0001193125-13-185997.txt : 20130430
0001193125-13-185997.hdr.sgml : 20130430
20130430131359
ACCESSION NUMBER: 0001193125-13-185997
CONFORMED SUBMISSION TYPE: 485BPOS
PUBLIC DOCUMENT COUNT: 4
FILED AS OF DATE: 20130430
DATE AS OF CHANGE: 20130430
EFFECTIVENESS DATE: 20130430
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AGL SEPARATE ACCOUNT VL-R
CENTRAL INDEX KEY: 0001051485
IRS NUMBER: 250598210
STATE OF INCORPORATION: TX
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-43264
FILM NUMBER: 13795964
BUSINESS ADDRESS:
STREET 1: 2727-A ALLEN PARKWAY
CITY: HOUSTON
STATE: TX
ZIP: 77019
BUSINESS PHONE: 713-522-1111
MAIL ADDRESS:
STREET 1: 2727-A ALLEN PARKWAY
CITY: HOUSTON
STATE: TX
ZIP: 77019
FORMER COMPANY:
FORMER CONFORMED NAME: AGL SEPARATE ACCOUNT VL R
DATE OF NAME CHANGE: 19990907
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN GENERAL LIFE INSURANCE CO SEPARATE ACCOUNT VL R
DATE OF NAME CHANGE: 19971216
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AGL SEPARATE ACCOUNT VL-R
CENTRAL INDEX KEY: 0001051485
IRS NUMBER: 250598210
STATE OF INCORPORATION: TX
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-08561
FILM NUMBER: 13795965
BUSINESS ADDRESS:
STREET 1: 2727-A ALLEN PARKWAY
CITY: HOUSTON
STATE: TX
ZIP: 77019
BUSINESS PHONE: 713-522-1111
MAIL ADDRESS:
STREET 1: 2727-A ALLEN PARKWAY
CITY: HOUSTON
STATE: TX
ZIP: 77019
FORMER COMPANY:
FORMER CONFORMED NAME: AGL SEPARATE ACCOUNT VL R
DATE OF NAME CHANGE: 19990907
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN GENERAL LIFE INSURANCE CO SEPARATE ACCOUNT VL R
DATE OF NAME CHANGE: 19971216
0001051485
S000000574
AGL SEPARATE ACCOUNT VL-R
C000001616
AGL Platinum Investor III VUL (333-43264 Form N-6) Policy No. 00600
485BPOS
1
d489971d485bpos.txt
POST-EFFECTIVE AMENDMENT NO. 22 (FORM N-6) AGL PLATINUM INVESTOR III VUL
Registration Nos. 333-43264
811-08561
As filed With the Securities and Exchange Commission on April 30, 2013
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. [ 22 ]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [ 167 ]
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) 831-4954
(Depositor's Telephone Number, Including Area Code)
AMERICAN HOME ASSURANCE COMPANY
(Name of Guarantor)
175 Water Street, 18/th/ Floor
New York, New York 10038
(212) 770-7000
(Guarantor's Telephone Number, Including Area Code)
Jennifer P. Powell, Esq.
Associate General Counsel
American General Life Insurance Company
2919 Allen Parkway, L4-01
Houston, Texas 77019-2111
(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)
[ X ] on April 30, 2013 pursuant to paragraph (b)
[ ] 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.
PLATINUM INVESTOR(R) III
FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICIES
(the "Policies") issued by
AMERICAN GENERAL LIFE INSURANCE COMPANY
("AGL") through its Separate Account VL-R
THIS PROSPECTUS IS DATED
MAY 1, 2013
This prospectus describes Platinum Investor III flexible premium variable
universal life insurance Policies issued by AGL. Platinum Investor III Policies
provide life insurance coverage with flexibility in death benefits, PREMIUM
PAYMENTS and INVESTMENT OPTIONS. During the lifetime of the INSURED PERSON you
may designate or change the BENEFICIARY to whom Platinum Investor III pays the
DEATH BENEFIT upon the insured person's death. You choose one of three death
benefit options. We guarantee a death benefit if the MONTHLY GUARANTEE PREMIUM
is paid and your Policy has not lapsed. AGL no longer sells Platinum Investor
III Policies.
For information on how to contact AGL, please see "CONTACT INFORMATION" page 5.
The Index of Special Words and Phrases on page 61 will refer you to pages that
contain more about many of the words and phrases that we use. All of the words
and phrases listed in the Index will be underlined and written in BOLD the
first time they appear in this prospectus.
This prospectus generally describes only the variable portions of the Policy,
except where the FIXED ACCOUNT is specifically mentioned. Please read this
prospectus carefully and keep it for future reference.
The AGL declared fixed interest account ("Fixed Account") is the fixed
investment option for these Policies. You can also use AGL's SEPARATE ACCOUNT
VL-R ("Separate Account") to invest in the Platinum Investor III VARIABLE
INVESTMENT OPTIONS. Currently, the Platinum Investor III variable investment
options each purchase shares of a corresponding FUND of:
. AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
("Invesco V.I.")
. The Alger Portfolios ("Alger")
. American Century(R) Variable Portfolios, Inc.
("American Century(R) VP")
. Fidelity(R) Variable Insurance Products ("Fidelity(R) VIP")
. Franklin Templeton Variable Insurance Products Trust ("Franklin
Templeton VIP")
. Janus Aspen Series ("Janus Aspen")
. JPMorgan Insurance Trust ("JPMorgan IT")
. MFS(R) Variable Insurance Trust ("MFS(R) VIT")
. Neuberger Berman Advisers Management Trust ("Neuberger Berman AMT")
. Oppenheimer Variable Account Funds ("Oppenheimer")
. PIMCO Variable Insurance Trust ("PIMCO")
. Pioneer Variable Contracts Trust ("Pioneer")
. Putnam Variable Trust ("Putnam VT")
. SunAmerica Series Trust ("SunAmerica ST")
. VALIC Company I ("VALIC Co. I")
. Vanguard(R) Variable Insurance Fund ("Vanguard VIF")
See "Variable Investment Options" on page 20 for a complete list of the
variable investment options and the respective advisers and sub-advisers of the
corresponding Funds. You should also read the prospectuses of the Funds
underlying the variable investment options that may interest you. You can
request free copies from your AGL representative or from our ADMINISTRATIVE
CENTER shown under "Contact Information" on page 5.
THERE IS NO GUARANTEED CASH SURRENDER VALUE FOR AMOUNTS ALLOCATED TO THE
VARIABLE INVESTMENT OPTIONS.
IF THE CASH SURRENDER VALUE (THE CASH VALUE REDUCED BY ANY LOAN BALANCE) IS
INSUFFICIENT TO COVER THE CHARGES DUE UNDER THE POLICY, THE POLICY MAY
TERMINATE WITHOUT VALUE.
BUYING THIS POLICY MIGHT NOT BE A GOOD WAY OF REPLACING YOUR EXISTING INSURANCE
OR ADDING MORE INSURANCE IF YOU ALREADY OWN A FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICY. YOU MAY WISH TO CONSULT WITH YOUR INSURANCE
REPRESENTATIVE OR FINANCIAL ADVISER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE POLICIES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD OR ANY
SIMILAR AGENCY. THEY ARE NOT A DEPOSIT OR OTHER OBLIGATION OF, NOR ARE THEY
GUARANTEED OR ENDORSED BY, ANY BANK OR DEPOSITORY INSTITUTION. AN INVESTMENT IN
A VARIABLE UNIVERSAL LIFE INSURANCE POLICY IS SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED.
