum Investor Survivor 433 13.05 5,656 0.99% 0.40% 9.66% Platinum Investor Survivor II 3,870 12.98 50,218 0.90% 0.75% 9.28% Oppenheimer Global Securities Fund/VA - Non-Service Shares Platinum Investor I & II 4,798 16.82 80,687 0.83% 0.75% 18.27% Platinum Investor III 51,328 16.83 863,930 0.82% 0.70% 18.33% Platinum Investor FlexDirector 2 11.17 24 0.00% 0.70% 11.74% Platinum Investor PLUS 5,613 16.83 94,470 0.18% 0.70% 18.33% Platinum Investor Survivor 2,375 16.92 40,174 1.20% 0.40% 18.69% Platinum Investor Survivor II 378 16.82 6,364 1.49% 0.75% 18.27% Oppenheimer High Income Fund/VA - Non-Service Shares AG Legacy Plus 8,004 12.51 100,163 6.11% 0.75% 8.15% PIMCO VIT Real Return Portfolio - Administrative Class AG Legacy Plus 47,824 14.00 669,702 0.99% 0.75% 8.11% Corporate America 2,327 15.51 36,096 0.91% 0.35% 8.54% Corporate America (reduced surrender charge) 753 10.31 7,759 0.91% 0.65% 3.11% Platinum Investor I & II 119,851 15.25 1,828,190 0.99% 0.75% 8.11% Platinum Investor III 561,931 15.32 8,607,213 1.05% 0.70% 8.16% Platinum Investor FlexDirector 298 10.38 3,095 1.06% 0.70% 3.79% Platinum Investor PLUS 30,515 12.93 394,609 1.02% 0.70% 8.16% Platinum Investor Survivor 65,768 15.48 1,017,948 0.99% 0.40% 8.48% Platinum Investor Survivor II 36,406 13.10 477,063 0.96% 0.75% 8.11%
VL-R - 87 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------- PIMCO VIT Short-Term Portfolio - Administrative Class Corporate America 21,965 $11.30 $ 248,233 1.37% 0.35% 0.95% Platinum Investor I & II 220,025 11.11 2,445,451 1.30% 0.75% 0.54% Platinum Investor III 210,849 11.13 2,346,366 1.34% 0.70% 0.60% Platinum Investor FlexDirector 4,059 10.04 40,769 1.29% 0.70% 0.44% Platinum Investor PLUS 14,162 10.36 146,681 1.31% 0.70% 0.60% Platinum Investor Survivor 40,126 11.28 452,530 1.70% 0.40% 0.90% Platinum Investor Survivor II 30,365 10.45 317,371 1.25% 0.75% 0.54% PIMCO VIT Total Return Portfolio - Administrative Class AG Legacy Plus 38,594 12.43 479,631 1.93% 0.75% 4.11% Corporate America 8,965 13.24 118,722 1.93% 0.35% 4.53% Platinum Investor I & II 248,730 13.02 3,239,319 1.90% 0.75% 4.11% Platinum Investor III 468,339 13.09 6,132,293 1.91% 0.70% 4.16% Platinum Investor FlexDirector 6,295 10.24 64,463 1.65% 0.70% 2.40% Platinum Investor PLUS 47,130 11.41 537,919 1.83% 0.70% 4.16% Platinum Investor Survivor 46,766 13.21 617,992 1.77% 0.40% 4.47% Platinum Investor Survivor II 58,228 11.52 670,760 1.81% 0.75% 4.11% Pioneer Fund VCT Portfolio - Class I Platinum Investor I & II 242,349 10.22 2,476,631 0.00% 0.75% 2.19% Platinum Investor III 55,443 10.22 566,601 0.00% 0.70% 2.20% Platinum Investor PLUS 998 10.22 10,195 0.00% 0.70% 2.20% Platinum Investor Survivor 28,172 10.22 287,951 0.00% 0.40% 2.21% Platinum Investor Survivor II 388 10.22 3,963 0.00% 0.75% 2.19% Pioneer Growth Opportunities VCT Portfolio - Class I Corporate America 3,474 10.28 35,720 0.00% 0.35% 2.83% Platinum Investor I & II 347,832 10.28 3,576,078 0.00% 0.75% 2.81% Platinum Investor III 137,933 10.28 1,418,142 0.00% 0.70% 2.81% Platinum Investor PLUS 4,979 10.28 51,195 0.00% 0.70% 2.81% Platinum Investor Survivor 14,319 10.28 147,243 0.00% 0.40% 2.83% Platinum Investor Survivor II 39,326 10.28 404,315 0.00% 0.75% 2.81% Putnam VT Diversified Income Fund - Class IB AG Legacy Plus 12,958 13.72 177,740 8.10% 0.75% 8.39% Corporate America 396,103 14.01 5,549,288 8.00% 0.35% 8.82% Platinum Investor I & II 60,463 13.25 801,033 8.55% 0.75% 8.39% Platinum Investor III 62,541 14.19 887,670 8.73% 0.70% 8.44% Platinum Investor FlexDirector 65 10.63 689 0.00% 0.70% 6.27% Platinum Investor PLUS 6,150 13.15 80,902 7.70% 0.70% 8.44% Platinum Investor Survivor 1,282 13.99 17,943 4.60% 0.40% 8.77% Platinum Investor Survivor II 1,337 13.51 18,073 11.52% 0.75% 8.39% Putnam VT Growth and Income Fund - Class IB Corporate America 499,841 11.25 5,623,805 1.35% 0.35% 10.72% Platinum Investor I & II 491,902 11.66 5,734,037 1.53% 0.75% 10.28% Platinum Investor III 524,351 10.53 5,520,350 1.50% 0.70% 10.34% Platinum Investor FlexDirector 9,148 10.55 96,528 0.00% 0.70% 5.52%
VL-R - 88 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- Putnam VT Growth and Income Fund - Class IB - Continued Platinum Investor PLUS 26,657 $11.78 $ 314,093 1.26% 0.70% 10.34% Platinum Investor Survivor 66,114 11.24 743,001 1.40% 0.40% 10.67% Platinum Investor Survivor II 4,481 11.56 51,804 1.48% 0.75% 10.28% Putnam VT International Growth and Income Fund - Class IB Corporate America 2,293 11.09 25,426 0.85% 0.35% 20.56% Platinum Investor I & II 204,673 12.88 2,635,270 1.20% 0.75% 20.08% Platinum Investor III 191,264 11.40 2,179,999 1.28% 0.70% 20.14% Platinum Investor FlexDirector 112 11.31 1,269 0.00% 0.70% 13.08% Platinum Investor PLUS 8,737 13.39 117,028 0.86% 0.70% 20.14% Platinum Investor Survivor 37,612 11.07 416,520 1.18% 0.40% 20.50% Platinum Investor Survivor II 7,551 14.56 109,912 1.49% 0.75% 20.08% Putnam VT Small Cap Value Fund - Class IB AG Legacy Plus 25,092 19.81 497,060 0.34% 0.75% 25.27% Putnam VT Vista Fund - Class IB AG Legacy Plus 15,137 5.56 84,219 0.00% 0.75% 17.72% Putnam VT Voyager Fund - Class IB AG Legacy Plus 57,401 5.76 330,363 0.24% 0.75% 4.25% Safeco RST Core Equity Portfolio Platinum Investor I & II -- 9.17 -- 2.18% 0.75% 4.59% Platinum Investor III -- 8.00 -- 2.43% 0.70% 4.64% Platinum Investor PLUS -- 10.96 -- 2.43% 0.70% 4.64% Platinum Investor Survivor -- 7.68 -- 2.59% 0.40% 4.94% Platinum Investor Survivor II -- 9.67 -- 4.87% 0.75% 4.59% Safeco RST Growth Opportunities Portfolio Corporate America -- 10.51 -- 0.00% 0.35% 18.54% Platinum Investor I & II -- 10.26 -- 0.00% 0.75% 18.09% Platinum Investor III -- 10.98 -- 0.00% 0.70% 18.15% Platinum Investor PLUS -- 11.86 -- 0.00% 0.70% 18.15% Platinum Investor Survivor -- 10.50 -- 0.00% 0.40% 18.48% Platinum Investor Survivor II -- 12.30 -- 0.00% 0.75% 18.09% Scudder VIT EAFE Equity Index Fund - Class A Legacy Plus -- 9.81 -- 0.00% 0.75% 18.18% Scudder VIT Equity 500 Index Fund - Class A Legacy Plus 1,857 10.15 18,849 1.05% 0.75% 9.77% SunAmerica - Aggressive Growth Portfolio - Class 1 Platinum Investor I & II 7,269 11.57 84,137 0.00% 0.75% 15.91% Platinum Investor III 29,137 11.59 337,687 0.00% 0.70% 15.97% Platinum Investor PLUS 6,198 12.31 76,281 0.00% 0.70% 15.97% Platinum Investor Survivor 1,019 11.68 11,899 0.00% 0.40% 16.32% Platinum Investor Survivor II 448 11.57 5,190 0.00% 0.75% 15.91% SunAmerica - SunAmerica Balanced Portfolio - Class 1 Platinum Investor I & II 247 10.72 2,648 1.65% 0.75% 5.98% Platinum Investor III 52,736 10.73 565,994 1.80% 0.70% 6.03%
VL-R - 89 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- SunAmerica - SunAmerica Balanced Portfolio - Class 1 - Continued Platinum Investor PLUS 13,740 $11.07 $ 152,117 1.70% 0.70% 6.03% Platinum Investor Survivor II 1,250 10.72 13,403 1.57% 0.75% 5.98% UIF Equity Growth Portfolio - Class I Platinum Investor I & II 288,941 10.27 2,966,331 0.17% 0.75% 6.97% Platinum Investor III 79,302 6.89 546,540 0.18% 0.70% 7.02% Platinum Investor PLUS 4,155 10.98 45,596 0.19% 0.70% 7.02% Platinum Investor Survivor 23,521 6.57 154,598 0.17% 0.40% 7.34% Platinum Investor Survivor II 219 9.69 2,122 0.12% 0.75% 6.97% UIF High Yield Portfolio - Class I Platinum Investor I & II 93,804 11.14 1,044,759 5.86% 0.75% 8.67% Platinum Investor III 28,634 11.55 330,711 6.14% 0.70% 8.72% Platinum Investor FlexDirector 1,735 10.79 18,729 0.00% 0.70% 7.94% Platinum Investor PLUS 2,194 12.90 28,302 5.96% 0.70% 8.72% Platinum Investor Survivor 24,176 10.83 261,899 6.03% 0.40% 9.05% Platinum Investor Survivor II 4,234 12.59 53,299 5.42% 0.75% 8.67% VALIC Company I - International Equities Fund AG Legacy Plus 20,142 8.21 165,429 1.50% 0.75% 16.98% Platinum Investor I & II 70,577 10.54 743,609 1.09% 0.75% 16.98% Platinum Investor III 86,492 9.11 788,095 1.37% 0.70% 17.03% Platinum Investor FlexDirector 349 11.20 3,911 0.09% 0.70% 12.00% Platinum Investor PLUS 8,032 11.93 95,823 1.49% 0.70% 17.03% Platinum Investor Survivor 13,559 8.07 109,465 1.43% 0.40% 17.39% Platinum Investor Survivor II 1,307 12.40 16,207 1.14% 0.75% 16.98% VALIC Company I - Mid Cap Index Fund AG Legacy Plus 24,611 12.87 316,673 0.81% 0.75% 15.18% Corporate America 6,003 13.98 83,891 0.79% 0.35% 15.64% Corporate America (reduced surrender charge) 704 11.26 7,926 0.79% 0.65% 12.64% Platinum Investor I & II 396,205 19.08 7,558,938 0.79% 0.75% 15.18% Platinum Investor III 430,957 12.53 5,400,920 0.82% 0.70% 15.24% Platinum Investor PLUS 37,895 12.90 488,950 0.92% 0.70% 15.24% Platinum Investor Survivor 67,872 13.96 947,463 0.83% 0.40% 15.58% Platinum Investor Survivor II 46,722 14.07 657,610 0.73% 0.75% 15.18% VALIC Company I - Money Market I Fund AG Legacy Plus 51,953 10.52 546,390 0.80% 0.75% 0.05% Corporate America 6,349 10.94 69,436 0.34% 0.35% 0.45% Corporate America (reduced surrender charge) 27,087 10.02 271,377 0.34% 0.65% 0.19% Legacy Plus 1,086 11.08 12,032 0.81% 0.75% 0.05% Platinum Investor I & II 947,402 11.59 10,981,940 0.74% 0.75% 0.05% Platinum Investor III 1,222,031 10.44 12,755,775 0.72% 0.70% 0.10% Platinum Investor FlexDirector 4,886 10.01 48,931 0.86% 0.70% 0.14% Platinum Investor PLUS 108,353 10.03 1,086,673 0.58% 0.70% 0.10% Platinum Investor Survivor 356,356 10.92 3,892,926 0.76% 0.40% 0.40% Platinum Investor Survivor II 485,564 10.05 4,880,633 0.82% 0.75% 0.05%
VL-R - 90 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS -CONTINUED Note G -Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------- VALIC Company I - Nasdaq-100 Index Fund Platinum Investor I & II 195,759 $ 4.85 $ 949,081 0.58% 0.75% 9.23% Platinum Investor III 480,541 4.76 2,289,462 0.56% 0.70% 9.28% Platinum Investor FlexDirector 48 10.78 516 1.00% 0.70% 7.84% Platinum Investor PLUS 11,709 13.66 159,943 0.73% 0.70% 9.28% Platinum Investor Survivor 29,567 4.92 145,457 0.65% 0.40% 9.61% Platinum Investor Survivor II 11,333 10.28 116,455 1.05% 0.75% 9.23% VALIC Company I - Science & Technology Fund Platinum Investor I & II 92,336 3.95 364,650 0.00% 0.75% 0.04% Platinum Investor III 193,053 3.92 756,120 0.00% 0.70% 0.09% Platinum Investor FlexDirector 51 9.96 507 0.00% 0.70% -0.41% Platinum Investor PLUS 3,497 12.14 42,443 0.00% 0.70% 0.09% Platinum Investor Survivor 16,097 4.01 64,505 0.00% 0.40% 0.39% Platinum Investor Survivor II 1,081 9.11 9,847 0.00% 0.75% 0.04% VALIC Company I - Small Cap Index Fund Corporate America 4,416 13.46 59,441 0.82% 0.35% 17.48% Platinum Investor I & II 107,394 13.24 1,421,650 0.84% 0.75% 17.01% Platinum Investor III 215,034 13.03 2,802,678 0.82% 0.70% 17.07% Platinum Investor FlexDirector 32 10.97 349 0.46% 0.70% 9.69% Platinum Investor PLUS 23,667 13.79 326,254 0.98% 0.70% 17.07% Platinum Investor Survivor 20,859 13.43 280,186 0.85% 0.40% 17.42% Platinum Investor Survivor II 3,333 14.83 49,411 0.84% 0.75% 17.01% VALIC Company I - Stock Index Fund AG Legacy Plus 70,818 8.35 591,082 1.57% 0.75% 9.68% Corporate America 14,690 8.36 122,821 1.54% 0.35% 10.12% Platinum Investor I & II 1,406,720 11.44 16,087,376 1.55% 0.75% 9.68% Platinum Investor III 1,990,719 8.65 17,228,974 1.55% 0.70% 9.74% Platinum Investor FlexDirector 87 10.55 916 0.00% 0.70% 5.46% Platinum Investor PLUS 63,224 11.86 749,828 1.64% 0.70% 9.74% Platinum Investor Survivor 437,170 8.35 3,650,823 1.50% 0.40% 10.07% Platinum Investor Survivor II 40,549 11.04 447,627 1.55% 0.75% 9.68% Van Kampen LIT Emerging Growth Portfolio - Class I AG Legacy Plus 11,991 4.75 56,964 0.00% 0.75% 6.23% Van Kampen LIT Government Portfolio - Class I AG Legacy Plus 13,807 12.90 178,108 4.89% 0.75% 3.39% Van Kampen LIT Growth and Income Portfolio - Class I Platinum Investor I & II 191,703 11.93 2,287,879 0.96% 0.75% 13.52% Platinum Investor III 242,172 11.95 2,894,060 0.90% 0.70% 13.58% Platinum Investor FlexDirector 32 10.83 343 0.00% 0.70% 8.26% Platinum Investor PLUS 16,160 12.18 196,763 0.82% 0.70% 13.58% Platinum Investor Survivor 16,686 12.05 201,015 1.03% 0.40% 13.92% Platinum Investor Survivor II 6,375 11.93 76,084 0.94% 0.75% 13.52%
VL-R - 91 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2004 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ---------------------------------------------------------------------------------------------------- Vanguard VIF High Yield Bond Portfolio Platinum Investor I & II 100,018 $12.76 $1,276,287 7.19% 0.75% 7.71% Platinum Investor III 330,232 12.86 4,246,662 6.58% 0.70% 7.77% Platinum Investor FlexDirector 32 10.66 337 0.00% 0.70% 6.58% Platinum Investor PLUS 22,057 12.37 272,761 4.95% 0.70% 7.77% Platinum Investor Survivor 86,078 12.95 1,114,534 1.13% 0.40% 8.09% Platinum Investor Survivor II 23,456 12.65 296,797 2.45% 0.75% 7.71% Vanguard VIF REIT Index Portfolio Corporate America 708 22.10 15,640 4.59% 0.35% 30.06% Platinum Investor I & II 99,576 21.74 2,164,676 2.49% 0.75% 29.54% Platinum Investor III 303,258 21.75 6,594,879 2.48% 0.70% 29.60% Platinum Investor FlexDirector 3,849 12.10 46,590 0.00% 0.70% 21.03% Platinum Investor PLUS 40,045 16.36 655,114 2.42% 0.70% 29.60% Platinum Investor Survivor 30,818 22.06 679,778 2.05% 0.40% 29.99% Platinum Investor Survivor II 23,561 18.94 446,319 1.46% 0.75% 29.54%
VL-R - 92 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------ AIM V.I. International Growth Fund - Series I AG Legacy Plus 17,769 $ 6.53 $ 116,061 0.48% 0.75% 28.10% Corporate America 6,858 6.30 43,188 0.57% 0.35% 28.61% Platinum Investor I & II 328,864 9.04 2,972,642 0.51% 0.75% 28.10% Platinum Investor III 120,999 7.59 917,986 0.60% 0.70% 28.16% Platinum Investor PLUS 3,813 10.50 40,027 0.82% 0.70% 28.16% Platinum Investor Survivor 46,420 6.29 292,156 0.52% 0.40% 28.55% Platinum Investor Survivor II 1,195 11.00 13,144 0.51% 0.75% 28.10% AIM V.I. Premier Equity Fund - Series I Corporate America 5,993 5.92 35,462 0.30% 0.35% 24.64% Legacy Plus -- 6.34 -- 0.00% 0.75% 20.44% Platinum Investor I & II 856,369 9.47 8,106,816 0.29% 0.75% 24.15% Platinum Investor III 433,128 7.04 3,047,453 0.33% 0.70% 24.21% Platinum Investor PLUS 8,904 10.21 90,916 0.46% 0.70% 24.21% Platinum Investor Survivor 109,492 5.91 647,508 0.31% 0.40% 24.58% Platinum Investor Survivor II 4,149 8.81 36,534 0.33% 0.75% 24.15% Alger American Leveraged AllCap Portfolio - Class O Shares Platinum Investor III 18,007 12.05 217,007 0.00% 0.70% 20.51% Platinum Investor PLUS 1,206 12.05 14,534 0.00% 0.70% 20.51% Platinum Investor Survivor 138 12.08 1,666 0.00% 0.40% 20.75% Platinum Investor Survivor II 103 12.05 1,236 0.00% 0.75% 20.47% Alger American MidCap Growth Portfolio - Class O Shares Platinum Investor III 18,785 13.58 255,035 0.00% 0.70% 35.76% Platinum Investor PLUS 985 13.58 13,374 0.00% 0.70% 35.76% Platinum Investor Survivor 2,174 13.60 29,576 0.00% 0.40% 36.03% Platinum Investor Survivor II 343 13.57 4,651 0.00% 0.75% 35.72% American Century VP Value Fund - Class I AG Legacy Plus 30,836 14.83 457,376 1.07% 0.75% 28.00% Corporate America 4,675 13.57 63,443 1.07% 0.35% 28.51% Platinum Investor I & II 210,667 13.40 2,822,824 0.96% 0.75% 28.00% Platinum Investor III 369,463 13.31 4,919,113 0.80% 0.70% 28.06% Platinum Investor PLUS 20,510 11.28 231,350 0.69% 0.70% 28.06% Platinum Investor Survivor 25,525 13.55 345,829 0.72% 0.40% 28.44% Platinum Investor Survivor II 66,916 11.80 789,838 0.79% 0.75% 28.00% Ayco Growth Fund Platinum Investor I & II -- 8.36 -- 0.47% 0.75% 26.35% Platinum Investor III -- 8.38 -- 0.52% 0.70% 26.41% Platinum Investor PLUS -- 10.23 -- 120.86% 0.70% 26.41% Platinum Investor Survivor -- 8.45 -- 0.86% 0.40% 26.78% Platinum Investor Survivor II -- 8.89 -- 0.83% 0.75% 26.35% Credit Suisse Small Cap Growth Portfolio Platinum Investor I & II 46,817 7.43 347,984 0.00% 0.75% 47.44% Platinum Investor III 114,690 7.28 834,569 0.00% 0.70% 47.51% Platinum Investor PLUS 3,837 11.62 44,567 0.00% 0.70% 47.51%
VL-R - 93 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- Credit Suisse Small Cap Growth Portfolio - Continued Platinum Investor Survivor 4,530 $ 7.52 $ 34,045 0.00% 0.40% 47.95% Platinum Investor Survivor II 749 11.01 8,249 0.00% 0.75% 47.44% Dreyfus IP MidCap Stock Portfolio - Initial shares Platinum Investor I & II 73,021 10.70 781,298 0.29% 0.75% 30.74% Platinum Investor III 161,611 10.52 1,699,951 0.30% 0.70% 30.80% Platinum Investor PLUS 11,054 11.05 122,113 0.39% 0.70% 30.80% Platinum Investor Survivor 18,763 10.82 202,999 0.27% 0.40% 31.20% Platinum Investor Survivor II 4,400 12.11 53,278 0.36% 0.75% 30.74% Dreyfus VIF Developing Leaders Portfolio - Initial shares Corporate America 12,360 10.38 128,308 0.03% 0.35% 31.23% Platinum Investor I & II 405,482 12.59 5,106,276 0.03% 0.75% 30.71% Platinum Investor III 377,518 9.70 3,660,894 0.03% 0.70% 30.77% Platinum Investor PLUS 14,951 10.47 156,515 0.04% 0.70% 30.77% Platinum Investor Survivor 58,620 10.37 608,130 0.04% 0.40% 31.16% Platinum Investor Survivor II 43,134 11.38 490,913 0.04% 0.75% 30.71% Dreyfus VIF Quality Bond Portfolio - Initial shares Corporate America 7,084 12.97 91,852 4.08% 0.35% 4.58% Platinum Investor I & II 351,864 12.99 4,571,955 3.97% 0.75% 4.16% Platinum Investor III 210,671 12.30 2,591,291 4.04% 0.70% 4.21% Platinum Investor PLUS 12,455 10.90 135,822 4.16% 0.70% 4.21% Platinum Investor Survivor 22,659 12.96 293,621 4.08% 0.40% 4.52% Platinum Investor Survivor II 4,881 10.95 53,463 4.05% 0.75% 4.16% Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Legacy Plus 13,924 10.24 142,609 2.47% 0.75% 16.78% Platinum Investor I & II 194,550 9.75 1,896,730 3.14% 0.75% 16.78% Platinum Investor III 146,922 9.72 1,428,653 2.37% 0.70% 16.84% Platinum Investor PLUS 7,471 11.12 83,043 1.34% 0.70% 16.84% Platinum Investor Survivor 8,861 9.86 87,351 3.52% 0.40% 17.19% Platinum Investor Survivor II 7,874 10.86 85,505 2.22% 0.75% 16.78% Fidelity VIP Contrafund Portfolio - Service Class 2 AG Legacy Plus 37,472 10.85 406,531 0.24% 0.75% 27.24% Corporate America 5,102 9.63 49,147 0.29% 0.35% 27.75% Platinum Investor I & II 275,267 9.51 2,618,131 0.26% 0.75% 27.24% Platinum Investor III 578,962 9.38 5,432,050 0.23% 0.70% 27.30% Platinum Investor PLUS 28,350 11.23 318,302 0.09% 0.70% 27.30% Platinum Investor Survivor 37,768 9.62 363,221 0.54% 0.40% 27.68% Platinum Investor Survivor II 8,993 11.84 106,506 0.19% 0.75% 27.24% Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Legacy Plus 53,210 9.98 531,275 1.36% 0.75% 29.06% Corporate America 19,278 10.22 197,063 1.46% 0.35% 29.57% Platinum Investor I & II 301,311 10.09 3,041,231 1.46% 0.75% 29.06% Platinum Investor III 618,890 10.10 6,252,170 1.23% 0.70% 29.12% Platinum Investor PLUS 28,808 10.88 313,370 0.72% 0.70% 29.12%
VL-R - 94 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income Portfolio - Service Class 2 - Continued Platinum Investor Survivor 65,789 $10.21 $671,430.00 2.70% 0.40% 29.51% Platinum Investor Survivor II 31,375 11.04 346,431 1.49% 0.75% 29.06% Fidelity VIP Growth Portfolio - Service Class 2 AG Legacy Plus 25,346 7.93 201,055 0.10% 0.75% 31.55% Corporate America 5,536 6.72 37,208 0.10% 0.35% 32.08% Platinum Investor I & II 301,685 6.64 2,002,210 0.10% 0.75% 31.55% Platinum Investor III 806,359 6.57 5,300,495 0.09% 0.70% 31.62% Platinum Investor PLUS 35,338 10.58 373,837 0.03% 0.70% 31.62% Platinum Investor Survivor 84,756 6.71 568,779 0.20% 0.40% 32.01% Platinum Investor Survivor II 33,499 9.41 315,255 0.11% 0.75% 31.55% Fidelity VIP Mid Cap Portfolio - Service Class 2 Platinum Investor I & II 13,930 14.00 194,978 0.00% 0.75% 39.97% Platinum Investor III 7,590 14.00 106,267 0.00% 0.70% 40.01% Platinum Investor PLUS 1,083 14.00 15,161 0.00% 0.70% 40.01% Platinum Investor Survivor II 646 14.00 9,039 0.00% 0.75% 39.97% Franklin Templeton - Franklin Small Cap Fund - Class 2 AG Legacy Plus 21,351 6.34 135,309 0.00% 0.75% 36.22% Franklin Templeton - Franklin Small Cap Value Securities Fund - Class 2 Platinum Investor I & II 823 13.27 10,925 0.00% 0.75% 32.71% Platinum Investor III 13,920 13.28 184,793 0.01% 0.70% 32.75% Platinum Investor PLUS 2,274 13.28 30,194 0.00% 0.70% 32.75% Platinum Investor Survivor 954 13.30 12,687 0.00% 0.40% 33.02% Platinum Investor Survivor II 407 13.27 5,400 0.00% 0.75% 32.71% Franklin Templeton - Franklin U.S. Government Fund - Class 2 Platinum Investor I & II 29,978 11.09 332,384 4.44% 0.75% 1.45% Platinum Investor III 993,247 11.10 11,023,739 4.48% 0.70% 1.50% Platinum Investor PLUS 32,257 10.74 346,310 8.97% 0.70% 1.50% Platinum Investor Survivor 307 11.17 3,422 9.35% 0.40% 1.81% Platinum Investor Survivor II 4,440 11.09 49,231 2.42% 0.75% 1.45% Franklin Templeton - Mutual Shares Securities Fund - Class 2 Platinum Investor I & II 24,270 10.88 264,074 0.65% 0.75% 24.21% Platinum Investor III 498,453 10.89 5,428,832 1.01% 0.70% 24.28% Platinum Investor PLUS 9,047 10.71 96,887 0.81% 0.70% 24.28% Platinum Investor Survivor 2,452 10.96 26,861 0.59% 0.40% 24.65% Platinum Investor Survivor II 16,089 10.88 175,057 0.99% 0.75% 24.21% Franklin Templeton - Templeton Foreign Securities Fund - Class 2 AG Legacy Plus 13,455 8.43 113,465 1.09% 0.75% 31.23% Platinum Investor I & II 54,774 10.55 578,054 1.04% 0.75% 31.23% Platinum Investor III 514,133 10.56 5,431,242 1.63% 0.70% 31.29% Platinum Investor PLUS 4,611 10.21 47,094 0.83% 0.70% 31.29% Platinum Investor Survivor 5,955 10.63 63,285 0.15% 0.40% 31.69% Platinum Investor Survivor II 26,168 10.55 276,165 1.34% 0.75% 31.23%
VL-R - 95 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) -------------------------------------------------------------------------------------------------------------------------- Goldman Sachs Capital Growth Fund Platinum Investor I & II 14,861 $ 8.55 $ 127,035 0.00% 0.75% 2.21% Platinum Investor III 16,224 8.56 138,901 0.00% 0.70% 2.22% Platinum Investor PLUS 115 10.46 1,202 0.00% 0.70% 2.22% Platinum Investor Survivor 740,038 8.64 6,394,727 0.00% 0.40% 2.23% Platinum Investor Survivor II 202,510 9.08 1,839,317 0.00% 0.75% 2.21% Janus Aspen Series International Growth Portfolio - Service Shares Corporate America 3,219 6.78 21,839 1.12% 0.35% 34.06% Platinum Investor I & II 84,575 6.70 566,508 0.97% 0.75% 33.53% Platinum Investor III 184,544 6.65 1,227,085 0.93% 0.70% 33.60% Platinum Investor PLUS 3,647 10.66 38,856 0.94% 0.70% 33.60% Platinum Investor Survivor 35,446 6.77 240,071 1.09% 0.40% 34.00% Platinum Investor Survivor II 4,343 10.53 45,738 1.20% 0.75% 33.53% Janus Aspen Series Mid Cap Growth Portfolio - Service Shares Corporate America 2,344 4.50 10,540 0.00% 0.35% 34.29% Platinum Investor I & II 52,305 4.44 232,264 0.00% 0.75% 33.76% Platinum Investor III 377,143 4.33 1,633,083 0.00% 0.70% 33.82% Platinum Investor PLUS 6,125 11.31 69,306 0.00% 0.70% 33.82% Platinum Investor Survivor 29,454 4.49 132,254 0.00% 0.40% 34.23% Platinum Investor Survivor II 996 10.11 10,066 0.00% 0.75% 33.76% Janus Aspen Series Worldwide Growth Portfolio - Service Shares Corporate America 10,759 6.34 68,223 0.91% 0.35% 23.25% Platinum Investor I & II 128,751 6.26 806,098 0.94% 0.75% 22.76% Platinum Investor III 314,555 6.20 1,951,654 0.84% 0.70% 22.82% Platinum Investor PLUS 8,332 9.91 82,556 0.88% 0.70% 22.82% Platinum Investor Survivor 36,703 6.33 232,358 0.94% 0.40% 23.19% Platinum Investor Survivor II 28,353 9.49 269,186 0.61% 0.75% 22.76% JPMorgan Mid Cap Value Portfolio Platinum Investor I & II 39 12.37 482 0.00% 0.75% 23.67% Platinum Investor III 9,332 12.37 115,457 0.00% 0.70% 23.72% Platinum Investor PLUS 139 12.37 1,723 0.00% 0.70% 23.72% Platinum Investor Survivor II 359 12.37 4,435 0.00% 0.75% 23.67% JPMorgan Small Company Portfolio Platinum Investor I & II 24,698 9.04 223,279 0.00% 0.75% 34.96% Platinum Investor III 62,123 8.89 552,395 0.00% 0.70% 35.03% Platinum Investor PLUS 1,545 11.07 17,103 0.00% 0.70% 35.03% Platinum Investor Survivor 1,101 9.14 10,060 0.00% 0.40% 35.43% Platinum Investor Survivor II 469 11.62 5,450 0.00% 0.75% 34.96% MFS VIT Capital Opportunities Series - Initial Class Corporate America 3,396 6.05 20,562 0.21% 0.35% 26.94% Platinum Investor I & II 123,819 5.98 740,269 0.26% 0.75% 26.44% Platinum Investor III 351,732 6.03 2,121,183 0.22% 0.70% 26.50% Platinum Investor PLUS 13,208 10.16 134,162 0.13% 0.70% 26.50%
VL-R - 96 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------------- MFS VIT Capital Opportunities Series - Initial Class - Continued Platinum Investor Survivor 42,350 $ 6.05 $ 256,019 0.22% 0.40% 26.88% Platinum Investor Survivor II 2,444 9.26 22,624 0.23% 0.75% 26.44% MFS VIT Emerging Growth Series - Initial Class AG Legacy Plus 9,716 9.57 92,944 0.00% 0.75% 29.25% Corporate America 1,272 4.40 5,594 0.00% 0.35% 29.77% Platinum Investor I & II 707,829 9.31 6,592,132 0.00% 0.75% 29.25% Platinum Investor III 710,798 4.93 3,503,311 0.00% 0.70% 29.32% Platinum Investor PLUS 10,988 10.38 114,037 0.00% 0.70% 29.32% Platinum Investor Survivor 128,450 4.39 564,347 0.00% 0.40% 29.71% Platinum Investor Survivor II 2,081 8.93 18,588 0.00% 0.75% 29.25% MFS VIT New Discovery Series - Initial Class AG Legacy Plus 11,867 7.40 87,852 0.00% 0.75% 32.72% Corporate America 4,165 8.03 33,449 0.00% 0.35% 33.25% Platinum Investor I & II 118,366 7.93 938,613 0.00% 0.75% 32.72% Platinum Investor III 209,507 7.76 1,626,577 0.00% 0.70% 32.79% Platinum Investor PLUS 7,988 10.55 84,253 0.00% 0.70% 32.79% Platinum Investor Survivor 12,890 8.02 103,356 0.00% 0.40% 33.18% Platinum Investor Survivor II 20,459 10.17 208,046 0.00% 0.75% 32.72% MFS VIT Research Series - Initial Class Corporate America 3,197 6.60 21,110 0.49% 0.35% 24.27% Platinum Investor I & II 45,499 6.52 296,621 0.62% 0.75% 23.77% Platinum Investor III 127,774 6.49 829,360 0.60% 0.70% 23.84% Platinum Investor PLUS 3,326 10.26 34,120 0.32% 0.70% 23.84% Platinum Investor Survivor 10,143 6.59 66,864 0.69% 0.40% 24.21% Platinum Investor Survivor II 3,856 9.56 36,872 0.50% 0.75% 23.77% MFS VIT Total Return Series - Initial Class AG Legacy Plus 133,539 5.64 752,783 1.61% 0.75% 15.45% Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I Corporate America 1,001 5.61 5,612 0.00% 0.35% 27.62% Platinum Investor I & II 51,089 5.54 282,942 0.00% 0.75% 27.11% Platinum Investor III 246,565 5.44 1,342,011 0.00% 0.70% 27.18% Platinum Investor PLUS 9,135 10.15 92,709 0.00% 0.70% 27.18% Platinum Investor Survivor 14,189 5.60 79,457 0.00% 0.40% 27.56% Platinum Investor Survivor II 6,290 9.32 58,612 0.00% 0.75% 27.11% Neuberger Berman AMT Partners Portfolio - Class I AG Legacy Plus 12,144 9.60 116,594 0.00% 0.75% 34.08% Oppenheimer Balanced Fund/VA - Non-Service Shares Platinum Investor I & II 2 11.87 18 0.00% 0.75% 18.74% Platinum Investor III 5,675 11.88 67,413 0.00% 0.70% 18.78% Platinum Investor PLUS 491 11.88 5,829 0.00% 0.70% 18.78% Platinum Investor Survivor 433 11.90 5,158 0.00% 0.40% 19.02% Platinum Investor Survivor II 3,197 11.87 37,965 0.00% 0.75% 18.74%
VL-R - 97 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------ Oppenheimer Global Securities Fund/VA - Non-Service Shares Platinum Investor I & II 2,681 $14.22 $ 38,121 0.00% 0.75% 42.19% Platinum Investor III 7,964 14.22 113,286 0.00% 0.70% 42.24% Platinum Investor PLUS 254 14.22 3,614 0.00% 0.70% 42.24% Platinum Investor Survivor 1,271 14.25 18,122 0.00% 0.40% 42.53% Platinum Investor Survivor II 316 14.22 4,494 0.00% 0.75% 42.19% Oppenheimer High Income Fund/VA - Non-Service Shares AG Legacy Plus 6,177 11.57 71,478 9.13% 0.75% 23.03% PIMCO VIT Real Return Portfolio - Administrative Class AG Legacy Plus 46,648 12.95 604,251 2.34% 0.75% 8.04% Corporate America 2,415 14.29 34,504 2.87% 0.35% 8.47% Platinum Investor I & II 115,773 14.11 1,633,587 2.41% 0.75% 8.04% Platinum Investor III 357,225 14.16 5,058,921 2.55% 0.70% 8.10% Platinum Investor PLUS 19,594 11.96 234,262 2.38% 0.70% 8.10% Platinum Investor Survivor 55,992 14.27 798,850 2.66% 0.40% 8.42% Platinum Investor Survivor II 12,541 12.12 152,019 2.32% 0.75% 8.04% PIMCO VIT Short-Term Portfolio - Administrative Class Corporate America 15,920 11.19 178,227 1.65% 0.35% 1.69% Platinum Investor I & II 198,676 11.05 2,196,210 2.23% 0.75% 1.29% Platinum Investor III 136,457 11.06 1,509,539 1.59% 0.70% 1.34% Platinum Investor PLUS 5,065 10.30 52,148 1.40% 0.70% 1.34% Platinum Investor Survivor 22,482 11.18 251,288 1.66% 0.40% 1.64% Platinum Investor Survivor II 29,761 10.40 309,375 1.79% 0.75% 1.29% PIMCO VIT Total Return Portfolio - Administrative Class AG Legacy Plus 35,437 11.94 423,015 2.68% 0.75% 4.26% Corporate America 6,930 12.67 87,796 3.00% 0.35% 4.68% Platinum Investor I & II 258,775 12.51 3,237,164 2.85% 0.75% 4.26% Platinum Investor III 437,126 12.57 5,495,000 2.98% 0.70% 4.31% Platinum Investor PLUS 24,496 10.96 268,413 2.72% 0.70% 4.31% Platinum Investor Survivor 51,352 12.65 649,546 2.80% 0.40% 4.63% Platinum Investor Survivor II 52,389 11.07 579,689 3.31% 0.75% 4.26% Putnam VT Diversified Income Fund - Class IB AG Legacy Plus 8,850 12.66 112,000 8.11% 0.75% 19.15% Corporate America 294,605 12.87 3,792,813 7.25% 0.35% 19.63% Platinum Investor I & II 89,892 12.22 1,098,789 9.11% 0.75% 19.15% Platinum Investor III 57,820 13.09 756,793 6.90% 0.70% 19.21% Platinum Investor PLUS 4,230 12.13 51,314 3.90% 0.70% 19.21% Platinum Investor Survivor 4,357 12.87 56,062 8.28% 0.40% 19.57% Platinum Investor Survivor II 122 12.47 1,524 0.00% 0.75% 19.15% Putnam VT Growth and Income Fund - Class IB Corporate America 371,886 10.16 3,778,936 1.40% 0.35% 26.94% Platinum Investor I & II 509,573 10.57 5,386,247 1.85% 0.75% 26.43% Platinum Investor III 467,361 9.54 4,459,408 1.57% 0.70% 26.49% Platinum Investor PLUS 13,002 10.68 138,850 1.12% 0.70% 26.49%
VL-R - 98 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------------------- Putnam VT Growth and Income Fund - Class IB - Continued Platinum Investor Survivor 70,398 $10.15 $ 714,878 1.73% 0.40% 26.87% Platinum Investor Survivor II 4,092 10.48 42,897 1.32% 0.75% 26.43% Putnam VT International Growth and Income Fund - Class IB Corporate America 1,334 9.20 12,264 0.00% 0.35% 37.37% Platinum Investor I & II 239,580 10.72 2,568,951 1.40% 0.75% 36.82% Platinum Investor III 198,598 9.49 1,884,181 1.43% 0.70% 36.89% Platinum Investor PLUS 4,529 11.15 50,500 0.85% 0.70% 36.89% Platinum Investor Survivor 43,197 9.19 396,996 2.62% 0.40% 37.30% Platinum Investor Survivor II 12,397 12.12 150,271 1.33% 0.75% 36.82% Putnam VT Small Cap Value Fund - Class IB AG Legacy Plus 25,739 15.81 407,015 0.33% 0.75% 48.53% Putnam VT Vista Fund - Class IB AG Legacy Plus 15,464 4.73 73,086 0.00% 0.75% 32.17% Putnam VT Voyager Fund - Class IB AG Legacy Plus 48,322 5.52 266,775 0.37% 0.75% 23.98% Safeco RST Core Equity Portfolio Platinum Investor I & II 276,177 8.77 2,421,492 0.89% 0.75% 23.85% Platinum Investor III 63,936 7.64 488,773 1.08% 0.70% 23.91% Platinum Investor PLUS 838 10.47 8,774 1.36% 0.70% 23.91% Platinum Investor Survivor 32,237 7.31 235,796 1.04% 0.40% 24.28% Platinum Investor Survivor II 187 9.24 1,733 1.11% 0.75% 23.85% Safeco RST Growth Opportunities Portfolio Corporate America 3,371 8.87 29,895 0.00% 0.35% 42.44% Platinum Investor I & II 396,491 8.69 3,446,391 0.00% 0.75% 41.87% Platinum Investor III 120,957 9.29 1,124,048 0.00% 0.70% 41.95% Platinum Investor PLUS 3,567 10.04 35,811 0.00% 0.70% 41.95% Platinum Investor Survivor 17,018 8.86 150,834 0.00% 0.40% 42.37% Platinum Investor Survivor II 23,243 10.41 242,035 0.00% 0.75% 41.87% Scudder VIT EAFE Equity Index Fund - Class A Legacy Plus -- 8.30 -- 0.00% 0.75% 32.36% Scudder VIT Equity 500 Index Fund - Class A Legacy Plus 1,670 9.25 15,448 1.15% 0.75% 27.20% SunAmerica - Aggressive Growth Portfolio - Class 1 Platinum Investor I & II 7,575 9.99 75,636 0.00% 0.75% 27.50% Platinum Investor III 14,418 9.99 144,087 0.00% 0.70% 27.56% Platinum Investor PLUS 1,974 10.61 20,949 0.00% 0.70% 27.56% Platinum Investor Survivor II 329 9.99 3,284 0.00% 0.75% 27.50% SunAmerica - SunAmerica Balanced Portfolio - Class 1 Platinum Investor I & II 195 10.11 1,968 2.38% 0.75% 14.26% Platinum Investor III 28,434 10.12 287,813 2.66% 0.70% 14.31% Platinum Investor PLUS 6,452 10.44 67,366 3.13% 0.70% 14.31% Platinum Investor Survivor II 407 10.11 4,119 0.00% 0.75% 14.26%
VL-R - 99 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) -------------------------------------------------------------------------------------------------------------- UIF Equity Growth Portfolio - Class I Platinum Investor I & II 326,206 $ 9.60 $ 3,130,767 0.00% 0.75% 23.99% Platinum Investor III 66,650 6.44 429,207 0.00% 0.70% 24.06% Platinum Investor PLUS 1,975 10.26 20,256 0.00% 0.70% 24.06% Platinum Investor Survivor 30,141 6.12 184,561 0.00% 0.40% 24.43% Platinum Investor Survivor II 141 9.06 1,280 0.00% 0.75% 23.99% UIF High Yield Portfolio - Class I Platinum Investor I & II 126,400 10.25 1,295,523 0.00% 0.75% 24.77% Platinum Investor III 20,941 10.62 222,461 0.00% 0.70% 24.83% Platinum Investor PLUS 432 11.86 5,121 0.00% 0.70% 24.83% Platinum Investor Survivor 24,802 9.93 246,395 0.00% 0.40% 25.21% Platinum Investor Survivor II 3,683 11.58 42,672 0.00% 0.75% 24.77% VALIC Company I - International Equities Fund AG Legacy Plus 14,398 7.02 101,091 1.46% 0.75% 28.67% Platinum Investor I & II 122,430 9.01 1,102,745 1.35% 0.75% 28.67% Platinum Investor III 67,471 7.79 525,299 1.44% 0.70% 28.73% Platinum Investor PLUS 3,724 10.19 37,962 2.18% 0.70% 28.73% Platinum Investor Survivor 12,165 6.88 83,664 1.61% 0.40% 29.12% Platinum Investor Survivor II 347 10.60 3,680 1.13% 0.75% 28.67% VALIC Company I - Mid Cap Index Fund AG Legacy Plus 19,915 11.17 222,472 0.66% 0.75% 34.11% Corporate America 6,985 12.09 84,411 0.67% 0.35% 34.65% Platinum Investor I & II 473,968 16.56 7,850,709 0.65% 0.75% 34.11% Platinum Investor III 355,307 10.88 3,864,025 0.67% 0.70% 34.18% Platinum Investor PLUS 15,183 11.20 169,998 0.77% 0.70% 34.18% Platinum Investor Survivor 65,007 12.08 785,117 0.67% 0.40% 34.58% Platinum Investor Survivor II 34,488 12.22 421,438 0.63% 0.75% 34.11% VALIC Company I - Money Market I Fund AG Legacy Plus 54,423 10.51 572,075 0.59% 0.75% -0.15% Corporate America 5,236 10.89 57,007 0.20% 0.35% 0.25% Legacy Plus 1,003 11.07 11,107 0.60% 0.75% -0.15% Platinum Investor I & II 1,187,067 11.59 13,752,956 0.59% 0.75% -0.15% Platinum Investor III 1,157,750 10.43 12,072,544 0.64% 0.70% -0.10% Platinum Investor PLUS 98,210 10.02 983,952 0.77% 0.70% -0.10% Platinum Investor Survivor 380,198 10.88 4,136,738 0.58% 0.40% 0.20% Platinum Investor Survivor II 506,784 10.05 5,091,299 0.62% 0.75% -0.15% VALIC Company I - Nasdaq-100 Index Fund Platinum Investor I & II 175,463 4.44 778,806 0.00% 0.75% 48.16% Platinum Investor III 458,384 4.36 1,998,388 0.00% 0.70% 48.24% Platinum Investor PLUS 5,849 12.50 73,115 0.00% 0.70% 48.24% Platinum Investor Survivor 20,392 4.49 91,524 0.00% 0.40% 48.68% Platinum Investor Survivor II 162 9.41 1,520 0.00% 0.75% 48.16%
VL-R - 100 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2003 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------- VALIC Company I - Science & Technology Fund Platinum Investor I & II 49,200 $ 3.95 $ 194,220 0.00% 0.75% 50.34% Platinum Investor III 164,694 3.91 644,460 0.00% 0.70% 50.42% Platinum Investor PLUS 2,392 12.13 29,006 0.00% 0.70% 50.42% Platinum Investor Survivor 13,270 3.99 52,968 0.00% 0.40% 50.87% Platinum Investor Survivor II 702 9.11 6,393 0.00% 0.75% 50.34% VALIC Company I - Small Cap Index Fund Corporate America 4,923 11.46 56,403 0.54% 0.35% 45.95% Platinum Investor I & II 132,279 11.31 1,496,516 0.51% 0.75% 45.37% Platinum Investor III 150,669 11.13 1,677,464 0.50% 0.70% 45.44% Platinum Investor PLUS 7,881 11.78 92,804 0.50% 0.70% 45.44% Platinum Investor Survivor 26,367 11.44 301,623 0.51% 0.40% 45.88% Platinum Investor Survivor II 1,939 12.67 24,572 0.55% 0.75% 45.37% VALIC Company I - Stock Index Fund AG Legacy Plus 40,926 7.61 311,432 1.31% 0.75% 27.24% Corporate America 14,966 7.59 113,624 1.35% 0.35% 27.75% Platinum Investor I & II 1,600,529 10.43 16,687,793 1.31% 0.75% 27.24% Platinum Investor III 2,468,374 7.89 19,467,096 1.39% 0.70% 27.31% Platinum Investor PLUS 42,167 10.81 455,713 1.42% 0.70% 27.31% Platinum Investor Survivor 685,168 7.59 5,198,479 1.33% 0.40% 27.69% Platinum Investor Survivor II 172,218 10.06 1,733,298 1.28% 0.75% 27.24% Van Kampen LIT Emerging Growth Portfolio - Class I AG Legacy Plus 13,282 4.47 59,393 0.00% 0.75% 26.39% Van Kampen LIT Government Portfolio - Class I AG Legacy Plus 13,082 12.48 163,224 4.12% 0.75% 0.99% Van Kampen LIT Growth and Income Portfolio - Class I Platinum Investor I & II 178,503 10.51 1,876,564 0.86% 0.75% 27.07% Platinum Investor III 155,250 10.52 1,633,472 0.92% 0.70% 27.14% Platinum Investor PLUS 9,593 10.72 102,840 0.39% 0.70% 27.14% Platinum Investor Survivor 15,154 10.57 160,247 1.05% 0.40% 27.52% Platinum Investor Survivor II 4,494 10.51 47,245 0.19% 0.75% 27.07% Vanguard VIF High Yield Bond Portfolio Platinum Investor I & II 73,461 11.85 870,269 5.46% 0.75% 16.00% Platinum Investor III 203,425 11.93 2,427,400 4.89% 0.70% 16.05% Platinum Investor PLUS 9,286 11.47 106,560 3.50% 0.70% 16.05% Platinum Investor Survivor 71,234 11.98 853,280 6.64% 0.40% 16.40% Platinum Investor Survivor II 3,152 11.75 37,022 4.95% 0.75% 16.00% Vanguard VIF REIT Index Portfolio Corporate America 3,843 17.00 65,316 4.03% 0.35% 35.01% Platinum Investor I & II 79,522 16.78 1,334,528 3.21% 0.75% 34.47% Platinum Investor III 239,528 16.78 4,019,190 3.13% 0.70% 34.54% Platinum Investor PLUS 14,257 12.62 179,968 3.25% 0.70% 34.54% Platinum Investor Survivor 21,216 16.97 360,003 3.42% 0.40% 34.94% Platinum Investor Survivor II 9,515 14.62 139,141 2.95% 0.75% 34.47%
VL-R - 101 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ---------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation Fund - Series I The One VUL Solution -- $ 4.77 $ -- 0.00% 0.75% -24.92% AIM V.I. International Growth Fund - Series I AG Legacy Plus 22,776 5.10 116,132 0.77% 0.75% -16.30% Corporate America 5,928 4.90 29,029 0.16% 0.35% -15.97% Platinum Investor I & II 368,831 7.06 2,602,616 0.60% 0.75% -16.30% Platinum Investor III 77,922 5.92 461,268 0.76% 0.70% -16.26% Platinum Investor PLUS 480 8.19 3,927 0.81% 0.70% 0.00% Platinum Investor Survivor 50,094 4.90 245,264 0.63% 0.40% -16.01% Platinum Investor Survivor II 1,368 8.59 11,750 1.20% 0.75% 0.00% The One VUL Solution -- 4.65 -- 1.13% 0.75% -16.31% AIM V.I. Premier Equity Fund - Series I Corporate America 6,136 4.75 29,131 0.07% 0.35% -30.50% Legacy Plus 1 5.27 3 0.00% 0.75% -30.78% Platinum Investor I & II 957,563 7.63 7,301,703 0.32% 0.75% -30.78% Platinum Investor III 347,063 5.66 1,965,988 0.44% 0.70% -30.75% Platinum Investor PLUS 1,706 8.22 14,024 0.81% 0.70% 0.00% Platinum Investor Survivor 105,247 4.75 499,599 0.34% 0.40% -30.54% Platinum Investor Survivor II 3,438 7.09 24,384 0.80% 0.75% 0.00% American Century VP Value Fund - Class I AG Legacy Plus 32,212 11.59 373,282 0.85% 0.75% -13.27% Corporate America 5,131 10.56 54,184 0.56% 0.35% -12.93% Platinum Investor I & II 180,166 10.47 1,886,100 0.79% 0.75% -13.27% Platinum Investor III 221,601 10.40 2,303,966 0.59% 0.70% -13.23% Platinum Investor PLUS 4,788 8.81 42,174 0.00% 0.70% 0.00% Platinum Investor Survivor 12,625 10.55 133,175 0.91% 0.40% -12.97% Platinum Investor Survivor II 42,508 9.22 391,994 0.01% 0.75% 0.00% Ayco Growth Fund Platinum Investor I & II 29,066 6.62 192,386 0.35% 0.75% -29.83% Platinum Investor III 30,148 6.63 199,755 0.39% 0.70% -29.80% Platinum Investor PLUS 1 8.10 7 0.00% 0.70% 0.00% Platinum Investor Survivor 789,598 6.67 5,264,612 0.32% 0.40% -29.58% Platinum Investor Survivor II 222,735 7.03 1,566,422 0.72% 0.75% 0.00% Credit Suisse Small Cap Growth Portfolio Platinum Investor I & II 35,231 5.04 177,610 0.00% 0.75% -34.19% Platinum Investor III 51,587 4.93 254,477 0.00% 0.70% -34.15% Platinum Investor PLUS 871 7.87 6,859 0.00% 0.70% 0.00% Platinum Investor Survivor 3,366 5.08 17,097 0.00% 0.40% -33.96% Platinum Investor Survivor II 124 7.47 929 0.00% 0.75% 0.00% Dreyfus IP MidCap Stock Portfolio - Initial shares Platinum Investor I & II 63,006 8.18 515,639 0.34% 0.75% -13.15% Platinum Investor III 121,203 8.04 974,668 0.41% 0.70% -13.10% Platinum Investor PLUS 3,019 8.45 25,502 0.58% 0.70% 0.00% Platinum Investor Survivor 20,439 8.25 168,544 0.34% 0.40% -12.84%
VL-R - 102 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ---------------------------------------------------------------------------------------------------------------------------- Dreyfus IP MidCap Stock Portfolio - Initial shares - Continued Platinum Investor Survivor II 1,861 $ 9.26 $ 17,237 0.63% 0.75% 0.00% Dreyfus VIF Developing Leaders Portfolio - Initial shares Corporate America 10,128 7.91 80,120 0.05% 0.35% -19.41% Platinum Investor I & II 426,312 9.63 4,107,348 0.05% 0.75% -19.73% Platinum Investor III 271,074 7.42 2,010,122 0.05% 0.70% -19.69% Platinum Investor PLUS 4,300 8.01 34,423 0.03% 0.70% 0.00% Platinum Investor Survivor 161,430 7.91 1,276,781 0.07% 0.40% -19.45% Platinum Investor Survivor II 19,192 8.71 167,114 0.05% 0.75% 0.00% Dreyfus VIF Quality Bond Portfolio - Initial shares Corporate America 7,235 12.40 89,712 4.91% 0.35% 7.39% Platinum Investor I & II 434,524 12.47 5,420,598 4.83% 0.75% 6.96% Platinum Investor III 153,439 11.80 1,811,076 5.31% 0.70% 7.01% Platinum Investor PLUS 4,878 10.46 51,041 1.39% 0.70% 0.00% Platinum Investor Survivor 19,599 12.40 242,975 5.20% 0.40% 7.33% Platinum Investor Survivor II 3,457 10.52 36,349 4.29% 0.75% 0.00% Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Legacy Plus 8,505 8.77 74,595 3.64% 0.75% -9.71% Platinum Investor I & II 174,156 8.35 1,453,875 0.54% 0.75% -9.71% Platinum Investor III 79,608 8.32 662,518 2.09% 0.70% -9.66% Platinum Investor PLUS 1,718 9.51 16,348 0.00% 0.70% 0.00% Platinum Investor Survivor 8,463 8.41 71,189 2.40% 0.40% -9.39% Platinum Investor Survivor II 4,060 9.30 37,752 0.00% 0.75% 0.00% Fidelity VIP Contrafund Portfolio - Service Class 2 AG Legacy Plus 25,788 8.53 219,877 0.37% 0.75% -10.28% Corporate America 4,783 7.54 36,062 0.48% 0.35% -9.92% Platinum Investor I & II 243,910 7.48 1,823,252 0.62% 0.75% -10.28% Platinum Investor III 301,956 7.37 2,225,469 0.41% 0.70% -10.24% Platinum Investor PLUS 4,180 8.82 36,867 0.00% 0.70% 0.00% Platinum Investor Survivor 272,383 7.53 2,051,592 0.66% 0.40% -9.97% Platinum Investor Survivor II 4,002 9.31 37,252 0.00% 0.75% 0.00% Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Legacy Plus 39,899 7.74 308,675 1.20% 0.75% -17.77% Corporate America 17,330 7.89 136,717 0.96% 0.35% -17.44% Platinum Investor I & II 264,111 7.82 2,065,557 1.52% 0.75% -17.77% Platinum Investor III 359,047 7.82 2,809,110 1.23% 0.70% -17.73% Platinum Investor PLUS 6,741 8.42 56,792 0.00% 0.70% 0.00% Platinum Investor Survivor 262,426 7.88 2,068,007 1.54% 0.40% -17.48% Platinum Investor Survivor II 28,086 8.56 240,289 0.10% 0.75% 0.00% Fidelity VIP Growth Portfolio - Service Class 2 AG Legacy Plus 21,662 6.03 130,618 0.19% 0.75% -30.82% Corporate America 4,366 5.09 22,219 0.10% 0.35% -30.54% Platinum Investor I & II 305,211 5.04 1,539,790 0.12% 0.75% -30.82% Platinum Investor III 528,324 4.99 2,638,612 0.10% 0.70% -30.78%
VL-R - 103 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ---------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio - Service Class 2 - Continued Platinum Investor PLUS 6,371 $ 8.04 $ 51,207 0.00% 0.70% 0.00% Platinum Investor Survivor 404,293 5.08 2,055,203 0.29% 0.40% -30.57% Platinum Investor Survivor II 30,554 7.15 218,579 0.00% 0.75% 0.00% Franklin Templeton - Franklin Small Cap Fund - Class 2 AG Legacy Plus 19,916 4.65 92,656 0.37% 0.75% -29.22% The One VUL Solution -- 4.23 -- 0.30% 0.75% -29.22% Franklin Templeton - Franklin U.S. Government Fund - Class 2 Platinum Investor I & II 19,378 10.93 211,781 0.20% 0.75% 0.00% Platinum Investor III 765,913 10.93 8,374,946 22.84% 0.70% 0.00% Platinum Investor PLUS 1,443 10.58 15,262 0.00% 0.70% 0.00% Platinum Investor Survivor 25,055 10.97 274,784 0.00% 0.40% 0.00% Platinum Investor Survivor II 372 10.93 4,064 0.00% 0.75% 0.00% Franklin Templeton - Mutual Shares Securities Fund - Class 2 Platinum Investor I & II 12,404 8.76 108,650 1.85% 0.75% 0.00% Platinum Investor III 485,325 8.76 4,253,340 0.00% 0.70% 0.00% Platinum Investor PLUS 2,794 8.62 24,079 0.00% 0.70% 0.00% Platinum Investor Survivor 1,068 8.79 9,384 0.00% 0.40% 0.00% Platinum Investor Survivor II 8,126 8.76 71,181 0.76% 0.75% 0.00% Franklin Templeton - Templeton Developing Markets Securities Fund - Class 2 The One VUL Solution -- 6.18 -- 2.91% 0.75% -0.89% Franklin Templeton - Templeton Foreign Securities Fund - Class 2 AG Legacy Plus 6,595 6.43 42,380 2.31% 0.75% -19.17% Platinum Investor I & II 7,590 8.04 61,042 0.76% 0.75% 0.00% Platinum Investor III 517,539 8.05 4,164,199 0.01% 0.70% 0.00% Platinum Investor PLUS 1,105 7.78 8,596 0.00% 0.70% 0.00% Platinum Investor Survivor 595 8.07 4,799 0.00% 0.40% 0.00% Platinum Investor Survivor II 9,504 8.04 76,434 1.64% 0.75% 0.00% Janus Aspen Series International Growth Portfolio - Service Shares Corporate America 1,873 5.06 9,478 0.94% 0.35% -26.02% Platinum Investor I & II 77,304 5.02 387,785 0.72% 0.75% -26.31% Platinum Investor III 130,384 4.98 648,942 0.79% 0.70% -26.28% Platinum Investor PLUS 1,057 7.98 8,431 0.62% 0.70% 0.00% Platinum Investor Survivor 25,566 5.05 129,225 0.79% 0.40% -26.05% Platinum Investor Survivor II 10,266 7.89 80,958 1.54% 0.75% 0.00% Janus Aspen Series Mid Cap Growth Portfolio - Service Shares Corporate America 2,135 3.35 7,151 0.00% 0.35% -28.37% Platinum Investor I & II 50,819 3.32 168,710 0.00% 0.75% -28.66% Platinum Investor III 257,635 3.24 833,628 0.00% 0.70% -28.62% Platinum Investor PLUS 1,532 8.45 12,952 0.00% 0.70% 0.00% Platinum Investor Survivor 14,436 3.35 48,291 0.00% 0.40% -28.41% Janus Aspen Series Worldwide Growth Portfolio - Service Shares Corporate America 8,060 5.14 41,468 0.79% 0.35% -25.97% Platinum Investor I & II 154,176 5.10 786,343 0.86% 0.75% -26.26%