THE POLICIES ARE NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT OFFER
THE POLICIES IN ANY JURISDICTION WHERE THEY CANNOT BE LAWFULLY SOLD. YOU SHOULD
RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS, OR ON SALES
MATERIALS WE HAVE APPROVED OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
TABLE OF CONTENTS
POLICY BENEFITS/RISKS SUMMARY............................................................ 6
POLICY BENEFITS.......................................................................... 6
YOUR SPECIFIED AMOUNT................................................................. 6
DEATH BENEFIT......................................................................... 6
DEATH BENEFIT PROCEEDS............................................................ 6
DEATH BENEFIT OPTION 1, OPTION 2 AND OPTION 3..................................... 6
DEATH BENEFIT OPTION 1......................................................... 7
DEATH BENEFIT OPTION 2......................................................... 7
DEATH BENEFIT OPTION 3......................................................... 7
FULL SURRENDERS, PARTIAL SURRENDERS, TRANSFERS, AND POLICY LOANS...................... 7
FULL SURRENDERS................................................................... 7
PARTIAL SURRENDERS................................................................ 7
TRANSFERS......................................................................... 7
POLICY LOANS...................................................................... 7
PREMIUMS.............................................................................. 7
FLEXIBILITY OF PREMIUMS........................................................... 7
FREE LOOK......................................................................... 8
THE POLICY............................................................................ 8
OWNERSHIP RIGHTS.................................................................. 8
SEPARATE ACCOUNT.................................................................. 8
FIXED ACCOUNT..................................................................... 8
ACCUMULATION VALUE................................................................ 8
PAYMENT OPTIONS................................................................... 8
TAX BENEFITS...................................................................... 8
SUPPLEMENTAL BENEFITS AND RIDERS...................................................... 8
POLICY RISKS............................................................................. 9
INVESTMENT RISK....................................................................... 9
RISK OF LAPSE......................................................................... 9
TAX RISKS............................................................................. 9
PARTIAL SURRENDER AND FULL SURRENDER RISKS............................................ 10
POLICY LOAN RISKS..................................................................... 10
PORTFOLIO RISKS.......................................................................... 10
TABLES OF CHARGES........................................................................ 11
GENERAL INFORMATION...................................................................... 17
AMERICAN GENERAL LIFE INSURANCE COMPANY............................................... 17
SEPARATE ACCOUNT VL-R................................................................. 17
GUARANTEE OF INSURANCE OBLIGATIONS.................................................... 18
ADDITIONAL INFORMATION................................................................ 18
COMMUNICATION WITH AGL................................................................ 18
ADMINISTRATIVE CENTER............................................................. 18
E-DELIVERY, E-SERVICE, TELEPHONE TRANSACTIONS AND WRITTEN TRANSACTIONS............ 19
E-DELIVERY..................................................................... 19
E-SERVICE...................................................................... 19
E-SERVICE TRANSACTIONS, TELEPHONE TRANSACTIONS AND WRITTEN TRANSACTIONS........ 19
ONE-TIME PREMIUM PAYMENTS USING E-SERVICE......................................... 20
TELEPHONE TRANSACTIONS............................................................ 20
GENERAL........................................................................... 20
VARIABLE INVESTMENT OPTIONS........................................................... 20
VOTING PRIVILEGES..................................................................... 24
FIXED ACCOUNT......................................................................... 25
OUR GENERAL ACCOUNT............................................................... 25
HOW WE DECLARE INTEREST........................................................... 25
Illustrations......................................................................... 25
2
POLICY FEATURES.................................................................... 26
AGE............................................................................. 26
DEATH BENEFITS.................................................................. 26
YOUR SPECIFIED AMOUNT OF INSURANCE.......................................... 26
YOUR DEATH BENEFIT.......................................................... 26
REQUIRED MINIMUM DEATH BENEFIT.............................................. 27
BASE COVERAGE AND SUPPLEMENTAL COVERAGE..................................... 28
PREMIUM PAYMENTS................................................................ 29
PREMIUM PAYMENTS............................................................ 29
PREMIUM PAYMENTS AND TRANSACTION REQUESTS IN GOOD ORDER..................... 29
LIMITS ON PREMIUM PAYMENTS.................................................. 30
CHECKS...................................................................... 30
PLANNED PERIODIC PREMIUMS................................................... 30
MONTHLY GUARANTEE PREMIUMS.................................................. 31
FREE LOOK PERIOD............................................................ 32
CHANGING YOUR INVESTMENT OPTION ALLOCATIONS..................................... 32
FUTURE PREMIUM PAYMENTS..................................................... 32
TRANSFERS OF EXISTING ACCUMULATION VALUE.................................... 32
CHARGES.................................................................. 32
RESTRICTIONS ON TRANSFERS FROM VARIABLE INVESTMENT OPTIONS............... 32
RESTRICTIONS ON TRANSFERS FROM THE FIXED ACCOUNT......................... 33
DOLLAR COST AVERAGING....................................................... 33
AUTOMATIC REBALANCING....................................................... 33
MARKET TIMING............................................................... 34
RESTRICTIONS INITIATED BY THE FUNDS AND INFORMATION SHARING OBLIGATIONS..... 35
CHANGING THE SPECIFIED AMOUNT OF INSURANCE...................................... 35
INCREASE IN COVERAGE........................................................ 35
DECREASE IN COVERAGE........................................................ 36
CHANGING DEATH BENEFIT OPTIONS.................................................. 36
CHANGE OF DEATH BENEFIT OPTION.............................................. 36
TAX CONSEQUENCES OF CHANGES IN INSURANCE COVERAGE........................... 37
EFFECT OF CHANGES IN INSURANCE COVERAGE ON GUARANTEE PERIOD................. 37
EFFECTIVE DATE OF POLICY AND RELATED TRANSACTIONS............................... 37
VALUATION DATES, TIMES, AND PERIODS......................................... 37
FUND PRICING................................................................ 37
DATE OF RECEIPT............................................................. 37
COMMENCEMENT OF INSURANCE COVERAGE.......................................... 38
DATE OF ISSUE; POLICY MONTHS AND YEARS...................................... 38
MONTHLY DEDUCTION DAYS...................................................... 38
COMMENCEMENT OF INVESTMENT PERFORMANCE...................................... 38
EFFECTIVE DATE OF OTHER PREMIUM PAYMENTS AND REQUESTS THAT YOU MAKE......... 38
REPORTS TO POLICY OWNERS........................................................ 39
ADDITIONAL BENEFIT RIDERS.......................................................... 39
RIDERS.......................................................................... 39
ACCIDENTAL DEATH BENEFIT RIDER.............................................. 39
CHILDREN'S INSURANCE BENEFIT RIDER.......................................... 39
MATURITY EXTENSION RIDER.................................................... 39
SPOUSE TERM RIDER........................................................... 40
TERMINAL ILLNESS RIDER...................................................... 41
WAIVER OF MONTHLY DEDUCTION RIDER........................................... 41
TAX CONSEQUENCES OF ADDITIONAL RIDER BENEFITS................................... 41
POLICY TRANSACTIONS................................................................ 42
E-DELIVERY, E-SERVICE, TELEPHONE TRANSACTIONS AND WRITTEN TRANSACTIONS.......... 42
WITHDRAWING POLICY INVESTMENTS.................................................. 42
FULL SURRENDER.............................................................. 42
PARTIAL SURRENDER........................................................... 42
3
EXCHANGE OF POLICY IN CERTAIN STATES........................................................ 42
POLICY LOANS................................................................................ 42
PREFERRED LOAN INTEREST RATE................................................................ 43
MATURITY OF YOUR POLICY..................................................................... 43
TAX CONSIDERATIONS.......................................................................... 44
POLICY PAYMENTS.................................................................................... 44
PAYMENT OPTIONS................................................................................. 44
CHANGE OF PAYMENT OPTION.................................................................... 44
TAX IMPACT.................................................................................. 45
THE BENEFICIARY................................................................................. 45
ASSIGNMENT OF A POLICY.......................................................................... 45
PAYMENT OF PROCEEDS............................................................................. 45
GENERAL..................................................................................... 45
DELAY OF FIXED ACCOUNT PROCEEDS............................................................. 45
DELAY FOR CHECK CLEARANCE................................................................... 45
DELAY OF SEPARATE ACCOUNT VL-R PROCEEDS..................................................... 45
DELAY TO CHALLENGE COVERAGE................................................................. 46
DELAY REQUIRED UNDER APPLICABLE LAW......................................................... 46
ADDITIONAL RIGHTS THAT WE HAVE..................................................................... 46
VARIATIONS IN POLICY OR INVESTMENT OPTION TERMS AND CONDITIONS..................................... 47
UNDERWRITING AND PREMIUM CLASSES............................................................ 47
POLICIES PURCHASED THROUGH "INTERNAL ROLLOVERS"............................................. 47
STATE LAW REQUIREMENTS...................................................................... 47
EXPENSES OR RISKS........................................................................... 47
UNDERLYING INVESTMENTS...................................................................... 48
CHARGES UNDER THE POLICY........................................................................... 48
STATUTORY PREMIUM TAX CHARGE................................................................ 48
TAX CHARGE BACK............................................................................. 48
PREMIUM EXPENSE CHARGE...................................................................... 48
DAILY CHARGE (MORTALITY AND EXPENSE RISK FEE)............................................... 48
FEES AND EXPENSES AND MONEY MARKET INVESTMENT OPTIONS....................................... 48
FLAT MONTHLY CHARGE......................................................................... 48
MONTHLY CHARGE PER $1,000 OF BASE COVERAGE.................................................. 48
MONTHLY INSURANCE CHARGE.................................................................... 49
MONTHLY CHARGES FOR ADDITIONAL BENEFIT RIDERS............................................... 49
SURRENDER CHARGE............................................................................ 50
PARTIAL SURRENDER PROCESSING FEE............................................................ 51
TRANSFER FEE................................................................................ 51
ILLUSTRATIONS............................................................................... 51
POLICY LOANS................................................................................ 51
CHARGE FOR TAXES............................................................................ 51
ALLOCATION OF CHARGES....................................................................... 51
MORE ABOUT POLICY CHARGES....................................................................... 51
PURPOSE OF OUR CHARGES...................................................................... 51
GENERAL..................................................................................... 52
ACCUMULATION VALUE................................................................................. 52
YOUR ACCUMULATION VALUE..................................................................... 52
YOUR INVESTMENT OPTIONS..................................................................... 52
POLICY LAPSE AND REINSTATEMENT..................................................................... 52
FEDERAL TAX CONSIDERATIONS......................................................................... 53
TAX EFFECTS..................................................................................... 53
GENERAL..................................................................................... 53
TESTING FOR MODIFIED ENDOWMENT CONTRACT STATUS.............................................. 54
OTHER EFFECTS OF POLICY CHANGES............................................................. 54
RIDER BENEFITS.............................................................................. 54
TAXATION OF PRE-DEATH DISTRIBUTIONS IF YOUR POLICY IS NOT A MODIFIED ENDOWMENT CONTRACT..... 55
4
TAXATION OF PRE-DEATH DISTRIBUTIONS IF YOUR POLICY IS A MODIFIED ENDOWMENT CONTRACT..... 55
POLICY LAPSES AND REINSTATEMENTS........................................................ 56
DIVERSIFICATION AND INVESTOR CONTROL.................................................... 56
ESTATE AND GENERATION SKIPPING TAXES.................................................... 56
LIFE INSURANCE IN SPLIT DOLLAR ARRANGEMENTS............................................. 57
PENSION AND PROFIT-SHARING PLANS........................................................ 57
OTHER EMPLOYEE BENEFIT PROGRAMS......................................................... 58
ERISA................................................................................... 58
OUR TAXES............................................................................... 58
WHEN WE WITHHOLD INCOME TAXES........................................................... 58
TAX CHANGES............................................................................. 58
LEGAL PROCEEDINGS.............................................................................. 59
FINANCIAL STATEMENTS........................................................................... 59
REGISTRATION STATEMENTS........................................................................ 60
INDEX OF SPECIAL WORDS AND PHRASES............................................................. 61
CONTACT INFORMATION
------------------------------------------------------------------------------------------------------------------
ADDRESSES AND TELEPHONE NUMBERS: HERE IS HOW YOU CAN CONTACT US ABOUT THE PLATINUM INVESTOR III POLICIES.
------------------------------------------------------------------------------------------------------------------
ADMINISTRATIVE CENTER: HOME OFFICE: PREMIUM PAYMENTS:
--------------------------------------------------------- -------------------------- ----------------------------
(EXPRESS DELIVERY) (U.S. MAIL) 2727-A Allen Parkway (EXPRESS DELIVERY)
VUL Administration VUL Administration Houston, Texas 77019-2191 American General Life
2727-A Allen Parkway P. O. Box 4880 1-713-831-3443 Insurance Company Payment
Houston, Texas 77019-2191 Houston, Texas 1-800-340-2765 Processing Center 8430 W.
1-713-831-3443, 1-800-340-2765 77210-4880 Bryn Mawr Avenue 3rd Floor
(Hearing Impaired) 1-888-436-5256 Lockbox 0993
Fax: 1-713-620-6653 Chicago, IL 60631
(EXCEPT PREMIUM PAYMENTS) (U.S. MAIL)
Payment Processing Center
P.O. Box 0993
Carol Stream, IL 60132-0993
5
POLICY BENEFITS/RISKS SUMMARY
This summary describes the Policy's important benefits and risks. The
sections in this prospectus following this summary discuss the Policy's
benefits and other provisions in more detail.
AGL no longer sells Platinum Investor III Policies.
POLICY BENEFITS
During the insured person's lifetime, you may, within limits, (1) change the
amount of insurance, (2) borrow or withdraw amounts you have invested,
(3) choose when and how much you invest, (4) choose whether your ACCUMULATION
VALUE or amount of premiums under your Policy, upon the insured person's death,
will be added to the insurance proceeds we otherwise will pay to the
beneficiary, and (5) add or delete certain other optional benefits that we make
available by rider to your Policy. At the time of purchase, you can decide
whether your Policy will be subject to certain tax rules that maximize the cash
value or rules that maximize the insurance coverage.
You may currently allocate your accumulation value among up to 57 variable
investment options available under the Policy, each of which invests in an
underlying fund (each available portfolio is referred to in this prospectus as
a "FUND," and collectively, the "Funds"), and the Fixed Account, which credits
a specified rate of interest.
Any Policy owner whose Policy was issued before May 1, 2006 may invest in 10
investment options that are not available to any other Policy owners. There are
restrictions on the use of four additional investment options. See "Variable
Investment Options" on page 20.
Your accumulation value will vary based on the investment performance of the
variable investment options you choose and interest credited in the Fixed
Account.
YOUR SPECIFIED AMOUNT
In your application to buy a Platinum Investor III Policy, you tell us how
much life insurance coverage you want. We call this the "SPECIFIED AMOUNT" of
insurance. The Policy is available for specified amounts of $50,000 or more.
The specified amount consists of what we refer to as "BASE COVERAGE" plus any
"SUPPLEMENTAL COVERAGE" you select. You decide how much base coverage and
supplemental coverage you want. Base coverage must be at least 10% of the
specified amount. We pay compensation to your insurance agent's broker-dealer
for the sale of both base and supplemental coverages. We pay a different level
of compensation based on the amounts of base and supplemental coverages you
select. See "Base coverage and supplemental coverage" on page 28.
DEATH BENEFIT
.. Death Benefit Proceeds: We pay the death benefit proceeds (reduced by any
outstanding POLICY LOANS and increased by any unearned LOAN INTEREST) to the
beneficiary when the insured person dies. We provide a guarantee of a death
benefit, contingent upon payment of the required premiums, equal to the
specified amount (less any indebtedness) and any applicable benefit riders
for a specified period. This guarantee is not applicable if your Policy has
lapsed.
.. Death Benefit Option 1, Option 2 and Option 3: Owners whose Policies were
issued before June 1, 2002 could choose only death benefit OPTION 1 or death
benefit OPTION 2. You can choose death benefit Option 1 or Option 2 at the
time of your application or at any later time before the death of the
insured person. You can choose death benefit OPTION 3 only at the time of
your application. You must choose one of the three Options when you apply
for your Policy.
6
. Death Benefit Option 1 is the specified amount on the date of the
insured person's death.
. Death Benefit Option 2 is the sum of (a) the specified amount on the
date of the insured person's death and (b) the Policy's accumulation
value as of the date of death.
. Death Benefit Option 3 is the sum of (a) the death benefit we would pay
under Option 1 and (b) the cumulative amount of premiums you paid for
the Policy and any riders. The death benefit payable will be reduced by
any amounts waived under the Waiver of Monthly Deduction Rider and any
PARTIAL SURRENDERS. Additional premiums you pay for the Policy and any
riders following a partial surrender are not considered part of the
"cumulative amount of premiums you paid" until the total value of the
premiums paid is equivalent to or greater than the amount surrendered.
Federal tax law may require us to increase the death benefit under any of
the above death benefit Options. See "REQUIRED MINIMUM DEATH BENEFIT" on page
27.
FULL SURRENDERS, PARTIAL SURRENDERS, TRANSFERS, AND POLICY LOANS
.. Full Surrenders: At any time while the Policy is in force, you may SURRENDER
your Policy in full. If you do, we will pay you the accumulation value, less
any Policy loans, plus any unearned loan interest, and less any surrender
charge that then applies. We call this amount your "CASH SURRENDER VALUE."
You cannot REINSTATE a surrendered Policy. A full surrender MAY HAVE ADVERSE
TAX CONSEQUENCES.
.. Partial Surrenders: You may, at any time after the first POLICY YEAR, make a
partial surrender of your Policy's cash surrender value. A partial surrender
must be at least $500. We do not allow partial surrenders that would reduce
the death benefit below $50,000. A partial surrender is also subject to any
surrender charge that then applies. A PARTIAL SURRENDER MAY HAVE ADVERSE TAX
CONSEQUENCES.
.. Transfers: Within certain limits, you may make TRANSFERS among the variable
investment options and the Fixed Account. You may make up to twelve
transfers of accumulation value among the variable investment options in
each Policy year without charge. We will assess a $25 charge for each
transfer after the 12th transfer in a Policy year. There are special limits
on transfers involving the Fixed Account.
.. Policy Loans: You may take a loan from your Policy at any time. The maximum
loan amount you may take is equal to your Policy's cash surrender value less
the loan interest that will be payable on your loan to your next Policy
anniversary. The minimum loan you may take is $500 or, if less, an amount
equal to your Policy's cash surrender value less the loan interest payable
to your next Policy anniversary. We charge you interest on your loan at an
annual effective rate of 4.75%, which is equal to 4.54% payable in advance.
We credit interest monthly on loaned amounts; we guarantee an annual
effective interest rate of 4.00%. After the tenth Policy year, you may take
a PREFERRED LOAN from your Policy. You may increase your risk of LAPSE if
you take a loan. LOANS MAY HAVE ADVERSE TAX CONSEQUENCES.
PREMIUMS
.. Flexibility of Premiums: After you pay the initial premium, you can pay
premiums at any time (prior to the Policy's MATURITY) and in any amount less
than the maximum amount allowed under tax laws. You can select a premium
payment plan to pay "PLANNED PERIODIC PREMIUMS" monthly, quarterly,
semiannually, or annually. You are not required to pay premiums according to
the plan. You may also choose to have premiums automatically deducted from
your bank account or other source under
7
our automatic payment plan. Under certain circumstances, we may limit the
amount of a premium payment or reject a premium payment.
.. Free Look: When you receive your Policy, the FREE LOOK period begins. You
may return your Policy during this period and receive a refund. We will
refund the greater of (i) any premium payments received by us or (ii) your
accumulation value plus any charges that have been deducted prior to
allocation to your specified investment options. The free look period
generally expires 10 days after you receive the Policy.
THE POLICY
.. Ownership Rights: While the insured person is living, you, as the owner of
the Policy, may exercise all of the rights and options described in the
Policy. These rights include selecting and changing the beneficiary,
changing the owner, and assigning the Policy.
.. Separate Account: You may direct the money in your Policy to any of the
available variable investment options of the Separate Account. Each variable
investment option invests exclusively in one of the Funds listed in this
prospectus. The value of your investment in a variable investment option
depends on the investment results of the related Fund. We do not guarantee
any minimum cash value for amounts allocated to the variable investment
options. If the Fund investments go down, the value of a Policy can decline.
.. Fixed Account: You may place amounts in the Fixed Account where it earns
interest at the rate of 4% annually. We may declare higher rates of
interest, but are not obligated to do so.
.. Accumulation Value: Your accumulation value is the sum of your amounts in
the variable investment options and the Fixed Account. Accumulation value
varies from day to day, depending on the investment performance of the
variable investment options you choose, interest we credit to the Fixed
Account, charges we deduct, and any other transactions (e.g., transfers,
partial surrenders and loans).
.. Payment Options: There are several ways of receiving proceeds under the
death benefit, surrender, and maturity provisions of the Policy, other than
in a lump sum. More detailed information concerning these PAYMENT OPTIONS is
available on request from our Administrative Center shown under "Contact
Information" on page 5. Also see "Payment Options" on page 44.
.. Tax Benefits: The Policy is designed to afford the tax treatment normally
accorded life insurance contracts under federal tax law. Generally, under
federal tax law, the death benefit under a qualifying life insurance policy
is excludable from the gross income of the beneficiary. In addition, this
means that under a qualifying life insurance policy, cash value builds up on
a tax deferred basis and transfers of cash value among the available
investment options under the policy may be made tax free. Under a qualifying
life insurance policy that is not a MODIFIED ENDOWMENT CONTRACT ("MEC"), the
proceeds from Policy loans would not be taxed. If the Policy is not a MEC,
distributions after the 15th Policy year generally will be treated first as
a return of BASIS or investment in the Policy and then as taxable income.
Moreover, loans will generally not be treated as distributions. Finally,
neither distributions nor loans from a Policy that is not a MEC are subject
to the 10% penalty tax.