VL-R - 104 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------ Janus Aspen Series Worldwide Growth Portfolio - Service Shares - Continued Platinum Investor III 206,199 $5.05 $1,041,675 0.76% 0.70% -26.23% Platinum Investor PLUS 1,138 8.07 9,184 0.70% 0.70% 0.00% Platinum Investor Survivor 21,524 5.14 110,615 0.71% 0.40% -26.00% Platinum Investor Survivor II 14,644 7.73 113,257 0.83% 0.75% 0.00% JPMorgan Small Company Portfolio Platinum Investor I & II 14,260 6.70 95,522 0.21% 0.75% -22.24% Platinum Investor III 32,094 6.59 211,344 0.17% 0.70% -22.20% Platinum Investor PLUS 83 8.20 678 0.00% 0.70% 0.00% Platinum Investor Survivor 1,804 6.75 12,176 0.26% 0.40% -21.96% Platinum Investor Survivor II 116 8.61 998 0.00% 0.75% 0.00% MFS VIT Capital Opportunities Series - Initial Class Corporate America 3,029 4.77 14,449 0.05% 0.35% -29.94% Platinum Investor I & II 138,353 4.73 654,212 0.04% 0.75% -30.22% Platinum Investor III 261,521 4.77 1,246,756 0.05% 0.70% -30.18% Platinum Investor PLUS 1,935 8.03 15,536 0.00% 0.70% 0.00% Platinum Investor Survivor 38,315 4.76 182,558 0.06% 0.40% -29.97% Platinum Investor Survivor II 1,984 7.32 14,526 0.01% 0.75% 0.00% MFS VIT Emerging Growth Series - Initial Class AG Legacy Plus 7,536 7.40 55,771 3.14% 0.75% -32.52% Corporate America 1,471 3.39 4,984 0.00% 0.35% -33.99% Platinum Investor I & II 734,536 7.21 5,292,534 0.00% 0.75% -34.26% Platinum Investor III 407,316 3.81 1,552,389 0.00% 0.70% -34.22% Platinum Investor PLUS 1,418 8.03 11,383 0.00% 0.70% 0.00% Platinum Investor Survivor 112,158 3.39 379,908 0.00% 0.40% -34.02% Platinum Investor Survivor II 978 6.91 6,758 0.00% 0.75% 0.00% MFS VIT Investors Trust Series - Initial Class The One VUL Solution -- 6.78 -- 0.75% 0.75% -21.56% MFS VIT New Discovery Series - Initial Class AG Legacy Plus 7,546 5.58 42,092 0.00% 0.75% -32.14% Corporate America 3,836 6.03 23,116 0.00% 0.35% -31.87% Platinum Investor I & II 109,936 5.97 656,847 0.00% 0.75% -32.14% Platinum Investor III 128,296 5.85 750,133 0.00% 0.70% -32.11% Platinum Investor PLUS 2,463 7.94 19,562 0.00% 0.70% 0.00% Platinum Investor Survivor 6,447 6.02 38,816 0.00% 0.40% -31.90% Platinum Investor Survivor II 18,384 7.66 140,857 0.00% 0.75% 0.00% MFS VIT Research Series - Initial Class Corporate America 2,002 5.31 10,636 0.19% 0.35% -24.80% Platinum Investor I & II 43,887 5.27 231,157 0.25% 0.75% -25.10% Platinum Investor III 95,980 5.24 503,077 0.25% 0.70% -25.06% Platinum Investor PLUS 444 8.28 3,676 0.00% 0.70% 0.00% Platinum Investor Survivor 9,598 5.31 50,938 0.31% 0.40% -24.84% Platinum Investor Survivor II 2,335 7.73 18,040 0.64% 0.75% 0.00%
VL-R - 105 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------- MFS VIT Total Return Series - Initial Class AG Legacy Plus 136,071 $ 4.88 $ 664,385 1.55% 0.75% -8.30% Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I Platinum Investor I & II 57,765 4.36 251,677 0.00% 0.75% -29.87% Platinum Investor III 171,461 4.28 733,802 0.00% 0.70% -29.83% Platinum Investor PLUS 1,371 7.98 10,937 0.00% 0.70% 0.00% Platinum Investor Survivor 175,271 4.39 769,462 0.00% 0.40% -29.62% Platinum Investor Survivor II 2,862 7.33 20,977 0.00% 0.75% 0.00% Neuberger Berman AMT Partners Portfolio - Class I AG Legacy Plus 11,767 7.16 84,258 0.73% 0.75% -24.71% One Group Investment Trust Equity Index Portfolio The One VUL Solution -- 6.19 -- 0.00% 0.75% -23.06% One Group Investment Trust Large Cap Growth Portfolio The One VUL Solution -- 4.33 -- 0.00% 0.75% -29.01% One Group Investment Trust Mid Cap Growth Portfolio The One VUL Solution -- 6.71 -- 0.00% 0.75% -20.73% Oppenheimer High Income Fund/VA - Non-Service Shares AG Legacy Plus 11,744 9.40 110,445 9.93% 0.75% -3.12% The One VUL Solution -- 8.41 -- 20.28% 0.75% -3.13% PIMCO VIT Real Return Portfolio - Administrative Class AG Legacy Plus 32,681 11.99 391,822 4.15% 0.75% 16.92% Corporate America 3,026 13.17 39,867 4.70% 0.35% 0.00% Platinum Investor I & II 190,024 13.06 2,481,720 5.95% 0.75% 16.92% Platinum Investor III 174,421 13.10 2,285,113 4.20% 0.70% 16.98% Platinum Investor PLUS 5,160 11.06 57,074 0.74% 0.70% 0.00% Platinum Investor Survivor 61,007 13.16 802,807 4.30% 0.40% 17.33% Platinum Investor Survivor II 5,707 11.22 64,033 4.48% 0.75% 0.00% PIMCO VIT Short-Term Portfolio - Administrative Class Corporate America 6,727 11.01 74,053 2.92% 0.35% 2.66% Platinum Investor I & II 80,480 10.91 878,341 2.93% 0.75% 2.25% Platinum Investor III 86,224 10.92 941,253 2.89% 0.70% 2.30% Platinum Investor PLUS 560 10.16 5,689 0.71% 0.70% 0.00% Platinum Investor Survivor 17,021 11.00 187,177 2.44% 0.40% 2.61% Platinum Investor Survivor II 34,758 10.26 356,732 3.78% 0.75% 0.00% PIMCO VIT Total Return Portfolio - Administrative Class AG Legacy Plus 25,099 11.45 287,373 4.25% 0.75% 8.27% Corporate America 4,850 12.10 58,703 4.47% 0.35% 8.71% Platinum Investor I & II 276,366 12.00 3,315,961 4.25% 0.75% 8.27% Platinum Investor III 301,969 12.05 3,639,057 4.27% 0.70% 8.33% Platinum Investor PLUS 4,990 10.50 52,417 1.45% 0.70% 0.00% Platinum Investor Survivor 51,588 12.09 623,682 3.98% 0.40% 8.65% Platinum Investor Survivor II 43,725 10.61 464,046 5.29% 0.75% 0.00%
VL-R - 106 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ----------------------------------------------------------------------------------------------------------------------- Putnam VT Diversified Income Fund - Class IB AG Legacy Plus 7,901 $10.62 $ 83,918 8.29% 0.75% 5.11% Corporate America 190,178 10.76 2,046,636 5.68% 0.35% 5.53% Platinum Investor I & II 100,097 10.26 1,026,852 9.81% 0.75% 5.11% Platinum Investor III 34,162 10.98 375,082 7.36% 0.70% 5.17% Platinum Investor PLUS 246 10.18 2,502 0.00% 0.70% 0.00% Platinum Investor Survivor 4,759 10.76 51,212 8.76% 0.40% 5.48% Putnam VT Growth and Income Fund - Class IB Corporate America 234,304 8.01 1,875,663 1.01% 0.35% -19.27% Platinum Investor I & II 556,852 8.36 4,655,525 1.65% 0.75% -19.59% Platinum Investor III 326,752 7.54 2,464,769 1.35% 0.70% -19.55% Platinum Investor PLUS 3,645 8.44 30,768 0.00% 0.70% 0.00% Platinum Investor Survivor 68,750 8.00 550,273 1.54% 0.40% -19.31% Platinum Investor Survivor II 2,240 8.29 18,571 0.00% 0.75% 0.00% Putnam VT International Growth and Income Fund - Class IB Platinum Investor I & II 235,399 7.84 1,844,874 0.53% 0.75% -14.41% Platinum Investor III 135,756 6.93 940,907 0.51% 0.70% -14.37% Platinum Investor PLUS 682 8.15 5,553 0.00% 0.70% 0.00% Platinum Investor Survivor 230,768 6.69 1,544,705 0.76% 0.40% -14.11% Platinum Investor Survivor II 12,013 8.86 106,432 0.53% 0.75% 0.00% Putnam VT Small Cap Value Fund - Class IB AG Legacy Plus 24,600 10.65 261,902 0.23% 0.75% -18.88% Putnam VT Vista Fund - Class IB AG Legacy Plus 14,678 3.58 52,485 0.00% 0.75% -31.12% The One VUL Solution -- 3.97 -- 0.00% 0.75% -31.12% Putnam VT Voyager Fund - Class IB AG Legacy Plus 47,406 4.45 211,102 0.59% 0.75% -27.08% Safeco RST Core Equity Portfolio Platinum Investor I & II 332,477 7.08 2,353,833 0.83% 0.75% -26.46% Platinum Investor III 48,012 6.17 296,218 1.53% 0.70% -26.43% Platinum Investor PLUS 291 8.45 2,455 1.58% 0.70% 0.00% Platinum Investor Survivor 27,186 5.89 160,003 1.28% 0.40% -26.20% Platinum Investor Survivor II 145 7.46 1,081 2.53% 0.75% 0.00% Safeco RST Growth Opportunities Portfolio Corporate America 3,445 6.23 21,447 0.00% 0.35% -37.89% Platinum Investor I & II 445,419 6.13 2,728,943 0.00% 0.75% -38.14% Platinum Investor III 105,618 6.55 691,469 0.00% 0.70% -38.11% Platinum Investor PLUS 1,743 7.07 12,330 0.00% 0.70% 0.00% Platinum Investor Survivor 30,017 6.23 186,867 0.00% 0.40% -37.92% Platinum Investor Survivor II 12,647 7.34 92,822 0.00% 0.75% 0.00% Scudder International Portfolio The One VUL Solution -- 5.42 -- 0.87% 0.75% -14.13% Scudder Small Cap Value Portfolio The One VUL Solution -- 10.75 -- 0.79% 0.75% -12.01%
VL-R - 107 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ------------------------------------------------------------------------------------------------------------------ Scudder VIT EAFE Equity Index Fund - Class A Legacy Plus -- $ 6.27 $ -- 0.00% 0.75% -22.13% Scudder VIT Equity 500 Index Fund - Class A Legacy Plus 1,610 7.27 11,703 0.15% 0.75% -22.86% SunAmerica - Aggressive Growth Portfolio - Class 1 Platinum Investor I & II 108 7.83 842 0.00% 0.75% 0.00% Platinum Investor III 2,070 7.83 16,214 0.24% 0.70% 0.00% Platinum Investor PLUS 124 8.32 1,030 0.00% 0.70% 0.00% SunAmerica - SunAmerica Balanced Portfolio - Class 1 Platinum Investor I & II 16 8.85 143 0.00% 0.75% 0.00% Platinum Investor III 8,391 8.85 74,301 2.13% 0.70% 0.00% Platinum Investor PLUS 2,001 9.13 18,277 0.00% 0.70% 0.00% UIF Equity Growth Portfolio - Class I Legacy Plus -- 7.69 -- 0.00% 0.75% -28.40% Platinum Investor I & II 381,798 7.74 2,955,218 0.15% 0.75% -28.40% Platinum Investor III 49,604 5.19 257,495 0.22% 0.70% -28.37% Platinum Investor PLUS 133 8.27 1,099 0.36% 0.70% 0.00% Platinum Investor Survivor 49,021 4.92 241,240 0.17% 0.40% -28.15% Platinum Investor Survivor II 99 7.31 726 0.00% 0.75% 0.00% UIF High Yield Portfolio - Class I Platinum Investor I & II 128,628 8.21 1,056,625 7.67% 0.75% -7.96% Platinum Investor III 13,440 8.51 114,370 10.10% 0.70% -7.92% Platinum Investor PLUS 0 9.50 1 0.00% 0.70% 0.00% Platinum Investor Survivor 23,236 7.93 184,358 8.91% 0.40% -7.64% Platinum Investor Survivor II 2,195 9.28 20,376 19.91% 0.75% 0.00% VALIC Company I - International Equities Fund AG Legacy Plus 11,056 5.46 60,328 0.64% 0.75% -19.40% Platinum Investor I & II 133,568 7.00 935,013 0.36% 0.75% -19.40% Platinum Investor III 43,063 6.05 260,439 0.40% 0.70% -19.36% Platinum Investor PLUS 57 7.92 453 0.00% 0.70% 0.00% Platinum Investor Survivor 13,500 5.33 71,906 0.42% 0.40% -19.11% Platinum Investor Survivor II 280 8.24 2,305 0.93% 0.75% 0.00% VALIC Company I - Mid Cap Index Fund AG Legacy Plus 17,425 8.33 145,149 0.99% 0.75% -15.54% Corporate America 7,522 8.98 67,512 0.64% 0.35% -15.20% Platinum Investor I & II 479,617 12.35 5,923,609 0.70% 0.75% -15.54% Platinum Investor III 229,906 8.10 1,863,384 0.72% 0.70% -15.50% Platinum Investor PLUS 2,609 8.34 21,775 0.27% 0.70% 0.00% Platinum Investor Survivor 60,525 8.97 543,149 0.73% 0.40% -15.24% Platinum Investor Survivor II 19,511 9.11 177,774 0.87% 0.75% 0.00% VALIC Company I - Money Market I Fund AG Legacy Plus 47,333 10.53 498,304 1.45% 0.75% 0.49% Corporate America 28,915 10.86 314,038 0.40% 0.35% 0.89% Legacy Plus 977 11.09 10,830 0.61% 0.75% 0.49%
VL-R - 108 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) --------------------------------------------------------------------------------------------------------------------- VALIC Company I - Money Market I Fund - Continued Platinum Investor I & II 1,576,362 $11.60 $18,291,099 1.32% 0.75% 0.49% Platinum Investor III 1,284,697 10.44 13,034,287 1.00% 0.70% 0.54% Platinum Investor PLUS 14,815 10.03 148,586 0.65% 0.70% 0.00% Platinum Investor Survivor 411,443 10.86 4,467,881 1.33% 0.40% 0.84% Platinum Investor Survivor II 514,618 10.06 5,177,910 1.05% 0.75% 0.49% The One VUL Solution -- 10.82 -- 0.00% 0.75% 0.49% VALIC Company I - Nasdaq-100 Index Fund Platinum Investor I & II 88,041 3.00 263,750 0.00% 0.75% -38.72% Platinum Investor III 337,089 2.94 991,382 0.00% 0.70% -38.69% Platinum Investor PLUS 457 8.43 3,855 0.00% 0.70% 0.00% Platinum Investor Survivor 10,382 3.02 31,341 0.00% 0.40% -38.50% VALIC Company I - Science & Technology Fund Platinum Investor I & II 33,591 2.63 88,200 0.00% 0.75% -40.66% Platinum Investor III 119,566 2.60 311,051 0.00% 0.70% -40.63% Platinum Investor PLUS 48 8.06 387 0.00% 0.70% 0.00% Platinum Investor Survivor 6,981 2.65 18,470 0.00% 0.40% -40.45% Platinum Investor Survivor II 506 6.06 3,062 0.00% 0.75% 0.00% VALIC Company I - Small Cap Index Fund Corporate America 3,525 7.85 27,671 1.27% 0.35% -21.10% Platinum Investor I & II 101,961 7.78 793,503 1.37% 0.75% -21.41% Platinum Investor III 89,617 7.65 686,001 0.98% 0.70% -21.37% Platinum Investor PLUS 1,298 8.10 10,508 0.65% 0.70% 0.00% Platinum Investor Survivor 20,366 7.84 159,702 1.03% 0.40% -21.14% Platinum Investor Survivor II 1,287 8.72 11,216 0.91% 0.75% 0.00% VALIC Company I - Stock Index Fund AG Legacy Plus 52,528 5.98 314,131 1.85% 0.75% -23.01% Corporate America 13,034 5.94 77,457 1.03% 0.35% -22.70% Platinum Investor I & II 1,712,769 8.19 14,034,484 1.18% 0.75% -23.01% Platinum Investor III 1,643,626 6.19 10,182,125 1.35% 0.70% -22.98% Platinum Investor PLUS 1,898 8.49 16,117 0.56% 0.70% 0.00% Platinum Investor Survivor 564,353 5.94 3,353,318 1.24% 0.40% -22.74% Platinum Investor Survivor II 80,956 7.91 640,336 2.27% 0.75% 0.00% Van Kampen LIT Emerging Growth Portfolio - Class I AG Legacy Plus 20,181 3.54 71,398 0.31% 0.75% -32.99% The One VUL Solution -- 3.49 -- 0.40% 0.75% -32.99% Van Kampen LIT Government Portfolio - Class I AG Legacy Plus 11,024 12.36 136,202 2.14% 0.75% 8.80% Van Kampen LIT Growth and Income Portfolio - Class I Platinum Investor I & II 154,511 8.27 1,278,271 2.59% 0.75% 0.00% Platinum Investor III 77,747 8.28 643,529 1.74% 0.70% 0.00% Platinum Investor PLUS 1,758 8.43 14,822 0.00% 0.70% 0.00% Platinum Investor Survivor 19,931 8.29 165,277 2.74% 0.40% 0.00% Platinum Investor Survivor II 451 8.27 3,734 0.00% 0.75% 0.00%
VL-R - 109 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights - Continued A summary of units outstanding, unit values, and net assets for the variable life policies and the investment income ratios, expense ratios (excluding expenses of the underlying Divisions) and total returns for the year ended December 31, 2002 are as follows:
Investment Income Expense Total Divisions Units Unit Value Net Assets Ratio (a) Ratio (b) Return (c) ---------------------------------------------------------------------------------------------------- Vanguard VIF High Yield Bond Portfolio Platinum Investor I & II 45,524 $10.21 $ 464,933 4.37% 0.75% 0.78% Platinum Investor III 110,201 10.28 1,133,078 5.72% 0.70% 0.84% Platinum Investor PLUS 1,974 9.89 19,522 0.00% 0.70% 0.00% Platinum Investor Survivor 58,997 10.29 607,114 8.53% 0.40% 1.14% Platinum Investor Survivor II 1,345 10.13 13,622 0.00% 0.75% 0.00% Vanguard VIF REIT Index Portfolio Corporate America 4,485 12.59 56,465 2.61% 0.35% 3.17% Platinum Investor I & II 70,827 12.48 883,918 1.54% 0.75% 2.76% Platinum Investor III 157,740 12.47 1,967,344 3.53% 0.70% 2.81% Platinum Investor PLUS 5,814 9.38 54,551 0.00% 0.70% 0.00% Platinum Investor Survivor 18,253 12.57 229,533 3.64% 0.40% 3.12% Platinum Investor Survivor II 5,625 10.87 61,169 0.00% 0.75% 0.00%
VL-R - 110 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED Note G - Financial Highlights (a)These amounts represent the dividends, excluding capital gain distributions from mutual funds, received by the Division from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that result in direct reduction in the unit value. The recognition of investment income by the Division is affected by the timing of the declaration of dividends by the underlying fund in which the Divisions invest. (b)These amounts represent the annualized policy expenses of the Separate Account, consisting primarily of mortality and expense risk charges, for each year indicated. These ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to policy owner accounts through the redemption of units and expenses of the underlying fund have been excluded. (c)These amounts represent the total return for the years indicated, including changes in the value of the underlying Division, and reflect deductions for those expenses that result in a direct reduction to unit values. The total return does not include policy charges deducted directly from account values. For the years ended December 31, 2002, no total return was calculated if the Division became an available investment option during the year. For the years ended December 31, 2006, 2005, 2004, and 2003, a total return was calculated using the initial unit value for the Division if the Division became an available investment option during the year and the underlying Fund was not available at the beginning of the year. * Fund Name Changes 2004 . Effective May 1, 2004, Oppenheimer Multiple Strategies Fund/VA - Non-Service Shares changed its name to Oppenheimer Balanced Fund/VA - Non-Service Shares. 2005 . Effective May 1, 2005, Franklin Templeton - Franklin Small Cap Fund - Class 2 changed its name to Franklin Templeton - Franklin Small-Mid Cap Growth Securities Fund - Class 2. 2006 . Effective August 15, 2006, Van Kampen LIT Emerging Growth Portfolio - Class I changed its name to Van Kampen LIT Strategic Growth Portfolio - Class I. . Effective December 1, 2006, Credit Suisse Small Cap Growth Portfolio changed its name to Credit Suisse Small Cap Core I Portfolio. VL-R - 111 LOGO OF PRICEWATERHOUSECOOPERS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholder and Board of Directors American General Life Insurance Company: In our opinion, the accompanying consolidated balance sheets as of December 31, 2006 and 2005 and the related consolidated statements of income, shareholder's equity, comprehensive income and cash flows present fairly, in all material respects, the financial position of American General Life Insurance Company and subsidiaries (the "Company"), an indirect, wholly-owned subsidiary of American International Group, Inc. at December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 2 to the financial statements, the Company changed its method for accounting for certain hybrid financial instruments in 2006, and changed its method of accounting for certain nontraditional long-duration contracts in 2004. PRICEWATERHOUSECOOPERS LLP Houston, Texas April 27, 2007 F-1 American General Life Insurance Company Consolidated Balance Sheet
December 31 ------------------------- 2006 2005 ------------ ------------ (In Thousands) Assets Investments: Fixed maturity securities, available for sale, at fair value (amortized cost - $49,672,653 - 2006; $48,882,647 - 2005) $ 50,811,516 $ 50,523,762 Hybrid securities, at fair value (amortized cost: 2006 - $159,623) 154,304 -- Fixed maturity securities, trading, at fair value (amortized cost - $150,863 - 2006; $148,276 - 2005) 147,820 148,025 Equity securities, available for sale, at fair value (cost - $43,908 - 2006; $33,457 - 2005) 83,314 66,361 Equity securities, trading, at fair value (cost - $1,000 - 2006; $1,000 - 2005) 1,000 1,000 Mortgage loans on real estate, net of allowance ($4,206 - 2006; $4,679 - 2005) 4,918,215 3,694,210 Policy loans 1,820,277 1,774,872 Investment real estate 34,086 35,595 Partnerships & other invested assets 3,482,590 2,656,696 Securities lending collateral 17,344,914 15,901,157 Short-term investments 42,485 84,220 Derivative assets 32,386 13,190 ------------ ------------ Total investments 78,872,907 74,899,088 Cash and cash equivalents 247,344 222,192 Restricted cash 18,433 17,705 Investment in ultimate Parent Company (cost - $8,597 in 2006 and 2005) 58,056 55,277 Notes receivable from affiliates 748,239 753,666 Accrued investment income 745,413 722,214 Accounts receivable 1,161,660 1,123,440 Deferred policy acquisition costs/cost of insurance purchased 5,228,469 4,308,283 Other assets 299,447 260,926 Deferred sales inducement 82,128 46,960 Assets held in separate accounts 30,272,167 27,162,510 ------------ ------------ Total assets $117,734,263 $109,572,261 ============ ============
See accompanying notes to consolidated financial statements. F-2 American General Life Insurance Company Consolidated Balance Sheet
December 31 ------------------------- 2006 2005 ------------ ------------ (In Thousands) Liabilities, Minority Interest and Shareholder's Equity Liabilities: Future policy benefits $ 11,630,686 $ 10,343,640 Policyholder contract deposits 41,038,296 39,716,124 Other policy claims and benefits payable 269,560 238,727 Other policyholders' funds 3,149,965 2,762,101 Federal income taxes 1,333,177 1,404,000 Indebtedness to affiliates 213,275 234,563 Securities lending payable 17,344,914 15,901,157 Other liabilities 1,251,272 1,328,146 Derivative liabilities 114,414 66,081 Liabilities related to separate accounts 30,272,167 27,162,510 ------------ ------------ Total liabilities 106,617,726 99,157,049 Minority interest 110,227 105,740 Shareholder's equity: Preferred stock, $100 par value, 8,500 shares authorized, issued and outstanding 850 850 Common stock, $10 par value, 600,000 shares authorized, issued and outstanding 6,000 6,000 Additional paid-in capital 3,664,906 3,627,638 Accumulated other comprehensive income 699,465 909,440 Retained earnings 6,635,089 5,765,544 ------------ ------------ Total shareholder's equity 11,006,310 10,309,472 ------------ ------------ Total liabilities, minority interest and shareholder's equity $117,734,263 $109,572,261 ============ ============
See accompanying notes to consolidated financial statements. F-3 American General Life Insurance Company Consolidated Statement of Income
2006 2005 2004 ---------- ---------- ---------- (In Thousands) Revenues: Premiums and other considerations $2,879,680 $2,782,785 $2,540,322 Net investment income 3,962,820 3,633,886 3,485,349 Net realized investment gain (losses) (289,654) (52,851) (63,437) Other 248,696 315,008 288,640 ---------- ---------- ---------- Total revenues 6,801,542 6,678,828 6,250,874 ---------- ---------- ---------- Benefits and expenses: Policyholders' benefits 2,027,046 1,782,042 1,650,664 Interest credited 2,299,622 2,163,035 2,063,646 Operating costs and expenses 1,009,675 1,129,210 1,069,054 ---------- ---------- ---------- Total benefits and expenses 5,336,343 5,074,287 4,783,364 ---------- ---------- ---------- Income before income tax expense 1,465,199 1,604,541 1,467,510 ---------- ---------- ---------- Income tax expense: Current 387,854 243,542 124,643 Deferred 4,451 137,039 267,475 ---------- ---------- ---------- Total income tax expense 392,305 380,581 392,118 ---------- ---------- ---------- Net income before cumulative effect of accounting change 1,072,894 1,223,960 1,075,392 Cumulative effect of accounting change, net of tax -- -- (16,859) ---------- ---------- ---------- Net income $1,072,894 $1,223,960 $1,058,533 ========== ========== ==========
See accompanying notes to consolidated financial statements. F-4 American General Life Insurance Company Consolidated Statement of Shareholder's Equity
Year ended December 31 ------------------------------------- 2006 2005 2004 ----------- ----------- ----------- (In Thousands) Preferred stock: Balance at beginning and end of year $ 850 $ 850 $ 850 ----------- ----------- ----------- Common stock: Balance at beginning and end of year 6,000 6,000 6,000 ----------- ----------- ----------- Additional paid-in capital: Balance at beginning of year 3,627,638 3,619,068 3,503,978 Capital contribution from Parent Company 37,268 8,570 115,090 ----------- ----------- ----------- Balance at end of year 3,664,906 3,627,638 3,619,068 Accumulated other comprehensive income: Balance at beginning of year 909,440 1,443,524 1,116,855 Other comprehensive income (loss) (209,975) (534,084) 326,669 ----------- ----------- ----------- Balance at end of year 699,465 909,440 1,443,524 Retained earnings: Balance at beginning of year 5,765,544 4,982,264 4,224,411 Net income 1,072,894 1,223,960 1,058,533 Dividends paid (208,213) (440,680) (300,680) Cumulative effect of accounting change, net of tax 4,864 -- -- ----------- ----------- ----------- Balance at end of year 6,635,089 5,765,544 4,982,264 ----------- ----------- ----------- Total shareholder's equity $11,006,310 $10,309,472 $10,051,706 =========== =========== ===========
See accompanying notes to consolidated financial statements. F-5 American General Life Insurance Company Consolidated Statement of Comprehensive Income
2006 2005 2004 ---------- ---------- ---------- (In Thousands) Net income $1,072,894 $1,223,960 $1,058,533 Other comprehensive income (loss): Net unrealized gains (losses) on securities, after tax (pretax: 2006 - $(79,564); 2005 - $(895,502); 2004 - $461,126) (51,717) (582,077) 299,732 Reclassification adjustment for (gains) losses included in net income (158,258) 47,993 26,937 ---------- ---------- ---------- Other comprehensive income (loss) (209,975) (534,084) 326,669 ---------- ---------- ---------- Comprehensive income $ 862,919 $ 689,876 $1,385,202 ========== ========== ==========
See accompanying notes to consolidated financial statements. F-6 American General Life Insurance Company Consolidated Statement of Cash Flows
2006 2005 2004 ------------ ------------ ------------ (In Thousands) Operating activities Net income $ 1,072,894 $ 1,223,960 $ 1,058,533 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change, net of tax -- -- 16,859 Interest credited on policyholder contracts 2,299,622 2,163,035 2,063,646 Change in future policy benefits and other policy claims (244,724) (335,380) (1,003,487) Realized investments (gains) losses 289,654 52,851 63,437 Change in other policyholders' funds 387,863 248,538 308,794 Amortization of policy acquisition costs and cost of insurance purchased 194,108 388,103 320,443 Policy acquisition costs deferred (921,193) (854,609) (732,410) Depreciation and amortization, including premiums and discounts 160,721 188,160 193,670 Provision for deferred income tax expense 2,223 160,107 250,746 Change in indebtedness to (from) affiliates (15,861) (142,992) (181,863) Change in trading securities 205 (131,000) 51,067 Change in accounts receivable (38,220) (35,189) (74,800) Other, net 3,414 59,664 64,984 ------------ ------------ ------------ Net cash provided by operating activities 3,190,706 2,985,248 2,399,619 Investing activities Purchases of : Fixed maturity and equity securities (16,398,704) (31,593,646) (27,390,556) Mortgage loans on real estate (1,680,140) (778,836) (691,747) Other investments (2,914,316) (2,063,663) (5,442,537) Sales of: Fixed maturity and equity securities 13,450,527 26,780,200 26,942,747 Other investments 397,147 1,109,408 120,049 Redemptions and maturities of: Fixed maturity and equity securities 3,096,819 2,892,484 1,735,026 Mortgage loans on real estate 441,731 412,603 307,711 Sales and purchases of property, equipment, and software, net 23,435 12,425 9,648 Change in short-term investments 41,735 (21,307) 49,527 Change in securities lending collateral (1,443,757) (2,887,153) (5,765,710) ------------ ------------ ------------ Net cash used in investing activities (4,985,523) (6,137,485) (10,125,842)
See accompanying notes to consolidated financial statements. F-7 American General Life Insurance Company Consolidated Statement of Cash Flows (continued)
2006 2005 2004 ----------- ----------- ----------- (In Thousands) Financing activities Net policyholder account deposits $ 5,070,463 $ 4,948,706 $ 7,332,833 Net policyholder account withdrawals (4,485,310) (4,278,916) (5,296,849) Dividends paid (208,213) (440,680) (300,680) Capital contribution from parent -- -- 115,090 Change in securities lending payable 1,443,757 2,887,153 5,765,710 Change in restricted cash (728) 942 70,134 ----------- ----------- ----------- Net cash provided by financing activities 1,819,969 3,117,205 7,686,238 ----------- ----------- ----------- Increase (decrease) in cash 25,152 (35,032) (39,985) Cash and cash equivalents at beginning of year 222,192 257,224 297,209 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 247,344 $ 222,192 $ 257,224 =========== =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid $ -- $ 121,904 $ 208,397 Interest paid $ 42,283 $ 44,952 $ 47,709 =========== =========== ===========
See accompanying notes to consolidated financial statements. F-8 American General Life Insurance Company Notes to Consolidated Financial Statements December 31, 2006 1. Nature of Operations American General Life Insurance Company including its wholly owned subsidiaries ("AGL" or the "Company"), is a wholly owned subsidiary of AGC Life Insurance Company ("Parent Company"), and its ultimate parent is American International Group, Inc. ("AIG"). The Company offers a broad portfolio of universal life, variable universal life, whole life, term life, accident and health, structured settlements, and fixed and variable annuities throughout the United States of America. The Company serves the estate planning needs of middle- and upper-income households and the life insurance needs of small- to medium-sized businesses. The Company, through its subsidiaries American General Life Companies ("AGLC") and American General Enterprise Services ("AGES"), and AGL's wholly owned broker-dealer subsidiary American General Equity Services Corporation ("AGESC"), also provides support services to certain affiliated insurance companies. The financial results, of the Variable Annuity Life Insurance Company ("VALIC"), a wholly owned subsidiary of the Company are also included in these consolidated financial statements. 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 of America. 2. Accounting Policies 2.1 Preparation of Financial Statements The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company, including its wholly owned subsidiaries and a variable interest entity (see below) in which the Company has a partial ownership interest. All significant intercompany accounts and transactions are eliminated in consolidation. Certain prior period items have been reclassified to conform to the current period's presentation. The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and disclosures of contingent assets and liabilities. These estimates and assumptions are particularly significant with respect to investments, deferred acquisition costs, and policyholder benefits. Ultimate results could differ from those estimates. The company performed a migration of certain blocks of reserves and deferred acquisition costs from various legacy valuation systems to a new valuation system as of December 31, 2006, F-9 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.1 Preparation of Financial Statements representing approximately $9.6 billion of reserves and $1.4 billion of DAC. The new system has the capability to refine estimates to a greater degree than previously possible using the older systems. The conversion resulted in an increase in GAAP reserves of $154.5 million, an increase in DAC of $136.3 million and a net decrease to 2006 pre-tax earnings of $18.2 million. CONSOLIDATION OF VARIABLE INTEREST ENTITY: On January 14, 2004, the Company purchased 43% of the non-voting preferred equity issued by Castle 2003-2 Trust ("Castle 1 Trust"), a Delaware special-purpose statutory trust established on November 21, 2003 (see Note 13). The business of Castle 2 Trust and its wholly owned subsidiaries is limited to acquiring, owning, leasing, maintaining, operating and selling commercial jet aircraft. In December 2003, the Financial Accounting Standards Board ("FASB") issued a "Revision to Interpretation No. 46, Consolidation of Variable Interest Entities" ("FIN 46(R)"). In accordance with FIN 46(R), the accounts of Castle 1 Trust have been included in these consolidated financial statements as of and for the years ended December 31, 2006, 2005 and 2004. 2.2 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 capital and surplus at December 31, 2006. Statutory net income, capital and surplus of AGL at December 31 was as follows: 2006 2005 2004 ---------- ---------- ---------- (In Thousands) Statutory net income $ 506,996 $ 637,973 $ 567,253 Statutory capital and surplus $5,447,528 $5,010,153 $4,705,497 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 F-10 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.2 Statutory Accounting (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) certain assets (principally agents' debit balances, computer software, and certain other receivables) are reported as assets rather than being charged to retained earnings; (d) acquisitions are accounted for using the purchase method of accounting rather than being accounted for as equity investments; and (e) fixed maturity investments are carried at fair value rather than amortized cost. In addition, statutory accounting principles require life insurance companies to establish an asset valuation reserve ("AVR") and an interest maintenance reserve ("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. 2.3 Insurance Contracts The insurance contracts accounted for in these financial statements include primarily long-duration contracts. Long-duration contracts include traditional whole life, limited payment, endowment, guaranteed renewable term life, universal life, 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. 2.4 Investments Cash & Short-Term Investments Cash includes cash and cash equivalents with original maturities of three months or less. Short-term investments primarily include interest bearing cash accounts, commercial paper and money market investments, with maturities of between three months and one year. F-11 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.4 Investments Restricted Cash Castle 1 Trust maintains restricted cash which primarily represents security deposits from lessees that are required to be segregated from other funds. Fixed Maturity and Equity Securities Fixed maturity and equity securities classified as available-for-sale are recorded at fair value at December 31, 2006 and 2005. Unrealized gains and losses, net of deferred taxes and amortization of deferred acquisition costs, are recorded as a separate component of other comprehensive income or loss within shareholder's equity. Realized gains and losses on the sale of investments are recognized in operating earnings at the date of sale and are determined by using the specific cost identification method. Interest on fixed maturity securities is recorded as income when earned and is adjusted for any amortization of premium or accretion of discount. Premiums and discounts on investments are amortized to investment income by using the interest method over the contractual lives or expected payment period of the investments. Dividend income on equity securities is generally recognized as income on the ex-dividend date. The Company may elect to measure any hybrid financial instrument at fair value, with changes in fair value recognized in earnings, if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounting for separately. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irrevocable at the acquisition of issuance date. Fixed maturity and equity securities classified as trading securities are carried at fair value, as it is the Company's intention to sell these securities in the near future. Realized and unrealized gains and losses are reflected in income currently. The Company regularly evaluates its investments for impairment. As a matter of policy, the determination that a security has incurred an other-than-temporary decline in value and the amount of any loss recognition requires the judgment of the Company's management and a continual review of its investments. In general, a security is considered a candidate for impairment if it meets any of the following criteria: F-12 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.4 Investments (continued) . Trading at a significant (25 percent or more) discount to par, amortized cost (if lower) or cost for an extended period of time (nine months or longer); . The occurrence of a discrete credit event resulting in the debtor defaulting or seeking bankruptcy or insolvency protection or voluntary reorganization; . The probability of non-realization of a full recovery on its investment, irrespective of the occurrence of one of the foregoing events. At each balance sheet date, the Company evaluates its securities holdings in an unrealized loss position. Where the Company does not intend to hold such securities until they have fully recovered their carrying value, based on the circumstances present at the date of evaluation, the Company records the unrealized loss in income. If events or circumstances change, such as unexpected changes in the creditworthiness of the obligor, unanticipated changes in interest rates, tax laws, statutory capital positions and liquidity events, among others, the Company revisits its intent. Further, if a loss is recognized from a sale subsequent to a balance sheet date pursuant to these unexpected changes in circumstances, the loss is recognized in the period in which the intent to hold the securities to recovery no longer existed. In periods subsequent to the recognition of an other-than-temporary impairment loss for debt securities, the Company generally amortizes the discount or reduced premium over the remaining life of the security in a prospective manner based on the amount and timing of future estimated cash flows. Once a security has been identified as impaired, the amount of such impairment is determined by reference to that security's contemporaneous market price, and recorded as a realized capital loss. Mortgage Loans Mortgage loans are reported at the unpaid principal balance, net of any 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 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 costs to sell. F-13 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.4 Investments (continued) Interest on performing mortgage loans is recorded as income when earned and is adjusted for any amortization of premium or accretion of discount. Interest on non-performing mortgage loans is recorded as income when received. Policy Loans Policy loans are reported at the aggregate unpaid principal balance. There is no allowance for policy loans as these loans serve to reduce the death benefits paid when the death claim is made and the balances are effectively collateralized by the cash surrender value of the policy. 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. Partnerships & Other Invested Assets Partnerships in which the Company holds less than a five percent interest are carried at fair value and the change in fair value is recognized as a component of other comprehensive income. With respect to partnerships in which the Company holds in the aggregate a five percent or greater interest, or less than five percent interest but the Company has more than a minor influence over the operations of the investee, the Company's carrying value is the net asset value. The changes in such net asset values accounted for under the equity method are recorded in earnings through net investment income. Aircraft owned by Castle 1 Trust are recorded at cost within other invested assets and depreciated on a straight-line basis, generally over estimated useful lives of 25 years from the date of manufacture to a residual value that is 15% of cost. Certain major additions and modifications to aircraft may be capitalized. The residual value estimates are reviewed periodically to ensure continued appropriateness. Aircraft are periodically reviewed for impairment and an impairment loss is recorded when the estimate of undiscounted future cash flows expected to be generated by the aircraft is less than its carrying value (net book value). Other invested assets also includes preferred equity investments in partially owned companies. Generally, the equity method of accounting is used for the Company's investment in F-14 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.4 Investments (continued) companies in which the Company's ownership interest approximates 20 percent but is not greater than 50 percent. At December 31, 2006 and 2005, the Company's investments in partially owned companies included its 38.7% interest in the non-voting preferred equity of Castle 2003-2 Trust ("Castle 2 Trust"; see Note 8). Other invested assets also include assets related to derivative financial instruments. Realized gains and losses on the sale of investments are recognized in operations at the date of sale and are determined by using the specific cost identification method. Premiums and discounts on investments are amortized to investment income by using the interest method over the contractual lives or expected payment period of the investments. Securities Lending Collateral and Securities Lending Payable The Company loans securities through a securities lending agreement with an affiliated lending agent, which authorizes the agent to lend securities held in the Company's portfolio to a list of authorized borrowers. The Company receives primarily cash collateral in an amount in excess of the market value of the securities loaned. The affiliated lending agent monitors the daily market value of securities loaned with respect to the collateral value and obtains additional collateral when necessary to ensure that collateral is maintained at a minimum of 102 percent of the value of the loaned securities. The fair values of securities pledged under the securities lending agreement were $17.3 billion and $ 15.9 billion as of December 31, 2006 and 2005, respectively, which represents securities included in fixed maturity securities available for sale in the consolidated balance sheet at the respective balance sheet dates. The collateral is held by the lending agent for the benefit of the Company and not available for the general use of the Company (restricted). Income earned on the collateral, net of interest paid on the securities lending agreements and the related management fees paid to administer the program, is recorded as investment income in the consolidated statement of income. Dollar Roll Agreements Throughout the year, the Company may enter into dollar roll agreements. These are agreements to sell mortgage-backed securities ("MBS") and to repurchase substantially similar securities at a specific price and date in the future. Dollar roll agreements are accounted for as sales of financial assets and forward repurchase commitments. Assets are removed from the consolidated balance sheet at the time of sale. The difference between sales proceeds and carrying values are recorded as realized gains or losses. The forward repurchase commitments are accounted for at fair value, and the changes in fair value are recorded as realized gains or losses. Assets are recorded at the F-15 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.4 Investments (continued) time of purchase at fair value. Unsettled amounts on the purchase contracts are reflected in the consolidated balance sheets in other liabilities. At December 31, 2006 and 2005, the Company had no dollar roll agreements outstanding. Derivative Financial Instruments The Company reports all derivative instruments at fair value in the consolidated balance sheet. The Company takes positions from time to time in certain derivative financial instruments in order to mitigate or hedge the impact of changes in interest rates, foreign currencies and equity markets on cash flows from investment income, policyholder liabilities and equity. The Company does not engage in the use of derivative instruments for speculative purposes and is neither a dealer nor trader in derivative instruments. The Company has issued a small number of equity-indexed annuity contracts, which contain embedded derivatives associated with guarantees tied to the S&P 500 index. The Company uses S&P 500 indexed call options to offset the increase in its liabilities resulting from the equity-indexed features of these annuity contracts. The embedded derivatives and the call options are carried at fair value, with changes in fair value recognized in realized investment gains and losses. Financial instruments used by the Company for such purposes include interest rate swaps, foreign currency swaps, S&P 500 index options (long and short positions) and futures contracts (short positions on U.S. treasury notes and U.S. long bonds). The Company believes that such hedging activities have been and remain economically effective, but do not currently qualify for hedge accounting (see Note 10). The Company carries all derivatives at fair value in the consolidated balance sheet. Changes in the fair value of derivatives are reported as part of realized investment gains and losses in the consolidated statement of income. 2.5 Separate Accounts Separate account assets and liabilities represent funds that are separately administered for variable annuities and variable universal life contracts, for which the investment risk lies solely with the contract holder, except to the extent of minimum guarantees made by the Company with respect F-16 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.5 Separate Accounts (continued) to certain policies. Therefore, the Company's liability for these separate accounts equals the value of the separate 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. The Company receives administrative fees and other fees for assuming mortality and certain expense risks. Such fees are included in premiums and other considerations in the consolidated statement of income. 