SUPPLEMENTAL BENEFITS AND RIDERS
You may be eligible to add additional rider benefits to your Policy. We
offer several riders that provide supplemental benefits under the Policy, such
as the Accidental Death Benefit Rider, which provides an additional death
benefit payable if the insured person dies from bodily injury that results from
an accident. For most of the riders that you choose, a charge, which is shown
on page 3 of your Policy, will be deducted from your accumulation value on each
monthly deduction day. Eligibility for and changes in these benefits
8
are subject to our rules and procedures as well as Internal Revenue Service
guidance and rules that pertain to the Code's definition of life insurance in
effect from time to time. Not all riders are available in all states.
POLICY RISKS
INVESTMENT RISK
The Policy is not suitable as a short-term investment. We designed the
Policy to meet long-term financial goals. In the Policy's early years, if the
total charges exceed total premiums paid or if your investment choices perform
poorly, your Policy may not have any cash surrender value. The surrender charge
is large enough in the Policy's early years so that if you fully surrender your
Policy you may receive no cash surrender value. If you take multiple partial
surrenders, your accumulation value may not cover required charges and your
Policy would lapse.
If you invest your accumulation value in one or more variable investment
options, then you will be subject to the risk that investment performance will
be unfavorable. You will also be subject to the risk that the accumulation
value will decrease because of the unfavorable performance and the resulting
higher insurance charges. You could lose everything you invest. You will also
be subject to the risk that the investment performance of the variable
investment options you choose may be less favorable than that of other variable
investment options, and in order to keep the Policy in force may be required to
pay more premiums than originally planned. WE DO NOT GUARANTEE A MINIMUM
ACCUMULATION VALUE.
If you allocate net premiums to the Fixed Account, then we credit your
accumulation value (in the Fixed Account) with a declared rate of interest, but
you assume the risk that the rate may decrease, although it will never be lower
than a guaranteed minimum annual effective rate of 4%.
RISK OF LAPSE
If your cash surrender value is not enough to pay the charges deducted
against your accumulation value each month, your Policy may enter a 61-day
GRACE PERIOD. We will notify you that the Policy will lapse (terminate without
value) at the end of the grace period unless you make a sufficient payment.
Your Policy may also lapse if outstanding Policy loans plus any accrued
interest payable exceeds the cash surrender value. While the monthly guarantee
premium provision is applicable to your Policy, if you pay the monthly
guarantee premiums your Policy will not lapse and we will provide a death
benefit depending on the death benefit option you chose.
TAX RISKS
We anticipate that the Policy should generally qualify as a life insurance
contract under federal tax law. However, due to limited guidance under the
Federal tax law, there is some uncertainty about the application of the federal
tax law to the Policy, particularly if you pay the full amount of premiums
permitted under the Policy. Please consult a tax adviser about these
consequences.
Depending on the total amount of premiums you pay, the Policy may be treated
as a MEC under federal tax laws. If a Policy is treated as a MEC, then
surrenders, partial surrenders, and loans under the Policy will be taxable as
ordinary income to the extent there are earnings in the Policy. In addition, a
10% penalty tax may be imposed on surrenders, partial surrenders, and loans
taken before you reach age 59 1/2.
See "Federal Tax Considerations" on page 53. You should consult a qualified
tax adviser for assistance in all Policy-related tax matters.
9
PARTIAL SURRENDER AND FULL SURRENDER RISKS
The surrender charge under the Policy applies for the first 10 Policy years
(and for a maximum of the first 10 Policy years after any requested increase in
the Policy's specified amount) in the event you surrender the Policy or
decrease the specified amount. The surrender charge may be considerable. It is
possible that you will receive no cash surrender value if you surrender your
Policy in the first few Policy years. Any outstanding loan balance reduces the
amount available to you upon a partial or full surrender. Under Death Benefit
Option 3, partial surrenders reduce the Policy's death benefit until the total
value of the premiums you pay after the partial surrender is equivalent to or
greater than the amount surrendered. You should purchase the Policy only if you
have the financial ability to keep it in force for a substantial period of
time. You should not purchase the Policy if you intend to surrender all or part
of the accumulation value in the near future. We designed the Policy to help
meet long-term financial goals.
A PARTIAL SURRENDER OR FULL SURRENDER MAY HAVE ADVERSE TAX CONSEQUENCES.
POLICY LOAN RISKS
A Policy loan, whether or not repaid, will affect accumulation value over
time because we subtract the amount of the loan and any accrued interest from
the variable investment options and/or Fixed Account as collateral, and this
loan collateral does not participate in the investment performance of the
variable investment options or receive any excess interest credited to the
Fixed Account.
We reduce the amount we pay on the insured person's death by the amount of
any Policy loan and any accrued interest. Your Policy may lapse (terminate
without value) if outstanding Policy loans plus any accrued interest payable
reduce the cash surrender value to zero.
If you surrender the Policy or allow it to lapse while a Policy loan remains
outstanding, the amount of the loan, to the extent it has not been previously
taxed, is treated as a distribution from the Policy and may be subject to
federal income taxation.
PORTFOLIO RISKS
A discussion of the risks of each Fund may be found in its prospectus.
Please refer to the Funds' prospectuses for more information. You may request a
copy of any or all of the Fund prospectuses by contacting your AGL
representative or the Administrative Center shown under "Contact Information"
on page 5.
There is no assurance that any of the Funds will achieve its stated
investment objective.
10
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.
The first tables describe the fees and expenses that are payable at the time
that you (1) buy a Policy, (2) surrender a Policy during the first 10 Policy
years and the first 10 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
---------------------------------------------------------------------------------------------------------------------
CHARGE WHEN CHARGE IS DEDUCTED MAXIMUM GUARANTEED CHARGE CURRENT CHARGE
----------------------- ----------------------------- ------------------------------- -------------------------------
STATUTORY PREMIUM TAX Upon receipt of each premium 3.5%/1/ of each premium 3.5%/1/ of each premium
CHARGE payment payment/2/ payment/2/
PREMIUM EXPENSE CHARGE Upon receipt of each premium 7.5% of the amount of each 5.0% of the amount of each
payment premium payment remaining premium payment remaining
after deduction of the premium after deduction of the premium
tax charge tax charge
--------------
/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, 0.50%, 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 1.78% of
each premium payment for Policy owners residing in Oregon. See "Tax charge
back" on page 48.
11
TRANSACTION FEES
---------------------------------------------------------------------------------------------------------------------------
CHARGE WHEN CHARGE IS DEDUCTED MAXIMUM GUARANTEED CHARGE CURRENT CHARGE
-------------------------------- ---------------------------------- ----------------------------- -------------------------
SURRENDER CHARGE
Maximum Charge/1/ Upon a partial surrender or a $48 per $1,000 of base $48 per $1,000 of base
full surrender of your Policy/2/ coverage coverage
Minimum Charge/3/ Upon a partial surrender or a $1 per $1,000 of base $1 per $1,000 of base
full surrender of your Policy/2/ coverage coverage
Example Charge - for the Upon a partial surrender or a $18 per $1,000 of base $18 per $1,000 of base
first Policy year - for a 40 full surrender of your Policy/2/ coverage coverage
year old male, with a
Specified Amount of
$360,000,of which
$252,000 is base coverage/2/
PARTIAL SURRENDER PROCESSING Upon a partial surrender of The lesser of $25 or 2.0% of $10
FEE your Policy the partial surrender
TRANSFER FEE Upon a transfer of $25 for each transfer/4/ $25 for each transfer/4/
accumulation value
POLICY OWNER ADDITIONAL Upon each request for a Policy $25 $0
ILLUSTRATION CHARGE illustration after the first in a
Policy year
---------------
/1/ The Maximum Charge for both the maximum guaranteed charge and the
current charge occurs during the insured person's first Policy year. The
Maximum Charge is for a male, standard tobacco, age 60 at the Policy's DATE OF
ISSUE, with a Specified Amount of $360,000, all of which is base coverage.
/2/ The Policies have a Surrender Charge that applies for a maximum of the
first 10 Policy years and for a maximum of the first 10 Policy years following
an increase in the Policy's base coverage. The Surrender Charge attributable to
an increase in the Policy's base coverage applies only to the increase in base
coverage. The Surrender Charge will vary based on the insured person's sex,
age, premium class, Policy year and base coverage. 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 28. The Surrender Charges shown in the table may not be typical of the
charges you will pay. Page 27 of your Policy will indicate the maximum
guaranteed Surrender Charges applicable to your Policy. More detailed
information concerning your Surrender Charge is available free of charge on
request from our Administrative Center shown under "Contact Information" on
page 5 of this prospectus.
/3/ The Minimum Charge for both the maximum guaranteed charge and the
current charge occurs during the insured person's 10th Policy year. The Minimum
Charge is for a female, juvenile, age 1 at the Policy's date of issue, with a
Specified Amount of $360,000, of which $252,000 is base coverage and $108,000
is supplemental coverage.
/4/ The first 12 transfers in a Policy year are free of charge.
12
The next tables describe the fees and expenses that you will pay during the
time that you own the Policy, not including Fund fees and expenses.
PERIODIC CHARGES
(OTHER THAN FUND FEES AND EXPENSES)
------------------------------------------------------------------------------------------------------------------------------
CHARGE WHEN CHARGE IS DEDUCTED MAXIMUM GUARANTEED CHARGE CURRENT CHARGE
-------------------------------- -------------------------- ---------------------------------- -------------------------------
FLAT MONTHLY CHARGE Monthly, at the beginning $6 $6
of each Policy month
COST OF INSURANCE CHARGE/1/
Maximum Charge/2/ Monthly, at the beginning $83.33 per $1,000 of net $27.68 per $1,000 of net
of each Policy month amount at risk/3 /attributable to amount at risk attributable to
base coverage; and base coverage; and
$83.33 per $1,000 of net $27.68 per $1,000 of net
amount at risk attributable to amount at risk attributable to
supplemental coverage supplemental coverage
Minimum Charge/4/ Monthly, at the beginning $0.06 per $1,000 of net $0.04 per $1,000 of net
of each Policy month amount at risk attributable to amount at risk attributable to
base coverage; and base coverage; and
$0.06 per $1,000 of net $0.03 per $1,000 of net
amount at risk attributable to amount at risk attributable to
supplemental coverage supplemental coverage
Example Charge for the first Monthly, at the beginning $0.25 per $1,000 of net $0.13 per $1,000 of net
Policy year - for a 40 year of each Policy month amount at risk attributable to amount at risk attributable to
old male, preferred non- base coverage; and base coverage; and
tobacco,with a Specified
Amount of $360,000, of $0.25 per $1,000 of net $0.07 per $1,000 of net
which $252,000 is base amount at risk attributable to amount at risk attributable to
coverage and $108,000 is supplemental coverage supplemental coverage
supplemental coverage
---------------
/1/ The Cost of Insurance Charge will vary based on the insured person's
sex, age, premium class, Policy year and base and supplemental coverage
amounts. See "Base coverage and supplemental coverage" on page 28. The Cost of
Insurance Charges shown in the table may not be typical of the charges you will
pay. Page 24 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 on request from our
Administrative Center shown under "Contact Information" on page 5 of this
prospectus. Also see "Illustrations" on page 25 of this prospectus.
/2/ The Maximum Charge for both the maximum guaranteed charge and the
current charge occurs during the 12 months following the policy anniversary
nearest the insured person's 99th birthday. The policy anniversary nearest the
insured person's 100th birthday is the Policy's maximum maturity date. The
Maximum Charge is for a male, standard tobacco, age 90 at the Policy's date of
issue, with a Specified Amount of $99,999, all of which is base coverage.
/3/ The NET AMOUNT AT RISK is the difference between the current death
benefit under your Policy and your accumulation value under the Policy.
/4/ The Minimum Charge for both the maximum guaranteed charge and the
current charge occurs in Policy year 1. The Minimum Charge is for a female,
juvenile, age 16 at the Policy's date of issue, with a Specified Amount of
$1,000,000, of which $100,000 is base coverage and $900,000 is supplemental
coverage.
13
PERIODIC CHARGES
(OTHER THAN FUND FEES AND EXPENSES)
-----------------------------------------------------------------------------------------------------------------------------
CHARGE WHEN CHARGE IS DEDUCTED MAXIMUM GUARANTEED CHARGE CURRENT CHARGE
------------------------------ -------------------------------- ----------------------------- -------------------------------
MONTHLY CHARGE PER $1,000
OF BASE COVERAGE/1/
Maximum Charge - for a Monthly, at the beginning of $1.25 per $1,000 of base $1.25 per $1,000 of base
75 year old male, standard each Policy month. This coverage coverage
tobacco, with a Specified Charge is imposed during the
Amount of $360,000, of first 7 Policy years and the
which $360,000 is base first 7 Policy years following
coverage an increase in base coverage/2/
Minimum Charge - for a 1 Monthly, at the beginning of $0.03 per $1,000 of base $0.03 per $1,000 of base
year old female, juvenile, each Policy month. This coverage coverage
with a Specified Amount Charge is imposed during the
of $360,000, of which first 7 Policy years and the
$36,000 is base coverage first 7 Policy years following
and $324,000 is an increase in base coverage/2/
supplemental coverage
Example Charge - for a Monthly, at the beginning of $0.16 per $1,000 of base $0.16 per $1,000 of base
40 year old male, standard each Policy month. This coverage coverage
non-tobacco, with a Charge is imposed during the
Specified Amount of first 7 Policy years and the
$360,000, of which first 7 Policy years following
$252,000 is base coverage an increase in base coverage/2/
and $108,000 is
supplemental coverage
DAILY CHARGE (MORTALITY AND Daily annual effective rate of annual effective rate of
EXPENSE RISK FEE) 0.70% of accumulation value 0.70% of accumulation
invested in the variable value invested in the
Policy years 1-10/3/ investment options/3/ variable investment options/3/
POLICY LOAN INTEREST CHARGE Annually (in advance on your 4.75% of the loan balance/4/ 4.75% of the loan balance/4/
Policy anniversary)
---------------
/1/ The Monthly Charge per $1,000 of base coverage is applied only against
each $1,000 of base coverage, and not against the Policy's supplemental
coverage. The Monthly Charge per $1,000 of base coverage will vary based on the
amount of base coverage and the insured person's sex, age and premium class.
See "Base coverage and supplemental coverage" on page 28. The Monthly Charge
per $1,000 of base coverage shown in the table may not be typical of the
charges you will pay. Page 3A of your Policy will indicate the initial Monthly
Charge per $1,000 of base coverage applicable to your Policy. Your Policy
refers to this charge as the "Monthly Expense Charge for First Seven Years."
There is no additional charge for illustrations at the time you apply for a
Policy which may show various amounts of base coverage and supplemental
coverage. When you become a Policy owner, we reserve the right to charge a $25
fee for each illustration after the first in each Policy year.
/2/ The charge assessed during the first 7 Policy years following an
increase in base coverage is only upon the amount of the increase in base
coverage.
/3/ After the 10th Policy year, the DAILY CHARGE will be as follows:
Policy years 11-20................... annual effective rate of 0.45%
Policy years 21+..................... annual effective rate of 0.10%
These reductions in the amount of the daily charge are guaranteed.
/4/ We assess loan interest at the beginning of each Policy year at a rate
of 4.54%. The 4.54% rate is equivalent to interest assessed at the end of the
Policy year at an annual effective rate of 4.75%. See "Policy loans" on page 42.
14
The next table describes the fees and expenses that you will pay if you
choose an optional benefit rider during the time that you own the Policy.
PERIODIC CHARGES
(OPTIONAL BENEFIT RIDERS ONLY)
----------------------------------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT RIDER CHARGES WHEN CHARGE IS DEDUCTED MAXIMUM GUARANTEED CHARGE CURRENT CHARGE
------------------------------- -------------------------- -------------------------------- --------------------------------
ACCIDENTAL DEATH BENEFIT/1/
Maximum Charge - for a 65 Monthly, at the beginning $0.15 per $1,000 of rider $0.15 per $1,000 of rider
year old of each Policy month coverage coverage
Minimum Charge - for a 29 Monthly, at the beginning $0.07 per $1,000 of rider $0.07 per $1,000 of rider
year old of each Policy month coverage coverage
Example Charge - for a 40 Monthly, at the beginning $0.09 per $1,000 of rider $0.09 per $1,000 of rider
year old of each Policy month coverage coverage
CHILDREN'S INSURANCE BENEFIT Monthly, at the beginning $0.48 per $1,000 of rider $0.48 per $1,000 of rider
of each Policy month coverage coverage
MATURITY EXTENSION Monthly, at the beginning $10 $0
ACCUMULATION VALUE VERSION of the Policy month which
follows your original
maturity date
MATURITY EXTENSION DEATH
BENEFIT VERSION
Initial Charge Monthly beginning 9 years $1 per $1,000 of net amount at $0.03 per $1,000 of net
before your original risk attributable to the Policy amount at risk attributable to
maturity date (without any riders) the Policy (without any riders)
Administrative Charge Monthly, at the beginning $10 $0
of the Policy month which
follows your original
maturity date
SPOUSE TERM/2/
Maximum charge - for a 75 Monthly at the beginning $5.54 per $1,000 of rider $4.61 per $1,000 of rider
year old male, standard of each Policy month coverage coverage
tobacco
Minimum charge - for a 15 Monthly at the beginning $0.07 per $1,000 of rider $0.01 per $1,000 of rider
year old female, standard of each Policy month coverage coverage
non-tobacco
Example charge - for a 40 Monthly at the beginning $0.25 per $1,000 of rider $0.15 per $1,000 of rider
year old male, standard non- of each Policy month coverage coverage
tobacco
---------------
/1/ The charge for the Accidental Death Benefit Rider will vary based on the
insured person's age.
/2/ The charge for the Spouse Term Rider will vary based on the Spouse's
sex, age and premium class.
15
PERIODIC CHARGES
(OPTIONAL BENEFIT RIDERS ONLY)
----------------------------------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT RIDER CHARGES WHEN CHARGE IS DEDUCTED MAXIMUM GUARANTEED CHARGE CURRENT CHARGE
------------------------------ ----------------------------- ------------------------------- -------------------------------
TERMINAL ILLNESS RIDER
Interest on Benefit At time benefit is paid and Greater of (1) Moody's Bond 5.25%
each Policy anniversary Average or (2) cash value
thereafter interest rate plus 1%/1/
ADMINISTRATIVE FEE At time of claim $250 $150
WAIVER OF MONTHLY
DEDUCTION/2/
Maximum Charge - for a 59 Monthly, at the beginning of $0.40 per $1,000 of net $0.40 per $1,000 of net
year old each Policy month amount at risk attributable to amount at risk attributable to
the Policy the Policy
Minimum Charge - for an Monthly, at the beginning of $0.02 per $1,000 of net $0.02 per $1,000 of net
18 year old each Policy month amount at risk attributable to amount at risk attributable to
the Policy the Policy
Example Charge - for a 40 Monthly, at the beginning of $0.03 per $1,000 of net $0.03 per $1,000 of net
year old each Policy month amount at risk attributable to amount at risk attributable to
the Policy the Policy
---------------
/1/ The guaranteed maximum interest rate will not exceed the greater of:
. the Moody's corporate Bond Yield Average-Monthly Average Corporates for
the month of October preceding the calendar year for which the loan
interest rate is determined; or
. the interest rate used to calculate cash values in the Fixed Account
during the period for which the interest rate is determined, plus 1%.
/2/ The charge for the Waiver of Monthly Deduction Rider will vary based on
the insured person's age when we assess the charge.
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, 2012. 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/ 1.18% 0.28%
Details concerning each Fund's specific fees and expenses are contained in
the Funds' prospectuses.
---------------
/1/ Currently 8 of the Funds have contractual reimbursements or fee waivers.
These reimbursements or waivers expire on April 30, 2014. These contractual
reimbursements or fee waivers do not change the maximum or minimum annual Fund
fees and expenses reflected in the table.