2.6 Deferred Policy Acquisition Costs ("DPAC"), Cost of Insurance Purchased ("CIP") and Deferred Sales Inducements Certain costs of writing an insurance policy, including commissions, underwriting, and marketing expenses, are deferred and reported as DPAC. The cost assigned to certain insurance contracts in force at January 31, 1995, the date of American General Corporation's ("AGC") acquisition of The Franklin, is reported as CIP. DPAC and CIP associated with interest-sensitive life contracts, insurance investment contracts, and participating life insurance contracts are 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 are 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 3.00 percent to 8.25 percent. With respect to the Company's variable annuity contracts, the assumption for the long-term annual growth of the separate account assets used by the Company in the determination of DPAC amortization is approximately 10 percent (the "long-term growth rate assumption"). The Company uses a "reversion to the mean" methodology which allows the Company to maintain this 10 percent long-term growth rate assumption, while also giving consideration to the effect of short-term swings in the equity markets. For example, if performance were 15 percent during the F-17 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.6 Deferred Policy Acquisition Costs ("DPAC"), Cost of Insurance Purchased ("CIP") and Deferred Sales Inducements (continued) first year following the introduction of a product, the DPAC model would assume that market returns for the following five years (the "short-term growth rate assumption") would approximate 9 percent, resulting in an average annual growth rate of 10 percent during the life of the product. Similarly, following periods of below 10 percent performance, the model will assume a short-term growth rate higher than 10 percent. An adjustment to DPAC will occur if management considers the short-term growth rate (i.e., the growth rate required to revert to the mean 10 percent growth rate over a five-year period) to be unachievable. The use of a reversion to the mean assumption is common within the industry; however, the parameters used in the methodology are subject to judgment and vary among companies. With respect to the Company's variable universal life policies, the assumption for the long-term growth of the separate account assets used by the Company in the determination of DPAC amortization is approximately 9 percent, but no reversion to the mean adjustment is applied. DPAC and CIP related to interest-sensitive products 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, net of deferred taxes, is included in unrealized investment gains (losses) in accumulated other comprehensive income within shareholder's equity. The Company reviews the carrying amounts of DPAC and CIP at least annually. 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. The Company currently offers sales inducements, which may include enhanced crediting rates or bonus payments to contractholders, on certain of its products. Sales inducements provided to the contractholder are recognized as part of the liability for policyholder contract deposits on the consolidated balance sheet. Deferred sales inducement assets are deferred and amortized over the life of the policy using the same methodology and assumptions used to amortize DAC. To qualify for such accounting treatment, the bonus interest must be explicitly identified in the contract at inception, and the Company must demonstrate that such amounts are incremental to amounts the Company credits on similar contracts without bonus interest, and are higher than the contract's expected ongoing crediting rates for periods after the bonus period. F-18 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.7 Future Life Policy Benefits and Policyholder Contract Deposits 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. Future policy benefits and policyholder contract deposit liabilities were as follows at December 31: 2006 2005 ----------- ----------- (In Thousands) Future policy benefits: Ordinary life $ 5,190,640 $ 4,852,453 Group life 25,202 25,760 Life contingent group annuities 83,159 85,565 Life contingent annuities 5,678,513 4,737,550 Terminal funding 394,000 397,630 Accident and health 259,172 244,682 ----------- ----------- Total $11,630,686 $10,343,640 =========== =========== Policyholder contract deposits: Annuities $33,738,454 $33,228,804 Corporate-owned life insurance 354,723 373,848 Universal life 6,945,119 6,113,472 ----------- ----------- Total $41,038,296 $39,716,124 =========== =========== 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. Interest, mortality, and surrender assumptions vary by product and are generally based upon actual experience at the time of issue. Interest assumptions used to compute individual life reserves ranged from 1 percent to 11 percent. The liability for policyholder contract deposits has been established based on various assumptions. Interest rates credited for deferred annuities vary by year of issuance and range from 3.0 percent to 10.0 percent. Current declared interest rates are generally guaranteed to remain in effect for a period of one year, though some are guaranteed for longer periods. Withdrawal charges generally range from 0.0 percent to 20.0 percent, grading to zero over a period of 0 to 19 years. Interest rates on corporate-owned life insurance are guaranteed at 3.0 or F-19 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.7 Future Life Policy Benefits and Policyholder Contract Deposits (continued) 4.0 percent, depending on policy form, and the weighted average rate credited in 2006 was 4.46 percent. 2.8 Guaranteed Minimum Death Benefits A majority of the Company's variable annuity products are issued with a death benefit feature which provides that, upon the death of a contract holder, the contract holder's beneficiary will receive the greater of (1) the contract holder's account value, or (2) a guaranteed minimum death benefit that varies by product ("the GMDB"). Depending on the product, the GMDB may equal the principal invested, adjusted for withdrawals; or the principal invested, adjusted for withdrawals, accumulated with interest at rates up to 3 percent per annum (subject to certain caps). The GMDB has issue age and other restrictions to reduce mortality risk exposure. The Company bears the risk that death claims following a decline in the financial markets may exceed contract holder account balances, and that the fees collected under the contract are insufficient to cover the costs of the benefit to be provided. Prior to January 1, 2004, the Company expensed GMDB-related benefits in the period incurred, and therefore did not provide reserves for future benefits. Effective January 1, 2004, the Company provides reserves for future GMDB-related benefits pursuant to the adoption of Statement of Position 03-01, "Accounting and Reporting by Insurance Enterprises for Certain Non-traditional Long-Duration Contracts and for Separate Accounts" ("SOP 03-01"). The GMDB liability is determined each period end by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. Changes in liabilities for minimum guarantees are included in policyholders' benefits in the consolidated statement of income. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to policyholders' benefits, if actual experience or other evidence suggests that earlier assumptions should be revised. 2.9 Premium Recognition Premiums for traditional life insurance products are recognized when due. For limited-payment contracts, net premiums are recorded as revenue. The difference between the gross received and the net premium is deferred and recognized in a constant relationship to insurance in force for life insurance contracts and to the amount of expected future benefit payments for annuity contracts. 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 F-20 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.9 Premium Recognition (continued) charges and are included in other income in the consolidated statement of income. 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. Variable annuity and variable universal life fees, asset management fees and surrender charges are recorded as income when earned. Net retained broker dealer commissions are recognized as income on a trade date basis. 2.10 Reinsurance The Company generally limits its exposure to loss on any single insured to $5.0 million by ceding additional risks through reinsurance contracts with other insurers. On an exception basis, the Company can increase its exposure to loss on any single insured up to $10.0 million. 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 reinsured benefits, both paid and pending, which is recoverable from the reinsurer. Total reinsurance recoverables on ceded reinsurance contracts are included in accounts receivable. Reinsurance premiums are recognized over the life of the reinsured policies using assumptions consistent with those used to account for the underlying policies. 2.11 Participating Policy Contracts Participating life insurance accounted for approximately 2 percent of life insurance in force at December 31, 2006. 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 $49.4 million, $56.4 million and $60.8 million in 2006, 2005 and 2004, respectively, and were included as part of policyholders' benefits in the consolidated statement of income. 2.12 Income Taxes For the tax years ending December 31, 2006, 2005 and 2004, the Company will join in the filing of a consolidated federal income tax return with AGC Life Insurance Company and its life insurance company subsidiaries. The Company has a written agreement with AGC Life Insurance Company setting forth the manner in which the total consolidated federal income tax is allocated F-21 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.12 Income Taxes (continued) to each entity that joins in the consolidation. Under this agreement, AGC Life Insurance Company agrees not to charge the Company a greater portion of the consolidated tax liability than would have been paid by the Company had it filed a separate federal income tax return. In addition, AGC Life Insurance Company agrees to reimburse the Company for the tax benefits from net losses and tax credits, if any, within a reasonable period of time after the filing of the consolidated federal income tax return for the year in which the losses are used. 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. 2.13 Recently Issued Accounting Standards FSP FAS 115-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments," replaces the measurement and recognition guidance set forth in Emerging Issue Task Force Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" and codifies certain existing guidance on impairment and accretion of income in periods subsequent to an other-than-temporary impairment, where appropriate. The Company's adoption of FSP FAS 115-1 on January 1, 2006 did not have a material effect on the Company's consolidated financial condition or results of operations. On April 13, 2006, the Financial Accounting Standards Board ("FASB") issued FSP FIN 46(R)-6, "Determining the Variability to be Considered in Applying FASB Interpretation No. 46(R)" ("FIN 46(R)-6"). FIN 46(R)-6 affects the identification of which entities are variable interest entities (VIEs) through a "by design" approach in identifying and measuring the variable interests of the VIE and its primary beneficiary. The requirements became effective beginning in the third quarter of 2006 and are to be applied to all new VIEs with which the Company becomes involved. The new requirements need not be applied to entities that have previously been F-22 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.13 Recently Issued Accounting Standards (continued) analyzed under FIN 46(R) unless a reconsideration event occurs. The adoption of this guidance did not have a material effect on the Company's consolidated financial condition or results of operations. In July 2003, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position 03-1 "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts" ("SOP 03-01"). This statement was effective as of January 1, 2004 and requires the Company to recognize a liability for GMDB, as discussed in note 2.8, related to its variable annuity and variable life contracts and modifies certain disclosures and financial statement presentations for these products. The Company reported a one-time cumulative accounting charge upon adoption of $16.9 million to reflect the guaranteed minimum death benefit liability as of January 1, 2004. In addition, under SOP 03-01, variable annuity assets held in separate accounts will continue to be measured at fair value and reported in summary total on the Company's financial statements, with an equivalent summary total reported for related liabilities, if the separate account arrangement meets certain specified conditions. Assets underlying the Company's interest in a separate account ("separate account seed money") do not qualify for separate account accounting and reporting. In December 2004, the FASB issued Statement No. 123 (revised 2004) ("FAS 123R"), "Share-Based Payment." FAS 123R replaces FASB Statement No. 123 ("FAS 123"), "Accounting for Stock-based Compensation," which superseded APB Opinion No. 25, "Accounting for Stock Issued to Employees" and amended FAS 95, "Statement of Cash Flows." FAS 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. On January 1, 2003, AIG adopted the recognition provisions of FAS 123. The effect of the compensation costs, as determined consistently with FAS 123, was not computed on a subsidiary basis, but rather on a consolidated basis for all subsidiaries of AIG and, therefore, are not presented herein. AIG adopted the provisions of the revised FAS 123R and its related interpretative guidance on January 1, 2006. The impact of adopting FAS 123R was not material to the consolidated financial position or results of operations of AIG or the Company. At the June 2005 meeting, the EITF reached a consensus with respect to Issue No. 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" (formerly, "Investor's Accounting for an Investment in a Limited Partnership When the Investor Is the Sole F-23 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.13 Recently Issued Accounting Standards (continued) General Partner and the Limited Partners Have Certain Rights"). The Issue addresses what rights held by the limited partner(s) preclude consolidation in circumstances in which the sole general partner would consolidate the limited partnership in accordance with generally accepted accounting principles absent the existence of the rights held by the limited partner(s). Based on that consensus, the EITF also agreed to amend the consensus in Issue No. 96-16, "Investor's Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholders Have Certain Approval or Veto Rights." The guidance in this Issue was effective after June 29, 2005 for general partners of all new limited partnerships formed and for existing limited partnerships for which the partnership agreements are modified. For general partners in all other limited partnerships, the guidance in this Issue was effective beginning January 1, 2006. The effect of the adoption of this EITF Issue was not material to the Company's consolidated financial condition or results of operations. On June 29, 2005, FASB issued Statement 133 Implementation Issue No. B38, "Embedded Derivatives: Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option." This implementation guidance relates to the potential settlement of the debtor's obligation to the creditor that would occur upon exercise of the put option or call option, which meets the net settlement criterion in FAS 133 paragraph 9(a). The effective date of the implementation guidance was January 1, 2006. The adoption of this guidance did not have a material effect on the Company's consolidated financial condition or results of operations. On June 29, 2005, FASB issued Statement 133 Implementation Issue No. B39, "Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor." The conditions in FAS 133 paragraph 13(b) do not apply to an embedded call option in a hybrid instrument containing a debt host contract if the right to accelerate the settlement of the debt can be exercised only by the debtor (issuer/borrower). This guidance does not apply to other embedded derivative features that may be present in the same hybrid instrument. The effective date of the implementation guidance was January 1, 2006. The adoption of this guidance did not have a material effect on the Company's consolidated financial condition or results of operations. On February 16, 2006, the FASB issued FAS No. 155, "Accounting for Certain Hybrid Financial Instruments" ("FAS 155"), an amendment of FAS 140 and FAS 133. FAS 155 permits the Company to elect to measure any hybrid financial instrument at fair value (with changes in fair value recognized in earnings) if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounted for separately under FAS 133. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irrevocable. The Company elected to early adopt FAS 155 effective January 1, 2006 F-24 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.13 Recently Issued Accounting Standards (continued) and apply FAS 155 fair value measurement to certain investments in its available for sale portfolio that existed at December 31, 2005. The effect of this adoption resulted in a $4.9 million aftertax ($7.5 million pretax) increase to retained earnings as of January 1, 2006. FUTURE APPLICATION OF ACCOUNTING STANDARDS On September 19, 2005, the AICPA issued SOP 05-1, "Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts" ("SOP 05-1"). SOP 05-1 provides guidance on accounting for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in FAS 97. The SOP defines an internal replacement as a modification in product benefits, features, rights, or coverage that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. The effective date of the implementation guidance is January 1, 2007. The Company does not expect the implementation of SOP 05-1 to have a material effect on its consolidated financial condition or consolidated results of operations. On July 13, 2006, the FASB issued FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the accounting for uncertainty in income tax positions. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and additional disclosures. The effective date of this implementation guidance is January 1, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The implementation of FIN 48 is not material to the Company's consolidated financial condition. On July 13, 2006, the FASB issued FASB Staff Position (FSP) No. FAS 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction ("FSP 13-2"). FSP 13-2 addresses how a change or projected change in the timing of cash flows relating to income taxes generated by a leveraged lease transaction affects the accounting for the lease by the lessor. The FSP is effective for fiscal years beginning after December 15, 2006. The Company expects to record an adjustment of $50 million, net of tax, to the beginning balance of retained earnings as of January 1, 2007 to reflect the cumulative effect of this change in accounting. F-25 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. Accounting Policies (continued) 2.13 Recently Issued Accounting Standards (continued) In September 2006, the FASB issued FAS No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently assessing the effect of implementing this guidance. In February 2007, the FASB issued FAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS 159"). FAS 159 permits entities to choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items will be required to be reported in earnings in the current period. FAS 159 also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently assessing the effect of implementing this guidance, which directly depends on the nature and extent of eligible items elected to be measured at fair value, upon initial application of the standard on January 1, 2008. 3. Investments 3.1 Investment Income Investment income by type of investment was as follows for the years ended December 31: 2006 2005 2004 ---------- ---------- ---------- (In Thousands) Investment income: Fixed maturities $3,393,034 $3,265,962 $3,101,785 Equity securities 2,852 3,435 8,070 Mortgage loans on real estate 287,872 273,270 229,921 Investment real estate 10,475 9,903 10,265 Policy loans 103,191 100,787 99,421 Other long-term investments 165,395 32,396 82,767 Short-term investments 35,420 28,263 16,697 ---------- ---------- ---------- Gross investment income 3,998,239 3,714,016 3,548,926 Investment expenses 35,419 80,130 63,577 ---------- ---------- ---------- Net investment income $3,962,820 $3,633,886 $3,485,349 ---------- ---------- ---------- F-26 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.1 Investment Income (continued) The carrying value of investments that produced no investment income during 2006 was less than 0.1 percent 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. During 2006, 2005 and 2004, investment income from other long-term investments is primarily related to gains or losses associated with various partnership interests. F-27 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.2 Net Realized Investment Gains (Losses) Realized gains (losses) by type of investment were as follows for the years ended December 31: 2006 2005 2004 --------- --------- --------- (In Thousands) Fixed maturities: Gross gains $ 125,224 $ 204,217 $ 270,273 Gross losses (341,900) (329,543) (256,398) --------- --------- --------- Total fixed maturities (216,676) (125,326) 13,875 Equity securities: Gross gains 17,272 36,750 12,999 Gross losses (1,424) (23) (5,958) Partnerships: Gross gains 5,000 2,000 0 Gross losses (21,847) (6,464) (20,818) Derivatives: Gross gains 2,000 5,162 1,000 Gross losses (46,720) 0 (32,852) Other : Gross gains 11,752 39,909 0 Gross losses (39,011) (4,859) (31,683) --------- --------- --------- Net realized investment gains (losses) before tax (289,654) (52,851) (63,437) Income tax benefit (99,042) (18,498) (22,203) --------- --------- --------- Net realized investment gains (losses) after tax $(190,612) $ (34,353) $ (41,234) ========= ========= ========= During 2006, 2005 and 2004, the Company's realized losses included write-downs of $222.3 million, $121.6 million and $63.1 million, respectively, for certain available for sale fixed maturity investments that experienced declines deemed other than temporary. The determination that a security has incurred an other-than-temporary decline in value and the amount of loss recognition requires the judgment of the Company's management and a continual review of its investments as discussed in Note 2. F-28 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.3 Fixed Maturity and Equity Securities The following table summarizes the Company's gross unrealized losses and estimated fair values on fixed maturity securities available for sale and equity securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2006 and 2005:
Less than 12 Months 12 Months or More Total -------------------- --------------------- --------------------- (In Thousands) Unrealized Unrealized Unrealized December 31, 2006 Fair Value Losses Fair Value Losses Fair Value Losses ----------------- ---------- ---------- ----------- ---------- ----------- ---------- Fixed maturity securities Corporate securities: Investment- grade $4,493,731 $(100,697) $ 5,835,318 $(194,125) $10,329,049 $(294,822) Below investment-grade 319,848 (20,308) 251,021 (11,808) 570,869 (32,116) Mortgage-backed securities 1,259,556 (15,702) 6,642,120 (121,012) 7,901,676 (136,714) U.S. government obligations 9,408 (126) 5,094 (730) 14,502 (856) Foreign governments 10,164 (6,225) -- -- 10,164 (6,225) State and political subdivisions 320,831 (5,074) 1,049,115 (35,459) 1,369,946 (40,533) Collateralized bonds 38,013 (987) 21,169 (1,331) 59,182 (2,318) Redeemable preferred stocks 30,492 (5,081) -- 30,492 (5,081) Equity securities 5,931 (1,048) -- -- 5,931 (1,048) ---------- --------- ----------- --------- ----------- --------- Total $6,487,974 $(155,248) $13,803,837 $(364,465) $20,291,811 $(519,713) ========== ========= =========== ========= =========== =========
F-29 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.3 Fixed Maturity and Equity Securities (continued)
Less than 12 Months 12 Months or More Total --------------------- -------------------- --------------------- (In Thousands) Unrealized Unrealized Unrealized December 31, 2005 Fair Value Losses Fair Value Losses Fair Value Losses ----------------- ----------- ---------- ---------- ---------- ----------- ---------- Fixed maturity securities Corporate securities: Investment- grade 6,047,418 (131,287) 467,666 (25,151) 6,515,084 (156,438) Below investment-grade 899,747 (60,173) 208,079 (19,281) 1,107,826 (79,454) Mortgage-backed securities 7,391,729 (119,489) 271,009 (8,492) 7,662,738 (127,981) U.S. government obligations 4,175 (200) 2,080 (477) 6,255 (677) Foreign governments 94,476 (6,565) 0 0 94,476 (6,565) State and political subdivisions 710,303 (17,311) 101,000 (7,000) 811,303 (24,311) Collateralized bonds 14,566 (933) 11,690 (792) 26,256 (1,725) Equity securities 2,794 (172) 1,742 (1,476) 4,536 (1,648) ----------- --------- ---------- -------- ----------- --------- Total $15,165,208 $(336,130) $1,063,266 $(62,669) $16,228,474 $(398,799) =========== ========= ========== ======== =========== =========
F-30 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.3 Fixed Maturity and Equity Securities (continued) The Company regularly reviews its investments for possible impairments based on the criteria discussed in Note 2. The determination that a security has incurred an other-than-temporary decline in value and the amount of any loss recognition requires the judgment of the Company's management and a continual review of its investments. As of December 31, 2006, all of the unrealized losses in the table shown above were considered to be temporary based on the results of this review. Fixed maturity and equity securities classified as available-for-sale are reported at fair value. Amortized cost and fair value at December 31, 2006 and 2005 were as follows:
Gross Gross Amortized Unrealized Unrealized Cost Gain Loss Fair Value ----------- ---------- ---------- ----------- (In Thousands) December 31, 2006 Fixed maturity securities: Corporate securities: Investment-grade $28,818,873 $1,078,472 $(294,822) $29,602,523 Below investment-grade 3,512,776 208,715 (32,116) 3,689,375 Mortgage-backed securities 12,799,496 158,103 (136,714) 12,820,885 U.S. government obligations 175,439 29,639 (856) 204,222 Foreign governments 709,116 87,008 (6,225) 789,899 State and political subdivisions 3,482,069 91,640 (40,533) 3,533,176 Collateralized bonds 99,611 1,740 (2,318) 99,033 Redeemable preferred stocks 75,273 2,211 (5,081) 72,403 ----------- ---------- --------- ----------- Total fixed maturity securities $49,672,653 $1,657,528 $(518,665) $50,811,516 =========== ========== ========= =========== Equity securities $ 43,908 $ 41,454 $ (1,048) $ 83,314 =========== ========== ========= =========== Separate account seed money $ -- $ -- $ -- $ -- =========== ========== ========= =========== Investment in AIG $ 8,597 $ 49,459 $ -- $ 58,056 =========== ========== ========= ===========
F-31 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.3 Fixed Maturity and Equity Securities (continued)
Gross Gross Amortized Unrealized Unrealized Cost Gain Loss Fair Value ----------- ---------- ---------- ----------- (In Thousands) December 31, 2005 Fixed maturity securities: Corporate securities: Investment-grade $28,425,624 $1,510,483 $(156,438) $29,779,669 Below investment-grade 3,504,754 145,856 (79,454) 3,571,156 Mortgage-backed securities 12,632,632 113,801 (127,981) 12,618,452 U.S. government obligations 175,470 34,052 (677) 208,845 Foreign governments 750,686 93,689 (6,565) 837,810 State and political subdivisions 3,256,136 125,314 (24,311) 3,357,139 Collateralized bonds 83,537 1,875 (1,725) 83,687 Redeemable preferred stocks 53,808 13,196 -- 67,004 ----------- ---------- --------- ----------- Total fixed maturity securities $48,882,647 $2,038,266 $(397,151) $50,523,762 =========== ========== ========= =========== Equity securities $ 33,457 $ 34,552 $ (1,648) $ 66,361 =========== ========== ========= =========== Separate account seed money $ 64,000 $ 3,000 $ -- $ 67,000 =========== ========== ========= =========== Investment in AIG $ 8,597 $ 46,680 $ -- $ 55,277 =========== ========== ========= ===========
F-32 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.3 Fixed Maturity and Equity Securities (continued) Net unrealized gains (losses) on securities included in accumulated other comprehensive income in shareholder's equity at December 31, 2006 were as follows: 2006 2005 2004 ---------- ---------- ---------- (In Thousands) ---------------------------------- Gross unrealized gains $1,748,441 $2,122,498 $2,988,563 Gross unrealized losses (519,713) (398,799) (165,639) DPAC and other fair value adjustments (148,357) (316,972) (587,095) Deferred federal income taxes (380,906) (497,287) (792,305) ---------- ---------- ---------- Net unrealized gains on securities $ 699,465 $ 909,440 $1,443,524 ========== ========== ========== The contractual maturities of fixed maturity securities at December 31, 2006 were as follows: 2006 ----------------------- Amortized Market Cost Value ----------- ----------- (In Thousands) Fixed maturity securities, excluding mortgage-backed securities: Due in one year or less $ 507,531 $ 516,401 Due after one year through five years 4,623,762 4,821,659 Due after five years through ten years 11,368,512 11,597,441 Due after ten years 20,373,352 21,055,130 Mortgage-backed securities 12,799,496 12,820,885 ----------- ----------- Total fixed maturity securities $49,672,653 $50,811,516 =========== =========== 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 $16.4 billion, $29.5 billion and $28.7 billion, during 2006, 2005 and 2004, respectively. At December 31, 2006, $47.6 million of bonds, at amortized cost, were on deposit with regulatory authorities in accordance with statutory requirements. F-33 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.4 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 percent or less, based on management's credit assessment of the borrower. The mortgage loan portfolio was distributed as follows at December 31, 2006 and 2005: Outstanding Percent of Percent Amount Total Nonperforming ----------- ---------- ------------- (In thousands) December 31, 2006 Geographic distribution: South Atlantic $1,031,455 21.0% 0.0% Pacific 1,105,137 22.4 0.0 Mid-Atlantic 1,243,973 25.3 0.0 East North Central 501,226 10.2 2.6 Mountain 196,097 4.0 0.0 West South Central 310,326 6.3 0.0 East South Central 241,600 4.9 0.0 West North Central 96,157 2.0 11.5 New England 174,664 3.6 0.0 Canada 21,786 0.4 0.0 Allowance for losses (4,206) (0.1) 0.0 ---------- ----- Total $4,918,215 100.0% 0.5% ========== ===== Property type: Office $2,035,908 41.4% 24 Retail 1,147,946 23.4 0 Industrial 467,101 9.5 0 Apartments 778,821 15.8 0 Hotel/motel 179,171 3.6 0 Other 313,474 6.4 0 Allowance for losses (4,206) (0.1) 0 ---------- ----- Total $4,918,215 100.0% 0.5% ========== ===== F-34 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 3. Investments (continued) 3.4 Mortgage Loans on Real Estate (continued) Outstanding Percent of Percent Amount Total Nonperforming ----------- ---------- ------------- (In thousands) December 31, 2005 Geographic distribution: South Atlantic $ 862,100 23.3% 0.0% Pacific 722,290 19.5 0.0 Mid-Atlantic 854,126 23.1 0.0 East North Central 395,301 10.7 8.9 Mountain 129,504 3.5 0.0 West South Central 235,138 6.4 0.0 East South Central 202,805 5.5 0.0 West North Central 104,233 2.8 21.6 New England 172,029 4.7 0.0 Canada 22,363 .6 0.0 Allowance for losses (4,679) (0.1) 0.0 ---------- ----- Total $3,694,210 100.0% 2.1% ========== ===== Property type: Office $1,435,719 38.9% 5.6% Retail 1,044,521 28.3 0.2 Industrial 426,077 11.4 0.0 Apartments 520,486 14.1 0.0 Hotel/motel 65,667 1.8 0.0 Other 206,419 5.6 0.0 Allowance for losses (4,679) (0.1) 0.0 ---------- ----- Total $3,694,210 100.0% 2.1% ========== ===== Impaired mortgage loans on real estate and related interest income is not material. F-35 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 4. Deferred Policy Acquisitions Costs, Cost of Insurance Purchased and Sales Inducements The following reflects deferred policy acquisition costs and cost of insurance purchased which will be amortized against future income and the related current amortization charges to income, excluding certain amounts deferred and amortized in the same period: 2006 2005 2004 ---------- ---------- ---------- (In Thousands) Balance at January 1 $3,972,384 $3,260,541 $2,913,067 Capitalization 921,193 833,211 719,346 Accretion of interest/amortization (188,138) (375,941) (279,149) Effect of unrealized (gains) losses on securities 99,677 259,223 (80,598) Effect of realized (gains) losses on securities 71,884 (4,650) (12,125) ---------- ---------- ---------- Balance at December 31 $4,877,000 $3,972,384 $3,260,541 ========== ========== ========== The Company adjusts DAC amortization ("a DAC unlocking") when estimates of current or future gross profits on FAS 97 products to be realized are revised. In 2006, DAC amortization was decreased by $134 million due to the combination of DAC and system migration of deferred annuities and interest sensitive life products. A roll forward of the cost of insurance purchased ("CIP") for the years ended December 31 follows: 2006 2005 2004 -------- -------- -------- (In Thousands) Balance at January 1 $335,899 $324,920 $338,520 Deferral of renewal commissions 0 0 3,623 Accretion of interest/amortization (5,970) (9,561) (30,316) Effect of unrealized (gains) losses on securities 18,449 23,672 12,725 Effect of realized (gains) losses on securities 3,091 (3,132) 368 -------- -------- -------- Balance at December 31 $351,469 $335,899 $324,920 ======== ======== ======== CIP amortization expected to be recorded in each of the next five years, from 2007 through 2011, is $12.9 million, $12.5 million, $11.6 million, $8.3 million, and $7.0 million, respectively. F-36 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 4. Deferred Policy Acquisitions Costs, Cost of Insurance Purchased and Sales Inducements (continued) Activity in sales inducement for the years ended December 31 follows: 2006 2005 2004 ------- ------- ------- (In Thousands) Balance at January 1 $46,960 $27,692 $20,000 Deferrals 41,681 21,284 8,741 Accretion of interest/amortization (4,513) (2,016) (1,049) Effect of unrealized (gains) losses on securities (2,000) -- -- Effect of realized (gains) losses on securities -- -- -- ------- ------- ------- Balance at December 31 $82,128 $46,960 $27,692 ======= ======= ======= 5. Reserves for Guaranteed Benefits Details concerning the Company's guaranteed minimum death benefit exposure including a return of net deposits plus a minimum return as of December 31, 2006 were as follows: 2006 2005 ------- ------- (In Millions) Account value $46,877 $45,297 Net amount at risk /(a)/ 1,322 1,801 Average attained age of contract holders 56 54 Range of guaranteed minimum return rates 0.00%-3.00% 0.00%-3.00% -------- /(a)/ Net amount at risk represents the guaranteed benefit exposure in excess of the current account value if all contract holders died at the same balance sheet date. The following summarizes the reserve for guaranteed benefits on variable contracts, which is reflected in the general account and reported in reserves for fixed annuity contracts on the consolidated balance sheet: F-37 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 5. Reserves for Guaranteed Benefits (continued) 2006 2005 ---- ---- (In Millions) Balance at January 1 $ 7 $10 Guaranteed benefits incurred 4 5 Guaranteed benefits paid (6) (8) ------ ------ Balance at December 31 $ 5 $ 7 ====== ====== The following assumptions and methodology were used to determine the reserve for guaranteed benefits at December 31, 2006 and December 31, 2005: . Data used was 1,000 stochastically generated investment performance scenarios. . Mean investment performance assumption was 10%. . Volatility assumption was 16%. . Mortality was assumed to be 70% to 87.5% of the 1983a table. . Lapse rates vary by contract type and duration and range from 5% to 25%. . The discount rate was 3% to 8%. 6. Other Assets Other assets consisted of the following: December 31 ----------------- 2006 2005 -------- -------- (In Thousands) Goodwill $ 37,951 $ 39,765 Computer software, net 72,566 96,184 Accounts receivable from brokers 53,960 14,582 Prepaid expenses 37,875 39,304 Property and equipment, net 60,012 45,366 Other assets 37,083 25,725 -------- -------- Total other assets $299,447 $260,926 ======== ======== F-38 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 7. Federal Income Taxes 7.1 Tax Liabilities Income tax liabilities were as follows: December 31 --------------------- 2006 2005 ---------- ---------- (In Thousands) Current tax receivables $ 52,860 $ 14,032 Net deferred tax liabilities 1,280,317 1,389,968 ---------- ---------- Income tax payable $1,333,177 $1,404,000 ========== ========== The components of deferred tax liabilities and assets at December 31 were as follows: 2006 2005 ----------- ---------- (In Thousands) Deferred tax liabilities applicable to: Deferred policy acquisition costs $ 1,418,736 $1,236,446 Basis differential of investments 218,891 215,648 Net unrealized gains on debt and equity securities available for sale 380,906 497,287 Capitalized EDP 25,305 24,144 Prepaid expenses 5,102 12,814 Other 239,478 143,258 ----------- ---------- Total deferred tax liabilities 2,288,418 2,129,597 Deferred tax assets applicable to: Policy reserves (1,003,225) (713,177) Other (4,876) (26,452) ----------- ---------- Total deferred tax assets (1,008,101) (739,629) ----------- ---------- Net deferred tax liabilities $ 1,280,317 $1,389,968 =========== ========== Under prior federal income tax law, one-half of the excess of a life insurance company's income from operations over its taxable investment income was not taxed, but was set aside in a special tax account designated as "policyholders' surplus." At January 1, 2005 the Company had F-39 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 7. Federal Income Taxes (continued) 7.1 Tax Liabilities (continued) approximately $382 million of policyholders' surplus on which no deferred tax liability has been recognized, as federal income taxes are not required unless it is distributed as a dividend, or recognized under other specified conditions. The American Jobs Creation Act of 2004 modified federal income tax law to allow life insurance companies to distribute amounts from policyholders' surplus during 2005 and 2006 without incurring federal income tax on the distributions. During 2005, the Company distributed cash dividends in excess of $382 million, thereby eliminating its policyholders' surplus account and its exposure to federal income taxation. 7.2 Tax Expense Components of income tax expense (benefit) for the years ended December 31 were as follows: 2006 2005 2004 -------- --------- -------- (In Thousands) Income tax at statutory percentage of GAAP pretax income $512,820 $ 561,589 $513,629 Non-conventional fuel source credits (89,803) (142,767) (96,202) Dividends received deduction (24,419) (28,583) (19,828) Prior year corrections 7,113 (10,989) (8,241) Other credits, taxes and settlements (13,406) 1,331 2,760 -------- --------- -------- Income tax expense $392,305 $ 380,581 $392,118 ======== ========= ======== F-40 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. Transactions With Affiliates Notes receivable from affiliates were as follows:
December 31, 2006 December 31, 2005 -------------------- -------------------- Par Value Book Value Par Value Book Value --------- ---------- --------- ---------- (In Thousands) American General Corporation, 9.375%, due 2008 $ 4,725 $ 4,297 $ 4,725 $ 4,091 Transatlantic Holdings Inc., Promissory notes, 5.75%, due 2015 164,000 163,358 164,000 163,202 AGC Life, Promissory notes, 5.02%, due 2010 116,000 116,000 116,000 116,000 American General Corporation, Promissory notes, 5.57%, due 2011 415,000 415,000 415,000 415,000 Castle Trust 2, Asset backed notes, 5.26%, due 2026 36,944 36,021 41,453 41,449 Castle Trust 2, Asset backed notes, 8.26%, due 2026 13,155 13,563 13,929 13,924 -------- -------- -------- -------- Total notes receivable from affiliates $749,824 $748,239 $755,107 $753,666 ======== ======== ======== ========