16
GENERAL INFORMATION
AMERICAN GENERAL LIFE INSURANCE COMPANY
We are American General Life Insurance Company ("AGL"). AGL is a stock life
insurance company organized under the laws of Texas. AGL's home office is
2727-A Allen Parkway, Houston, Texas 77019-2191. 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"), a Delaware corporation.
AGL is regulated for the benefit of Policy owners by the insurance regulator
in its state of domicile and also by all state insurance departments where it
is licensed to conduct business. AGL is required by its regulators to hold a
specified amount of reserves in order to meet its contractual obligations to
Policy owners. Insurance regulations also require AGL to maintain additional
surplus to protect against a financial impairment; the amount of which surplus
is based on the risks inherent in AGL's operations.
American General Life Companies, www.americangeneral.com, is the marketing
name for a group of affiliated domestic life insurers, including AGL.
AIG is a leading international insurance organization serving customers in
more than 130 countries. AIG companies serve commercial, institutional, and
individual customers through one of the most extensive worldwide
property-casualty networks of any insurer. In addition, AIG companies are
leading providers of life insurance and retirement services in the United
States. AIG common stock is listed on the New York Stock Exchange and the Tokyo
Stock Exchange.
Through a series of transactions that closed on January 14, 2011, AIG
exchanged various forms of government support for AIG Common Stock, and the
Department of the Treasury became AIG's majority shareholder, with
approximately 92 percent of outstanding AIG Common Stock at that time. The
Department of the Treasury, as selling shareholder, sold all of its shares of
AIG Common Stock through six registered public offerings completed in 2011 and
2012, with the sale of the Department of the Treasury's last remaining AIG
shares on December 14, 2012.
The transactions described above do not alter our obligations to you. More
information about AIG may be found in the regulatory filings AIG files from
time to time with the U.S. Securities and Exchange Commission ("SEC") at
www.sec.gov.
SEPARATE ACCOUNT VL-R
We hold the Fund shares in which any of your accumulation value is invested
in the Separate Account. The Separate Account is registered as a unit
investment trust with the SEC under the Investment Company Act of 1940. We
created the Separate Account on May 6, 1997 under Texas law.
For record keeping and financial reporting purposes, the Separate Account is
divided into 99 separate "divisions," 57 of which correspond to the 57 variable
"investment options" available under the Policy. The remaining 42 divisions,
and all of these 57 divisions, represent investment options available under
other variable universal life policies we offer. 14 of these 57 divisions are
not available to all Policy owners. 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. Income, gains and losses credited to, or charged
against, the Separate Account
17
reflect the Separate Account's own investment experience and not the investment
experience of the Separate Account's other assets.
The assets in the Separate Account 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.
GUARANTEE OF INSURANCE OBLIGATIONS
Insurance obligations under all Policies with a date of issue prior to
December 29, 2006 at 4:00 p.m. Eastern time are guaranteed (the "Guarantee") by
American Home Assurance Company ("American Home"), an affiliate of AGL.
Insurance obligations include, without limitation, Policy values invested in
the Fixed Account, death benefits and Policy features that provide return of
premium or protection against Policy lapse. The Guarantee does not guarantee
Policy value or the investment performance of the variable investment options
available under the Policies. The Guarantee provides that Policy owners can
enforce the Guarantee directly.
As of December 29, 2006 at 4:00 p.m. Eastern time (the "Point of
Termination"), the Guarantee was terminated for prospectively issued Policies.
The Guarantee will not cover any Policies with a date of issue later than the
Point of Termination. The Guarantee will continue to cover Policies with a date
of issue earlier than the Point of Termination until all insurance obligations
under such Policies are satisfied in full.
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 office is located at 175 Water Street, 18th Floor, New
York, New York 10038. 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 American International Group,
Inc. and an affiliate of AGL.
ADDITIONAL INFORMATION
We have filed a Statement of Additional Information (the "SAI") with the SEC
which includes more information about your Policy. The back cover page to this
prospectus describes how you can obtain a copy of the SAI.
COMMUNICATION WITH AGL
When we refer to "you," we mean the person who is authorized to take any
action with respect to a Policy. Generally, this is the owner named in the
Policy. Where a Policy has more than one owner, each owner generally must join
in any requested action, except for transfers and changes in the allocation of
future premiums or changes among the investment options.
Administrative Center. The Administrative Center provides service to all
Policy owners. See "Contact Information" on page 5 of this prospectus. For
applicants, your AGL representative will tell you if you should use an address
other than the Administrative Center address. All premium payments, requests,
directions and other communications should be directed to the appropriate
location. You should mail premium payments and loan repayments (or use express
delivery, if you wish) directly to the appropriate address shown on your
billing statement. If you do not receive a billing statement, send your premium
directly to the address for premium payments shown under "Contact Information"
on page 5.
18
You should communicate notice of the insured person's death, including any
related documentation, to our Administrative Center address.
E-Delivery, E-Service, telephone transactions and written transactions.
There are several different ways to request and receive Policy services.
E-Delivery. Instead of receiving paper copies by mail of certain
documents we are required to provide to you, including annual Policy and Fund
prospectuses, you may select E-Delivery. E-Delivery allows you to receive
notification by E-mail when new or updated documents are available that pertain
to your Policy. You may then follow the link contained within the E-mail to
view these documents on-line. You may find electronically received documents
easier to review and retain than paper documents. To enroll for E-Delivery, you
can complete certain information at the time of your Policy application (with
one required extra signature). If you prefer, you can go to
www.americangeneral.com and at the same time you enroll for E-Service, enroll
for E-Delivery. You do not have to enroll for E-Service to enroll for
E-Delivery unless you enroll on-line. You may select or cancel E-Delivery at
any time. There is no charge for E-Delivery.
E-Service. You may enroll for E-Service to have access to on-line
services for your Policy. These services include transferring values among
investment options and changing allocations for future premiums. You can also
view Policy statements. If you have elected E-Service, you may choose to handle
certain Policy requests by E-Service, in writing or by telephone. We expect to
expand the list of available E-Service transactions in the future. To enroll
for E-Service, go to www.americangeneral.com, click the "Create Account" link
beneath the E-Service login box, and complete the on-line enrollment pages. You
may select or cancel the use of E-Service at any time. There is no charge for
E-Service.
E-Service transactions, telephone transactions and written transactions.
Certain transaction requests currently must be made in writing. You must make
the following requests in writing (unless you are permitted to make the
requests by E-Service or by telephone. See "Telephone transactions" on page 20).
. transfer of accumulation value;*
. change of allocation percentages for premium payments;*
. change of allocation percentages for Policy deductions;*
. telephone transaction privileges;*
. loan;*
. full surrender;
. partial surrender;*
. premium payments;**
. change of beneficiary or contingent beneficiary;
. loan repayments or loan interest payments;**
. change of death benefit option or manner of death benefit payment;
. change in specified amount;
. addition or cancellation of, or other action with respect to any
benefit riders;
. election of a payment option for Policy proceeds; and
. tax withholding elections.
--------
* These transactions are permitted by E-Service, by telephone or in
writing.
** These transactions are permitted by E-Service or in writing.
19
We have special forms which should be used for loans, assignments, partial
and full surrenders, changes of owner or beneficiary, and all other contractual
changes. You will be asked to return your Policy when you request a full
surrender. You may obtain these forms from our Administrative Center, shown
under "Contact Information" on page 5, or from your AGL representative. Each
communication must include your name, Policy number and, if you are not the
insured person, that person's name. We cannot process any requested action that
does not include all required information.
One-time premium payments using E-Service. You may use E-Service to schedule
one-time premium payments for your Policy. The earliest scheduled payment date
available is the next business day. For the purposes of E-Service one-time
premium payments only, a business day is a day the United States Federal
Reserve System ("Federal Reserve") is open. If payment scheduling is completed
after 4:00 p.m. Eastern time, then the earliest scheduled payment date
available is the second business day after the date the payment scheduling is
completed.
Generally, your payment will be applied to your Policy on the scheduled
payment date, and it will be allocated to your chosen variable investment
options based upon the prices set after 4:00 p.m. eastern time on the scheduled
payment date. See "Effective Date of Policy and Related Transactions" on page
37.
Premium payments may not be scheduled for Federal Reserve holidays, even if
the New York Stock Exchange ("NYSE") is open. If the NYSE is closed on your
scheduled payment date, your payment will be allocated to your chosen variable
investment options based upon the prices set after 4:00 p.m. Eastern time on
the first day the NYSE is open following your scheduled payment date.
Telephone transactions. If you have a completed telephone authorization form
on file with us, you may make transfers, or change the allocation of future
premium payments or deduction of charges, by telephone, subject to the terms of
the form. We will honor telephone instructions from any person who provides the
correct information, so there is a risk of possible loss to you if unauthorized
persons use this service in your name. Our current procedure is that only the
owner or your AGL representative may make a transfer request by phone. We are
not liable for any acts or omissions based upon instructions that we reasonably
believe to be genuine. Our procedures include verification of the Policy
number, the identity of the caller, both the insured person's and owner's
names, and a form of personal identification from the caller. We will promptly
mail a written confirmation of the transaction. If (a) many people seek to make
telephone requests at or about the same time, or (b) our recording equipment
malfunctions, it may be impossible for you to make a telephone request at the
time you wish. You should submit a written request if you cannot make a
telephone request. Also, if due to malfunction or other circumstances your
telephone request is incomplete or not fully comprehensible, we will not
process the transaction. The phone number for telephone requests is
1-800-340-2765.
General. It is your responsibility to carefully review all documents you
receive from us and immediately notify the Administrative Center of any
potential inaccuracies. We will follow up on all inquiries. Depending on the
facts and circumstances, we may retroactively adjust your Policy, provided you
notify us of your concern within 30 days of receiving the transaction
confirmation, statement or other document. Any other adjustments we deem
warranted are made as of the time we receive notice of the potential error. If
you fail to notify the Administrative Center of any potential mistakes or
inaccuracies within 30 days of receiving any document, we will deem you to have
ratified the transaction.
VARIABLE INVESTMENT OPTIONS
We divided the Separate Account into variable investment options, each of
which invests in shares of a corresponding Fund. We have listed the investment
options in the following two tables. The name of
20
each Fund or a footnote for the Fund describes its type (for example, money
market fund, growth fund, equity fund, etc.). The text of the footnotes follows
the tables. Fund sub-advisers are shown in parentheses.
All Policy owners may invest premium payments in variable investment options
investing in the Funds listed in the first table. The second table lists
investment options that are available to some Policy owners with a Policy issue
date prior to May 1, 2006.
The investment options listed in the following table are available to all
Policy owners:
INVESTMENT ADVISER (SUB-ADVISER, IF
VARIABLE INVESTMENT OPTIONS APPLICABLE)
-------------------------------------- --------------------------------------
Alger Capital Appreciation Portfolio Fred Alger Management, Inc.
- Class I-2 Shares
Alger Mid Cap Growth Portfolio - Fred Alger Management, Inc.
Class I-2 Shares
American Century(R) VP Value Fund American Century Investment
Management, Inc.
Fidelity(R) VIP Asset Manager/SM Fidelity Management & Research
/Portfolio - Service Class 2/1/ Company ("FMR")
(FMR Co., Inc.)
(Fidelity Investments Money
Management, Inc.)
(Other affiliates of FMR)
Fidelity(R) VIP Contrafund(R) FMR (FMR Co., Inc.)
Portfolio - Service Class 2/2/ (Other affiliates of FMR)
Fidelity(R) VIP Equity-Income FMR (FMR Co., Inc.)
Portfolio - Service Class 2 (Other affiliates of FMR)
Fidelity(R) VIP Freedom 2020 Strategic Advisers(R), Inc.
Portfolio - Service Class 2/3/
Fidelity(R) VIP Freedom 2025 Strategic Advisers(R), Inc.
Portfolio - Service Class 2/4/
Fidelity(R) VIP Freedom 2030 Strategic Advisers(R), Inc.
Portfolio - Service Class 2/5/
Fidelity(R) VIP Growth Portfolio - FMR (FMR Co., Inc.)
Service Class 2 (Other affiliates of FMR)
Fidelity(R) VIP Mid Cap Portfolio - FMR (FMR Co., Inc.)
Service Class 2 (Other affiliates of FMR)
Franklin Templeton VIP Franklin Small Franklin Advisory Services, LLC
Cap Value Securities Fund - Class 2/6/
Franklin Templeton VIP Franklin U.S. Franklin Advisers, Inc.
Government Fund - Class 2
Franklin Templeton VIP Mutual Shares Franklin Mutual Advisers, LLC
Securities Fund - Class 2/7/
Franklin Templeton VIP Templeton Templeton Investment Counsel, LLC
Foreign Securities Fund - Class 2/8/
Invesco V.I. Growth and Income Fund - Invesco Advisers, Inc.
Series 1 Shares
Invesco V.I. International Growth Invesco Advisers, Inc.
Fund - Series I Shares
Janus Aspen Enterprise Portfolio - Janus Capital Management LLC
Service Shares/9/
Janus Aspen Overseas Portfolio - Janus Capital Management LLC
Service Shares/10/
JPMorgan IT Small Cap Core Portfolio J.P. Morgan Investment Management Inc.
- Class 1 Shares
MFS(R) VIT New Discovery Series - Massachusetts Financial Services
Initial Class/11/ Company
MFS(R) VIT Research Series - Initial Massachusetts Financial Services
Class/12/ Company
Neuberger Berman AMT Mid-Cap Growth Neuberger Berman Management LLC
Portfolio - Class I (Neuberger Berman LLC)
Oppenheimer Capital Income Fund/VA - OppenheimerFunds, Inc.
Non-Service Shares/13/
Oppenheimer Global Fund/VA - OppenheimerFunds, Inc.
Non-Service Shares
PIMCO CommodityRealReturn(R) Strategy Pacific Investment Management Company
Portfolio - Administrative Class/14/ LLC
PIMCO Real Return Portfolio - Pacific Investment Management Company
Administrative Class/15/ LLC
PIMCO Short-Term Portfolio - Pacific Investment Management Company
Administrative Class LLC
PIMCO Total Return Portfolio - Pacific Investment Management Company
Administrative Class LLC
Pioneer Mid Cap Value VCT Portfolio - Pioneer Investment Management, Inc.
Class I Shares
Putnam VT Diversified Income Fund - Putnam Investment Management, LLC
Class IB/16/ (Putnam Investments Limited)
Putnam VT International Value Fund - Putnam Investment Management, LLC
Class IB/17/
21
INVESTMENT ADVISER (SUB-ADVISER, IF
VARIABLE INVESTMENT OPTIONS APPLICABLE)
------------------------------------- -------------------------------------
(Putnam Advisory Company, LLC)
(Putnam Investments Limited)
SunAmerica ST Aggressive Growth SunAmerica Asset Management Corp.
Portfolio - Class 1 Shares (Wells Capital
Management Incorporated)
SunAmerica ST Balanced Portfolio - SunAmerica Asset Management Corp.
Class 1 Shares/18/
(J.P. Morgan Investment Management,
Inc.)
VALIC Co. I International Equities VALIC* (PineBridge Investments LLC)
Fund/19/
VALIC Co. I Mid Cap Index Fund VALIC* (SunAmerica Asset Management
Corp.)
VALIC Co. I Money Market I Fund VALIC* (SunAmerica Asset Management
Corp.)
VALIC Co. I Nasdaq-100(R) Index VALIC* (SunAmerica Asset Management
Fund/20/ Corp.)
VALIC Co. I Science & Technology VALIC*
Fund/21/ (RCM Capital Management, LLC)
(T. Rowe Price Associates, Inc.)
(Wellington Management Company, LLP)
VALIC Co. I Small Cap Index Fund/22/ VALIC* (SunAmerica Asset Management
Corp.)
VALIC Co. I Stock Index Fund/23/ VALIC* (SunAmerica Asset Management
Corp.)
Vanguard** VIF High Yield Bond Wellington Management Company, LLP
Portfolio
Vanguard** VIF REIT Index Portfolio The Vanguard Group, Inc.
-----------------
/1/ The Fund type for Fidelity(R) VIP Asset Manager /SM/ Portfolio -
Service Class 2 is high total return.
/2/ The Fund type for Fidelity(R) VIP Contrafund(R) Portfolio - Service
Class 2 is long-term capital appreciation.
/3/ The Fund type for Fidelity(R) VIP Freedom 2020 Portfolio - Service
Class 2 is high total return.
/4/ The Fund type for Fidelity(R) VIP Freedom 2025 Portfolio - Service
Class 2 is high total return.
/5/ The Fund type for Fidelity(R) VIP Freedom 2030 Portfolio - Service
Class 2 is high total return.
/6/ The Fund type for Franklin Templeton VIP Franklin Small Cap Value
Securities Fund - Class 2 is long-term total return.
/7/ The Fund type for Franklin Templeton VIP Mutual Shares Securities
Fund - Class 2 is capital appreciation with income as a secondary
goal.
/8/ The Fund type for Franklin Templeton VIP Templeton Foreign Securities
Fund - Class 2 is long-term capital growth.
/9/ The Fund type for Janus Aspen Enterprise Portfolio - Service Shares
is long-term growth of capital.
/10/ The Fund type for Janus Aspen Overseas Portfolio - Service Shares is
long-term growth of capital.
/11/ The Fund type for MFS(R) VIT New Discovery Series - Initial Class is
capital appreciation.
/12/ The Fund type for MFS(R) VIT Research Series - Initial Class is
capital appreciation.
/13/ The Fund type for Oppenheimer Capital Income Fund/VA - Non-Service
Shares is total return.
/14/ The Fund type for PIMCO CommodityRealReturn(R) Strategy Portfolio -
Administrative Class is maximum real return.
/15/ The Fund type for PIMCO Real Return Portfolio - Administrative Class
is maximum real return.
/16/ The Fund type for Putnam VT Diversified Income Fund - Class IB is as
high a level of current income as Putnam Investment Management, LLC
believes is consistent with preservation of capital.
/17/ The Fund type for Putnam VT International Value Fund - Class IB is
capital growth. Current income is a secondary objective.
/18/ The Fund type for SunAmerica ST Balanced Portfolio - Class 1 Shares
is conservation of principal and capital appreciation.
/19/ The Fund type for VALIC Co. I International Equities Fund is
long-term growth of capital through investments primarily in a
diversified portfolio of equity and equity-related securities of
foreign issuers.
/20/ The Fund type for VALIC Co. I Nasdaq-100(R) Index Fund is long-term
capital growth through investments in the stocks that are included in
the Nasdaq-100(R) Index.
/21/ The Fund type for VALIC Co. I Science & Technology Fund is long-term
capital appreciation. This Fund is a sector fund.
/22/ The Fund type for VALIC Co. I Small Cap Index Fund is growth of
capital through investment primarily in a diversified portfolio of
common stocks that, as a group, the sub-adviser believes may provide
investment results closely corresponding to the performance of the
Russell 2000(R) Index.
/23/ The Fund type for VALIC Co. I Stock Index Fund is long-term capital
growth through investment in common stocks that, as a group, are
expected to provide investment results closely corresponding to the
performance of the S&P 500(R) Index.
22
* "VALIC" means The Variable Annuity Life Insurance Company.
** "Vanguard" is a trademark of The Vanguard Group, Inc.
The investment options listed in the following table are available only to
certain Policy owners. The notes that follow the table explain the restrictions
on availability.
INVESTMENT ADVISER (SUB-ADVISER, IF
VARIABLE INVESTMENT OPTIONS APPLICABLE)
-------------------------------------- --------------------------------------
Dreyfus IP MidCap Stock Portfolio - The Dreyfus Corporation
Initial Shares*
Dreyfus VIF Opportunistic Small Cap The Dreyfus Corporation
Portfolio - Initial Shares*
Dreyfus VIF Quality Bond Portfolio - The Dreyfus Corporation
Initial Shares*
Goldman Sachs VIT Strategic Growth Goldman Sachs Asset Management, L.P.