Various AIG companies provide services to the Company, principally mortgage servicing and investment management services, provided by American International Group Global Investment Corporation ("AIGGIC") on a fee basis. The Company paid approximately $69.9 million, $66.9 million and $67.5 million for such services in 2006, 2005 and 2004, respectively. Accounts payable for such services at December 31, 2006 and 2005 were not material. The Company rents facilities and provides services on an allocated cost basis to various AIG companies. Beginning in 1998, amounts received by the Company from affiliates include amounts received by its wholly owned, non-life insurance subsidiary, AGLC. AGLC provides shared services, including technology, to a number of AIG's life insurance subsidiaries. The Company received approximately $354.8 million, $329.2 million and $337.0 million for such services and rent in 2006, 2005 and 2004, respectively. Accounts receivable for rent and services at December 31, 2006 and 2005 were not material. As a matter of Company policy, derivative contracts are generally executed with AIG F-41 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. Transactions With Affiliates (continued) Financial Products Corp. ("AIGFP"), an affiliated financial products company. From time to time, derivatives will be entered into with unaffiliated parties in conjunction with private placement investments. During 2004, the Company purchased 38.7% of the non-voting preferred equity issued by Castle Trust 2003-II LP ("Castle Trust 2") for $116,558,398. The remaining non-voting equity interest and 100% of the voting equity of Castle Trust are held by various affiliates of the Company. The business of Castle Trust 2, and its wholly owned subsidiaries, is limited to buying, owning, leasing and selling a portfolio of aircraft. The purchase was funded by a capital contribution received from AGC Life Insurance Company. The Company's investment in Castle Trust 2 is reported in partnerships on the consolidated balance sheet. On January 14, 2004, the Company purchased $65 million of fixed-rate asset-backed notes issued by Castle Trust 2. The notes mature on November 15, 2026 and are included in notes receivable from affiliates on the consolidated balance sheet. On December 29, 2004, the Company purchased from Ambler Holding Corp, a wholly-owned subsidiary of the Company's affiliate AIG Financial Products, all of its Class D membership interests in Spicer Energy II LLC ("Spicer") for a purchase price of $86,100,234. As a result, the Company's Class D interest represents 25.3% of the equity in Spicer's three synfuel facilities. The Company's investment in Spicer is reported in partnerships on the consolidated balance sheet. Effective August 1, 2003, the Company and AIG Life Insurance Company of Bermuda ("AIGB") entered into a Cut-through Agreement pursuant to which insureds, their beneficiaries and owners were granted a direct right of action against the Company in the event AIGB becomes insolvent or otherwise cannot or refuses to perform its obligations under certain life insurance policies issued by AIGB. The Cut-through Agreement was approved by the Texas Department of Insurance. The amount of the retained liability on AIGB's books related to this agreement totaled $340,000 at December 31, 2006 and $345,000 at December 31, 2005. The Company believes the probability of loss under this agreement is remote. Effective June 23, 2003, the Company entered into a Cut-through Agreement with AIG Life of Canada ("AIGC") pursuant to which claimants were granted a direct right of action against the Company in the event AIGC becomes insolvent or otherwise cannot or refuses to perform its obligations under certain structured settlement contracts issued by AIGC. On November 6, 2003, the Company filed the Cut-through Agreement with the Texas Department of Insurance (the F-42 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. Transactions With Affiliates (continued) Department). In early 2005, the Company discussed this Cut-through Agreement with the Department and a reserve was established under these contracts that would not exceed $300 million without the consent of the Department. In 2006, the Company again discussed the Cut-through Agreement with the Department. The Company requested that the maximum allowed reserve be increased to $500 million. The reserves recorded by AIGC, related to these contracts, totaled $362 million at December 31, 2006 and $231 million at December 31, 2005. The Company believes the probability of loss under this agreement is remote. On December 7, 2005, the Company acquired 5.75% Senior Notes due December 14, 2015, issued by Transatlantic Holdings, Inc., an affiliate of the Company, at a cost of $163.2 million. Other affiliates of the Company are holders of the same class of securities. On September 23, 2003, the Company purchased 68 percent of the non-voting preferred equity issued by Castle 2003-1 Trust ("Castle Trust") for $182.3 million. The remaining non-voting preferred equity and 100 percent of the voting equity of Castle Trust are held by affiliates of the Company. Castle Trust is a Delaware statutory trust established on July 31, 2003. The business of Castle Trust and its wholly owned subsidiaries is limited to buying, owning, leasing and selling a portfolio of commercial jets. In December 2003, the FASB issued a "Revision to Interpretation No. 46, Consolidation of Variable Interest Entities" ("FIN46R") (See Note 2.14). In accordance with FIN46R, Castle Trust has been consolidated in the Company's consolidated financial statements for the years ending December 31, 2006, 2005 and 2004. Effective May 31, 2006, ownership of American General Securities, Inc. (AGSI) was transferred from American General Equity Services Corp. (AGESC), a wholly owned subsidiary of the Company, to AIG Advisor Group, Inc., an indirect wholly owned subsidiary of AIG, through a series of related party dividends and contributions within AIG-owned companies. On September 25, 2006, the Company purchased 27% of a nonaffiliated Mortgage Loan at its estimated fair market value of $8,767,005, from SunAmerica Life Insurance Company (an affiliate), which included a purchase premium of $492,885. American Home Assurance Company ("American Home"), an indirect wholly owned subsidiary of AIG, has terminated the General Guarantee Agreement dated March 3, 2003 ("the Guarantee") with respect to prospectively issued policies and contracts issued by the Company. The Guarantee terminated on December 29, 2006 at 4:00 p.m. Eastern Time ("Point of Termination"). Pursuant to its terms, the Guarantee does not apply to any group or individual policy, contract or certificate issued after the Point of Termination. The Guarantee will continue to cover the F-43 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 8. Transactions With Affiliates (continued) policies, contracts and certificates with a date of issuance earlier than the Point of Termination until all insurance obligations under such policies, contracts and certificates are satisfied in full. American Home's audited statutory financial statements are filed with the SEC in the Company's registration statements for its variable products. 9. Benefit Plans Effective January 1, 2002, the Company's employees participate in various benefit plans sponsored by AIG, including a noncontributory qualified defined benefit retirement plan, various stock option and purchase plans, a 401(k) plan and a post retirement benefit program for medical care and life insurance. AIG's U.S. plans do not separately identify projected benefit obligations and plan assets attributable to employees of participating affiliates. 10.Derivative Financial Instruments 10.1 Use of Derivative Financial Instruments The Company's use of derivative financial instruments is generally limited to interest rate swaps, currency swaps, S&P 500 index options and Treasury note and U.S. long bond futures as economic hedges of certain financial assets and liabilities as follows: Derivative Instrument Economically Hedged Item --------------------- ------------------------ Interest rate and currency swaps Private placement bonds S&P index options Equity-indexed policy liabilities on certain universal life and annuity policies Treasury note and long bond futures Bonds purchased for short-term (trading) purposes The Company believes that such hedging activities have been and remain economically effective, but do not currently qualify for hedge accounting. With the exception of premiums required for the purchase of publicly-traded or over-the-counter (OTC) traded S&P 500 index options and futures, derivatives contracts purchased by the Company require no up-front cash payment and provide for net settlement. F-44 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 10.Derivative Financial Instruments (continued) 10.2 Risks Inherent In the Use of Derivatives Risks inherent in the use of derivatives include market risk, credit risk in the event of non-performance by counterparties, and mismatch risk. Exposure to market risk is mitigated by the fact that all derivatives contracts are executed as effective economic hedges, the financial effects of which are offset by another financial instrument (investment securities or index-based policy liabilities). Counterparty credit exposure is limited by entering into agreements with affiliated counterparties or unaffiliated counterparties having high credit ratings. Affiliated counterparties are guaranteed by AIG and unaffiliated counterparty credit ratings are monitored on a regular basis. Mismatch risk is the risk that hedges are executed improperly or become ineffective over the term of the contracts. Procedures have been implemented at AIG Global Investment Group, the company's affiliated investment advisor, and within the Life Insurance Division to prevent and detect such mismatches. 10.3 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 and to convert certain fixed rates to different fixed rates. 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. Swap agreements have terms of two to twenty-two years. Interest rate and currency swap agreements related to investment securities at December 31 were as follows: 2006 2005 ------ ------ (In Millions) Interest rate swap agreements: Notional amount $1,275 $1,320 Fair value (15) (6) Currency swap agreements : Notional amount $ 772 602 Fair Value (97) (57) F-45 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 10.Derivative Financial Instruments (continued) 10.4 Index Options S&P 500 index options (puts and calls) are purchased as economic hedges of index-based exposures inherent in the Company's equity-indexed universal life and annuity products. Such options generally have terms of one or two years. The Company has procedures in place to economically match option purchases to policy liabilities. Contracts outstanding at December 31 were as follows: 2006 2005 -------------- -------------- Fair Fair Notional Value Notional Value -------- ----- -------- ----- (In Millions) Calls: One-year (or less) contracts $319 $26 $310 $10 Two-year contracts 41 4 32 3 10.5 Futures The Company purchases and sells short futures (Treasury note and U.S. long bond) to offset interest rate exposures on certain bonds purchased for the trading portfolio. All futures positions are closed out at the end of each quarter with the realized gains and losses recorded as a component of operating earnings. F-46 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 11.Fair Value of Financial Instruments Carrying amounts and fair values for certain of the Company's financial instruments at December 31 are presented below.
2006 2005 ---------------- ---------------- Fair Carrying Fair Carrying Value Amount Value Amount ------- -------- ------- -------- (In Millions) Assets Cash $ 247 $ 247 $ 222 $ 222 Fixed maturity and equity securities 51,198 51,198 50,739 50,739 Mortgage loans on real estate 5,041 4,918 4,841 3,694 Policy loans 1,840 1,820 1,823 1,775 Short-term investments 42 42 84 84 Derivative assets 32 32 13 13 Partnerships 3,483 3,483 2,657 2,657 Separate account seed money -- -- 67 67 Investment in ultimate Parent Company 58 58 55 55 Notes receivable from affiliates 748 748 754 754 Securities lending collateral 17,345 17,345 15,901 15,901 Assets held in separate accounts 30,272 30,272 27,163 27,163 Liabilities Investment contracts 32,752 35,343 32,512 34,556 Dividend accumulations 884 884 898 898 Derivative liabilities 114 114 66 66 Securities lending payable 17,345 17,345 15,901 15,901 Liabilities related to separate accounts 30,272 30,272 27,163 27,163
The following methods and assumptions were used to estimate the fair value of financial instruments: Cash and Short-Term Investments Carrying value is considered to be a reasonable estimate of fair value. F-47 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 11.Fair Value of Financial Instruments (continued) Fixed Maturity and Equity Securities Fair value for fixed maturity securities was based principally on independent pricing services, broker quotes and other independent information. For securities that do not have readily determinable market prices, the Company estimated fair value using internally prepared valuations (including those based on estimates of future profitability). Otherwise, the Company used its most recent purchases and sales of similar unquoted securities, independent broker quotes or comparison to similar securities with quoted prices when possible to estimate the fair value of those securities. Fair values for equity securities were based upon quoted market prices. 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 AIG The fair value of the investment in the AIG is based on quoted market prices of AIG common stock. Securities Lending Collateral / Securities Lending Payable Carrying value is considered to be a reasonable estimate of fair value. 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 held in separate accounts. F-48 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 11.Fair Value of Financial Instruments (continued) Derivative Financial Instruments Fair value of derivative liabilities is based on the use of valuation models that utilize, among other things, current interest, foreign exchange and volatility rates, as applicable Investment Contracts Fair value of insurance investment contracts was estimated using cash flows discounted at market interest rates. Dividend Accumulation Fair value of dividend accumulation is the accumulated value of dividend to be paid to the policyholder with interest. Notes Receivable from Affiliates Fair value of promissory notes and asset backed notes from affiliates were based on quoted market prices, where available. For investments not actively traded, fair value was 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. Partnerships Fair value of partnerships is based upon the fair value of the net assets of these investments as determined by the general partners. Separate Account Seed Money Fair value is considered to be the market value of the underlying securities. 12.Commitments and Contingencies 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-49 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 12.Commitments and Contingencies (continued) 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. The Company had unfunded investment commitments totaling $521.2 million of which $412.8 million was committed to fund limited partnership investments. The company also had $108.4 million in commitments relating to mortgage loans at December 31, 2006. All fifty states have laws requiring solvent life insurance companies to pay assessments to protect the interests of policyholders of insolvent life insurance and annuity companies. The Company recognizes a liability for insurance-related assessments when all of the following three conditions have been met: (i) an assessment has been imposed or information available prior to the issuance of financial statements indicates it is probable that an assessment will be imposed, (ii) the event obligating the Company to pay an imposed or probable assessment occurred on or before the date of the financial statements and (iii) the amount of the assessment can be reasonably estimated. The December 31, 2006 liability was estimated by the Company using the latest information available from the National Organization of Life and Health Insurance Guaranty Associations. The liability is not material to the Company's consolidated statement of position. While it is not possible to exactly estimate the portion of the industry assessments for which the Company will be responsible, it is expected that any difference between the estimated assessments and the actual assessments will not be material to the Company's consolidated results of operations and financial position. Although the amount accrued represents the Company's best estimate of its liability, this estimate may change in the future. On November 1, 2002, the Company and various affiliates entered into a one-year inter-affiliate credit facility (the "facility"), under which the Company commits to make loans to AIG. The maximum aggregate amount of the commitment is currently $145.0 million. Such loans may take F-50 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 12.Commitments and Contingencies (continued) the form of variable rate loans that pay the higher of the federal funds rate plus 0.5 percent or the prime rate, or fixed rate loans that pay LIBOR plus a specific margin. AIG has the option, at the commitment termination date to convert any outstanding loan balances to one-year term. After an initial one-year extension, effective October 29, 2004, the facility was amended annually to extend the commitment termination date. Effective October 28, 2006, the termination date was extended to October 27, 2007. The Company originally received annual facility fees of 0.045%. However, effective as of October 29, 2004, the facility fee was changed to 0.040%. Effective October 28, 2006 the facility fee was changed to .030%. No loans were funded during 2006 or 2005. AGL owns interests in certain limited liability companies (LLCs) which invested in six coal synthetic fuel production facilities. The sale of coal synthetic fuel produced by these six facilities generated income tax credits. Since acquiring the facilities, AGL has recognized approximately $541 million of synfuel tax credits through December 31, 2006. By letters dated February 17, 2006, the IRS field agents have advised the LLCs that all six production facilities were placed in service before July 1, 1998 and that they will withdraw the 60-day letters issued to the LLCs. The Company generates income tax credits as a result of investing in synthetic fuel under section production. Tax credits generated from the production and sale of synthetic fuel under the Internal Revenue Code are subject to an annual phase-out provision that is based on the average wellhead price of domestic crude oil. The price range within which the tax credits are phased-out was originally established in 1980 and is adjusted annually for inflation. Depending on the price of domestic crude oil for a particular year, all or a portion of the tax credits generated in that year might be eliminated. The Company evaluates the production levels of its synthetic fuel production facilities in light of the risk of phase-out of the associated tax credits. As a result of fluctuating domestic crude oil prices, the Company evaluates and adjusts production levels when appropriate in light of this risk. Regardless of the oil prices, the tax credits expire after 2007. During 1997 and 1998, the Company participated in a workers' compensation underwriting pool with a third party insurance company. Both companies share equally in the pool. Collectively, the workers' compensation business is assumed from over 50 ceding companies and retro-ceded to 15 programs. The business covers risks primarily from the 1997 and 1998 underwriting years but also includes risk from the 1996 underwriting year. Prior to 2006, net premiums and losses retained by the Company, after retro-cessions to various quota share reinsurers, were 100% retro-ceded to another AIG subsidiary, American General Assurance Company ("AGAC"). During 2006, the agreement with AGAC terminated and the F-51 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 12.Commitments and Contingencies (continued) retrocession was recaptured. On February 9, 2006, AIG announced that it has reached a resolution of claims and matters under investigation with the United States Department of Justice ("DOJ"), the Securities and Exchange Commission ("SEC"), the Office of the New York Attorney General ("NYAG") and the New York State Department of Insurance ("DOI"). The settlements resolve outstanding litigation filed by the SEC, NYAG and DOI against AIG and conclude negotiations with these authorities and the DOJ in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, as well as claims relating to the underpayment of certain workers compensation premium taxes and other assessments. As a result of the settlement, the Company obtained temporary permission from the SEC to continue to provide its variable products. It is expected that a permanent exemptive order will be granted, although there is no assurance the SEC will issue the order. Accordingly, no assurance can be given that any further changes in circumstances for AIG will not impact the Company. Various federal, state and other regulatory agencies are reviewing certain transactions and practices of the Company and its affiliates in connection with industry-wide and other inquiries. In the opinion of the Company's management, based on the current status of these inquiries, it is not likely that any of these inquiries will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. F-52 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 13.Reinsurance Reinsurance transactions for the years ended December 31, 2006, 2005 and 2004 were as follows:
Percentage Ceded to Assumed From of Amount Other Other Assumed Gross Amount Companies Companies Net Amount to Net ------------ ------------ ------------ ----------- ---------- (In Thousands) December 31, 2006 Life insurance in force $589,468,232 $495,146,951 $2,816,826 $97,138,107 2.90% ============ ============ ========== =========== Premiums: Life insurance and annuities 3,366,468 525,132 12,259 2,853,595 0.43% Accident and health insurance 27,548 1,659 196 26,085 0.75% ------------ ------------ ---------- ----------- Total premiums $ 3,394,016 $ 526,791 $ 12,455 $ 2,879,680 0.43% ============ ============ ========== =========== December 31, 2005 Life insurance in force $502,899,091 $408,690,675 $3,081,688 $97,290,104 3.17% ============ ============ ========== =========== Premiums: Life insurance and annuities 3,200,493 456,696 14,397 2,758,194 0.52% Accident and health insurance 25,590 2,926 1,927 24,591 7.84% ------------ ------------ ---------- ----------- Total premiums $ 3,226,083 $ 459,622 $ 16,324 $ 2,782,785 0.59% ============ ============ ========== =========== December 31, 2004 Life insurance in force $410,133,222 $314,611,320 $2,814,650 $98,336,552 2.86% ============ ============ ========== =========== Premiums: Life insurance and annuities 2,903,136 395,625 9,307 2,516,818 0.37% Accident and health insurance 25,374 2,999 1,129 23,504 4.80% ------------ ------------ ---------- ----------- Total premiums $ 2,928,510 $ 398,624 $ 10,436 $ 2,540,322 0.41% ============ ============ ========== ===========
Reinsurance recoverable on paid losses was approximately $32.9 million, and $44.7 million, at December 31, 2006 and 2005, respectively. Reinsurance recoverable on unpaid losses was approximately $139.6 million, and $114.5 million at December 31, 2006 and 2005, respectively. F-53 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 13.Reinsurance (continued) Total reinsurance recoverables are included in Accounts Receivable on the Consolidated Balance Sheet. In December 2002, the Company entered into a coinsured/modified coinsurance agreement with AIG Life Insurance Company of Bermuda ("AIGB"), an affiliate. The agreement has an effective date of March 1, 2002. Under the agreement, AIGB reinsures 100% quota share of the Company's liability on virtually all level term and universal life products issued by the Company with issue dates on or after March 1, 2002. The agreement is unlimited in duration but either party may terminate the agreement as to new business with thirty days written notice to the other party. The agreement also provides for an experience refund of all profits, less a reinsurance risk charge. 14.Shareholder's Equity 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 Company's stock is held by its immediate parent, AGC Life Insurance Company. The Company paid $200 million, $440 million and $300 million in dividends on common stock to AGC Life in 2006, 2005 and 2004, respectively. The Company also paid $680,000 in dividends on preferred stock to AGC Life in 2006, 2005 and 2004. In addition, the Company paid a stock dividend of $7.5 million to the Parent Company during 2006. 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, 2006, approximately $10.4 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 $4.6 billion of consolidated shareholder's 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 AGC Life 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 percent of policyholders' surplus or the previous year's statutory net gain from operations. F-54 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 15.Subsequent Event On February 28, 2007, the Company acquired Matrix Direct, Inc. ("Matrix Direct"), a direct marketer of life insurance, from Protective Life Corporation. The transaction was accounted for as a stock purchase of all of the outstanding capital stock of Matrix Direct. Although the acquisition cost is not material, less than .2% of the Company's equity, the Company will have the opportunity to further expand its sales of life insurance through this acquisition, as well as apply its direct marketing expertise to a more diverse set of products. F-55 American Home Assurance Company NAIC Code: 19380 Statutory Basis Financial Statements December 31, 2006 and 2005 American Home Assurance Company Statutory Basis Financial Statements December 31, 2006 and 2005 Table of Contents Report of Independent Auditors............................................. 2 Statements of Admitted Assets.............................................. 3 Statements of Liabilities, Capital and Surplus............................. 4 Statements of Income and Changes in Capital and Surplus.................... 5 Statements of Cash Flow.................................................... 6 Notes to Statutory Basis Financial Statements.............................. 7 Report of Independent Auditors To the Board of Directors and Shareholder of American Home Assurance Company: We have audited the accompanying statutory statements of admitted assets and liabilities, capital and surplus of American Home Assurance Company (the Company) as of December 31, 2006 and 2005, and the related statutory statements of income and changes in capital and surplus, and of cash flow for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1 to the financial statements, the Company prepared these financial statements using accounting practices prescribed or permitted by the Insurance Department of the State of New York, which practices differ from accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the statutory basis of accounting and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. In our opinion, because of the effects of the matter discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2006 and 2005, or the results of its operations or its cash flows for the years then ended. In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities and surplus of the Company as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended, on the basis of accounting described in Note 1 to the financial statements. PRICEWATERHOUSECOOPERS LLP New York, NY April 26, 2007 2 American Home Assurance Company Statements of Admitted Assets Statutory Basis As of December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 2005 ------------------ ----------- ----------- Cash and Invested Assets: Bonds, at amortized cost (NAIC market value: 2006 - $15,146,927; 2005 - $9,798,011) $14,844,987 $ 9,663,980 Stocks: Common stocks, at NAIC market value (Cost: 2006 - $1,602,207; 2005 - $1,575,109) 3,304,355 3,190,583 Preferred stocks, primarily at NAIC market value (Cost: 2006 - $577,109; 2005 - $539,993) 587,471 542,438 Other invested assets, primarily at equity (Cost: 2006 - $1,171,367; 2005 - $2,109,071) 1,509,651 2,261,269 Securities lending collateral 203,323 295,591 Short-term investments, at amortized cost (approximates NAIC market value) 129,196 95,534 Cash 164,596 22,494 Receivable for securities -- 164,069 ----------- ----------- Total Cash and Invested Assets 20,743,579 16,235,958 ----------- ----------- Investment income due and accrued 203,764 234,067 Agents' balances or uncollected premiums: Premiums in course of collection 955,240 925,573 Premiums and installments booked but deferred and not yet due 371,971 355,388 Accrued retrospective premiums 1,606,389 1,267,421 Amounts billed and receivable from high deductible policies 76,370 104,345 Reinsurance recoverable on loss payments 488,243 399,204 Funds held by or deposited with reinsurers 13,951 23,948 Deposit accounting assets 809,537 1,336,343 Deposit accounting assets - funds held 94,279 432,987 Federal and foreign income taxes recoverable from parent 63,569 794,462 Net deferred tax assets 421,900 308,507 Equities in underwriting pools and associations 858,614 577,679 Electronic data processing equipment, less accumulated depreciation -- 93,882 Receivable from parent, subsidiaries and affiliates 1,484,555 3,189,824 Other admitted assets 179,243 178,400 ----------- ----------- Total Admitted Assets $28,371,204 $26,457,988 =========== =========== See Notes to Statutory Basis Financial Statements 3 American Home Assurance Company Statements of Liabilities, Capital and Surplus Statutory Basis As of December 31, 2006 and 2005 (000's Omitted Except Share Information) As of December 31, 2006 2005 ------------------ ----------- ----------- Liabilities Reserves for losses and loss adjustment expenses $12,754,581 $11,620,078 Unearned premium reserves 4,518,443 4,334,485 Commissions, premium taxes, and other expenses payable 183,640 118,273 Reinsurance payable on paid loss and loss adjustment expenses 308,091 247,937 Funds held by company under reinsurance treaties 228,878 255,848 Provision for reinsurance 128,824 210,152 Ceded reinsurance premiums payable, net of ceding commissions 427,505 431,565 Retroactive reinsurance reserves - assumed 23,242 32,893 Retroactive reinsurance reserves - ceded (61,283) (65,044) Deposit accounting liabilities 172,296 486,910 Deposit accounting liabilities - funds held 703,508 1,006,426 Securities lending payable 203,323 295,591 Collateral deposit liability 613,043 505,755 Payable to parent, subsidiaries and affiliates 1,547,586 1,583,699 Payable for securities 110,581 -- Other liabilities 297,093 343,769 ----------- ----------- Total Liabilities 22,159,351 21,408,337 ----------- ----------- Capital and Surplus Common capital stock, $15.00 par value, 1,758,158 shares authorized, 1,695,054 shares issued and outstanding 25,426 25,426 Capital in excess of par value 2,779,526 2,779,526 Unassigned surplus 3,357,054 2,176,592 Special surplus funds from retroactive reinsurance 49,847 68,107 ----------- ----------- Total Capital and Surplus 6,211,853 5,049,651 ----------- ----------- Total Liabilities, Capital, and Surplus $28,371,204 $26,457,988 =========== =========== See Notes to Statutory Basis Financial Statements 4 American Home Assurance Company Statements of Income and Changes in Capital and Surplus Statutory Basis For the Years Ended December 31, 2006 and 2005 (000's Omitted) For the Years Ended December 31, 2006 2005 -------------------------------- ---------- ----------- Statements of Income Underwriting Income: Premiums earned $7,700,011 $ 7,045,820 ---------- ----------- Underwriting Deductions: Losses incurred 4,606,481 5,406,410 Loss adjustment expenses incurred 803,517 1,098,644 Other underwriting expenses incurred 1,825,815 1,584,477 ---------- ----------- Total Underwriting Deductions 7,235,813 8,089,531 ---------- ----------- Net Underwriting Income (Loss) 464,198 (1,043,711) ---------- ----------- Investment Income: Net investment income earned 702,426 630,678 Net realized capital gains (net of capital gains taxes: 2006 - $29,092; 2005 - $20,492) 61,624 38,055 ---------- ----------- Net Investment Gain 764,050 668,733 ---------- ----------- Net loss from agents' or premium balances charged-off (49,762) (145,742) Other gain, net of dividends to policyholders 63,978 91,947 ---------- ----------- Income (Loss) After Capital Gains Taxes and Before Federal Income Taxes 1,242,464 (428,773) Federal income tax expense (benefit) 263,263 (243,047) ---------- ----------- Net Income (Loss) $ 979,201 $ (185,726) ========== =========== Changes in Capital and Surplus Capital and Surplus, as of December 31, Previous Year $5,049,651 $ 3,339,340 Adjustment to beginning surplus 55,538 (211,984) ---------- ----------- Capital and Surplus, as of January 1, 5,105,189 3,127,356 ---------- ----------- Changes in Capital and Surplus: Net income (loss) 979,201 (185,726) Change in net unrealized capital gains (net of capital gains taxes: 2006 - $121,173; 2005 - $13,354) 119,660 164,444 Change in net deferred income tax (13,270) 112,728 Change in non-admitted assets (80,352) (322,775) Change in provision for reinsurance 81,328 166,585 Paid in capital and surplus -- 2,076,780 Cash dividends to stockholder -- (31,732) Other surplus adjustments 1,268 -- Foreign exchange translation 18,829 (58,009) ---------- ----------- Total Changes in Capital and Surplus 1,106,664 1,922,295 ---------- ----------- Capital and Surplus, December 31, $6,211,853 $ 5,049,651 ========== =========== See Notes to Statutory Basis Financial Statements 5 American Home Assurance Company Statements of Cash Flow Statutory Basis For the Years Ended December 31, 2006 and 2005 (000's Omitted) For the Years Ended December 31, 2006 2005 -------------------------------- ----------- ----------- Cash From Operations Premiums collected, net of reinsurance $ 6,433,712 $ 7,143,463 Net investment income 787,413 604,156 Miscellaneous income (expense) 75,317 (53,776) ----------- ----------- Sub-total 7,296,442 7,693,843 ----------- ----------- Benefit and loss related payments 3,520,205 3,809,181 Commission and other expense paid 2,401,959 2,171,077 Dividends paid to policyholders 1,344 878 Change in Federal and foreign income taxes (438,538) (3,783) ----------- ----------- Net Cash Provided from Operations 1,811,472 1,716,490 ----------- ----------- Cash From Investments Proceeds from investments sold, matured, or repaid Bonds 5,231,792 4,129,223 Stocks 3,211,715 2,795,546 Other 1,646,730 3,042,793 ----------- ----------- Total Proceeds from Investments Sold, Matured, or Repaid 10,090,237 9,967,562 ----------- ----------- Cost of investments acquired Bonds 10,488,316 5,803,573 Stocks 3,180,130 3,071,743 Other 350,752 3,630,931 ----------- ----------- Total Cost of Investments Acquired 14,019,198 12,506,247 ----------- ----------- Net Cash (Used in) Investing Activities (3,928,961) (2,538,685) ----------- ----------- Cash From Financing and Miscellaneous Sources Capital and Surplus paid-in, less treasury stock 1,326,780 750,000 Dividends to stockholder -- (47,598) Intercompany receivable and payable, net 342,735 195,946 Net deposit on deposit-type contracts and other insurance 262,411 285,727 Other 361,327 (332,847) ----------- ----------- Net Cash Provided from Financing Activities 2,293,253 851,228 ----------- ----------- Net Change in Cash and Short-term Investments 175,764 29,033 Cash and Short-term Investments: Beginning of year 118,028 88,995 ----------- ----------- End of Year $ 293,792 $ 118,028 =========== =========== See Notes to Statutory Basis Financial Statements 6 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT STATUTORY BASIS ACCOUNTING POLICIES A. Organization The American Home Assurance Company (AHAC or the Company) is a direct wholly-owned subsidiary of the AIG Commercial Insurance Group, Inc., a Delaware corporation. On December 29, 2006, as part of a reorganization of the American International Group, Inc.'s (the Ultimate Parent or AIG) domestic property-casualty insurance operations, AIG contributed its 100% ownership of the Company's common stock to AIG Commercial Insurance Group, Inc., an indirect wholly-owned subsidiary of AIG (formerly known as NHIG Holding Corp.). Prior to the reorganization, the Company was a direct wholly-owned subsidiary of AIG. The ownership change had no effect on the Company's operations. The Company writes substantially all lines of property and casualty insurance with an emphasis on U.S. commercial business. In addition to writing substantially all classes of business insurance, including large commercial or industrial property insurance, excess liability, inland marine, environmental, workers' compensation and excess and umbrella coverages, the Company offers many specialized forms of insurance such as aviation, accident and health, equipment breakdown, directors and officers liability, difference in conditions, kidnap-ransom, export credit and political risk, and various types of errors and omissions coverages. Through AIG's risk management operation, the Company provides insurance and risk management programs to large corporate customers, while through AIG's risk finance operation, the Company is a leading provider in customized structured products. The accompanying financial statements include the Company's U.S. operation and its Japan and Canadian branches. The Company accepts business mainly from insurance brokers, enabling selection of specialized markets and retention of underwriting control. Any licensed insurance broker is able to submit business to the Company, but such broker usually has no authority to commit the Company to accept risk. In addition, the Company utilizes certain managing general agents and third party administrators for policy issuance and administration, underwriting, and claims adjustment services. The Company has significant transactions with AIG and affiliates. In addition, the Company participates in an inter-company pooling agreement with certain affiliated companies (see Note 5). 7 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) B. Summary of Significant Statutory Basis Accounting Policies Prescribed or Permitted Statutory Accounting Practices: The accompanying financial statements of the Company have been prepared in conformity with accounting practices prescribed or permitted by the Insurance Department of the State of New York (NY SAP). The Insurance Department of the State of New York recognizes only statutory accounting practices prescribed or permitted by the State of New York for determining and reporting the financial position and results of operations of an insurance company and for the purpose of determining its solvency under the New York Insurance Law. The National Association of Insurance Commissioners Accounting Practices and Procedures Manual (NAIC SAP) has been adopted as a component of prescribed practices by the State of New York. The Superintendent of the New York Insurance Department (the Superintendent) has the right to permit other specific practices that deviate from prescribed practices. The New York State Insurance Department has adopted certain accounting practices that differ from those set forth in NAIC SAP; specifically the prescribed practices of (1) allowing the discounting of workers compensation loss reserves on a non-tabular basis; under NAIC SAP, non-tabular discounting of reserves is not permitted; (2) under New York Insurance Law, electronic data processing (EDP) apparatus and related equipment constituting a data processing, record keeping, or accounting system is allowed as an admitted asset to be amortized over a ten year period provided that the cost exceeds $50,000 per system; NAIC SAP allows EDP equipment and operating system software as assets, subject to an aggregate limit of three percent of surplus and an amortization period not to exceed the lesser of three years or the useful life; (3) New York State Insurance Department Regulation 20 (Regulation 20) allows certain offsets to the provision for reinsurance, including parental letter of credits, that are not permitted under NAIC SAP; and (4) goodwill admissibility rules differ between New York Insurance Law and NAIC SAP. In addition, New York Insurance Law Section 1414 requires that the shares of a subsidiary insurer be valued at the lesser of the subsidiary's market value or book value as shown by its last annual statement or report on examination, whichever is more recent. 8 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) A reconciliation of the Company's net income and capital and surplus between NAIC SAP and practices prescribed by NY SAP is shown below: December 31, 2006 2005 ------------ ---------- ---------- Net Income (Loss), NY SAP $ 979,201 $ (185,726) State Practices - (Deduction): Non-Tabular Discounting (21,866) (31,431) ---------- ---------- Net Income (Loss), NAIC SAP $ 957,335 $ (217,157) ========== ========== Statutory Surplus, NY SAP $6,211,853 $5,049,651 State Prescribed Practices - (Charge): Non-Tabular Discounting (234,471) (212,605) Regulation 20 - Other reinsurance credits (133,123) (208,499) Regulation 20 - Parental letter of credit (383,651) (400,458) EDP equipment and software -- (93,881) ---------- ---------- Total State Prescribed Practices (751,245) (915,443) ---------- ---------- Statutory Surplus, NAIC SAP $5,460,608 $4,134,208 ========== ========== In 2006 and 2005, the Superintendent permitted the Company to utilize the independent audit of AIG to support the requirement for audited U.S. GAAP equity of the investments in non insurance and foreign insurance entities. As of December 31, 2006, the aggregate value of equity investments to which this permitted practice applies amounted to $403,460. The Superintendent has also permitted the Company to utilize audited financial statements prepared on a basis of accounting other than U.S. GAAP to value investments in limited partnerships and joint ventures. As of December 2006, the aggregate value of limited partnerships and joint ventures to which this permitted practice applies is $131,697. In addition, the Superintendent has permitted the Company to account for investments in publicly traded affiliated common stocks at the quoted market value less a discount as prescribed by NAIC SAP. The difference between the carrying value and book value as of December 31, 2006 amounted to $251,881. The use of all the aforementioned prescribed and permitted practices has not adversely affected the Company's ability to comply with the NAIC's risk based capital and surplus requirements for the 2006 reporting period. Statutory Accounting Practices and Generally Accepted Accounting Principles: NAIC SAP is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP). NAIC SAP and NY SAP vary in certain respects from GAAP. A description of certain of these accounting differences is set forth below: 9 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) Under GAAP: a. Costs incidental to acquiring business related to premiums written and costs allowed by assuming reinsurers related to premiums ceded are deferred and amortized over the periods covered by the underlying policies or reinsurance agreements; b. Statutory basis reserves, such as non-admitted assets and unauthorized reinsurance are restored to surplus; c. The equity in earnings of affiliates with ownership between 20.0% and 50.0% is included in net income, and investments in subsidiaries with greater than 50.0% ownership are consolidated; d. Estimated undeclared dividends to policyholders are accrued; e. The reserves for losses and loss adjustment expenses (LAE) and unearned premium reserves are presented gross of ceded reinsurance by establishing a reinsurance asset; f. Debt and equity securities deemed to be available-for-sale and trading securities are reported at fair value. The difference between cost and fair value of securities available-for-sale is reflected net of related deferred income tax, as a separate component of accumulated other comprehensive income in shareholder's equity. For trading securities, the difference between cost and fair value is included in income, while securities held to maturity are valued at amortized cost; g. Direct written premium contracts that do not have sufficient risk transfer are treated as deposit accounting liabilities; h. Insurance and reinsurance contracts recorded as retroactive retain insurance accounting treatment if they pass the risk transfer test. If risk transfer is not met, no insurance accounting treatment is permitted. All income is then recognized based upon either the interest or recovery method; and i. Deferred Federal income taxes are provided for temporary differences for the expected future tax consequences of events that have been recognized in the Company's financial statements. The provision for deferred income taxes is reported in the statement of income. Under NAIC SAP: a. Costs incidental to acquiring business related to premiums written and costs allowed by assuming reinsurers related to premiums ceded are immediately expensed; b. Statutory basis reserves, such as non-admitted assets and unauthorized reinsurance are charged directly to surplus; c. Subsidiaries are not consolidated. The equity in earnings of affiliates is included in unrealized appreciation/(depreciation) of investments which is reported directly in surplus. Dividends are reported as investment income; d. Declared dividends to policyholders are accrued; e. The reserves for losses and LAE and unearned premium reserves are presented net of ceded reinsurance; 10 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) f. NAIC investment grade debt securities are reported at amortized cost, while NAIC non-investment grade debt securities (NAIC rated 3 to 6) are reported at lower of cost or market; g. Direct written premium contracts are reported as insurance as long as policies are issued in accordance with insurance requirements; h. Insurance and reinsurance contracts deemed to be retroactive receive special accounting treatment. Gains or losses are recognized in the statement of income and surplus is segregated by the ceding entity to the extent of gains realized; and i. Deferred Federal income taxes are provided for temporary differences for the expected future tax consequences of events that have been recognized in the Company's financial statements. Changes in deferred income taxes are charged directly to surplus and have no impact on statutory earnings. The admissibility of deferred tax assets is limited by statutory guidance. The effects on the financial statements of the variances between the statutory basis of accounting and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Significant Statutory Accounting Practices: A summary of the Company's significant statutory accounting practices are as follows: Use of Estimates: The preparation of financial statements in conformity with NY SAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. On an ongoing basis, the Company evaluates all of its estimates and assumptions. It also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from management's estimates. Invested Assets: The Company's invested assets are accounted for as follows: . Short-term Investments: The Company considers all highly liquid debt securities with maturities of greater than three months but less than twelve months from the date of purchase to be short-term investments. Short-term investments are carried at amortized cost which approximates NAIC market value (as designated by the NAIC Securities Valuation Office). . Bonds: Bonds with an NAIC designation of 1 and 2 are carried at amortized cost using the scientific method. Bonds with an NAIC designation of 3 to 6 are carried at the lower of amortized cost or the NAIC designated market value. If a bond is determined to have an other-than-temporary decline in value the cost basis is written-down to fair value as a new cost basis, with the corresponding charge to Net Realized Capital Gains as a realized loss. Mortgage-backed securities are carried at amortized cost and generally are more likely to be prepaid than other fixed maturities. As of December 31, 2006 and 2005, the NAIC market value of the Company's mortgage-backed securities approximated $160,750 and $165,005, respectively. Mortgage-backed securities 11 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) include prepayment assumptions used at the purchase date and valuation changes caused by changes in estimated cash flow and are valued using the retrospective method. Prepayment assumptions were obtained from third party vendors. . Common and Preferred Stocks: Unaffiliated common stocks are carried principally at market value. Perpetual preferred stocks with an NAIC rating of P1 or P2 are carried at market value. Redeemable preferred stocks with an NAIC rating of RP1 or RP2 that are subject to a 100.0% mandatory sinking fund or paid in-kind are carried at amortized cost. All below investment grade, NAIC 3 to 6 preferred stocks, are carried at the lower of amortized cost or NAIC designated market values. Investments in affiliates for which the Company's ownership interest (including ownership interest of the Ultimate Parent and its subsidiaries) is less than 85.0%, and whose securities are traded on one of the three major U.S. exchanges, are included in common stock at the quoted market value less a discount as prescribed by NAIC SAP. The average discount rate is approximately 20.1%. Other investments in affiliates are included in common stocks based on the net worth of the entity. . Other Invested Assets: Other invested assets consist primarily of investments in joint ventures and partnerships. Joint ventures and partnership investments are accounted for under the equity method, based on the most recent financial statements of the entity. Changes in carrying value are recorded as unrealized gains or losses. For investments in joint ventures and partnerships that are determined to have an other-than-temporary decline in value, the cost basis is written-down to fair value as a new cost basis, with the corresponding charge to Net Realized Capital Gains as a realized loss. . Derivatives: Foreign exchange forward contracts are derivatives whereby the Company agrees to exchange a specific amount of one currency for the specific amount of another currency at a date in the future. Foreign exchange contracts are entered into in order to manage exposure to changes in the foreign exchange rates related to long-term foreign denominated bonds held by the Company. The contracts are usually one to three months in duration and are marked to market every month using publicly obtained foreign exchange rates. When the contract expires, realized gains and losses are recorded in investment income. Options purchased are included in Other Invested Assets on the Company's Statements of Admitted Assets. Options are carried at market value. Options written are reported in Other Liabilities on the Statements of Liabilities, Capital and Surplus. Realized gains or losses on the sales of options are determined on the basis of specific identification and are included in income. Futures are exchange contracts whereby the Company agrees to buy a specific amount of an underlying security (usually an equity index) at a specific price in the future. Throughout the term of the contract, the change in the underlying security's price in the future is calculated each business day, and the gain or loss is transferred in cash to or from the counterparty. When the future position is closed out or expires, a final payment is made. The daily mark-to-market payments are accounted for as realized gains or losses. Any change in unrealized gains or losses on options purchased or written are credited or charged to unassigned surplus. The Company does not use hedge accounting for its derivatives. 12 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) . Net Investment Gains (Losses): Net investment gains (losses) consist of net investment income earned and realized gains or losses from the disposition or impairment of investments. Net investment income earned includes accrued interest, accrued dividends and distributions from partnerships and joint ventures. Investment income is recorded as earned. Realized gains or losses on the disposition of investments are determined on the basis of the specific identification. Investment income due and accrued is assessed for collectibility. The Company writes-off investment income due and accrued when it is probable that the amount is uncollectible by recording a charge against investment income in the period such determination is made. Any amounts over 90 days past due which have not been written-off are non-admitted by the Company. As of December 31, 2006 and 2005, no investment income due and accrued was determined to be uncollectible or non-admitted. . Unrealized Gains (Losses): Unrealized gains (losses) on all stocks, bonds carried at NAIC designated values, joint ventures, partnerships, derivatives, and foreign currency translation are credited or charged to unassigned surplus. Revenue Recognition: Direct written premiums contracts are primarily earned on a pro-rata basis over the terms of the policies to which they relate. Accordingly, unearned premiums represent the portion of premiums written which is applicable to the unexpired terms of policies in force. Ceded premiums are amortized into income over the contract period in proportion to the protection received. Premium estimates for retrospectively rated policies are recognized within the periods in which the related losses are incurred. In accordance with NAIC Statement of Statutory Accounting Principles (SSAP) No. 66, entitled Retrospectively Rated Contracts, the Company estimates accrued retrospectively rated premium adjustments using the application of historical ratios of retrospective rated premium development. The Company records accrued retrospectively rated premiums as an adjustment to earned premiums. In connection therewith, as of December 31, 2006 and 2005, accrued premiums related to the Company's retrospectively rated contracts amounted to $1,606,389 and $1,267,421, respectively, net of non-admitted premium balances of $55,203 and $3,084, respectively. For the years ended December 31, 2006 and 2005, $684,635 and $510,615 of net written premiums were subject to retrospective rating features and amounted to 8.7% and 7.4% of total net written premiums, respectively. Adjustments to premiums for changes in the level of exposure to insurance risk are generally determined based upon audits conducted after the policy expiration date. In accordance with SSAP No. 53, entitled Property and Casualty Contracts - Premiums (SSAP 53), the Company records the audit premium estimates as an adjustment to written premium, and earns these premiums immediately. For premium adjustments that result in a return of premium to the policyholder, the Company immediately reduces earned premiums. When the premium exceeds the amount of collateral held, a non-admitted asset (equivalent to 10.0% of this excess amount) is recorded. In accordance with SSAP 53, the Company reviews its ultimate losses with respect to its premium reserves. A liability is established if the premium reserves are not sufficient to cover the ultimate loss projection and associated acquisition expenses. Investment income is not considered in the calculation. 13 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) For certain lines of business for which an insurance policy is issued on a claims-made basis, the Company offers to its insurers the option to purchase an extended reporting endorsement which permits the extended reporting of insured events after the termination of the claims-made contract. Extended reporting endorsements modify the exposure period of the underlying contract and can be for a defined period (e.g., six months, one year, five years) or an indefinite period. For defined reporting periods, premiums are earned over the term of the fixed period. For indefinite reporting periods, premiums are fully earned and loss and LAE liabilities associated with the unreported claims are recognized immediately. Reinsurance: Ceded premiums, commissions, expense reimbursements and reserves related to ceded business are accounted for on a basis consistent with that used in accounting for the original contracts issued and the terms of the reinsurance contract. Ceded premiums have been reported as a reduction of premium earned. Amounts applicable to ceded reinsurance for unearned premium reserves, and reserves for losses and LAE have been reported as a reduction of these items, and expense allowances received in connection with ceded reinsurance are accounted for as a reduction of the related acquisition cost. Retroactive Reinsurance: Retroactive reinsurance reserves are shown separately in the balance sheet. Gains or losses are recognized in the statement of income. Surplus gains are reported as segregated unassigned surplus until the actual retroactive reinsurance recovered exceeds the consideration paid. As agreed with the Company's domiciliary state, the Company analyzed the current status of all reinsurance treaties entered into on or after January 1, 1994 for which ceded reserves as of December 31, 2004 (including incurred but not reported (IBNR)) exceeded $100 for compliance with the nine month rule as described in SSAP No. 62, entitled Property and Casualty Reinsurance (SSAP 62). Any such treaties for which the documentation required by SSAP 62 did not exist were reclassified as retroactive, with appropriate adjustments to underwriting accounts and unassigned surplus. Treaties entered into prior to January 1, 2005 for which such documentation is contained in the Company's files retained prospective treatment, irrespective of whether such documentation was executed within nine months of the treaty's effective date in accordance with agreements reached with the domiciliary insurance department. In early 2007, the Company discovered that certain foreign reinsurance treaties for the period January 1, 2005 to November 30, 2006 were not in compliance with the nine month rule as described in SSAP 62. As agreed with the Company's domiciliary state, the Company recorded these reinsurance treaties as prospective. The Company is unable to quantify the impact on policyholders' surplus or net income from the aforementioned practices regarding the nine month rule. Deposit Accounting: Assumed and ceded reinsurance contracts which the Company determines do not transfer a sufficient amount of insurance risk are recorded as deposit accounting transactions. In accordance with SSAP 62 and SSAP No. 75, entitled Reinsurance Deposit Accounting An Amendment to SSAP No. 62, Property and Casualty Reinsurance, the Company records the net consideration paid or received as a deposit asset or liability, respectively. The deposit asset is reported as admitted if i) the assuming company is licensed, credited or qualified by the Insurance Department of the State of New York; or ii) the collateral (i.e.: funds withheld, letters of credit or trusts) meets all the requirements of the Insurance Department of the State of New York. The deposit asset or liability is adjusted by calculating the effective yield on the deposit to reflect the actual payments made or received to date and expected future payments with a corresponding credit or charge to other gain in the statement of income. 14 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As agreed with the Company's domiciliary state, direct insurance transactions whereby the Company determines there was insufficient risk transfer, other than those where a policy was issued (a) in respect of the insured's requirement for evidence of coverage pursuant to applicable statutes (insurance statutes or otherwise), contractual terms or normal business practices, (b) in respect of an excess insurer's requirement for an underlying primary insurance policy in lieu of self insurance, or (c) in compliance with filed forms, rates and/or rating plans, are recorded as deposit accounting arrangements. Foreign Property Casualty Business: As agreed with the Company's domiciliary state, the Company will continue to follow the current presentation practices relating to its foreign branches and participation in the business of the American International Underwriters Overseas Association (the Association or AIUOA). See Note 5 for a description of the AIUOA pooling arrangement and related financial statement presentation. Commissions and Underwriting Expenses: Commissions, premium taxes, and certain underwriting expenses related to premiums written are charged to income at the time the premiums are written and are included in Other Underwriting Expenses Incurred. In accordance with SSAP 62, the Company records a liability for reinsurance ceding commissions recorded in excess of acquisition costs. The liability is earned over the terms of the underlying policies. Reserves for Losses and LAE: The reserves for losses and LAE, including IBNR losses, are determined on the basis of actuarial specialists' evaluations and other estimates, including historical loss experience. The methods of making such estimates and for establishing the resulting reserves are continually reviewed and updated, and any resulting adjustments are recorded in the current period. Accordingly, losses and LAE are charged to income as incurred. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. The Company discounts its loss reserves on workers' compensation claims. The calculation of the Company's tabular discount is based upon the 1979-81 Decennial Mortality Table, and applying a 3.5% interest rate. Loss reserves (net of reinsurance) subject to the tabular discounting were $1,676,681 and $1,671,598, as of December 31, 2006 and 2005, respectively. As of December 31, 2006 and 2005, the Company's tabular discount amounted to $238,180 and $184,289, respectively, all of which were applied against the Company's case reserves. The calculation of the Company's non-tabular discount is based upon the Company's own payout pattern and a 5.0% interest rate as prescribed by the New York State Insurance Department. Loss and LAE reserves (net of reinsurance) subject to the non-tabular discounting were $1,676,681 and $1,671,598 as of December 31, 2006 and 2005, respectively. As of December 31, 2006 and 2005, the Company's non-tabular discount amounted to $234,471 and $212,605, respectively, all of which were applied against the Company's case reserves. 15 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) Foreign Exchange: Assets and liabilities denominated in foreign currencies are translated at the rate of exchange in effect at the close of the reporting period. Revenues, expenses, gains, losses and surplus adjustments are translated using weighted average exchange rates. Unrealized gains and losses from translating balances from foreign currency into United States currency are recorded as adjustments to surplus. Gains and losses resulting from foreign currency transactions are included in income. Statutory Basis Reserves: Certain required statutory basis reserves, principally the provision for reinsurance, are charged to surplus and reflected as a liability of the Company. Policyholders' Dividends: Dividends to policyholders are charged to income as declared. Capital and Surplus: Common capital stock and capital in excess of par value represents amounts received by the Company in exchange for shares issued. The common capital stock represents the number of shares issued multiplied by par value per share. Capital in excess of par value represents the value received by the Company in excess of the par value per share. Non-Admitted Assets: Certain assets, EDP equipment, software, leasehold improvements, certain overdue agents' balances, accrued retrospective premiums, certain deposit accounting assets that do not meet all the State of New York requirements, prepaid expenses, certain deferred taxes that exceed statutory guidance and unsupported current taxes are designated as non-admitted assets and are directly charged to Unassigned Surplus. EDP equipment primarily consists of non-operating software and is depreciated over its useful life, generally not exceeding 5 years. Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the leasehold improvement. In connection therewith, for the years ended December 31, 2006 and 2005, depreciation and amortization expense amounted to $21,036 and $24,616, and accumulated depreciation as of December 31, 2006 and 2005 amounted to $107,392 and $88,562, respectively. Reclassifications: Certain balances contained in the 2005 financial statements have been reclassified to conform with the current year's presentation. During 2006 the Company recorded a pre-tax charge of $249,898 relating to the reconciliations and substantiation of certain balance sheet accounts. As agreed with the Company's domiciliary state, the Company has recorded all amounts as changes in estimate for 2006. NOTE 2 - ACCOUNTING ADJUSTMENTS TO STATUTORY BASIS FINANCIAL STATEMENTS During 2006 and 2005, the Company dedicated significant effort to the resolution of previously identified weaknesses in internal controls. As a result of these remediation efforts, management concluded that adjustments should be made to the assets, liabilities, and surplus to policyholders as reported in the Company's 2005 and 2004 annual statements. The corrections of these errors resulted in an after tax statutory credit (charge) of $55,538 and ($211,984) as of December 31, 2005 and 2004, respectively. 16 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) In accordance with SSAP No. 3 entitled Accounting Changes and Correction of Errors, the correction of these errors has been reported as an adjustment to unassigned surplus as of January 1, 2006 and 2005. The impact of these corrections on policyholder surplus as of January 1, 2006 and 2005 is as follows: Policyholders Surplus ------------- Balance at December 31, 2005 $5,049,651 Correction of Error Adjustments: Asset admissibility (3,482) Foreign translation adjustment 102,290 Federal income taxes (43,270) ---------- Total Correction of Error Adjustments 55,538 ---------- Balance at January 1, 2006, as Adjusted $5,105,189 ========== Policyholders Surplus ------------- Balance at December 31, 2004, as Amended $3,339,340 Correction of Error Adjustments: Asset realization (229,448) Revenue recognition (65,075) Federal income taxes 82,539 ---------- Total Correction of Error Adjustments (211,984) ---------- Balance at January 1, 2005, as Adjusted $3,127,356 ========== An explanation for each of the adjustments for prior period corrections is described below: Asset Admissibility: The Company determined that certain receivables for high deductible policies should have been non-admitted. Foreign Translation Adjustment: The Company determined that certain adjustments were required relating to the translation of balances for the Company's Canadian branch. 17 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) Asset Realization: The Company determined that the allowances related to certain premium receivable, reinsurance recoverable and other asset accounts were not sufficient. The adjustment has established additional allowances for these items. Revenue Recognition: The Company determined that certain revisions to revenues that were recognized in prior periods related to certain long-duration environmental insurance contracts were needed. Federal Income Taxes (Current and Deferred): The change in Federal income tax expense is primarily related to an increase in provisions for potential tax exposures, corrections to the deferred income tax inventory and the current tax receivable. Certain corrections to gross deferred tax assets were non-admitted by the Company, resulting in no impact in the table above (see Note 9). NOTE 3 - INVESTMENTS Statutory Fair Value of Financial Instruments: The following table presents the carrying amount and statutory fair values of the Company's financial instruments as of December 31, 2006 and 2005.
2006 2005 ----------------------- --------------------- Carrying Statutory Carrying Statutory As of December 31, Amount Fair Value Amount Fair Value ------------------ ----------- ----------- ---------- ---------- Assets: Bonds $14,844,987 $15,146,927 $9,663,980 $9,798,011 Common stocks 3,304,355 3,684,898 3,190,583 3,592,207 Preferred stocks 587,471 588,334 542,438 541,945 Other invested assets 1,509,651 1,509,651 2,261,269 2,261,269 Securities lending collateral 203,323 203,323 295,591 295,591 Cash and short-term investments 293,792 293,792 118,028 118,028 Receivable for securities -- -- 164,069 164,069 Liabilities: Securities lending payable $ 203,323 $ 203,323 $ 295,591 $ 295,591 Collateral deposit liability 613,043 613,043 505,755 505,755 Payable for securities 110,581 110,581 -- --
The methods and assumptions used in estimating the statutory fair values of financial instruments are as follows: The statutory fair values of bonds, unaffiliated common stocks and preferred stocks are based on NAIC market value*. The statutory fair values of affiliated common stock are based on the underlying equity of the respective entity's financial statements, except for publicly traded affiliates which are based on quoted market values. -------- * The NAIC market value was used where available. When not available, market values were obtained from third party pricing sources. 18 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) Other invested assets include primarily partnerships and joint ventures. Fair values are based on the net asset value of the respective entity's financial statements. The carrying value of all other financial instruments approximates fair value. The amortized cost and NAIC market values* of the Company's bond investments as of December 31, 2006 and 2005 are outlined in the table below:
Gross Gross Amortized Unrealized Unrealized NAIC * Cost Gains Losses Market Value ----------- ---------- ---------- ------------ As of December 31, 2006 U.S. governments $ 331,819 $ 1,828 $ 2,571 $ 331,076 All other governments 1,195,804 5,207 3,017 1,197,994 States, territories and possessions 2,320,995 45,984 928 2,366,051 Political subdivisions of states, territories and possessions 3,319,677 79,061 796 3,397,942 Special revenue and special assessment obligations and all non-guaranteed obligations of agencies and authorities and their political subdivisions 7,052,116 172,223 1,204 7,223,135 Public utilities 45,542 186 460 45,268 Industrial and miscellaneous 579,034 10,772 4,345 585,461 ----------- -------- ------- ----------- Total Bonds, as of December 31, 2006 $14,844,987 $315,261 $13,321 $15,146,927 =========== ======== ======= =========== As of December 31, 2005 U.S. governments $ 339,230 $ 1,331 $ 4,491 $ 336,070 All other governments 1,030,463 5,491 4,015 1,031,939 States, territories and possessions 1,437,180 25,194 4,641 1,457,733 Political subdivisions of states, territories and possessions 1,971,726 34,761 2,780 2,003,707 Special revenue and special assessment obligation and all non-guaranteed obligations of agencies and authorities and their political subdivisions 4,242,687 78,602 6,193 4,315,096 Public utilities 46,234 634 226 46,642 Industrial and miscellaneous 596,460 13,179 2,815 606,824 ----------- -------- ------- ----------- Total Bonds, as of December 31, 2005 $ 9,663,980 $159,192 $25,161 $ 9,798,011 =========== ======== ======= ===========
As of December 31, 2006 and 2005, the actual fair market value principally priced by Interactive Data Corporation, a third party rating source, for the above listed securities amounted to $15,167,455 and $9,818,483, respectively. -------- * The NAIC market value was used where available. When not available, market values were obtained from third party pricing sources. 19 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) The amortized cost and NAIC market values* of bonds at December 31, 2006 and 2005, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.
2006 2005 ------------------------ ----------------------- Amortized NAIC * Amortized NAIC * As of December 31, Cost Market Value Cost Market Value ------------------ ----------- ------------ ---------- ------------ Due in one year or less $ 981,727 $ 981,280 $ 957,757 $ 954,751 Due after one year through five years 780,263 782,785 855,048 857,130 Due after five years through ten years 10,452,785 10,679,977 6,253,720 6,338,300 Due after ten years 2,474,294 2,542,135 1,435,025 1,482,825 Mortgaged-backed securities 155,918 160,750 162,430 165,005 ----------- ----------- ---------- ---------- Total Bonds $14,844,987 $15,146,927 $9,663,980 $9,798,011 =========== =========== ========== ==========
During 2006 and 2005, proceeds from the sales of the Company's bonds amounted to $4,370,165 and $3,278,300, respectively. During 2006 and 2005, the Company realized gross gains of $6,407 and $31,404, and gross losses of $21,502 and $17,304, respectively, related to these sales. During 2006 and 2005, proceeds from the sales of the Company's equity investments amounted to $3,151,915 and $2,703,032, respectively. Gross gains of $222,465 and $132,690 and gross losses of $105,248 and $91,050 were realized on those sales in 2006 and 2005, respectively. -------- * The NAIC market value was used where available. When not available, market values were obtained from third party pricing sources. 20 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) The cost or amortized cost and NAIC market values* of the Company's common and preferred stocks as of December 31, 2006 and 2005 are set forth in the table below: December 31, 2006 ------------------------------------------------------ Cost or Gross Gross NAIC * Amortized Unrealized Unrealized Market Carrying Cost Gains Losses Value Value ---------- ---------- ---------- ---------- ---------- Common Stocks: Affiliated $ 610,842 $1,517,992 $60,010 $2,068,824 $2,068,824 Non-affiliated 991,365 266,605 22,439 1,235,531 1,235,531 ---------- ---------- ------- ---------- ---------- Total $1,602,207 $1,784,597 $82,449 $3,304,355 $3,304,355 ---------- ---------- ------- ---------- ---------- Preferred Stocks: Affiliated $ -- $ -- $ -- $ -- $ -- Non-affiliated 577,109 11,225 -- 588,334 587,471 ---------- ---------- ------- ---------- ---------- Total $ 577,109 $ 11,225 $ -- $ 588,334 $ 587,471 ========== ========== ======= ========== ========== December 31, 2005 ------------------------------------------------------ Cost or Gross Gross NAIC * Amortized Unrealized Unrealized Market Carrying Cost Gains Losses Value Value ---------- ---------- ---------- ---------- ---------- Common Stocks: Affiliated $ 602,396 $1,521,619 $ 68,346 $2,055,669 $2,055,669 Non-affiliated 972,712 198,989 36,787 1,134,914 1,134,914 ---------- ---------- -------- ---------- ---------- Total $1,575,108 $1,720,608 $105,133 $3,190,583 $3,190,583 ========== ========== ======== ========== ========== Preferred Stocks: Affiliated $ -- $ -- $ -- $ -- $ -- Non-affiliated 539,993 10,710 8,758 541,945 542,438 ---------- ---------- -------- ---------- ---------- Total $ 539,993 $ 10,710 $ 8,758 $ 541,945 $ 542,438 ========== ========== ======== ========== ========== As of December 31, 2006 and 2005, the Company held derivative investments of $0 and $(572), respectively. -------- * The NAIC market value was used where available. When not available, market values were obtained from third party pricing sources. 21 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) The fair market value together with the aging of the gross pre-tax unrealized losses with respect to the Company's bonds and stocks as of December 31, 2006 and 2005 is set forth in the table below:
12 Months Greater than or Less 12 Months Total --------------------- ------------------- --------------------- Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Losses Value Losses Value Losses ------------------------- ---------- ---------- -------- ---------- ---------- ---------- As of December 31, 2006: U. S. Governments $ 101,082 $ 767 $ 73,937 $ 1,804 $ 175,019 $ 2,571 All Other Governments 683,798 1,753 57,405 1,264 741,203 3,017 States, territories and possessions 135,854 161 64,833 767 200,687 928 Political subdivisions of states, territories and possessions 80,117 277 35,991 519 116,108 796 Special revenue 289,115 808 39,210 396 328,325 1,204 Public utilities 1,236 14 18,342 446 19,578 460 Industrial and miscellaneous 68,790 458 108,020 3,887 176,810 4,345 ---------- ------- -------- ------- ---------- -------- Total Bonds 1,359,992 4,238 397,738 9,083 1,757,730 13,321 ---------- ------- -------- ------- ---------- -------- Common Stock 189,762 29,564 283,252 52,885 473,014 82,449 ---------- ------- -------- ------- ---------- -------- Total Stocks 189,762 29,564 283,252 52,885 473,014 82,449 ---------- ------- -------- ------- ---------- -------- Total Bonds and Stocks $1,549,754 $33,802 $680,990 $61,968 $2,230,744 $ 95,770 ========== ======= ======== ======= ========== ======== As of December 31, 2005: U. S. Governments $ 263,575 $ 3,780 $ 14,643 $ 711 $ 278,218 $ 4,491 All Other Governments 831,441 3,520 19,830 495 851,271 4,015 States, territories and possessions 368,996 3,419 51,889 1,222 420,885 4,641 Political subdivisions of states, territories and possessions 380,044 2,347 23,929 433 403,973 2,780 Special revenue 549,541 4,212 72,215 1,981 621,756 6,193 Public utilities 16,300 188 1,661 38 17,961 226 Industrial and miscellaneous 115,026 2,247 14,784 568 129,810 2,815 ---------- ------- -------- ------- ---------- -------- Total Bonds 2,524,923 19,713 198,951 5,448 2,723,874 25,161 ---------- ------- -------- ------- ---------- -------- Common Stock 421,479 31,543 215,755 73,590 637,234 105,133 Preferred Stock 276,755 6,666 40,807 2,092 317,562 8,758 ---------- ------- -------- ------- ---------- -------- Total Stocks 698,234 38,209 256,562 75,682 954,796 113,891 ---------- ------- -------- ------- ---------- -------- Total Bonds and Stocks $3,223,157 $57,922 $455,513 $81,130 $3,678,670 $139,052 ========== ======= ======== ======= ========== ========
22 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) In general, a security is considered a candidate for other-than-temporary impairments if it meets any of the following criteria: a. Trading at a significant (25 percent or more) discount to par or amortized cost (if lower) for an extended period of time (nine months or longer); or b. The occurrence of a discrete credit event resulting in (i) the issuer defaulting on a material outstanding obligation; or (ii) the issuer seeking protection from creditors under the bankruptcy laws or any similar laws intended for the court supervised reorganization of insolvent enterprises; or (iii) the issuer proposing a voluntary reorganization pursuant to which creditors are asked to exchange their claims for cash or securities having a fair value substantially lower than par value of their claims; or c. In the opinion of Company's management, it is probable that the Company may not realize a full recovery on its investment, irrespective of the occurrence of one of the foregoing events. As of December 31, 2006, the Company has both the ability and intent to hold these investments to recovery. During 2006 and 2005, the Company reported write-downs on its common and preferred stock investments due to an other-than-temporary decline in fair value of $17,934 and $972, respectively, and reported write-downs on its bond investments due to an other-than-temporary decline in fair value of $776 and $2,542, respectively. During 2006 and 2005, the Company reported the following write-downs on its joint venture and partnership investments due to an other-than-temporary decline in fair value: For the Years Ended December 31, 2006 2005 -------------------------------- ------ ------ Grshm Global Investment Fund ll K4 $2,559 $ -- Morgan Stanley III -- 1,684 Items less than $1.0 million 1,051 11 ------ ------ Total $3,610 $1,695 ====== ====== As of December 31, 2006 and 2005, securities with a market value of $199,380 and $289,449, respectively, were on loan. The Company receives as collateral 102.0% of the market value of domestic transactions and 105.0% for cross-border transactions. Securities lent, under the Securities Lending Agreement, are under exclusive control of the Company. Pursuant to the Securities Agency Lending Agreement, AIG Global Securities Lending Corporation, a Delaware registered company, maintains responsibility for the investment and control of such collateral. Securities carried at an amortized cost of $2,565,608 and $2,270,251 were deposited with regulatory authorities as required by law as of December 31, 2006 and 2005, respectively. Other invested assets include $966,546 of collateralized loans as of December 31, 2005. As agreed with the Company's domiciliary state, these loans represented the Company's entire investment in life settlements and were 23 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) accounted for as collateral loans in accordance with SSAP No. 21, entitled Other Admitted Assets. The admitted value of the loans were not in excess of the cost (including capitalization of interest) of acquiring the life settlements and maintaining them in force for so long as the fair value of the underlying life settlements collateralizing such loans was at least equal to the outstanding amount of such loans. On June 29, 2006, the Company entered into a transaction that was not objected to by the Insurance Department of the State of New York which resulted in the satisfaction of the loans. As of December 31, 2006, the Company has no collateralized loans. During 2006 and 2005, included in Net Investment Income Earned were investment expenses of $7,329 and $7,139, respectively, and interest expense of $98,741 and $77,243, respectively. NOTE 4 - RESERVES FOR LOSSES AND LAE A reconciliation of the Company's reserves for losses and LAE as of December 31, 2006 and 2005 is set forth in the table below: 2006 2005 ------------ ----------- Reserves for Losses and LAE, Beginning of Year $ 11,620,078 $ 9,357,799 Adjustments for prior period corrections -- (165,738) Incurred losses and LAE related to: Current accident year 5,343,020 5,111,414 Prior accident years 66,978 1,393,640 ------------ ----------- Total Incurred Losses and LAE 5,409,998 6,505,054 ------------ ----------- Paid losses and LAE related to: Current accident year (1,265,788) (1,284,778) Prior accident years (3,009,707) (2,792,259) ------------ ----------- Total Paid Losses and LAE (4,275,495) (4,077,037) ------------ ----------- Reserves for Losses and LAE, as of December 31, $ 12,754,581 $11,620,078 ============ =========== During 2006 and 2005 calendar years, estimated ultimate incurred losses and LAE attributable to insured events of prior years increased by $66,978 and $1,393,640, respectively. The Company experienced adverse loss and LAE reserve development primarily related to claims from accident years 2002 and prior. The classes of business accounting for the majority of this adverse development were directors & officers' liability and related management liability classes of business, excess casualty, and excess workers' compensation. In addition, the Company significantly increased its reserves for asbestos based on a ground up review of its asbestos claims exposures conducted for year-end 2005 (see Note 12.B. for further information concerning the Company's asbestos and environmental reserves). As of December 31, 2006 and 2005, the Company's reserves for losses and LAE have been reduced by anticipated salvage and subrogation of $198,524 and $188,050, respectively. 24 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 and 2005, the Company's reserves for losses and LAE have been reduced by credits for reinsurance recoverable of $6,322,799 and $7,425,539, respectively (exclusive of inter-company pooling). NOTE 5 - RELATED PARTY TRANSACTIONS A. National Union Inter-company Pooling Agreement The Company, as well as certain other insurance affiliates, is a party to an inter-company reinsurance pooling agreement. In accordance with the terms and conditions of this agreement, the member companies cede all direct and assumed business except business from foreign branches (excluding Canada) to National Union Fire Insurance Company of Pittsburgh, PA (National Union), the lead pooling participant. In turn, each pooling participant receives from National Union their percentage share of the pooled business. In connection therewith, the Company's share of the pool is 36.0%. Accordingly, premiums earned, losses and LAE incurred, and other underwriting expenses, as well as related assets and liabilities, in the accompanying financial statements emanate from the Company's percentage participation in the pool. A list of all pooling participants and their respective participation percentages is set forth in the table below: NAIC Co. Participation Member Company Code Percent -------------- -------- ------------- National Union 19445 38.0% American Home Assurance Company 19380 36.0% Commerce and Industry Insurance Company 19410 10.0% New Hampshire Insurance Company 23481 5.0% The Insurance Company of the State of Pennsylvania 19429 5.0% AIG Casualty Company (formerly known as Birmingham Fire Insurance Company of Pennsylvania) 19402 5.0% AIU Insurance Company 19399 1.0% American International Pacific Insurance Company 23795 0.0% American International South Insurance Company 40258 0.0% Granite State Insurance Company 23809 0.0% Illinois National Insurance Company 23817 0.0% Subject to regulatory approval, American International Pacific Insurance Company (AIP) will be removed from the National Union inter-company pooling agreement and added as a participant in AIG's Personal Lines Pool. AIP's pooling participation percentage in the AIG Personal Lines Pool will be zero percent. 25 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) B. American International Underwriters Overseas Association Pooling Arrangement AIG formed AIUOA, a Bermuda unincorporated association, in 1976, as the pooling mechanism for AIG's international general insurance operations. A list of all members in AIUOA and their respective participation percentages is set forth in the table below: NAIC Co. Participation Member Company Code Percent -------------- -------- ------------- American International Underwriters Overseas, Limited -- 67.0% New Hampshire Insurance Company (NHIC) 23481 12.0% National Union 19445 11.0% American Home Assurance Company (AHAC) 19380 10.0% In exchange for membership in AIUOA at the assigned participation, the members contributed capital in the form of cash and other assets, including rights to future business written by international operations owned by the members. The legal ownership and insurance licenses of these international branches remain in the name of NHIC, National Union, and the Company. At the time of forming the AIUOA, the member companies entered into an open-ended reinsurance agreement, cancelable with six months written notice by any member. The reinsurance agreement governs the insurance business pooled in the AIUOA. As discussed in Note 1, the Company continues to follow the current practices relating to its foreign branches and participation in the business of AIUOA by recording: (a) its net (after pooling) liability on such business as direct writings in its statutory financial statements, rather than recording gross direct writings with reinsurance cessions to the other pool members; (b) its corresponding balance sheet position, excluding loss reserves, unearned premiums and funds withheld, as a net equity interest in Equities in Underwriting Pools and Associations; and (c) loss reserves, unearned premiums and funds withheld are recorded on a gross basis. As of December 31, 2006 and 2005, the Company's interest in the AIUOA amounted to $858,614 and $581,410, respectively, gross of the following amounts, after consideration of the National Union inter-company pooling agreement. As of December 31, 2006 2005 ------------------ -------- -------- Loss and LAE reserves $778,277 $622,815 Unearned premium reserves 337,926 284,060 Funds held 17,712 15,740 Additionally, the Company holds 4.5% of the issued share capital of AIG Europe S.A. for the beneficial interest of the AIUOA. As of December 31, 2006 and 2005, the Company's interest in AIG Europe S.A. amounted to $32,575 and $25,858, respectively. 26 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) C. Guarantee Arrangements The Company has issued guarantees whereby the Company unconditionally and irrevocably guarantees all present and future obligations and liabilities of any kind arising from the policies of insurance issued by the guaranteed companies in exchange for an annual guarantee fee. The guarantees are not expected to have a material effect upon the Company's surplus as the guaranteed companies have admitted assets in excess of policyholder liabilities. The Company believes that the likelihood of a payment under the guarantee is remote. These guarantees are provided to maintain the guaranteed company's rating status issued by certain rating agencies. In the event of termination of a guarantee, obligations in effect or contracted for on the date of termination would remain covered until extinguished. The Company is party to an agreement with AIG whereby AIG has agreed to make any payments due under the guarantees in the place and stead of the Company. 27 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) The guarantees that were in effect as of December 31, 2006 are included in the table below:
Date Policyholder Invested Estimated Policyholder Guaranteed Company Issued Obligations Assets Loss Surplus ------------------ -------- ------------ ------------ --------- ------------ AIG Hawaii Insurance Company, Inc. 11/05/97 $ 95,738 $ 162,307 $-- $ 69,612 American International Insurance Company 11/05/97 335,804 785,981 -- 357,830 AIG Mexico Seguros Interamericana, S.A. de C.V. 12/15/97 93,868 87,395 -- 78,395 American International Insurance Company of California, Inc. 12/15/97 144,248 56,694 -- 22,827 American International Insurance Company of New Jersey 12/15/97 109,426 55,929 -- 29,210 AIG Advantage Insurance Company(formerly Minnesota Ins. Co.) 12/15/97 34,592 52,177 -- 21,703 Landmark Insurance Company, Limited * 03/02/98 423,761 521,339 -- 114,836 AIG Europe S.A. 03/02/98 2,278,448 1,211,630 -- 1,363,948 AIG Edison Life Insurance Company 09/15/98 20,854,923 21,353,910 -- 1,348,668 AIG SunAmerica Life Assurance Company (+) * 01/04/99 4,239,331 4,576,100 -- 797,911 First SunAmerica Life Insurance Company * 01/04/99 4,547,648 4,914,123 -- 397,499 SunAmerica Life Insurance Company (+) * 01/04/99 35,545,269 46,184,379 -- 4,557,590 AIG Europe (Netherlands) N.V. 11/01/02 606,697 151,940 -- 167,456 American General Life Insurance Company (+) 03/03/03 23,712,805 26,595,082 -- 2,575,981 American General Life and Accident Insurance Company 03/03/03 7,644,336 8,687,269 -- 563,418 The United States Life Insurance Company of the City of NY 03/03/03 3,374,806 3,972,505 -- 426,210 The Variable Annuity Life Insurance Company (+) 03/03/03 29,499,828 34,152,961 -- 3,726,128 AIG Czech Republic Posjistovna, A.S. 03/03/03 16,701 24,897 -- 23,910 Lloyds Syndicate 1414 12/15/04 944,323 864,322 -- 108,634 ------------ ------------ --- ----------- Total Guarantees $134,502,552 $154,410,940 $-- $16,751,766 ============ ============ === ===========
-------- + This guarantee was terminated as to policies written after December 29, 2006. * The guaranteed company is also backed by a support agreement issued by AIG. 28 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) D. Investments in Affiliates As of December 31, 2006 and 2005, the Company's common stock investments with its affiliates together with the related change in unrealized appreciation were as follows: Equity at Change in Affiliated Common Stock Ownership Cost December 31, Equity Investments Percent 2006 2006 2006 ----------------------- --------- -------- ------------ --------- AIG Hawaii Insurance Company, Inc. 100.00% $ 10,000 $ 69,612 $ 9,783 AIG Non Life Holding Company (Japan), Inc. 100.00% 124,477 401,018 69,103 American International Realty Corporation 31.47% 29,581 44,044 18,696 Eastgreen, Inc. 13.42% 12,804 14,222 287 Pine Street Real Estate Holdings Corporation 31.47% 5,445 2,816 (18,531) AIG Mexico Industrial, I.L.L.C. 49.00% 9,463 2,442 1,425 American International Life Assurance Company 22.48% 70,387 157,619 1,090 American International Insurance Company 25.00% 25,000 89,457 13,559 AIG Claim Service, Inc. 50.00% 48,962 46,675 (12,204) Transatlantic Holdings, Inc. 33.34% 34,055 1,048,323 (86,094) 21st Century Insurance Group 16.65% 240,668 192,596 16,041 -------- ---------- -------- Total Common Stocks - Affiliates $610,842 $2,068,824 $ 13,155 ======== ========== ========
Equity at Change in Affiliated Common Stock Ownership Cost December 31, Equity Investments Percent 2005 2005 2005 ----------------------- --------- -------- ------------ --------- AIG Hawaii Insurance Company, Inc. 100.00% $ 10,000 $ 59,829 $ (2,590) AIG Non Life Holding Company (Japan), Inc. 100.00% 124,477 331,915 63,241 American International Realty Corporation 31.47% 29,581 25,348 (1,932) Eastgreen, Inc. 13.42% 12,804 13,935 355 Pine Street Real Estate Holdings Corporation 31.47% 5,445 21,347 4 AIG Mexico Industrial, I.L.L.C. 49.00% 1,017 1,017 -- American International Life Assurance Company 22.48% 70,387 156,529 20,123 American International Insurance Company 25.00% 25,000 75,898 4,380 AIG Claim Service, Inc. 50.00% 48,963 58,879 2,350 Transatlantic Holdings, Inc. 33.34% 34,055 1,134,417 90,652 21st Century Insurance Group 16.65% 240,667 176,555 28,153 -------- ---------- -------- Total Common Stocks - Affiliates $602,396 $2,055,669 $204,736 ======== ========== ========
29 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) Investments in affiliates are included in common stocks based on the net worth of the entity except for publicly traded affiliates which are based on quoted market values, less a discount as prescribed by NAIC SAP (see Note 2). The Company has ownership interests in certain affiliated real estate holding companies. The remaining equity interest in these investments, except for 21st Century Insurance Group and Transatlantic Holdings, Inc., is owned by other affiliated companies, which are wholly-owned by the Ultimate Parent. From time to time, the Company may own investments in partnerships across various other AIG affiliated entities with a combined percentage greater than 10.0%. As of December 31, 2006 and 2005, the Company's total investments in partnerships with affiliated entities where AIG's interest was greater than 10.0% amounted to $1,032,694 and $912,569, respectively. E. Other Related Party Transactions The following table summarizes transactions (excluding reinsurance and cost allocation transactions) that occurred during 2006 between the Company and any affiliated companies that exceeded one-half of one percent of the Company's admitted assets as of December 31, 2006. No transactions (excluded reinsurance and cost allocation transactions) occurred during 2005 between the Company and any affiliated companies that exceeded one-half of one percent of the Company's admitted assets as of December 31, 2005.
Assets Received Assets Transferred by the Company by the Company ---------------------- --------------------- Date of Explanation of Name of Statement Statement Transaction Transaction Affiliate Value Description Value Description ----------- ----------------- --------- ---------- ----------- --------- ----------- 06/29/2006 Loan Satisfaction A100 LLC $1,170,421 Cash $-- n/a 06/29/2006 Loan Satisfaction AIRCO $ 239,966 Cash $-- n/a
The Company also reinsures risks and assumes reinsurance from other affiliates. As agreed upon with the Insurance Department of the State of New York, transactions with Union Excess Reinsurance Company Ltd. (Union Excess) and Richmond Insurance Company (Barbados) Limited (Richmond) are treated as affiliated. The Company did not change its methods of establishing terms regarding any affiliate transactions during the years ended December 31, 2006 and 2005. 30 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) In the ordinary course of business, the Company utilizes AIG Technology, Inc., AIG Global Investment Corp., and AIG Domestic Claims, Inc. for data center systems, investment services, salvage and subrogation, and claims management, respectively. In connection with these services, the fees paid by the Company to these affiliates during 2006 and 2005 are outlined in the table below: For the Years Ended December 31, 2006 2005 -------------------------------- -------- -------- AIG Technology, Inc. $ 24,562 $ 26,700 AIG Global Investment Corp. 6,047 4,565 AIG Domestic Claims, Inc. 117,231 110,589 -------- -------- Total $147,840 $141,854 ======== ======== As of December 31, 2006 and 2005, short-term investments included amounts invested in the AIG Managed Money Market Fund of $100,915 and $73,379, respectively. Federal and foreign income taxes recoverable from AIG as of December 31, 2006 and 2005 amounted to $63,569 and $794,462, respectively. During 2005, the Company sold $191,606 of premium receivables without recourse to AI Credit Corporation, and recorded losses of $3,436. There were no premium receivable sales in 2006. 31 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 and 2005, the Company had the following balances receivable/payable from/to its affiliates (excluding reinsurance transactions): As of December 31, 2006 2005 ------------------ ---------- ---------- AIG (see Note 11) $ -- $1,326,780 Balances with pool member companies 1,434,952 1,768,006 Balances with less than 0.5% of admitted assets 49,603 95,038 ---------- ---------- Receivable from Parent, Subsidiaries and Affiliates $1,484,555 $3,189,824 ========== ========== Balances with pool member companies $1,449,305 $1,549,731 Balances with less than 0.5% of admitted assets 98,281 33,968 ---------- ---------- Payable to Parent, Subsidiaries and Affiliates $1,547,586 $1,583,699 ========== ========== Note 6 - Reinsurance In the ordinary course of business, the Company reinsures certain risks with affiliates and other companies. Such arrangements serve to limit the Company's maximum loss on catastrophes, large and unusually hazardous risks. To the extent that any reinsuring company might be unable to meet its obligations, the Company would be liable for its respective participation in such defaulted amounts. The Company purchased catastrophe excess of loss reinsurance covers protecting its net exposures from an excessive loss arising from property insurance losses and excessive losses in the event of a catastrophe under workers' compensation contracts issued without limit of loss. 32 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) During 2006 and 2005, the Company's net premiums written and net premiums earned were comprised of the following: For the Years Ended December 31, 2006 2005 ------------------- ----------------------- ----------------------- Written Earned Written Earned ----------- ----------- ----------- ----------- Direct premiums $ 7,514,507 $ 7,180,260 $ 6,522,919 $ 6,219,261 Reinsurance premiums assumed: Affiliates 11,336,822 11,001,341 11,104,687 11,235,985 Non-affiliates 48,750 243,681 23,903 (176,461) ----------- ----------- ----------- ----------- Gross Premiums 18,900,079 18,425,282 17,651,509 17,278,785 ----------- ----------- ----------- ----------- Reinsurance premiums ceded: Affiliates 9,833,954 9,534,749 9,252,497 9,022,390 Non-affiliates 1,182,156 1,190,522 1,247,759 1,210,575 ----------- ----------- ----------- ----------- Net Premiums $ 7,883,969 $ 7,700,011 $ 7,151,253 $ 7,045,820 =========== =========== =========== =========== The maximum amount of return commissions which would have been due reinsurers if all of the Company's reinsurance had been cancelled as of December 31, 2006 and 2005 with the return of the unearned premium reserve is as follows:
Assumed Reinsurance Ceded Reinsurance Net --------------------- --------------------- --------------------- Unearned Unearned Unearned Premium Commission Premium Commission Premium Commission Reserves Equity Reserves Equity Reserves Equity ---------- ---------- ---------- ---------- ---------- ---------- December 31, 2006 Affiliates $5,579,685 $675,713 $3,844,106 $423,050 $1,735,579 $252,663 Non-affiliates 11,551 1,399 496,499 54,641 (484,948) (53,242) ---------- -------- ---------- -------- ---------- -------- Totals $5,591,236 $677,112 $4,340,605 $477,691 $1,250,631 $199,421 ========== ======== ========== ======== ========== ======== December 31, 2005 Affiliates $5,444,204 $663,323 $3,544,901 $413,904 $1,899,303 $249,419 Non-affiliates 6,481 790 504,864 58,948 (498,383) (58,158) ---------- -------- ---------- -------- ---------- -------- Totals $5,450,685 $664,113 $4,049,765 $472,852 $1,400,920 $191,261 ========== ======== ========== ======== ========== ========
33 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 and 2005 and for the years then ended, the Company's unearned premium reserves, paid losses and LAE, and reserves for losses and LAE (including IBNR), have been reduced for reinsurance ceded as follows: Unearned Paid Reserves for Premium Losses and Losses and Reserves LAE LAE ---------- ---------- ------------ December 31, 2006 Affiliates $3,844,106 $ 82,387 $14,899,524 Non-Affiliates 496,499 405,856 2,873,315 ---------- -------- ----------- Total $4,340,605 $488,243 $17,772,839 ========== ======== =========== December 31, 2005 Affiliates $3,544,901 $ 91,985 $14,577,562 Non-Affiliates 504,864 307,219 3,542,634 ---------- -------- ----------- Total $4,049,765 $399,204 $18,120,196 ========== ======== =========== 34 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) The Company's unsecured reinsurance recoverables as of December 31, 2006 in excess of 3.0% of its capital and surplus is set forth in the table below: NAIC Co. Reinsurer Code Amount --------- -------- ----------- Affiliates: National Union Pool Companies -- $15,644,476 American International Reinsurance Co. Ltd -- 1,623,719 American International Insurance Company 32220 438,594 American International Underwriters Overseas, Ltd. -- 412,665 Transatlantic Reinsurance Company 19453 270,098 AIG Global Trade and Political Risk Insurance Co. 10651 103,009 United Guaranty Insurance Company 11715 63,190 Lexington Insurance Company 19437 50,273 American International Life Assurance Co. NY (US) 60607 22,165 Hartford Steam Boiler Inspection and Insurance Co. 11452 12,701 National Union Fire Ins Company of Vermont -- 5,487 Ascot Syndicate Lloyds 1414 -- 3,600 Starr Excess Liability Insurance Company, Ltd. 10932 3,115 Universal Insurance Company Limited -- 1,121 Other -- 14,847 ----------- Total Affiliates 18,669,060 ----------- Munich Re Group -- 240,118 Lloyd's -- 274,819 Swiss Re Group -- 324,144 ----------- Total Non Affiliates 839,081 ----------- Total Affiliates and Non Affiliates $19,508,141 =========== During 2006 and 2005, the Company reported in its statements of income $12,318 and $43,141, respectively, of statutory underwriting losses, which were comprised of premiums earned of $0 and $(1,710), respectively, less losses incurred of $12,318 and $41,431 respectively, as a result of commutations with the following reinsurers: Company 2006 2005 ------- ------- ------- Trenwick America $ 8,280 $ -- Alea Group 2,432 -- SCOR Reinsurance Company -- 42,442 Other reinsurers below $1 million 1,606 699 ------- ------- Total $12,318 $43,141 ======= ======= 35 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 and 2005, the Company had reinsurance recoverables on paid losses in dispute of $78,472 and $141,589, respectively. During 2006 and 2005, the Company wrote-off reinsurance recoverables balances of $30,849 and $65,282, respectively. NOTE 7 - RETROACTIVE REINSURANCE As of December 31, 2006, the Company reported the following activity and balances with respect to its retroactive reinsurance arrangements: Assumed Ceded --------- -------- Reserves Transferred: Initial Reserves $ 216,347 $453,727 Adjustments - prior year(s) (171,243) (33,563) Adjustments - current year (2,455) 8,416 --------- -------- Balance as of December 31, 2006 42,649 428,580 --------- -------- Paid Losses Recovered: Prior year(s) 12,212 355,120 Current year 7,195 12,177 --------- -------- Total Recovered as of December 31, 2006 19,407 367,297 --------- -------- Carried Reserves as of December 31, 2006 $ 23,242 $ 61,283 ========= ======== Consideration Paid or Received: Initial Reserves $ 201,597 $276,437 Adjustments - prior year(s) (180,000) (18,869) Adjustments - current year (15) 4,538 --------- -------- Total Paid as of December 31, 2006 $ 21,582 $262,106 ========= ======== 36 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) Assumed Ceded ------- -------- Special Surplus from Retroactive Reinsurance: Initial surplus gain or loss realized $-- $ 47,559 Adjustments - prior year(s) -- 20,548 Adjustments - current year -- (18,260) --- -------- Balance as of December 31, 2006 $-- $ 49,847 === ======== The Company's retroactive reinsurance balance (by reinsurer) as of December 31, 2006, is set forth in the table below: Reinsurer Assumed Ceded --------- ------- ------- American International Reins. Co. $ -- $45,664 PEG Reinsurance Co. -- 8,830 Lyndon Property Ins. Company -- 1,780 American International Specialty Lines Insurance Company 17,247 -- Commerce and Industry Insurance Company of Canada 5,930 -- All other reinsurers below $1.0 million 65 5,009 ------- ------- Total $23,242 $61,283 ======= ======= NOTE 8 - DEPOSIT ACCOUNTING ASSETS AND LIABILITIES Certain of the products offered by the Company include funding components or have been structured in a manner such that little or no insurance risk is transferred. Funds received in connection with these arrangements are recorded as deposit liabilities, rather than premiums and incurred losses. In addition, the Company has entered into several reinsurance arrangements, both treaty and facultative, which were determined to be deposit agreements. Conversely, funds paid in connection with these arrangements are recorded as deposit assets, rather than as ceded premiums and ceded incurred losses. 37 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 and 2005, the Company's deposit assets and liabilities were comprised of the following: Deposit Deposit Funds Held Funds Held Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- December 31, 2006: Direct $ -- $ 77,954 $ -- $ -- Assumed -- 94,342 94,279 -- Ceded 809,537 -- -- 703,508 ---------- -------- -------- ---------- Total $ 809,537 $172,296 $ 94,279 $ 703,508 ========== ======== ======== ========== Deposit Deposit Funds Held Funds Held Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- December 31, 2005: Direct $ -- $ 56,768 $ -- $ -- Assumed -- 430,142 432,987 91,467 Ceded 1,336,343 -- -- 914,959 ---------- -------- -------- ---------- Total $1,336,343 $486,910 $432,987 $1,006,426 ========== ======== ======== ========== A reconciliation of the Company's deposit asset and deposit liabilities as of December 31, 2006 and 2005 is set forth in the table below: 2006 2005 ---------------------- ---------------------- Deposit Deposit Deposit Deposit Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Balance at January 1 $1,336,343 $ 486,910 $1,638,716 $ 465,475 Deposit activity, including loss recoveries (654,672) (343,610) (446,464) (11,942) Interest income or expense, net of amortization of margin 113,438 28,996 90,901 33,377 Non-admitted asset portion 14,428 -- 53,190 -- ---------- ---------- ---------- ---------- Balance as of December 31 $ 809,537 $ 172,296 $1,336,343 $ 486,910 ========== ========== ========== ========== 2006 2005 ---------------------- ---------------------- Funds Held Funds Held Funds Held Funds Held Assets Liabilities Assets Liabilities ---------- ----------- ---------- ----------- Balance at January 1 $ 432,987 $1,006,426 $ 424,685 $1,089,396 Contributions -- 60,915 1,425 -- Withdrawals (355,065) (422,715) (15,788) (154,798) Interest 16,357 58,882 22,665 71,828 ---------- ---------- ---------- ---------- Balance as of December 31 $ 94,279 $ 703,508 $ 432,987 $1,006,426 ========== ========== ========== ========== 38 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 and 2005, the deposit assets with related parties, mostly reinsurance transactions with Union Excess, amounted to $630,370 and $1,192,231, respectively. During 2006, loss recoveries from Union Excess resulted in a decrease in deposit accounting assets and funds held on deposit accounting liability of $406,719 and $273,291, respectively. During 2006, the Company commuted $40,267 of the deposit assets and $40,267 of the funds held on deposit accounting liability with Union Excess with no impact to net income. During 2005, the Company commuted $258,052 of the deposit assets with Union Excess and Richmond resulting in losses of $3,737. During 2006, the Company commuted contracts that were accounted for as deposit accounting. The largest commutations resulted in a decline in the following: deposit accounting assets - $97,009, funds held on deposit accounting - $332,073, deposit accounting liability - $314,735 and funds held on deposit accounting liability - $82,054. Note 9 - Federal Income Taxes The Company files a consolidated U.S. Federal income tax return with the Ultimate Parent and its domestic subsidiaries pursuant to a tax sharing agreement. The agreement provides that the Ultimate Parent will not charge the Company a greater portion of the consolidated tax liability than would have been paid by the Company if it had filed a separate Federal income tax return. In addition, the agreement provides that the Company will be reimbursed by the Ultimate Parent for tax benefits relating to any net losses or any tax credit of the Company utilized in filing the consolidated return. The Federal income tax recoverables in the accompanying Statements of Admitted Assets were due from the Ultimate Parent. As of December 31, 2006 and 2005, the U.S. Federal income tax rate applicable to ordinary income was 35.0%. The components of the Company's net deferred tax assets/liabilities as of December 31, 2006 and 2005 are as follows: As of December 31, 2006 2005 ------------------ ---------- ---------- Gross deferred tax assets $1,236,352 $1,252,733 Gross deferred tax liabilities (267,583) (149,521) Non-admitted deferred tax assets in accordance with SSAP No.10, income taxes (546,869) (794,705) ---------- ---------- Net Admitted Deferred Tax Assets $ 421,900 $ 308,507 ========== ========== Change in Deferred Tax Assets Non-admitted $ 247,836 $ (299,271) ========== ========== 39 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) During 2006 and 2005, the Company's current Federal income tax expense (benefit) was comprised of the following: For the Years Ended December 31, 2006 2005 -------------------------------- -------- --------- Income tax expense (benefit) on net underwriting and net investment income $261,144 $(252,358) Federal income tax adjustment - prior year 2,119 9,311 -------- --------- Current Income Tax Expense (Benefit) $263,263 $(243,047) ======== ========= Income Tax on Realized Capital Gains $ 29,092 $ 20,492 ======== ========= 40 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) The composition of the Company's net deferred tax assets as of December 31, 2006 and 2005, and changes in deferred income taxes for 2006 is set forth in the table below:
As of December 31, 2006 2005 Change ------------------ ---------- ---------- --------- Deferred Tax Assets Loss reserve discount $ 476,856 $ 499,838 $ (22,982) Non-admitted assets 160,128 206,602 (46,474) Unearned premium reserve 316,291 303,414 12,877 Partnership adjustments 33,192 -- 33,192 Pension adjustments -- 7,328 (7,328) Reserves 183,902 75,662 108,240 Other temporary difference 65,983 54,878 11,105 Deferred tax remediation - adjustments to December 31, 2005 surplus -- 105,011 (105,011) ---------- ---------- --------- Gross Deferred Tax Assets 1,236,352 1,252,733 (16,381) Non-admitted deferred tax assets (546,869) (689,694) 142,825 Non-admitted deferred tax - adjustments to December 31, 2005 surplus -- (105,011) 105,011 ---------- ---------- --------- Admitted Deferred Tax Assets 689,483 458,028 231,455 ---------- ---------- --------- Deferred Tax Liabilities Unrealized capital gains (236,490) (115,317) (121,173) Partnership adjustments -- (4,047) 4,047 Other temporary differences (31,093) (30,157) (936) ---------- ---------- --------- Gross Deferred Tax Liabilities (267,583) (149,521) (118,062) ---------- ---------- --------- Net Admitted Deferred Tax Assets $ 421,900 $ 308,507 $ 113,393 ========== ========== ========= Gross deferred tax assets 1,236,352 1,252,733 (16,381) Gross deferred tax liabilities (267,583) (149,521) (118,062) ---------- ---------- --------- Net Deferred Tax Assets $ 968,769 $1,103,212 (134,443) ========== ========== Income tax effect of unrealized capital (gains) / losses 121,173 --------- Change in Net Deferred Income Taxes $ (13,270) =========
41 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) The actual tax expense on income from operations differs from the tax expense calculated at the statutory tax rate. A reconciliation of the Company's income tax expense and the significant items causing this difference for the year ended December 31, 2006 are as follows:
Amount Tax Effect ---------- ---------- Income before Federal income taxes $1,271,556 $ 445,045 Book to tax adjustments: Tax exempt income and dividends received deduction, net of proration (455,068) (159,274) Intercompany dividends (21,938) (7,678) Meals and entertainment 1,543 540 Non-deductible penalties 2,410 844 Change in non-admitted assets 132,784 46,474 Federal income tax adjustment - prior year -- (6,222) Foreign tax credits -- (14,104) ---------- --------- Total Book to Tax Adjustments (340,269) (139,420) ---------- --------- Federal taxable income $ 931,287 $ 305,625 ========== ========= Current Federal income tax expense $ 263,263 Income tax on net realized capital gains 29,092 Change in deferred income taxes 13,270 --------- Total Federal income tax benefit $ 305,625 =========
The amount of Federal income taxes incurred and available for recoupment in the event of future net operating losses for tax purposes is set forth in the table below: Current year $222,388 First preceding year $ -- The Company had no unused net operating loss carry forwards or tax credits available to offset against future taxable income as of December 31, 2006 and 2005. Federal income taxes paid to (recovered from) the Ultimate Parent amounted to $372,256 during 2006 and ($43,213) during 2005. 42 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) NOTE 10 - PENSION PLANS AND DEFERRED COMPENSATION ARRANGEMENTS A. Pension Employees of AIG, the ultimate holding company, its subsidiaries and certain affiliated companies, including employees in foreign countries, are generally covered under various funded and insured pension plans. Eligibility for participation in the various plans is based on either completion of a specified period of continuous service or date of hire, subject to age limitation. AIG's U.S. retirement plan is a qualified, non-contributory defined benefit retirement plan which is subject to the provisions of the Employee Retirement Income Security Act of 1974. All employees of AIG and most of its subsidiaries and affiliates who are regularly employed in the United States, including certain U.S. citizens employed abroad on a U.S. dollar payroll, and who have attained age 21 and completed twelve months of continuous service are eligible to participate in this plan. An employee with five or more years of service is entitled to pension benefits beginning at normal retirement at age 65. Benefits are based upon a percentage of average final compensation multiplied by years of credited service limited to 44 years of credited service. The average final compensation is subject to certain limitations. The employees may elect certain options with respect to their receipt of their pension benefits including a joint and survivor annuity. An employee with ten or more years of service may retire early from age 55 to 64. An early retirement factor is applied resulting in a reduced benefit. If an employee terminates with less than five years of service, such employees forfeit their right to receive any pension benefits accumulated thus far. Annual funding requirements are determined based on the Projected Unit Credit Cost Method which attributes a pro-rata portion of the total projected benefit payable at normal retirement to each year of credited service. The Company's share of net expense for the qualified pension plan was $9,000 and $6,500 for the years ended December 31, 2006 and 2005, respectively. B. Stock Option and Deferred Compensation Plans Some of the Company's officers and key employees are participants in AIG's stock option plans of 1991 and 1999. During 2006 and 2005, AIG allocated $6,242 and $2,177, respectively, of the cost of these stock options and certain other deferred compensation programs to the Company. Post-retirement Benefit Plans AIG's U.S. postretirement medical and life insurance benefits are based upon the employee electing immediate retirement and having a minimum of ten years of service. Retirees and their dependents who were 65 by May 1, 1989 participate in the medical plan at no cost. Employees who retired after May 1, 1989 or prior to January 1, 1993 pay the active employee premium if under age 65 and 50 percent of the active employee premium if over age 65. Retiree contributions are subject to adjustment annually. Other cost sharing features of the medical plan include deductibles, coinsurance and Medicare coordination and a lifetime maximum benefit of $2,000. The maximum life insurance benefit prior to age 70 is $32 with a maximum $25 thereafter. 43 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) Effective January 1, 1993, both plans' provisions were amended. Employees who retire after January 1, 1993 are required to pay the actual cost of the medical insurance benefit premium reduced by a credit which is based upon years of service at retirement. The life insurance benefit varies by age at retirement from $5 for retirement at ages 55 through 59 and $10 for retirement at ages 60 through 64 and $15 from retirement at ages 65 and over. The postretirement benefit obligations and amounts recognized in AIG's consolidated balance sheet as of December 31, 2006 and 2005 were $184,884 and $140,100, respectively. These obligations are not funded currently. The Company's share of other postretirement benefit plans was $282 and $200 for 2006 and 2005, respectively. AIG is the Plan Sponsor of the pension, postretirement and benefit plans and is ultimately responsible for the conduct of the plans. The Company is only obligated to the extent of their allocation of expenses from these plans. The weighted average assumptions that were used to determine its pension benefit obligations as of December 31, 2006 and 2005 are set forth in the table below: As of December 31, 2006 2005 ------------------ ---------------- ---------------- Discount rate 6.00% 5.50% Rate of compensation increase (average) 4.25% 4.25% Measurement date December 31, 2006 December 31, 2005 Medical cost trend rate N/A N/A C. Post-employment Benefits and Compensated Absences AIG provides certain benefits to inactive employees who are not retirees. Certain of these benefits are insured and expensed currently; other expenses are provided for currently. Such expenses include long-term disability benefits, medical and life insurance continuation and COBRA medical subsidies. The costs of these plans are borne by AIG. 44 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) NOTE 11 - CAPITAL AND SURPLUS AND DIVIDEND RESTRICTIONS A. Capital and Surplus The portion of unassigned surplus as of December 31, 2006 and 2005 represented by each item below is as follows: 2006 2005 ----------- ----------- Unrealized gains $ 2,013,671 $ 1,725,717 Non-admitted asset values $(1,448,058) $(1,378,106) Provision for reinsurance $ (128,824) $ (210,152) During 2005, the board of directors of AIG, authorized a resolution where it committed to replenish any surplus lost as a result of the effects of the restatements of the Company's December 31, 2004 financial statements as well as any additional loss and loss adjustment expense strengthening as a result of the reserve review conducted by an independent actuarial consultant. In accordance with that resolution, on February 15, 2006, the Ultimate Parent contributed $1,326,780 in cash to the Company. In connection therewith, at December 31, 2005, the Company reported a receivable of $1,326,780 with its Ultimate Parent and increased its Capital in Excess of Par Value, accordingly. The recognition of this surplus contribution has been approved by the Insurance Department of the State of New York. B. Risk-Based Capital Requirements The NAIC has adopted a Risk-based Capital (RBC) formula to be applied to all property and casualty insurance companies. RBC is a method of establishing the minimum amount of capital appropriate for an insurance company to support its overall business operations in consideration of its size and risk profile. A company's RBC is calculated by applying different factors to various asset classes, net premiums written and loss and LAE reserves. A company's result from the RBC formula is then compared to certain established minimum capital benchmarks. To the extent a company's RBC result does not either reach or exceed these established benchmarks, certain regulatory actions may be taken in order for the insurer to meet the statutorily-imposed minimum capital and surplus requirements. In connection therewith, the Company has satisfied the capital and surplus requirements of RBC for the 2006 reporting period. 45 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) C. Dividend Restrictions Under New York law, the Company may pay cash dividends only from earned surplus determined on a statutory basis. Further, the Company is restricted (on the basis of the lower of 10.0% of the Company's statutory surplus as of December 31, 2006, or 100.0% of the Company's adjusted net investment income for the preceding 36 month period ending December 31, 2006) as to the amount of dividends it may declare or pay in any twelve-month period without the prior approval of the Insurance Department of the State of New York. As of December 31, 2006, the maximum dividend payment, which may be made without prior approval during 2007, is approximately $621,185. Within the limitations noted above, there are no restrictions placed on the portion of Company profits that may be paid as ordinary dividends to stockholders. There were no restrictions placed on the Company's surplus including for whom the surplus is being held. There is no stock held by the Company for any special purpose. NOTE 12 - CONTINGENCIES A. Legal Proceedings The Company is involved in various legal proceedings incident to the operation of its business. Such proceedings include claims litigation in the normal course of business involving disputed interpretations of policy coverage. Other proceedings in the normal course of business include allegations of underwriting errors or omissions, bad faith in the handling of insurance claims, employment claims, regulatory activity, and disputes relating to the Company's business ventures and investments. Other legal proceedings include the following: AIG, National Union Fire Insurance Company of Pittsburgh, Pa. (National Union), and American International Specialty Lines Insurance Company (AISLIC) have been named defendants (the AIG Defendants) in two putative class actions in state court in Alabama that arise out of the 1999 settlement of class and derivative litigation involving Caremark Rx, Inc. (Caremark). The plaintiffs in the second-filed action have intervened in the first-filed action, and the second-filed action has been dismissed. An excess policy issued by a subsidiary of AIG with respect to the 1999 litigation was expressly stated to be without limit of liability. In the current actions, plaintiffs allege that the judge approving the 1999 settlement was misled as to the extent of available insurance coverage and would not have approved the settlement had he known of the existence and/or unlimited nature of the excess policy. They further allege that the AIG Defendants and Caremark are liable for fraud and suppression for misrepresenting and/or concealing the nature and extent of coverage. In their complaint, plaintiffs request compensatory damages for the 1999 class in the amount of $3,200,000, plus punitive damages. The AIG Defendants deny the allegations of fraud and suppression and have asserted, inter alia, that information concerning the excess policy was publicly disclosed months prior to the approval of the settlement. The AIG Defendants further assert that the current claims are barred by the statute of limitations and that plaintiffs' assertions that the statute was tolled cannot stand against the public disclosure of the excess coverage. Plaintiffs, in turn, have 46 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) asserted that the disclosure was insufficient to inform them of the nature of the coverage and did not start the running of the statute of limitations. The trial court is currently considering, under standards mandated by the Alabama Supreme Court, whether a class action can be certified and whether the defendants in the case brought by the intervenors should be dismissed. On September 2, 2005, certain AIG companies including American Home Assurance Company (American Home), AIU Insurance Company (AIUI) and New Hampshire Insurance Company (NHIC) (the AIG Plaintiffs) sued The Robert Plan Corporation (RPC), an agency servicing personal auto assigned risk business, certain affiliated entities, and two of RPC's senior executives. This suit was brought in New York Supreme Court and alleges the misappropriation of funds and other violations of contractual arrangements. On September 26, 2005, RPC countersued the AIG Plaintiffs and AIG itself for, among other things, $370,000 in disgorged profits and $500,000 of punitive damages under a claim of fraud. As of December 31, 2005, RPC was terminated as the AIG Plaintiffs' agent with respect to claims administration of the personal auto assigned risk business, and as of March 31, 2006, RPC was terminated as the AIG Plaintiffs' agent with respect to underwriting of personal auto assigned risk business. On March 10, 2006, RPC moved to dismiss its fraud claim without prejudice for the purposes of bringing that claim in New Jersey. On that date, RPC also amended its counterclaim, setting forth a number of causes of action for breach of contract. Each side then filed a partial motion to dismiss some of the counts asserted by the other side. RPC also moved for summary judgment on one of its breach of contract causes of action (relating to RPC's assertion that the AIG Plaintiffs are responsible to pay approximately $7,000 of RPC's income taxes). On April 10, 2007, the Court granted the AIG Plaintiffs' motion with respect to four of RPC's counterclaims and denied the rest of the motion; granted RPC's motion to dismiss with respect to two of the AIG Plaintiffs' claims and denied the rest; and denied RPC's motion for summary judgment on the tax issue. Additionally, on February 8, 2007, the AIG Plaintiffs moved for leave to amend their complaint against RPC and to add Lincoln General Insurance Company and Kingsway Financial Services Inc. as additional defendants, alleging tortious interference with contract claims related to certain transactions between those entities and RPC. Following the production of certain documents by RPC, on March 7, 2007, the AIG Plaintiffs filed another motion for leave to amend their complaint to add additional claims against RPC, individual shareholders of RPC and Lincoln General, including claims for breach of covenants, tortious interference with contract and fraudulent conveyance. The motion also seeks a preliminary injunction prohibiting RPC from paying creditors other than ordinary course trade creditors. The AIG Plaintiffs' motion is scheduled to be heard on May 3, 2007. The AIG Plaintiffs believe RPC's counterclaims, including its previously asserted counterclaim for fraud, are without merit and intend to defend them vigorously. Effective February 9, 2006, AIG reached a resolution of claims and matters under investigation with the United States Department of Justice (the DOJ), the United States Securities and Exchange Commission (the SEC), the Office of the Attorney General of the State of New York (the NYAG) and the New York Insurance Department (the NYDOI). The settlements resolve outstanding litigation and allegations by such agencies against AIG in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, as well as claims relating to the underpayment of certain workers compensation premium taxes and other assessments. As a result of these settlements, AIG recorded an after-tax-charge of $1,150,000 in the fourth quarter of 2005, and made payments or placed in escrow approximately $1,640,000 including (i) $375,000 into a fund under the supervision of the NYAG and NYDOI to be available principally to pay certain AIG insurance company subsidiary policyholders who purchased excess casualty policies through Marsh & McLennan Companies, Inc. and Marsh Inc. (the Excess Casualty Fund) and (ii) $343,000 into a fund under the supervision of the NYAG and 47 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) the NYDOI to be used to compensate various states in connection with the underpayment of certain workers compensation premium taxes and other assessments. As of April 23, 2007, eligible policyholders entitled to receive approximately $358,600 (or 95.6%) of the Excess Casualty Fund had opted to receive settlement payments in exchange for releasing AIG and its subsidiaries from liability relating to certain insurance brokerage practices. Amounts remaining in the Excess Casualty Fund may be used by AIG to settle claims from other policyholders relating to such practices through January 31, 2008, after which they will be distributed pro rata to participating policyholders. Various state regulatory agencies are reviewing certain other transactions and practices of AIG and its subsidiaries, including the Company, in connection with certain industry-wide and other inquiries including, but not limited to, insurance brokerage practices relating to contingent commissions and the liability of certain AIG subsidiaries, including the Company, for taxes, assessments and surcharges relating to the underreporting or misreporting of workers compensation premium. It is possible that additional civil or regulatory proceedings will be filed. Specifically, on February 16, 2006, the Attorney General of the State of Minnesota filed a complaint against AIG alleging that, beginning no later than 1985, AIG made false statements and reports to Minnesota agencies and regulators, unlawfully reduced AIG's contributions and payments to Minnesota's workers' compensation funds, misreported the character of workers' compensation premiums as general or auto liability premiums, and unlawfully reduced its Minnesota tax obligations. The complaint claims that AIG thereby violated Minnesota state law prohibiting unfair and deceptive practices, that AIG violated Minnesota state law prohibiting uniform deceptive trade practices, that AIG violated Minnesota's Prevention of Fraud Act, that AIG is liable for common law fraud, and that AIG is liable under a theory of unjust enrichment. The State of Minnesota seeks injunctive relief, damages, penalties and interest. By agreement of the parties, AIG's time to answer the complaint in this action or otherwise move with respect to the complaint was extended indefinitely to permit the parties to pursue settlement. Moreover, the National Workers Compensation Reinsurance Pool, on behalf of its participant members, has communicated to AIG that such members may assert claims with respect to the underpayment of residual market assessments on workers compensation premium. In addition, several state insurance guaranty associations and funds have communicated that they may assert claims with respect to the Company's underreporting of workers compensation premium. And, in August 2006, the National Association of Insurance Commissioners (the NAIC) formed a Settlement Review Working Group to review the Workers Compensation Residual Market Assessment portion of the settlement between AIG, the NYAG, and the NYDOI. In April 2007, the NAIC Settlement Review Working Group commenced its own investigation into the Company's underreporting of workers compensation premium, which is being directed by the State of Indiana. Since October 19, 2004, AIG and certain subsidiaries have been named as defendants in numerous complaints that were filed in federal court and in state court and removed to federal court. These cases generally allege that AIG and its subsidiaries violated federal and various state antitrust and anti-racketeering laws, various state deceptive and unfair practice laws and certain state laws governing fiduciary duties. The alleged basis of these claims is that there was a conspiracy between insurance companies and insurance brokers with regard to the bidding practices 48 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) for insurance coverage and with regard to the practices involving compensation paid to insurance producers in certain sectors of the insurance industry. The Judicial Panel on Multidistrict Litigation entered an order consolidating most of these cases and transferring them to the United States District Court for the District of New Jersey. On August 15, 2005, the plaintiffs in the multidistrict litigation filed a Corrected First Consolidated Amended Commercial Class Action Complaint that names AIG and the following additional AIG subsidiaries as defendants: AIUI, American Home, National Union, AISLIC, American International Insurance Company, Birmingham Fire Insurance Company of Pennsylvania (now known as AIG Casualty Company), Commerce and Industry Insurance Company, Lexington Insurance Company, National Union Fire Insurance Company of Louisiana, NHIC, The Hartford Steam Boiler Inspection and Insurance Company, and The Insurance Company of the State of Pennsylvania (the Commercial Complaint). Also on August 15, 2005, AIG, American Home, and AIG Life Insurance Company were named as defendants in a Corrected First Consolidated Amended Employee Benefits Complaint filed in the District of New Jersey that adds claims under ERISA (the Employee Benefits Complaint). On October 3, 2006, the District Court reserved in part and denied in part motions filed by the insurer defendants and broker defendants to dismiss these complaints. The Court also ordered the plaintiffs in both actions to file supplemental statements of particularity to elaborate on the allegations in their complaints. Plaintiffs filed their supplemental statements on October 25, 2006, and the AIG defendants, along with other insurer and broker defendants, filed renewed motions to dismiss on November 30, 2006. On April 5, 2007, the Court granted the defendants' renewed motions to dismiss the Commercial and Employee Benefits Complaints with respect to the antitrust and RICO claims. The claims were dismissed without prejudice and the plaintiffs were given 30 days to file amended complaints. On April 11, 2007, the Court stayed all proceedings, including all discovery, that are part of the multidistrict litigation until any renewed motions to dismiss the amended complaints are resolved. On April 19, 2007, plaintiffs sought an additional 30 days in which to file amended complaints, and on April 23, 2007, the Court gave plaintiffs an additional 15 days. Accordingly, plaintiffs' amended complaints are due on May 22, 2007. A number of complaints making allegations similar to those in the Commercial Complaint have been filed against AIG and other defendants in state and federal courts around the country. The defendants have thus far been successful in having the federal actions transferred to the District of New Jersey and consolidated into the multidistrict litigation. The AIG defendants have also sought to have state court actions making similar allegations stayed pending resolution of the multidistrict litigation. On December 4, 2006, AIG and certain subsidiaries, including the Company, settled numerous arbitrations and litigations between them and the agencies owned by C.V. Starr & Co., Inc. (C.V. Starr), including those relating to the termination of the managing general agency relationships between AIG's subsidiaries and the agencies owned by C.V. Starr, and the use of the "Starr" and "American International" trademarks. The financial terms of the confidential settlement will not have a material adverse effect on the Company's financial position. AIG Domestic Claims, Inc. (AIGDC), an indirect wholly owned subsidiary of AIG that provides certain claims adjustment services to the Company, has been named as a defendant in a putative class action lawsuit that is currently pending in the 14th Judicial District Court for the State of Louisiana. Plaintiffs are medical providers who allege that AIGDC (as well as other defendants not affiliated with the Company) failed to comply with 49 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) certain provisions of the Louisiana Any Willing Provider Act (the Act). The complaint seeks monetary penalties and injunctive relief related to preferred provider organization discounts taken by defendants on bills submitted by Louisiana medical providers and hospitals who provided treatment or services to workers' compensation claimants. These claimants are injured workers whose employers are named insureds under workers compensation policies issued by various insurance companies, including the Company. On September 23, 2005, certain defendants, including AIGDC filed a motion for summary judgment, seeking dismissal of plaintiffs' claims, and plaintiffs cross-moved for partial summary judgment. On July 20, 2006, the Court both denied AIGDC's motion for summary judgment and granted plaintiffs' partial motion for summary judgment, holding that AIGDC is a "group purchaser" under the Act, and that the Act applies to medical services provided to workers' compensation claimants. On November 28, 2006, the Court issued an order certifying a class of providers and hospitals. In an unrelated action also arising under the Act, a Louisiana appellate court ruled that the Court lacked jurisdiction to adjudicate the claims at issue. In response, defendants filed an exception for lack of subject matter jurisdiction. On January 19, 2007, the Court denied the motion, holding that it has jurisdiction over the putative class claims. AIGDC is appealing the class certification ruling and is seeking an appeal from the jurisdictional ruling. AIGDC believes that it has meritorious defenses to plaintiffs' claims. The Company is not presently a named party to the lawsuit, and it cannot predict its ultimate liability as an insurer or reinsurer of various workers compensation policies at issue in this matter. AIG is also subject to various legal proceedings which have been disclosed in AIG's periodic filings under the Securities Exchange Act of 1934, as amended, in which the Company is not named as a party, but whose outcome may nonetheless adversely affect the Company's financial position or results of operation. The Company cannot predict the outcome of the matters described above, reasonably estimate the potential costs related to these matters, or determine whether other AIG subsidiaries, including the Company, would have exposure to proceedings in which they are not named parties by virtue of their participation in an intercompany pooling arrangement. In the opinion of management, the Company's ultimate liability for the matters referred to above is not likely to have a material adverse effect on the Company's financial position, although it is possible that the effect would be material to the Company's results of operations for an individual reporting period. B. Asbestos and Environmental Reserves The Company continues to receive indemnity claims asserting injuries from toxic waste, hazardous substances, asbestos and other environmental pollutants and alleged damages to cover the clean-up costs of hazardous waste dump sites (environmental claims). Estimation of environmental claims loss reserves is a difficult process, as these claims, which emanate from policies written in 1984 and prior years, cannot be estimated by conventional reserving techniques. Environmental claims development is affected by factors such as inconsistent court resolutions, the broadening of the intent of policies and scope of coverage and increasing number of new claims. The Company and other industry members have and will continue to litigate the broadening judicial interpretation of policy coverage and the liability issues. If the courts continue in the future to expand the intent of the policies and the scope of the coverage, as they have in the past, additional liabilities would emerge for amounts in excess of reserves held. This emergence cannot now be reasonably estimated, but could have a material impact on the Company's future operating results or financial position. 50 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) The Company's environmental exposure arises from the sale of general liability, product liability or commercial multi peril liability insurance, or by assumption of reinsurance within these lines of business. The Company tries to estimate the full impact of the asbestos and environmental exposure by establishing full case basis reserves on all known losses and establishes bulk reserves for IBNR losses and LAE based on management's judgment after reviewing all the available loss, exposure, and other information. The Company's asbestos and environmental related loss and LAE reserves (including case & IBNR reserves) for the year ended December 31, 2006 and 2005, gross and net of reinsurance credits, are as follows:
Asbestos Losses Environmental Losses ---------------------- ------------------ 2006 2005 2006 2005 ---------- ---------- -------- -------- Direct : Loss and LAE reserves, beginning of year $1,087,625 $ 693,044 $288,676 $256,889 Incurred losses and LAE 159,878 489,955 (75,819) 63,051 Calendar year paid losses and LAE (149,366) (95,374) (34,473) (31,264) ---------- ---------- -------- -------- Loss and LAE Reserves, end of year $1,098,137 $1,087,625 $178,384 $288,676 ========== ========== ======== ======== Assumed: Loss and LAE reserves, beginning of year $ 97,399 $ 90,162 $ 6,561 $ 6,626 Incurred losses and LAE 14,332 14,722 (1,462) 830 Calendar year paid losses and LAE (14,387) (7,485) (151) (895) ---------- ---------- -------- -------- Loss and LAE Reserves, end of year $ 97,344 $ 97,399 $ 4,948 $ 6,561 ========== ========== ======== ======== Net of Reinsurance: Loss and LAE reserves, beginning of year $ 518,246 $ 348,261 $134,977 $142,025 Incurred losses and LAE 83,696 209,273 (22,324) 16,410 Calendar year paid losses and LAE (68,837) (39,288) (20,443) (23,458) ---------- ---------- -------- -------- Loss and LAE Reserves, end of year $ 533,105 $ 518,246 $ 92,210 $134,977 ========== ========== ======== ========
Management believes that the reserves carried for the asbestos and environmental claims at December 31, 2006 are adequate as they are based on known facts and current law. AIG continues to receive claims asserting injuries from toxic waste, hazardous substances, and other environmental pollutants and alleged damages to cover the cleanup costs of hazardous waste dump sites (hereinafter collectively referred to as environmental claims) and 51 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) indemnity claims asserting injuries from asbestos. Estimation of asbestos and environmental claims loss reserves is a difficult process, as these claims, which emanate from policies written in 1984 and prior years, cannot be estimated by conventional reserving techniques. C. Leases The Company is the lessee for office space occupied by it and several affiliates under various non-cancelable operating lease agreements that expire through 2021. Rental expense under these leases is allocated to each affiliate based upon the percentage of space occupied. In 2006 and 2005, the total lease expense was $38.5 million and $34.8 million, respectively. At January 1, 2007, the minimum annual aggregate rental commitments are as follows: 2007 $ 40,630 2008 40,143 2009 37,875 2010 37,367 2011 35,585 Thereafter 253,990 -------- Total minimum lease payments $445,590 ======== Certain rental commitments have renewal options extending through the year 2031. Some of these renewals are subject to adjustments in future periods. The Company is not involved in any material sales-leaseback transactions. D. Other Contingencies In the ordinary course of business, the Company enters into structured settlements to settle certain claims. Structured settlements involve the purchase of an annuity to fund future claim obligations. In the event the life insurers providing the annuity, on certain structured settlements, are not able to meet their obligations, the Company would be liable for the payments of benefits. As of December 31, 2006, the Company has not incurred a loss and there has been no default by any of the life insurers included in the transactions. Management believes that based on the financial strength of the life insurers involved in these structured settlements, the likelihood of a loss is remote. In connection therewith, as of December 31, 2006, the Company's loss reserves eliminated by annuities mostly from affiliates amounted to $781,163 and included unrecorded loss contingencies of $758,100. As part of its private equity portfolio investment the Company may be called upon for an additional capital investment of up to $640,408, as of December 31, 2006. The Company expects only a small portion of this 52 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) portfolio will be called during 2007. As fully disclosed in Note 5, the Company has guaranteed the policyholder obligations of certain affiliated insurance companies. Each of the guaranteed affiliates has admitted assets in excess of policyholder liabilities. The Company believes that the likelihood of a payment under any of these guarantees is remote. NOTE 13 - OTHER SIGNIFICANT MATTERS A. September 11, 2001 Events As of December 31, 2006 and 2005, the Company's ultimate losses and LAE as a result of the September 11th events gross, ceded and net of reinsurance, is set forth in the table below: As of December 31, 2006 2005 ------------------ --------- --------- Gross of reinsurance $ 448,183 $ 448,183 Ceded reinsurance (386,704) (386,704) --------- --------- Net of Reinsurance $ 61,479 $ 61,479 ========= ========= All contingencies and unpaid claims or losses resulting from the September 11th events have been recognized in the financial statements. The Company does not expect any unrecognized contingencies or unpaid claims or losses to impact the financial statements in the near term. B. Other The Company underwrites a significant concentration of its direct business with brokers. As of December 31, 2006 and 2005, the amount of reserve credits recorded for high deductibles on unpaid claims amounted to $3,833,600 and $3,700,000, respectively. As of December 31, 2006 and 2005, the amount billed and recoverable on paid claims amounted to $332,913 and $397,395, respectively, of which $19,716 and $16,600, respectively, were non-admitted. The Company's direct percentage of policyholder dividend participating policies is 0.05 percent. Policyholder dividends are accounted for on an incurred basis. In connection therewith, during 2006 and 2005, policyholder dividends amounted to $1,344 and $19, respectively, and were reported as Other Gains in the accompanying statements of income. 53 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 and 2005, other admitted assets as reported in the accompanying statements of admitted assets were comprised of the following balances: As of December 31, 2006 2005 ------------------ --------- --------- Guaranty funds receivable or on deposit $ 18,220 $ 20,098 Loss funds on deposit 92,573 71,016 Outstanding loss drafts - suspense accounts 489,807 509,571 Accrued recoverables 4,691 6,780 Other 3,176 17,681 Allowance for doubtful accounts (429,224) (446,746) --------- --------- Total Other Admitted Assets $ 179,243 $ 178,400 ========= ========= Guaranty funds receivable represent payments to various state insolvency funds which are recoupable against future premium tax payment in the respective states. Various states allow insurance companies to recoup assessments over a period of five to ten years. As of December 31, 2006 the Company's liability for insolvency assessments amounted to $31,000 with a related asset for premium tax credits of $18,200. Of the amount accrued, the Company expects to pay approximately $12,800 for insolvency assessments during the next year. In addition, the Company anticipates it will realize $12,100 of premium tax offset credits and the associated liability in years two through five. The remaining $6,100 will be realized between years five and ten. The Company routinely assesses the collectibility of its receivable balances for potentially uncollectible premiums receivable due from agents and reinsurance recoverable balances. In connection therewith, as of December 31, 2006 and 2005, the Company had established an allowance for doubtful accounts of $429,224 and $446,746, respectively, which was reported as a contra asset within Other Admitted Assets in the accompanying Statements of Admitted Assets. During 2005, the Company recorded $145,742 of the increase in the allowance for doubtful accounts to Net Loss from Agents' Balances Charged-off in the accompanying 2005 Statement of Income, and recorded the remaining increase of $197,153 as an adjustment for prior period corrections to the Company's Capital and Surplus balance at January 1, 2005. 54 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) As of December 31, 2006 and 2005, other liabilities as reported in the accompanying Statements of Liabilities, Capital and Surplus were comprised of the following balances: Other Liabilities 2006 2005 ----------------- -------- -------- Other liabilites, includes suspense accounts, expense account balances and certain accruals $107,092 $175,986 Accrued retrospective premiums 77,001 50,624 Accounts payable 23,744 23,160 Deferred commission earnings 10,039 37,787 Service carrier liabilty 2,336 5,919 Retroactive reinsurance payable (14,859) (12,171) Amounts withheld or retained by company for account of others 28,058 31,331 Policyholder funds on deposit 11,572 12,578 Loss clearing 12,166 13,610 Liability for pension and severance pay 2,705 4,945 Remmittances and items not allocated 37,240 -- -------- -------- Total Other Liabilities $297,094 $343,769 ======== ======== 55 American Home Assurance Company Notes to Statutory Basis Financial Statements December 31, 2006 and 2005 (000's Omitted) NOTE 14 - SUBSEQUENT EVENTS On January 24, 2007, the Company's Ultimate Parent announced that it had submitted a letter to the board of directors of 21st Century Insurance Group (21st Century) proposing to acquire the outstanding 38.16% publicly held shares of 21st Century for $19.75 per share in cash. The Ultimate Parent and its subsidiaries own approximately 61.84% of the outstanding shares of 21st Century, including 16.65% of the outstanding shares that are owned by the Company. The aggregate cash consideration payable by the Ultimate Parent would be approximately $690 million. Following the transaction, the Ultimate Parent and its subsidiaries will own 100% of 21st Century. In February 2007, the Company entered into a Capital Maintenance Agreement (CMA) with its Ultimate Parent, AIG. The CMA provides that in the event that the Company's Total Adjusted Capital falls below 200% of the Company's Authorized Control Level RBC, as shown in the Company's 2006 Annual Statement, together with any adjustments or modifications required by the Company's domiciliary regulator, AIG will within thirty days of written notice thereof provide a capital contribution to the Company in an amount that equals the difference between the Company's Total Adjusted Capital and 200% of the Company's Authorized Control Level RBC. In lieu of making any such capital contribution, with the approval of the domiciliary insurance department, AIG may provide a letter of credit naming the Company as beneficiary. Effective upon the date of filing of the Company's 2006 Annual Statement with its domiciliary regulator, this current CMA supersedes and replaces a similar agreement that related to the Company's December 31, 2005 surplus position. Subject to regulatory approval, AIP will be removed from the National Union inter-company pooling agreement and added as a participant in AIG's Personal Lines Pool. AIP's pooling participation percentage in the AIG Personal Lines Pool will be zero percent. On March 30th, 2007, the Company paid a dividend of $500,000 to its parent, AIG Commercial Insurance Group, Inc. 56 Note 15 - Event (Unaudited) Subsequent to the Date of the Independent Auditor's Report On May 15, 2007, the Company's Ultimate Parent entered into a definitive merger agreement with 21st Century Insurance Group (21st Century) by which the Ultimate Parent will acquire the outstanding 39.3% publicly held shares of 21st Century for $22.00 per share in cash. The Ultimate Parent and its subsidiaries own approximately 60.7% of the outstanding shares of 21st Century, including approximately 16.32% of the outstanding shares that are owned by the Company. The aggregate cash consideration payable by the Ultimate Parent would be approximately $813 million. Following the transaction, the Ultimate Parent and its subsidiaries will own 100% of 21st Century and the Company will update the carrying value of its investment in 21st Century from quoted market values less a discount of 24.2% to the statutory net worth of the entity. On May 24, 2007, the National Council on Compensation Insurance, Inc. (the NCCI), in its capacity as attorney-in-fact for the participating companies of the National Workers Compensation Reinsurance Pool (the NWCRP), commenced an action in the United States District Court for the Northern District of Illinois against AIG and certain of its subsidiaries, including the Company, alleging claims for fraud, breach of contract and violation of the federal anti-racketeering statute in connection with the underreporting of workers compensation premium. The suit purports to seek in excess of $1 billion in damages. On June 14, 2007, the Defendants filed a motion seeking to have the federal court abstain in favor of a parallel action filed by AIG and certain of its subsidiaries, including the Company, in New York (see below), dismiss the complaint on forum non conveniens grounds or transfer venue to the Southern District of New York. Defendants' motion was denied on August 6, 2007, and their deadline to respond or otherwise move with respect to the complaint is now September 5, 2007. Also on May 24, 2007, AIG and certain of its subsidiaries, including the Company, commenced an action in the Supreme Court of the State of New York against the NWCRP and NCCI that seeks a declaratory judgment confirming that the workers compensation fund established in connection with AIG's settlement with the New York Attorney General and New York Department of Insurance is sufficient to compensate any claims by the NWCRP and its members in connection with the underreporting of workers compensation premium, and quantifying the related obligations to such parties. Defendants moved to dismiss the action on June 25, 2007, and Plaintiffs served their opposition to that motion on July 16, 2007. On July 17, 2007, the Workers Compensation Reinsurance Association and the Minnesota Workers Compensation Insurers Association, Inc. commenced an action in the United States District Court for the District of Minnesota against AIG and certain of its subsidiaries, including the Company, alleging claims for common law fraud, unjust enrichment and violation of the federal anti-racketeering statute in connection with the underreporting of workers compensation premium. AIG and the Company are currently due to respond to the complaint on August 6, 2007. The Company cannot currently predict the outcome or reasonably estimate the potential costs related to these matters. In the opinion of management, the Company's ultimate liability for the matters referred to above is not likely to have a material adverse effect on the Company's financial position, although it is possible that the effect would be material to the Company's results of operations for an individual reporting period. PART C: OTHER INFORMATION Item 26. Exhibits (a)Board of Directors Resolution. (1)Resolutions of Board of Directors of American General Life Insurance Company authorizing the establishment of Separate Account VL-R. (1) (b)Custodian Agreements. Inapplicable. (c)Underwriting Contracts. (1)Distribution Agreement between American General Life Insurance Company and American General Equity Services Corporation, effective October 1, 2002. (25) (2)Form of Selling Group Agreement. (26) (3)Schedule of Commissions (Incorporated by reference from the text included under the heading "Distribution of the Policies" in the Statement of Additional Information that is filed as part of this amended Registration Statement). (d)Contracts. (1)Specimen form of the "Platinum Investor(R) Survivor II" Flexible Premium Variable Universal Life Insurance Policy (Policy Form No. 01206). (23) (2)Specimen form of Extension of Maturity Date Rider, Accumulation Value version (Maturity Extension Rider), Form No. 99110. (42) (3)Specimen form of Extension of Maturity Date Rider, Death Benefit version (Maturity Extension Rider), Form No. 99111. (42) (4)Form of Overloan Protection Rider, Form No. 07620. (Filed herewith) (e)Applications. (1)Specimen form of Life Insurance Application - Part A, Form No. AGLC100565-2006. (49) (2)Specimen form of Life Insurance Application - Part B, Form No. AGLC100566-2006. (49) C-1 (3)Specimen form of Variable Universal Life Insurance Supplemental Application, Form No. AGLC 0461-2001 Rev0406. (41) (4)Form of Service Request Form, Form No. AGLC0463 Rev0506. (41) (5)Form of Cash Disbursement Request Form, Form No. AGLC0109 Rev0904. (38) (6)Form of Assignment Form, Form No. AGLC0205 Rev0904. (38) (7)Form of Electronic Funds Authorization Form, Form No. AGLC0220 Rev0904. (38) (8)Form of Name and Address Change Form, Form No. AGLC0222 Rev0904. (38) (9)Form of Change of Ownership Form, Form No. AGLC0113 Rev0705. (38) (10)Form of Cash Surrender Request Form, Form No. AGLC0112 Rev0403. (38) (11)Form of Change of Beneficiary Form, Form No. AGLC0108 Rev0904. (38) (12)Specimen form of Limited Temporary Life Insurance Application, Form No. AGLC101431-2005. (40) (13)Form of Reinstatement or Reduction of Premium Rate Application for Life Insurance Form, Form No. AGLC 100440-2002. (38) (14)Form of In-Force Change Application Form, Form No. AGLC 100386-2002. (38) (15)Form of Service Request Form, Form No. AGLC0107 0904. (38) (f)Depositor's Certificate of Incorporation and By-Laws. (1)Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective December 31, 1991. (2) (2)Amendment to the Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective July 13, 1995. (4) (3)By-Laws of American General Life Insurance Company, restated as of June 8, 2005. (35) (g)Reinsurance Contracts. (1)Form of Reinsurance Agreement between American General Life Insurance Company and General & Cologne Life Re of America. (46) C-2 (2)Form of Reinsurance Agreement between American General Life Insurance Company and Munich American Reassurance Company. (46) (3)Form of Reinsurance Agreement between American General Life Insurance Company and RGA Reinsurance Company. (46) (4)Form of Reinsurance Agreement between American General Life Insurance Company and Swiss Re Life & Health America, Inc. (46) (h)Participation Agreements. (1)(a)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. (5) (1)(b)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. (16) (1)(c)Form of Amendment Six 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. (28) (2)(a)Form of Participation Agreement by and among The Alger American Fund, American General Life Insurance Company and Fred Alger & Company, Incorporated. (29) (3)(a)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. (18) (4)(a)Form of Participation Agreement Between American General Life Insurance Company, Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. (5) (4)(b)Amendment 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. (7) C-3 (4)(c)Form of Amendment Two 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 as of September 1, 1999. (34) (4)(d)Form of Amendment 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 as of October 31, 2003. (34) (5)(a)Form of Amended and Restated Participation Agreement by and between Variable Insurance Products Fund, Fidelity Distributors Corporation and American General Life Insurance Company. (18) (5)(b)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. (23) (6)(a)Form of Amended and Restated Participation Agreement by and between Variable Insurance Products Fund II, Fidelity Distributors Corporation and American General Life Insurance Company. (18) (6)(b)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. (23) (7)(a)Form of Participation Agreement by and between Variable Insurance Products Fund III, Fidelity Distributors Corporation and American General Life Insurance Company. (29) (8)(a)Form of Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Equity Services Corporation, Franklin Templeton Variable Insurance Products Trust and Franklin Templeton Distributors, Inc., dated as of October 1, 2002. (15) (8)(b)Form of Amendment No. 3 to Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Equity Services Corporation, Franklin Templeton Variable Insurance Products Trust and Franklin Templeton Distributors, Inc., dated as of March 31, 2006. (39) C-4 (9)(a)Form of Participation Agreement by and between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co. and American General Life Insurance Company. (22) (10)(a)Form of Fund Participation Agreement by and between American General Life Insurance Company and Janus Aspen Series. (18) (10)(b)Form of Amendment No. 1 to Fund Participation Agreement by and between American General Life Insurance Company and Janus Aspen Series. (23) (11)(a)Form of Participation Agreement by and between American General Life Insurance Company and J.P. Morgan Series Trust II. (18) (11)(b)Form of Amendment No. 1 to Participation Agreement by and between American General Life Insurance Company and J.P. Morgan Series Trust I. (29) (12)(a)Form of Participation Agreement Among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (5) (12)(b)Form of Amendment Five to Participation Agreement by and among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (18) (12)(c)Form of Amendment Six to Participation Agreement by and among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (23) (12)(d)Form of Letter Agreement between Massachusetts Financial Services, MFS Variable Insurance Trust and American General Life Insurance Company dated December 19, 2005. (46) (13)(a)Participation Agreement by and 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. (8) (13)(b)Amendment Number One to Participation Agreement by and 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. (10) C-5 (13)(c)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) (13)(d)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 Distributors, Inc. (23) (13)(e)Form of Amendment Nine 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. (24) (13)(f)Form of Amendment Ten 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. (27) (13)(g)Form of Amendment Eleven 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. (12) (14)(a)Sales Agreement by and between American General Life Insurance Company, Neuberger & Berman Advisors Management Trust and Neuberger & Berman Management Incorporated. (14) (14)(b)Form of Assignment and Modification Agreement to Fund Participation Agreement (formerly known as Sales Agreement) by and between Neuberger & Berman Management Incorporated and American General Life Insurance Company. (14) (14)(c)Form of Amendment to Fund Participation Agreement by and between Neuberger & Berman Management Inc., Neuberger & Berman Advisors Management Trust and American General Life Insurance Company. (45) (15)(a)Form of Participation Agreement by and among American General Life Insurance Company, Oppenheimer Variable Account Funds and OppenheimerFunds, Inc. (20) C-6 (15)(b)Form of Amendment No. 1 to Participation Agreement by and among American General Life Insurance Company, Oppenheimer Variable Account Funds and OppenheimerFunds, Inc. (38) (16)(a)Form of Participation Agreement by and between American General Life Insurance Company, PIMCO Variable Insurance Trust and PIMCO Funds Distributor LLC. (18) (16)(b)Form of Amendment No. 1 to Participation Agreement by and between American General Life Insurance Company, PIMCO Variable Insurance Trust and PIMCO Funds Distributor LLC. (38) (17)(a)Form of Participation Agreement by and Among Pioneer Variable Contracts Trust, American General Life Insurance Company, on its own Behalf and on Behalf of Each of the Segregated Asset Accounts, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. (15) (17)(b)Form of Amendment No. 1 to Participation Agreement by and Among Pioneer Variable Contracts Trust, American General Life Insurance Company, on its own Behalf and on Behalf of Each of the Segregated Asset Accounts, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. (38) (18)(a)Form of Participation Agreement Among Putnam Variable Trust, Putnam Mutual Funds Corp., and American General Life Insurance Company. (5) (19)(a)Form of Participation Agreement by and among American General Life Insurance Company and SunAmerica Series Trust. (19) (19)(b)Form of Addendum to Fund Participation Agreement For Class A Shares by and between SunAmerica Series Trust and American General Life Insurance Company. (32) (19)(c)Form of Amendment to Participation Agreement by and between SunAmerica Series Trust and American General Life Insurance Company. (12) (20)(a)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) C-7 (20)(b)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. (7) (20)(c)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) (20)(d)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. (23) (20)(e)Form of Amendment Eight 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. (24) (21)(a)Form of Participation Agreement by and between Vanguard Variable Insurance Funds, The Vanguard Group, Inc., Vanguard Marketing Corporation and American General Life Insurance Company. (18) (22)(a)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. (9) (22)(b)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. (7) (22)(c)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. (18) (22)(d)Form of Amendment Three 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. (16) C-8 (22)(e)Form of Amendment Four 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. (12) (23)(a)Form of Administrative Services Agreement between American General Life Insurance Company and fund distributor. (4) (24)(a)Form of Amended and Restated Administrative Services Agreement between American General Life Insurance Company and AIM Advisors, Inc. (32) (25)(a)Form of Services Agreement Class O between Fred Alger Management, Inc. and American General Life Insurance Company. (29) (26)(a)Form of Shareholder Services Agreement by and between American General Life Insurance Company and American Century Investment Management, Inc. (14) (26)(b)Form of Amendment Two to Shareholder Services Agreement by and between American General Life Insurance Company and American Century Investment Management, Inc. (32) (27)(a)Form of Administrative Services Agreement by and between American General Life Insurance Company and Credit Suisse Asset Management, LLC. (18) (28)(a)Administrative Services Agreement dated as of August 11, 1998, between American General Life Insurance Company and The Dreyfus Corporation. (3) (28)(b)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. (3) (29)(a)Form of Amended and Restated Service Contract by and between Fidelity Distributors Corporation and American General Equity Services Corporation, effective May 1, 2006. (45) (30)(a)Form of Service Agreement by and between Fidelity Investments Institutional Operations Company, Inc. and American General Life Insurance Company. (18) (30)(b)Form of First Amendment to Service Agreement by and between Fidelity Investments Institutional Operations Company, Inc. and American General Life Insurance Company. (45) C-9 (31)(a)Form of Administrative Services Agreement by and among American General Life Insurance Company and Franklin Templeton Services, Inc., dated as of July 1, 1999. (11) (31)(b)Form of Amendment to Administrative Services Agreement by and among American General Life Insurance Company and Franklin Templeton Services, LLC, effective November 1, 2001. (21) (32)(a)Form of Administrative Services Agreement by and between Goldman, Sachs & Co. and American General Life Insurance Company. (22) (33)(a)Form of Distribution and Shareholder Services Agreement by and between Janus Distributors, Inc. and American General Life Insurance Company. (18) (34)(a)Form of Administrative Services Agreement by and between American General Life Insurance Company and JPMorgan Chase Bank, effective May 1, 2003. (29) (35)(a)Form of Indemnification Letter Agreement by and between J.P. Morgan Investment Management, Inc. and American General Life Insurance Company. (32) (36)(a)Form of Administrative Services Agreement between American General Life Insurance Company, Miller Anderson & Sherrard LLP and Morgan Stanley Dean Witter Investment Management Inc. (13) (36)(b)Form of Amendment One to Administrative Services Agreement between American General Life Insurance Company, Miller Anderson & Sherrard LLP and Morgan Stanley Dean Witter Investment Management Inc. (12) (37)(a)Form of Administrative Services Agreement by and between American General Life Insurance Company and Neuberger & Berman Management Incorporated. (14) (37)(b)Form of Amendment to Administrative Services Agreement by and between American General Life Insurance Company and Neuberger & Berman Management Incorporated. (12) (38)(a)Form of Administrative Services Agreement by and among American General Life Insurance Company and OppenheimerFunds, Inc. (20) (38)(b)Form of Amendment No. 1 to Administrative Services Agreement by and among American General Life Insurance Company and OppenheimerFunds, Inc. (38) C-10 (39)(a)Form of Services Agreement by and between American General Life Insurance Company and Pacific Investment Management, LLC. (18) (40)(a)Form of PIMCO Variable Insurance Trust Services Agreement by and between American General Life Insurance Company and PIMCO Variable Insurance Trust. (18) (41)(a)Form of Marketing and Administrative Services Support Agreement between American General Life Insurance Company and Putnam Retail Management Limited Partnership. (39) (42)(a)Form of Administrative Services Agreement by and among American General Life Insurance Company and SunAmerica Asset Management Corp. (19) (43)(a)Form of Administrative Services Agreement between Van Kampen Asset Management Inc. and American General Life Insurance Company dated January 1, 2000 (20) (43)(b)Form of Amendment Two to Administrative Services Agreement between Van Kampen Asset Management Inc. and American General Life Insurance Company dated May 14, 2002. (33) (44)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between AIM and American General Life Insurance Company. (46) (45)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Alger and American General Life Insurance Company. (46) (46)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between American Century and American General Life Insurance Company. (46) (47)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Credit Suisse and American General Life Insurance Company. (46) (48)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Dreyfus and American General Life Insurance Company. (46) (49)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Fidelity and American General Life Insurance Company. (46) (50)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Franklin Templeton and American General Life Insurance Company. (46) C-11 (51)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Goldman Sachs and American General Life Insurance Company. (47) (52)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Janus and American General Life Insurance Company. (46) (53)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between J.P. Morgan and American General Life Insurance Company. (46) (54)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between MFS and American General Life Insurance Company. (46) (55)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Neuberger Berman and American General Life Insurance Company. (46) (56)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Oppenheimer and American General Life Insurance Company. (46) (57)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between PIMCO and American General Life Insurance Company. (46) (58)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Pioneer and American General Life Insurance Company. (46) (59)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Putnam and American General Life Insurance Company. (46) (60)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between SunAmerica and American General Life Insurance Company. (46) (61)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between UIF Morgan Stanley and American General Life Insurance Company. (46) (62)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between VALIC and American General Life Insurance Company. (46) (63)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Van Kampen and American General Life Insurance Company. (46) (64)(a)Form of SEC Rule 22c-2 Information Sharing Agreement between Vanguard and American General Life Insurance Company. (46) C-12 (i)Administrative Contracts. (1)(a)Form of Service and Expense Agreement dated February 1, 1974, between American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company. (30) (1)(b)Form of Addendum No. 1 to Service and Expense Agreement dated February 1, 1974, between American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company, dated May 21, 1975. (30) (1)(c)Form of Addendum No. 2 to Service and Expense Agreement dated February 1, 1974, between American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company, dated September 23, 1975. (30) (1)(d)Form of Addendum No. 24 to Service and Expense Agreement dated February 1, 1974, between American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company, dated December 30, 1998. (30) (1)(e)Form of Addendum No. 28 to Service and Expense Agreement dated February 1, 1974, among American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company and American General Life Companies, effective January 1, 2002. (30) (1)(f)Form of Addendum No. 30 to Service and Expense Agreement dated February 1, 1974, among American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company and American General Life Companies, LLC, effective January 1, 2002. (30) (1)(g)Form of Addendum No. 32 to Service and Expense Agreement dated February 1, 1974, among American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company, American General Life Companies, LLC and American General Equity Services Corporation, effective May 1, 2004. (32) (j)Other Material Contracts. (1)General Guarantee Agreement from American Home Assurance Company on behalf of American General Life Insurance Company. (35) (2)Notice of Termination of Guarantee as Published in the Wall Street Journal on November 24, 2006. (43) C-13 (k)Legal Opinion. (1)Opinion and Consent of Pauletta P. Cohn, General Counsel, Life Insurance Operations of American General Life Companies. (23) (2)Opinion and Consent of Sullivan & Cromwell LLP, Counsel to American Home Assurance Company. (36) (l)Actuarial Opinion. (1)Opinion and Consent of American General Life Insurance Company's actuary. (23) (m)Calculation. None (n)Other Opinions. (1)Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP. (Filed herewith) (o)Omitted Financial Statements. None (p)Initial Capital Agreements. None (q)Redeemability Exemption. (1)Description of American General Life Insurance Company's Issuance, Transfer and Redemption Procedures for the Variable Universal Life Insurance Policies Pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940 as of May 1, 2007. (46) (r)Powers of Attorney. (1)Power of Attorney with respect to Registration Statements and Amendments thereto signed by the directors and, where applicable, officers of American Home Assurance Company. (37) (2)Power of Attorney with respect to Registration Statements and Amendments thereto signed by Charles H. Dangelo, Director, and Neil Anthony Faulkner, Director, and David Neil Fields, Director, and Kenneth Vincent Harkins, Director, of American Home Assurance Company. (44) (3)Power of Attorney with respect to Registration Statements and Amendments thereto removing Neil Anthony Faulkner, Director, and adding Worth Gordon Knight, Jr., Director, of American Home Assurance Company. (Filed herewith) C-14 -------- (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. 033-43390) of American General Life Insurance Company Separate Account D filed on October 16, 1991. (3)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. (4)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. (5)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. (6)Incorporated by reference to Pre-Effective Amendment No. 23 to Form N-4 Registration Statement (File No. 033-44745) of American General Life Insurance Company Separate Account A filed on April 24, 1998. (7)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. (8)Incorporated by reference to Post-Effective Amendment No. 12 to Form N-4 Registration Statement (File No. 033-43390) of American General Life Insurance Company Separate Account D filed on April 30, 1997. (9)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. (10)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. (11)Incorporated by reference to Post-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 October 10, 2000. C-15 (12)Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-109206) of American General Life Insurance Company Separate Account D filed on December 17, 2003. (13)Incorporated by reference to Post-Effective Amendment No. 18 to Form N-4 Registration Statement (File No. 033-43390) of American General Life Insurance Company Separate Account D filed on April 12, 2000. (14)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. (15)Incorporated by reference to Post-Effective Amendment No. 7 to Form N-6 Registration Statement (File No. 333-80191) of American General Life Insurance Company Separate Account VL-R filed on December 2, 2004. (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 initial filing of Form N-6 Registration Statement (File No. 333-109613) of American General Life Insurance Company Separate Account VL-R filed on October 10, 2003. (18)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. (19)Incorporated by reference to Post-Effective Amendment No. 2 to Form S-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on April 24, 2002. (20)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. (21)Incorporated by reference to Post-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on December 3, 2001. (22)Incorporated by reference to Post-Effective Amendment No. 7 to Form N-6 Registration Statement (File No. 333-90787) of American General Life Insurance Company Separate Account VL-R filed on December 19, 2003. C-16 (23)Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on October 10, 2001. (24)Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-82982) of American General Life Insurance Company Separate Account VL-R filed on May 13, 2002. (25)Incorporated by reference to Post-Effective Amendment No. 7 to Form N-4 Registration Statement (File No. 333-40637) of American General Life Insurance Company Separate Account D filed on November 8, 2002. (26)Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-102299) of American General Life Insurance Company Separate Account VUL-2 filed on December 31, 2002. (27)Incorporated by reference to Post-Effective Amendment No. 3 to Form N-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on January 23, 2003. (28)Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-103361) of American General Life Insurance Company Separate Account VL-R filed on February 21, 2003. (29)Incorporated by reference to Post-Effective Amendment No. 6 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on April 30, 2003. (30)Incorporated by reference to Post-Effective Amendment No. 8 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on May 3, 2004. (31)Incorporated by reference to Post-Effective Amendment No. 8 to Form N-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on December 3, 2004. (32)Incorporated by reference to Post-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-118318) of American General Life Insurance Company Separate Account VL-R filed on May 2, 2005. (33)Incorporated by reference to Post-Effective Amendment No. 7 to Form N-6 Registration Statement (File No. 333-82982) of American General Life Insurance Company Separate Account VL-R filed on May 2, 2005. C-17 (34)Incorporated by reference to Post-Effective Amendment No. 6 to Form N-6 Registration Statement (File No. 333-80191) of American General Life Insurance Company Separate Account VL-R filed on June 10, 2004. (35)Incorporated by reference to Post-Effective Amendment No. 11 to Form N-6 (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on August 12, 2005. (36)Incorporated by reference to Post-Effective Amendment No. 11 to Form N-6 (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on October 24, 2005. (37)Incorporated by reference to Post-Effective Amendment No. 12 to Form N-6 (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on March 31, 2006. (38)Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-6 (File No. 333-129552) of American General Life Insurance Company Separate Account VL-R filed on March 30, 2006. (39)Incorporated by reference to Post-Effective Amendment No. 1 to Form N-6 (File No. 333-129552) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2006. (40)Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-129552) of American General Life Insurance Company Separate Account VL-R filed on November 8, 2005. (41)Incorporated by reference to Post-Effective Amendment No. 13 to Form N-6 (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2006. (42)Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-118318) of American General Life Insurance Company Separate Account VL-R filed on August 18, 2004. (43)Incorporated by reference to Post-Effective Amendment No. 6 to Form N-6 (File No. 333-118318) of American General Life Insurance Company Separate Account VL-R filed on December 12, 2006. (44)Incorporated by reference to Post-Effective Amendment No. 14 to Form N-6 (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on December 12, 2006. C-18 (45)Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-6 (File No. 333-137817) of American General Life Insurance Company Separate Account VL-R filed on December 14, 2006. (46)Incorporated by reference to Post-Effective Amendment No. 7 to Form N-6 (File No. 333-118318) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2007. (47)Incorporated by reference to Post-Effective Amendment No. 16 to Form N-6 (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2007. (48)Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-143072) of American General Life Insurance Company Separate Account VL-R filed on May 18, 2007. (49)Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-6 (File No. 333-143072) of American General Life Insurance Company Separate Account VL-R filed on August 22, 2007. Item 27. Directors and Officers of the Depositor Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Rodney O. Martin, Jr. Director and Chairman of the Board of Directors 2929 Allen Parkway Houston, TX 77019 M. Bernard Aidinoff Director Sullivan and Cromwell 125 Broad Street New York, NY 10004 Mary Jane B. Fortin Director, Executive Vice President and Chief 2929 Allen Parkway Financial Officer Houston, TX 77019 David L. Herzog Director 70 Pine Street New York, NY 10270 Richard A. Hollar Director, Chairman-Life Profit Center and 750 West Virginia Street Independent Distribution and Chief Executive Milwaukee, WI 53204 Officer-Life Profit Center and Independent Distribution C-19 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Royce G. Imhoff, II Director, President-Independent Distribution 2929 Allen Parkway Houston, TX 77019 David W. O'Leary Director, President-Specialty Markets Group and 2929 Allen Parkway Chief Executive Officer-Specialty Markets Group Houston, TX 77019 Gary D. Reddick Director 2929 Allen Parkway Houston, TX 77019 Christopher J. Swift Director 2929 Allen Parkway Houston, TX 77019 James W. Weakley Director, President-AIG Benefit Solutions Profit 2929 Allen Parkway Center and Chief Executive Officer-AIG Benefit Houston, TX 77019 Solutions Profit Center Matthew E. Winter Director, President and Chief Executive Officer 2929 Allen Parkway Houston, TX 77019 Thomas L. Booker President-Annuity Profit Center 2727 Allen Parkway Houston, TX 77019 Richard C. Schuettner President-AIG Life Brokerage Profit Center 750 West Virginia Street Milwaukee, WI 53204 James P. Steele President-Structured Settlements 205 E. 10th Street Amarillo, TX 79101 Don M. Ward President-Financial Institution Marketing Group 2929 Allen Parkway Houston, TX 77019 David R. Armstrong Executive Vice President-AIG Benefit Solutions & AIG 3600 Route 66 Financial Institution Solutions Profit Center Neptune, NJ 07754 C-20 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ----------------------------------------------------- Rebecca G. Campbell Executive Vice President-Human Resources 2929 Allen Parkway Houston, TX 77019 Rodney N. Hook Executive Vice President-AIG Benefit Solutions 3600 Route 66 Profit Center and Chief Risk Officer-AIG Benefit Neptune, NJ 07754 Solutions Profit Center Gary Parker Executive Vice President and Chief Product Officer 2929 Allen Parkway Houston, TX 77019 Dan E. Trudan Executive Vice President-Individual Product 750 West Virginia St. Operations Milwaukee, WI 53204 Steven D. Anderson Senior Vice President-Life Profit Center & 2727 Allen Parkway Independent Distribution and Chief Financial Houston, TX 77019 Officer-Life Profit Center & Independent Distribution Erik A. Baden Senior Vice President-Strategic Marketing and 2727 Allen Parkway Business Development Houston, TX 77019 Wayne A. Barnard Senior Vice President, Illustration Actuary 2929 Allen Parkway Houston, TX 77019 Robert M. Beuerlein Senior Vice President and Chief and Appointed Actuary 2727-A Allen Parkway Houston, TX 77019 Jeffrey H. Carlson Senior Vice President and Chief Information Officer 2727 Allen Parkway Houston, TX 77019 James A. Galli Senior Vice President and Chief Business Development 830 Third Avenue Officer New York, NY 10022 Robert M. Goldbloom Senior Vice President-Terminal Funding Annuities 80 Pine Street New York, NY 10005 C-21 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- William F. Guterding Senior Vice President 830 Third Avenue New York, NY 10022 Robert F. Herbert, Jr. Senior Vice President, Treasurer and Controller 2727-A Allen Parkway Houston, TX 77019 S. Douglas Israel Senior Vice President 2929 Allen Parkway Houston, TX 77019 Kyle L. Jennings Senior Vice President, General Counsel and Chief 2929 Allen Parkway Compliance Officer Houston, TX 77019 Althea R. Johnson Senior Vice President 2929 Allen Parkway Houston, TX 77019 Glen D. Keller Senior Vice President 2727 Allen Parkway Houston, TX 77019 Stephen Kennedy Senior Vice President 750 West Virginia Street Milwaukee, WI 53204 Simon J. Leech Senior Vice President 2727-A Allen Parkway Houston, TX 77019 Charles L. Levy Senior Vice President and Medical Director 2727 Allen Parkway Houston, TX 77019 Kent D. Major Senior Vice President 2727-A Allen Parkway Houston, TX 77019 Richard D. McFarland Senior Vice President 2727 Allen Parkway Houston, TX 77019 C-22 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Mark R. McGuire Senior Vice President 2727-A Allen Parkway Houston, TX 77019 Laura W. Milazzo Senior Vice President 2727 Allen Parkway Houston, TX 77019 Lawrence J. O'Brien Senior Vice President, Chief Marketing Officer - 2929 Allen Parkway Independent Agency Group Houston, TX 77019 William J. Packer Senior Vice President 3600 Route 66 Neptune, NJ 07754 John W. Penko Senior Vice President 2727 Allen Parkway Houston, TX 77019 Dennis H. Roberts Senior Vice President, Chief Distribution Officer - 2727 Allen Parkway Independent Agency Group Houston, TX 77019 Robert E. Steele Senior Vice President 205 E. 10th Street Amarillo, TX 79101 Frederic R. Yopps Senior Vice President 750 West Virginia St. Milwaukee, WI 53204 Chris Ayers Vice President 2727-A Allen Parkway Houston, TX 77019 Edward F. Bacon Vice President 2727-A Allen Parkway Houston, TX 77019 Joan M. Bartel Vice President 2727 Allen Parkway Houston, TX 77019 C-23 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Michael B. Boesen Vice President 2727-A Allen Parkway Houston, TX 77019 Laura J. Borowski Vice President 750 West Virginia St. Milwaukee, WI 53204 James B. Brown Vice President 2727 Allen Parkway Houston, TX 77019 David W. Butterfield Vice President 3600 Route 66 Neptune, NJ 07754 Valerie A. Childrey Vice President and Medical Director 750 West Virginia Street Milwaukee, WI 53204 Mark E. Childs Vice President 2727 Allen Parkway Houston, TX 77019 Robert M. Cicchi Vice President 2727 Allen Parkway Houston, TX 77019 James Cortiglia Vice President 3600 Route 66 Neptune, NJ 07754 Steven A. Dmytrack Vice President 2929 Allen Parkway Houston, TX 77019 Elizabeth Dobbs Vice President 2727 Allen Parkway Houston, TX 77019 Douglas M. Donnenfield Vice President 750 West Virginia Street Milwaukee, WI 53204 C-24 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Timothy M. Donovan Vice President 2727 Allen Parkway Houston, TX 77019 Farideh N. Farrokhi Vice President and Assistant Secretary 2727-A Allen Parkway Houston, TX 77019 John T. Fieler Vice President and Medical Director 2727-A Allen Parkway Houston, TX 77019 Patrick S. Froze Vice President 750 West Virginia Street Milwaukee, WI 53204 Brad J. Gabel Vice President 750 West Virginia Street Milwaukee, WI 53204 Frederick J. Garland, Jr. Vice President 2727 Allen Parkway Houston, TX 77019 Lisa Gerhart Vice President 2727 Allen Parkway Houston, TX 77019 Liza Glass Vice President 2727-A Allen Parkway Houston, TX 77019 Richard L. Gravette Vice President and Assistant Treasurer 2727-A Allen Parkway Houston, TX 77019 Kenneth J. Griesemer Vice President 6363 Forest Park Road Dallas, TX 75235 Daniel J. Gutenberger Vice President and Medical Director 70 Pine Street New York, NY 10270 C-25 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Joel H. Hammer Vice President 70 Pine Street New York, NY 10270 D. Leigh Harrington Vice President 2727 Allen Parkway Houston, TX 77019 Keith C. Honig Vice President 1 SunAmerica Center Los Angeles, CA 90067 Stephen D. Howard Vice President 2929 Allen Parkway Houston, TX 77019 Janna M. Hubble Vice President 2929 Allen Parkway Houston, TX 77019 Walter P. Irby Vice President 2727 Allen Parkway Houston, TX 77019 Sharla A. Jackson Vice President 205 E. 10th Street Amarillo, TX 79101 Gary J. Kleinman Vice President and Real Estate Investment Officer 70 Pine Street New York, NY 10270 Michael J. Krugel Vice President 750 West Virginia Street Milwaukee, WI 53204 Robert J. Ley Vice President 70 Pine Street New York, NY 10270 Jerry L. Livers Vice President 2727 Allen Parkway Houston, TX 77019 C-26 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Gwendolyn J. Mallett Vice President 2727 Allen Parkway Houston, TX 77019 W. Larry Mask Vice President, Real Estate Investment Officer and 2727 Allen Parkway Assistant Secretary Houston, TX 77019 Melvin C. McFall Vice President 2727 Allen Parkway Houston, TX 77019 Beverly A. Meyer Vice President 750 West Virginia Street Milwaukee, WI 53204 Candace A. Michael Vice President 2727 Allen Parkway Houston, TX 77019 Anne K. Milio Vice President 2727 Allen Parkway Houston, TX 77019 Sylvia A. Miller Vice President #1 Franklin Square Springfield, IL 62713 Michael R. Murphy Vice President 750 West Virginia Street Milwaukee, WI 53204 David W. Napoli Vice President 2727 Allen Parkway Houston, TX 77019 Carl T. Nichols Vice President and Medical Director 205 E. 10th Street Amarillo, TX 79101 Rick Niu Vice President American General Center 2000 American General Way Brentwood, TN 37027 C-27 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Deanna D. Osmonson Vice President and Chief Privacy Officer 2727 Allen Parkway Houston, TX 77019 Rembert R. Owen, Jr. Vice President, Real Estate Investment Officer and 2929 Allen Parkway Assistant Secretary Houston, TX 77019 Lori J. Payne Vice President 2727 Allen Parkway Houston, TX 77019 Cathy A. Percival Vice President and Medical Director 2727 Allen Parkway Houston, TX 77019 Andrew J. Rasey Vice President 2727 Allen Parkway Houston, TX 77019 Rodney E. Rishel Vice President American General Center 2000 American General Way Brentwood, TN 37027 Terri Robbins Vice President 175 Water Street New York, NY 10038 Walter J. Rudecki, Jr. Vice President 2929 Allen Parkway Houston, TX 77019 John Rugel Vice President 750 West Virginia Street Milwaukee, WI 53204 Dale W. Sachtleben Vice President #1 Franklin Square Springfield, IL 62713 Richard W. Scott Vice President and Chief Investment Officer 70 Pine Street New York, NY 10270 C-28 Name and Principal Positions and Offices with Depositor Business Address American General Life Insurance Company ------------------ ---------------------------------------------------- Michael C. Sibley Vice President Walnut Glen Tower 8144 Walnut Hill Lane Dallas, TX 75231 T. Clay Spires Vice President and Tax Officer 2929 Allen Parkway Houston, TX 77019 Dale A. Stewart Vice President and General Auditor 2727-A Allen Parkway Houston, TX 77019 Gregory R. Thornton Vice President #1 Franklin Square Springfield, IL 62713 Veronica Torralba Vice President 2929 Allen Parkway Houston, TX 77019 Christian D. Weiss Vice President #1 Franklin Square Springfield, IL 62713 Cynthia P. Wieties Vice President 2727 Allen Parkway Houston, TX 77019 Elizabeth M. Tuck Secretary 70 Pine Street New York, NY 10270 Lauren W. Jones Assistant Secretary 2929 Allen Parkway Houston, TX 77019 C-29 Item 28.Persons Controlled by or Under Common Control with the Depositor or the Registrant The Depositor is an indirect wholly-owned subsidiary of American International Group, Inc. ("AIG"). See footnotes to table below at end of Item 28. Table of subsidiaries of AIG can be found as Exhibit 21 in Form 10-K, SEC file number 001-08787, accession number 0000950123-07-003026, filed March 1, 2007. Subsidiaries of AIG
Percentage of Voting Securities Jurisdiction of held by Incorporation Immediate or Organization Parent/(1)/ --------------- ----------- American International Group, Inc./(2)/...................................... Delaware /(3)/ AIG Capital Corporation................................................... Delaware 100 AIG Capital India Private Limited..................................... India 99/(4)/ AIG Global Asset Management Company (India) Private Limited........ India 99/(5)/ AIG Consumer Finance Group, Inc....................................... Delaware 100 AIG Bank Polska S.A................................................ Poland 99.92 AIG Credit S.A..................................................... Poland 100 Compania Financiera Argentina S.A.................................. Argentina 100 AIG Equipment Finance Holdings, Inc................................... Delaware 100 AIG Commercial Equipment Finance, Inc.............................. Delaware 100 AIG Commercial Equipment Finance Company Canada................ Canada 100 AIG Rail Services, Inc............................................. Delaware 100 AIG Finance Holdings, Inc............................................. New York 100 AIG Finance (Hong Kong) Limited.................................... Hong Kong 100 AIG Global Asset Management Holdings Corp............................. Delaware 100 AIG Asset Management Services, Inc................................. Delaware 100 Brazos Capital Management, L.P................................. Delaware 100 AIG Capital Partners, Inc.......................................... Delaware 100 AIG Equity Sales Corp.............................................. New York 100 AIG Global Investment Corp......................................... New Jersey 100 AIG Securities Lending Corp........................................ Delaware 100 AIG Global Real Estate Investment Corp................................ Delaware 100 International Lease Finance Corporation............................... California 67.23/(6)/ AIG Credit Corp........................................................... Delaware 100 A.I. Credit Consumer Discount Corp.................................... Pennsylvania 100 A.I. Credit Corp...................................................... New Hampshire 100 AICCO, Inc............................................................ Delaware 100 AICCO, Inc............................................................ California 100 AIG Credit Corp. of Canada............................................ Canada 100 Imperial Premium Funding, Inc......................................... Delaware 100 AIG Egypt Insurance Company, S.A.E........................................ Egypt 89.98 AIG Federal Savings Bank.................................................. USA 100
C-30 Subsidiaries of AIG
Percentage of Voting Securities Jurisdiction of held by Incorporation Immediate or Organization Parent/(1)/ --------------- ----------- AIG Financial Advisor Services, Inc............................................. Delaware 100 AIG Financial Advisor Services (Europe), S.A................................. Luxembourg 100 AIG Financial Products Corp..................................................... Delaware 100 AIG Matched Funding Corp..................................................... Delaware 100 Banque AIG................................................................... France 90/(7)/ AIG Funding, Inc................................................................ Delaware 100 AIG Global Trade & Political Risk Insurance Company............................. New Jersey 100 AIG Israel Insurance Company Ltd................................................ Israel 100 AIG Life Holdings (International) LLC........................................... Delaware 100 AIG Star Life Insurance Co., Ltd............................................. Japan 100 American International Reinsurance Company, Ltd.............................. Bermuda 100 AIG Life Edison Insurance Company........................................ Japan 90/(8)/ American International Assurance Company, Limited........................ Hong Kong 100 American International Assurance Company (Australia) Limited............. Australia 100 American International Assurance Company (Bermuda) Limited............... Bermuda 100 American International Assurance Co. (Vietnam) Limited................ Vietnam 100 Tata AIG Life Insurance Company Limited............................... India 26 Nan Shan Life Insurance Company, Ltd..................................... Taiwan 95 AIG Life Insurance Company...................................................... Delaware 79/(9)/ AIG Life Insurance Company of Puerto Rico....................................... Puerto Rico 100 AIG Life Insurance Company (Switzerland) Ltd.................................... Switzerland 100 AIG Liquidity Corp.............................................................. Delaware 100 AIG Private Bank Ltd............................................................ Switzerland 100 AIG Property Casualty Insurance Group, Inc...................................... Delaware 100 AIG Commercial Insurance Group, Inc.......................................... Delaware 100 AIG Aviation, Inc........................................................ Georgia 100 AIG Casualty Company..................................................... Pennsylvania 100 AIG Risk Management, Inc........................................................ New York 100 AIU Insurance Company.................................................... New York 52/(10)/ American Home Assurance Company.......................................... New York 100 AIG Domestic Claims, Inc.............................................. Delaware 50/(11)/ AIG Hawaii Insurance Company.......................................... Hawaii 100 American Pacific Insurance Company................................ Hawaii 100 American International Insurance Company.............................. New York 50/(12)/ AIG Advantage Insurance Company................................... Minnesota 100 American International Insurance Company of California............ California 100 American International Insurance Company of New Jersey............ New Jersey 100 American International Realty Corp.................................... Delaware 31.5/(13)/ Pine Street Real Estate Holdings Corp................................. New Hampshire 31.47/(14)/ Transatlantic Holdings, Inc........................................... Delaware 33.34/(15)/ Transatlantic Reinsurance Company................................. New York 100 Putnam Reinsurance Company..................................... New York 100 Trans Re Zurich................................................ Switzerland 100 American International Surplus Lines Agency, Inc................................ New Jersey 100 Audubon Insurance Company....................................................... Louisiana 100
C-31 Subsidiaries of AIG
Percentage of Voting Securities Jurisdiction of held by Incorporation Immediate or Organization Parent/(1)/ --------------- ----------- Agency Management Corporation................................... Louisiana 100 The Gulf Agency, Inc........................................ Alabama 100 Audubon Indemnity Company....................................... Mississippi 100 Commerce and Industry Insurance Company............................ New York 100 Commerce and Industry Insurance Company of Canada.................. Canada 100 The Insurance Company of the State of Pennsylvania................. Pennsylvania 100 Landmark Insurance Company......................................... California 100 National Union Fire Insurance Company of Pittsburgh, Pa............ Pennsylvania 100 American International Specialty Lines Insurance Company........ Alaska 70/(16)/ Lexington Insurance Company..................................... Delaware 70/(17)/ AIG Centennial Insurance Company............................ Pennsylvania 100 AIG Auto Insurance Company of New Jersey................. New Jersey 100 AIG Preferred Insurance Company.......................... Pennsylvania 100 AIG Premier Insurance Company............................ Pennsylvania 100 AIG Indemnity Insurance Company...................... Pennsylvania 100 JI Accident & Fire Insurance Co. Ltd........................ Japan 50 National Union Fire Insurance Company of Louisiana.............. Louisiana 100 National Union Fire Insurance Company of Vermont................ Vermont 100 21st Century Insurance Group.................................... California 33.03/(18)/ 21st Century Casualty Company............................... California 100 21st Century Insurance Company.............................. California 100 21st Century Insurance Company of the Southwest............. Texas 100 Starr Excess Liability Insurance Company, Ltd................... Delaware 100 Starr Liability Insurance International Ltd................. Ireland 100 New Hampshire Insurance Company.................................... Pennsylvania 100 AI Network Corporation.......................................... Delaware 100 AIG Europe, S.A................................................. France 70.48/(19)/ American International Pacific Insurance Company................ Colorado 100 American International South Insurance Company.................. Pennsylvania 100 Granite State Insurance Company................................. Pennsylvania 100 Illinois National Insurance Co.................................. Illinois 100 New Hampshire Indemnity Company, Inc............................ Pennsylvania 100 AIG National Insurance Company, Inc......................... New York 100 New Hampshire Insurance Services, Inc........................... New Hampshire 100 Risk Specialists Companies, Inc.................................... Delaware 100 AIG Marketing, Inc..................................................... Delaware 100 American International Insurance Company of Delaware................... Delaware 100 Hawaii Insurance Consultants, Inc...................................... Hawaii 100 AIG Retirement Services, Inc.............................................. Delaware 100 SunAmerica Life Insurance Company...................................... Arizona 100 SunAmerica Investments, Inc........................................ Georgia 70/(20)/ AIG Advisor Group, Inc.......................................... Maryland 100 Advantage Capital Corporation............................... New York 100 American General Securities Incorporated.................... Texas 100 FSC Securities Corporation.................................. Delaware 100
C-32 Subsidiaries of AIG
Percentage of Voting Securities Jurisdiction of held by Incorporation Immediate or Organization Parent/(1)/ --------------- ----------- Royal Alliance Associates, Inc........................................ Delaware 100 SunAmerica Securities, Inc............................................ Delaware 100 AIG SunAmerica Life Assurance Company..................................... Arizona 100 AIG SunAmerica Asset Management Corp.................................. Delaware 100 AIG SunAmerica Capital Services, Inc...................................... Delaware 100 First SunAmerica Life Insurance Company.......................................... New York 100 AIG Technologies, Inc............................................................... New Hampshire 100 AIG Trading Group, Inc.............................................................. Delaware 100 AIG International, Inc........................................................... Delaware 100 AIGTI, Inc.......................................................................... Delaware 100 AIU Holdings, LLC................................................................... Delaware 100 AIG Central Europe & CIS Insurance Holdings Corporation.......................... Delaware 100 AIG Bulgaria Insurance and Reinsurance Company EAD........................... Bulgaria 100 AIG Czech Republic pojistovna, as............................................ Czech Republic 100 AIG Kazakhstan Insurance Company, S.A........................................ Kazakhstan 88.87 AIG Memsa, Inc................................................................... Delaware 100 AIG Hayleys Investment Holdings (Private) Ltd................................ Sri Lanka 80 Hayleys AIG Insurance Company, Ltd........................................ Sri Lanka 100 AIG Iraq......................................................................... Delaware 100 AIG Lebanon, S.A.L............................................................... Lebanon 100 AIG Libya, Inc................................................................... Libya 100 AIG Sigora A.S................................................................... Turkey 100 Tata AIG General Insurance Company Limited....................................... India 26 AIU Africa Holdings, Inc......................................................... Delaware 100 AIG Kenya Insurance Company, Limited......................................... Kenya 100 AIU North America, Inc.............................................................. New York 100 American General Corporation........................................................ Texas 100 AGC Life Insurance Company....................................................... Missouri 100 AIG Life Holdings (Canada), ULC.............................................. Canada 100 AIG Assurance Canada.................................................. Canada 100 AIG Life Insurance Company of Canada.................................. Canada 100 AIG Life of Bermuda, Ltd..................................................... Bermuda 100 American General Life and Accident Insurance Company......................... Tennessee 100 American General Life Insurance Company...................................... Texas 100 AIG Annuity Insurance Company......................................... Texas 100 AIG Enterprise Services, LLC.......................................... Delaware 100 American General Annuity Service Corporation.......................... Texas 100 American General Life Companies, LLC.................................. Delaware 100 American General Property Insurance Company........................... Tennessee 51.85/(21)/ American General Property Insurance Company of Florida.......................................................... Florida 100 The United State Life Insurance Company in the City of New York............................................................ New York 100 The Variable Annuity Life Insurance Company........................... Texas 100 VALIC Retirement Services Company.................................. Texas 100 American General Assurance Company............................................... Illinois 100 American General Indemnity Company............................................... Illinois 100
C-33 Subsidiaries of AIG
Percentage of Voting Securities Jurisdiction of held by Incorporation Immediate or Organization Parent/(1)/ -------------------- ----------- American General Bancassurance Services, Inc........................... Illinois 100 American General Finance, Inc.......................................... Indiana 100 American General Auto Finance, Inc................................. Delaware 100 American General Finance Corporation............................... Indiana 100 Merit Life Insurance Co......................................... Indiana 100 MorEquity, Inc.................................................. Nevada 100 Wilmington Finance, Inc..................................... Delaware 100 Yosemite Insurance Company...................................... Indiana 100 CommoLoCo, Inc.............................................. Puerto Rico 100 American General Financial Services of Alabama, Inc................ Delaware 100 American General Investment Management Corporation..................... Delaware 100 American General Realty Investment Corporation......................... Texas 100 Knickerbocker Corporation.............................................. Texas 100 American International Life Assurance Company of New York................. New York 77.52/(22)/ American International Underwriters Corporation........................... New York 100 American International Underwriters Overseas, Ltd......................... Bermuda 100 A.I.G. Colombia Seguros Generales S.A.................................. Colombia 100 AIG Brasil Companhia de Seguros........................................ Brazil 50 AIG Direct Marketing Company Ltd....................................... Taiwan 100 Central Insurance Company Limited.................................. Taiwan 100 AIG Europe (Ireland) Limited........................................... Ireland 100 AIG Europe (UK) Limited................................................ England 100 AIG General Insurance (Thailand) Company Limited....................... Thailand 100 AIG General Insurance (Vietnam) Company Limited........................ Vietnam 100 AIG MEMSA Insurance Company Ltd........................................ United Arab Emirates 100 AIG Takaful B.S.C...................................................... Bahrain 100 American International Insurance Company of Puerto Rico................ Puerto Rico 100 American International Underwriters GmBH............................... Germany 100 La Meridional Compania Argentina de Seguros............................ Argentina 100 La Seguridad de Centroamerica Compania de Seguros S.A.................. Guatemala 100 Richmond Insurance Company Limited..................................... Bermuda 100 Underwriters Adjustment Company........................................ Panama 100 American Life Insurance Company........................................... Delaware 100 AIG Life (Bulgaria) Z.D.A.D............................................ Bulgaria 100 ALICO, S.A............................................................. France 100 First American Polish Life Insurance and Reinsurance Company, S.A...... Poland 100 Inversiones Interamericana S.A. (Chile)................................ Chile 100 Pharaonic American Life Insurance Company.............................. Egypt 71.63 Unibanco AIG Seguros S.A............................................... Brazil 47.80/(23)/ American Security Life Insurance Company, Ltd............................. Lichtenstein 100 Delaware American Life Insurance Company.................................. Delaware 100 HSB Group, Inc............................................................ Delaware 100 The Hartford Steam Boiler Inspection and Insurance Company............. Connecticut 100 The Hartford Steam Boiler Inspection and Insurance Company of Connecticut...................................................... Connecticut 100
C-34 Subsidiaries of AIG
Percentage of Voting Securities Jurisdiction of held by Incorporation Immediate or Organization Parent/(1)/ --------------- ----------- HSB Engineering Insurance Limited.................................... England 100 The Boiler Inspection and Insurance Company of Canada............ Canada 100 Mt. Mansfield Company, Inc..................................................... Vermont 100 The Philippine American Life and General Insurance Company..................... Philippines 99.78 Pacific Union Assurance Company............................................. California 100 Philam Equitable Life Assurance Company, Inc................................ Philippines 95.31 Philam Insurance Company, Inc............................................... Philippines 100 United Guaranty Corporation.................................................... North Carolina 36.31/(24)/ A.I.G. Mortgage Holdings Israel, Ltd........................................ Israel 82.12 E.M.I.-Ezer Mortgage Insurance Company, Limited......................... Israel 100 AIG United Guaranty Agenzia DI Assicurazione S.R.L.......................... Italy 100 AIG United Guaranty Insurance (Asia) Limited................................ Hong Kong 100 AIG United Guaranty Re, Ltd................................................. Ireland 100 United Guaranty Insurance Company........................................... North Carolina 100 United Guaranty Mortgage Insurance Company.................................. North Carolina 100 United Guaranty Mortgage Insurance Company Canada........................... Canada 100 United Guaranty Mortgage Insurance Company of North Carolina................ North Carolina 100 United Guaranty Partners Insurance Company.................................. Vermont 80 United Guaranty Residential Insurance Company............................... North Carolina 75.03/(25)/ United Guaranty Credit Insurance Company................................ North Carolina 100 United Guaranty Insurance Company of North Carolina..................... North Carolina 100 United Guaranty Mortgage Indemnity Company.............................. North Carolina 100 United Guaranty Residential Insurance Company of North Carolina................ North Carolina 100 United Guaranty Services, Inc.................................................. North Carolina 100
-------- (1)Percentages include directors' qualifying shares. (2)All subsidiaries listed are consolidated in the accompanying financial statements. Certain subsidiaries have been omitted from the tabulation. The omitted subsidiaries, when considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary. (3)The common stock is owned approximately 14.1 percent by C.V. Starr & Co., Inc., Edward E. Matthews, Maurice R. and Corinne P. Greenberg Joint Tenancy Company, LLC, Starr International Company, Inc., The Maurice R. Greenberg and Corinne P. Greenberg Family Foundation, Inc. and the Universal Foundation, Inc. (4)Also owned 1 percent by AIG Global Investment Corp. (5)Also owned 1 percent by AIG Capital Corporation. (6)Also owned 32.77 percent by National Union Fire Insurance Company of Pittsburgh, Pa. (7)Also owned 10 percent by AIG Matched Funding Corp. (8)Also owned 10 percent by a subsidiary of American Life Insurance Company. (9)Also owned 21 percent by Commerce and Industry Insurance Company. (10)Also owned 8 percent by The Insurance Company of the State of Pennsylvania, 32 percent by National Union Fire Insurance Company of the Pittsburgh, Pa., and 8 percent by AIG Casualty Company. (11)Also owned 50 percent by The Insurance Company of the State of Pennsylvania. (12)Also owned 25 percent by Commerce and Industry Insurance Company and 25 percent by AIU Insurance Company. (13)Also owned by 11 other AIG subsidiaries. (14)Also owned by 11 other AIG Subsidiaries. (15)Also owned 25.85 percent by AIG. (16)Also owned 20 percent by the Insurance Company of the State of Pennsylvania and 10 percent by AIG Casualty Company. C-35 (17)Also owned 20 percent by the Insurance Company of the State of Pennsylvania and 10 percent by AIG Casualty Company. (18)Also owned 16.85 percent by American Home Assurance Company, 6.34 percent by Commerce and Industry Insurance Company and 6.34 percent by New Hampshire Insurance Company. (19)100 percent held together with AIG companies. (20)Also owned 30 percent by AIG Retirement Services, Inc. (21)Also owned 48.15 percent by American General Life and Accident Insurance Company. (22)Also owned 22.48 percent by American Home Assurance Company. (23)Also owned 1.7 percent by American International Underwriters Overseas, Ltd. and 0.48 percent by American Home Assurance Company. (24)Also owned 45.88 percent by National Union Fire Insurance Company of Pittsburgh, Pa., 16.95% by New Hampshire Insurance Company and 0.86 percent by The Insurance Company of the State of Pennsylvania. (25)Also owned 24.97 percent by United Guaranty Residential Insurance Company of North Carolina. The Registrant is a separate account of American General Life Insurance Company (Depositor). Item 29. Indemnification 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. American General Life Insurance Company Except as otherwise required by applicable law: (a) The company shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or on behalf of the company) by reason of the fact that he is or was director, officer, or employee or agent of the company, or is or was serving at the request of the company as director, officer, employee or agent of another company or enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding; provided that he (1) acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the company; and, (2) with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, by itself, create a presumption that the person did not act in good faith and in a manner he reasonably believed to C-36 be in or not opposed to the best interest of the company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was lawful. (b) The company shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or on behalf of the company to procure a judgment in the company's favor, by reason of the fact that he is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company or enterprise, against expenses (including attorney's fees), judgments and amounts paid in settlement actually and reasonably incurred by him in connection with the defense or settlement of such action, suit or proceeding; provided that he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the company, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the company unless and only to the extent that the court in which such action, suit or proceeding was brought or any other court of competent jurisdiction shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity. (c) To the extent that a director, officer, or employee or agent of the company has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under paragraphs (a) and (b) above (unless ordered by a court or made pursuant to a determination by a court as hereinafter provided) shall be made by the company upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances and he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (1) by the Board by a majority of a quorum consisting of directors who were not parties to such action, suit or proceeding (disinterested), or (2) by a committee of disinterested directors designated by majority vote of disinterested directors, even though less than a quorum, or (3) by independent legal counsel in a written opinion, and such legal counsel was selected by a majority vote of a quorum of the disinterested directors, or (4) by the stockholders. In the absence of a determination that indemnification is proper, the director, officer or employee may apply to the court conducting the proceeding or another court of competent jurisdiction which shall determine whether the director, officer, employee or agent has met the applicable standard of conduct set forth in paragraphs (a) and (b). If the court shall so determine, indemnification shall be made under paragraph (a) or (b) as the case may be. (e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the company in advance of the final disposition of such action, suit or proceeding as authorized by the Board in the manner provided in paragraph (d) upon receipt of a written instrument acceptable to the Board by or on behalf of the director, officer, employee or agent to repay such C-37 amount unless it shall ultimately be determined that he is entitled to be indemnified by the company as authorized in this section. (f) The indemnification provided by the company's By-laws shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any agreement, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit or the heirs, executors and administrators of such a person. (g) The company shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company, or enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the company would have the power to indemnify him against such liability under the provisions of the company's By-Laws. Item 30. Principal Underwriters (a) Other Activity. Registrant's principal underwriter, American General Equity Services Corporation, also acts as principal underwriter for American General Life Insurance Company Separate Account A and American General Life Insurance Company Separate Account D, which both offer interests in variable annuities. American General Equity Services Corporation also acts as principal underwriter for certain other separate accounts of American General Life Insurance Company affiliates. (b) Management. Name and Principal Positions and Offices with Underwriter Business Address American General Equity Services Corporation ------------------ ---------------------------------------------------- Matthew E. Winter Director and Chairman of the Board of Directors 2929 Allen Parkway Houston, TX 77019 Mark R. McGuire Director and Senior Vice President 2727 Allen Parkway Houston, TX 77019 David W. O'Leary Director, President and Chief Executive Officer 2929 Allen Parkway Houston, TX 77019 Larry E. Blews Vice President and Chief Compliance Officer 2727-A Allen Parkway Houston, TX 77019 C-38 Name and Principal Positions and Offices with Underwriter Business Address American General Equity Services Corporation ------------------ ---------------------------------------------------- Robert F. Herbert, Jr. Vice President 2727-A Allen Parkway Houston, TX 77019 Deanna D. Osmonson Vice President and Anti-Money Laundering Compliance 2727 Allen Parkway Officer Houston, TX 77019 T. Clay Spires Vice President and Tax Officer 2727-A Allen Parkway Houston, TX 77019 Rhonda Washington Treasurer and Controller 2727 Allen Parkway Houston, TX 77019 Elizabeth M. Tuck Secretary 70 Pine Street New York, NY 10270 Amy Marie Cinquegrana Assistant Secretary 70 Pine Street New York, NY 10270 Sarah L. Hosker Assistant Secretary 70 Pine Street New York, NY 10270 Lauren W. Jones Assistant Secretary 2929 Allen Parkway Houston, TX 77019 John D. Fleming Assistant Treasurer 2929 Allen Parkway Houston, TX 77019 Barbara J. Moore Assistant Tax Officer 2919 Allen Parkway Houston, TX 77019 C-39 (c) Compensation From the Registrant.
Compensation on Events Occasioning Net Underwriting the Deduction Discounts and of a Deferred Brokerage Other Name of Principal Underwriter Commissions Sales Load Commissions Compensation ----------------------------- ---------------- ------------- ----------- ------------ American General Equity Services Corporation...... 0 0 0 0
Item 31. Location of Accounts and Records All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-1 through 31a-3 thereunder, are maintained and in the custody of American General Life Insurance Company at its principal executive office located at 2727-A Allen Parkway, Houston, Texas 77019-2191 or at American General Life Insurance Company's Administrative Office located at #1 Franklin Square, Springfield, Illinois 62713. Item 32. Management Services Not applicable. Item 33. Fee Representation 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. Undertakings of the Depositor During any time there are insurance obligations outstanding and covered by the guarantee issued by the American Home Assurance Company ("American Home Guarantee Period"), filed as an exhibit to this Registration Statement (the "American Home Guarantee"), the Depositor hereby undertakes to provide notice to policy owners covered by the American Home Guarantee promptly after the happening of significant events related to the American Home Guarantee. These significant events include: (i) termination of the American Home Guarantee that has a material adverse effect on the policy owner's rights under the American Home Guarantee; (ii) a default under the American Home Guarantee that has a material adverse effect on the policy owner's rights under the American Home Guarantee; or (iii) the insolvency of American Home Assurance Company ("American Home"). Depositor hereby undertakes during the American Home Guarantee Period to cause Registrant to file post-effective amendments to this Registration Statement as frequently as is necessary to ensure that the current annual audited statutory financial statements of American Home in the Registration Statement are updated to be as of a date not more than 16 months prior to the effective date of this Registration Statement, and to cause Registrant to include as an exhibit to C-40 this Registration Statement the consent of the independent registered public accounting firm of American Home regarding such financial statements. During the American Home Guarantee Period, the Depositor hereby undertakes to include in the prospectus to policy owners, an offer to supply the Statement of Additional Information which shall contain the annual audited statutory financial statements of American Home, free of charge upon a policy owner's request. C-41 POWERS OF ATTORNEY Each person whose signature appears below hereby appoints Robert F. Herbert, Jr., Gary W. Parker and Kyle L. Jennings and each of them, any one of whom may act without the joinder of the others, as his/her attorney-in-fact to sign on his/her behalf and in the capacity stated below and to file all amendments to this Registration Statement, which amendment or amendments may make such changes and additions to this Registration Statement as such attorney-in-fact may deem necessary or appropriate. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, American General Life Insurance Company Separate Account VL-R, certifies that it meets all of the requirements for effectiveness of this amended Registration Statement under Rule 485(a) under the Securities Act of 1933 and has duly caused this amended Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Houston, and State of Texas on the 21st day of August, 2007. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R (Registrant) BY: AMERICAN GENERAL LIFE INSURANCE COMPANY (On behalf of the Registrant and itself) BY: ROBERT F. HERBERT, JR. ------------------------------ ROBERT F. HERBERT, JR. SENIOR VICE PRESIDENT, TREASURER AND CONTROLLER AGL - 1 Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed below by the following persons, on behalf of the Depositor and Registrant, in the capacities and on the dates indicated. Signature Title Date --------- ----------------------------- --------------- RODNEY O. MARTIN, JR. Director and Chairman of the August 21, 2007 --------------------- Board of Directors RODNEY O. MARTIN, JR. MATTHEW E. WINTER Director, President and Chief August 21, 2007 --------------------- Executive Officer MATTHEW E. WINTER MARY JANE B. FORTIN Director, Executive Vice August 21, 2007 --------------------- President and Chief Financial MARY JANE B. FORTIN Officer M. BERNARD AIDINOFF Director August 21, 2007 --------------------- M. BERNARD AIDINOFF DAVID L. HERZOG Director August 21, 2007 --------------------- DAVID L. HERZOG RICHARD A. HOLLAR Director August 21, 2007 --------------------- RICHARD A. HOLLAR ROYCE G. IMHOFF II Director August 21, 2007 --------------------- ROYCE G. IMHOFF II AGL - 2 Signature Title Date --------- ----------------------------- --------------- DAVID W. O'LEARY Director August 21, 2007 -------------------- DAVID W. O'LEARY GARY D. REDDICK Director August 21, 2007 -------------------- GARY D. REDDICK CHRISTOPHER J. SWIFT Director August 21, 2007 -------------------- CHRISTOPHER J. SWIFT JAMES W. WEAKLEY Director August 21, 2007 -------------------- JAMES W. WEAKLEY AGL - 3 333-65170 811-08561 SIGNATURES American Home Assurance Company has caused this amended Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of New York, and State of New York on the 21 day of August, 2007. AMERICAN HOME ASSURANCE COMPANY By: ROBERT S. SCHIMEK ------------------------------ ROBERT S. SCHIMEK SENIOR VICE PRESIDENT AND TREASURER AH - 1 This amended Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date --------- ----------------------------- --------------- *KRISTIAN PHILIP MOOR Director and Chairman August 21, 2007 ------------------------- KRISTIAN PHILIP MOOR *JOHN QUINLAN DOYLE Director and President August 21, 2007 ------------------------- JOHN QUINLAN DOYLE *ROBERT S. SCHIMEK Director, Senior Vice August 21, 2007 ------------------------- President, and Treasurer ROBERT S. SCHIMEK *MERTON BERNARD AIDINOFF Director August 21, 2007 ------------------------- MERTON BERNARD AIDINOFF *CHARLES H. DANGELO Director August 21, 2007 ------------------------- CHARLES H. DANGELO *DAVID NEIL FIELDS Director August 21, 2007 ------------------------- DAVID NEIL FIELDS *KENNETH VINCENT HARKINS Director August 21, 2007 ------------------------- KENNETH VINCENT HARKINS *DAVID LAWRENCE HERZOG Director August 21, 2007 ------------------------- DAVID LAWRENCE HERZOG *WORTH GORDON KNIGHT, JR. Director August 21, 2007 ------------------------- WORTH GORDON KNIGHT, JR. *ROBERT EDWARD LEWIS Director August 21, 2007 ------------------------- ROBERT EDWARD LEWIS *WIN JAY NEUGER Director August 21, 2007 ------------------------- WIN JAY NEUGER *NICHOLAS SHAW TYLER Director August 21, 2007 ------------------------- NICHOLAS SHAW TYLER *NICHOLAS CHARLES WALSH Director August 21, 2007 ------------------------- NICHOLAS CHARLES WALSH *BY: ROBERT S. SCHIMEK -------------------------- ROBERT S. SCHIMEK ATTORNEY-IN-FACT (Exhibit (r)(3) to the Registration Statement) AH - 2 EXHIBIT INDEX Item 26. Exhibits (d)(4) Form of Overloan Protection Rider, Form No. 07620. (n)(1) Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP. (r)(3) Power of Attorney with respect to Registration Statements and Amendments thereto removing Neil Anthony Faulkner, Director, and adding Worth Gordon Knight, Jr., Director, of American Home Assurance Company.
E-1