Fund/1, /**
Invesco V.I. Core Equity Fund - Invesco Advisers, Inc.
Series I Shares*
Invesco V.I. High Yield Fund - Series Invesco Advisers, Inc.
I Shares*
Janus Aspen Global Research Portfolio Janus Capital Management LLC
- Service Shares/2, /*
JPMorgan IT Mid Cap Value Portfolio - J.P. Morgan Investment Management Inc.
Class 1 Shares**
MFS(R) VIT Core Equity Series - Massachusetts Financial Services
Initial Class /3, /* Company
MFS(R) VIT Growth Series - Initial Massachusetts Financial Services
Class* Company
Pioneer Fund VCT Portfolio - Class I Pioneer Investment Management, Inc.
Shares/4, /***
Pioneer Select Mid Cap Growth VCT Pioneer Investment Management, Inc.
Portfolio - Class I Shares****
Putnam VT Growth and Income Fund - Putnam Investment Management, LLC
Class IB* (Putnam Investments Limited)
UIF Growth Portfolio - Class I Shares* Morgan Stanley Investment Management
Inc.
--------
/1/ The Fund type for Goldman Sachs VIT Strategic Growth Fund is
long-term growth of capital.
/2/ The Fund type for Janus Aspen Global Research Portfolio - Service
Shares is long-term growth of capital.
/3/ The Fund type for MFS(R) VIT Core Equity Series - Initial Class is
capital appreciation.
/4/ The Fund type for Pioneer Fund VCT Portfolio - Class I Shares is
reasonable income and capital growth.
* This investment option is available only to Policy owners whose
Policies were effective before May 1, 2006. If a Policy's date of
issue is before May 1, 2006 only because we assigned an earlier date
than otherwise would apply to preserve a younger age at issue for the
insured person, the Policy owner will not be able to invest in this
investment option. See "Date of issue; Policy months and years" on
page 38.
** Policy owners with accumulation value in this investment option may
transfer any or all of the value from the investment option. This
investment option is not available for any other purpose. This
investment option is not offered for new Policies.
*** Any Policy owner whose accumulation value as of December 10, 2004 was
invested in whole or in part in the investment option funded by this
Portfolio may continue to use the investment option for any purpose
allowed under the Policy.
**** Any Policy owner whose accumulation value as of December 10, 2004 was
invested in whole or in part in the investment option funded by this
Portfolio may continue to use the investment option for any purpose
allowed under the Policy.
From time to time, certain Fund names are changed. When we are notified of a
name change, we will make changes so that the new name is properly shown.
However, until we complete the changes, we may provide you with various forms,
reports and confirmations that reflect a Fund's prior name.
YOU CAN LEARN MORE ABOUT THE FUNDS, THEIR INVESTMENT POLICIES, RISKS,
EXPENSES AND ALL OTHER ASPECTS OF THEIR OPERATIONS BY READING THEIR
PROSPECTUSES. You should carefully read the Funds' prospectuses before you
select any variable investment option. We do not guarantee that any Fund will
achieve its objective. In addition, no single Fund or investment option, by
itself, constitutes a balanced investment plan. A Fund's prospectus may be
supplemented by the Fund's Investment Adviser. Please
23
check the Platinum Investor III webpage to view your Fund prospectuses and
their supplements at www.americangeneral.com.
We have entered into various services agreements with most of the advisers
or administrators for the Funds. We receive payments for the administrative
services we perform such as proxy mailing and tabulation, mailing of Fund
related information and responding to Policy owners' inquiries about the Funds.
Currently, these payments range from 0.15% to 0.35% of the daily market value
of the assets invested in the underlying Fund as of a certain date, usually
paid at the end of each calendar quarter.
We have entered into a services agreement with PIMCO Variable Insurance
Trust ("PIMCO") under which we receive fees of up to 0.15% of the daily market
value of the assets invested in the underlying Fund, paid directly by PIMCO for
services we perform.
We also receive what are referred to as "12b-1 fees" from some of the Funds
themselves. These fees are designed to help pay for our direct and indirect
distribution costs for the Policies. These fees are generally equal to 0.25% of
the daily market value of the assets invested in the underlying Fund.
From time to time some of these arrangements, except for 12b-1 arrangements,
may be renegotiated so that we receive a greater payment than previously paid
depending on our determination that the expenses we incur are greater than we
anticipated. If the expenses we incur are less than we anticipated, we may make
a profit from some of these arrangements. These payments do not result in any
additional charges under the Policies that are not described under "Charges
Under the Policy" on page 48.
VOTING PRIVILEGES
We are the legal owner of the Funds' shares held in the Separate Account.
However, you may be asked to instruct us how to vote the Fund shares held in
the various Funds that are attributable to your Policy at meetings of
shareholders of the Funds. The number of votes for which you may give
directions will be determined as of the record date for the meeting. The number
of votes that you may direct related to a particular Fund is equal to (a) your
accumulation value invested in that Fund divided by (b) the net asset value of
one share of that Fund. Fractional votes will be recognized.
We will vote all shares of each Fund that we hold of record, including any
shares we own on our own behalf, in the same proportions as those shares for
which we have received instructions from owners participating in that Fund
through the Separate Account. Even if Policy owners participating in that Fund
choose not to provide voting instructions, we will vote the Fund's shares in
the same proportions as the voting instructions which we actually receive. As a
result, the instructions of a small number of Policy owners could determine the
outcome of matters subject to shareholder vote.
If you are asked to give us voting instructions, we will send you the proxy
material and a form for providing such instructions. Should we determine that
we are no longer required to send the owner such materials, we will vote the
shares as we determine in our sole discretion.
In certain cases, we may disregard instructions relating to changes in a
Fund's investment manager or its investment policies. We will advise you if we
do and explain the reasons in our next report to Policy owners. AGL reserves
the right to modify these procedures in any manner that the laws in effect from
time to time allow.
24
FIXED ACCOUNT
We invest any accumulation value you have allocated to the Fixed Account as
part of our general assets. We credit interest on that accumulation value at a
rate which we declare from time to time. We guarantee that the interest will be
credited at an annual effective rate of at least 4%. Although this interest
increases the amount of any accumulation value that you have in the Fixed
Account, such accumulation value will also be reduced by any charges that are
allocated to this option under the procedures described under "Allocation of
charges" on page 51. The "daily charge" described on page 48 and the fees and
expenses of the Funds discussed on page 16 do not apply to the Fixed Account.
You may transfer accumulation value into the Fixed Account at any time.
However, there are restrictions on the amount you may transfer out of the Fixed
Account in a Policy year. Please see "Transfers of existing accumulation value"
on page 32.
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 Fixed Account. Unlike the
Separate Account, the assets in the general account may be used to pay any
liabilities of AGL in addition to those arising from the Policies. 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 annual
effective rate of at least 4%.
Under these procedures, it is likely that at any time different interest
rates will apply to different portions of your accumulation value, depending on
when each portion was allocated to our 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.
ILLUSTRATIONS
We may provide you with illustrations for your Policy's death benefit,
accumulation value, and cash surrender value based on hypothetical rates of
return. Hypothetical illustrations also assume costs of insurance for a
hypothetical person. These illustrations are illustrative only and should not
be considered a representation of past or future performance. Your actual rates
of return and actual charges may be higher or lower than these illustrations.
The actual return on your accumulation value will depend on factors such as the
amounts you allocate to particular investment options, the amounts deducted for
the Policy's fees and charges, the variable investment options' fees and
charges, and your Policy loan and partial surrender history.
Before you purchase the Policy, we will provide you with what we refer to as
a personalized illustration. A personalized illustration shows future benefits
under the Policy based upon (1) the proposed insured person's age and premium
class and (2) your selection of a death benefit option, specified amount,
planned periodic premiums, riders, and proposed investment options.
25
After you purchase the Policy and upon your request, we will provide a
similar personalized illustration that takes into account your Policy's actual
values and features as of the date the illustration is prepared. We reserve the
right to charge a maximum fee of $25 for personalized illustrations prepared
after the Policy is issued if you request us to do so more than once each year.
We do not currently charge for additional personalized illustrations.
POLICY FEATURES
Keep in mind as you review the following Policy features that we no longer
sell Platinum Investor III Policies.
AGE
Generally, our use of age in your Policy and this prospectus refers to a
person who is between six months younger and six months older than the stated
age. Sometimes we refer to this as the "age nearest birthday."
DEATH BENEFITS
Your specified amount of insurance. In your application to buy a Platinum
Investor III Policy, you tell us how much life insurance coverage you want. We
call this the "specified amount" of insurance. The specified amount consists of
what we refer to as "BASE COVERAGE" plus any "supplemental coverage" you
select. Base coverage must be at least 10% of the specified amount. We pay a
different level of compensation based on the amounts of base and supplemental
coverages you select. See "Base coverage and supplemental coverage" on page 28.
We also guarantee a death benefit for a specified period provided you have
paid the required monthly guarantee premiums. The guaranteed death benefit is
equal to the specified amount (less any indebtedness) and any benefit riders.
We refer to this guarantee in both your Policy and this prospectus as the
"GUARANTEE PERIOD BENEFIT." We provide more information about the specified
amount and the guarantee period benefit under "Monthly guarantee premiums,"
beginning on page 31. You should read these other discussions carefully because
they contain important information about how the choices you make can affect
your benefits and the amount of premiums and charges you may have to pay.
Investment performance affects the amount of your Policy's accumulation
value. We deduct all charges from your accumulation value. The amount of the
monthly charges may differ from month to month. However, as long as all
applicable charges are paid timely each month, the specified amount of
insurance payable under your Policy is unaffected by investment performance.
(See "MONTHLY INSURANCE CHARGE" on page 49.)
Your death benefit. You must choose one of three death benefit options under
your Policy at the time it is issued. Owners whose Policies were issued before
June 1, 2002 could choose only death benefit Option 1 or death benefit Option 2.
You can choose Option 1 or Option 2 at the time of your application or at
any later time before the death of the insured person. You can choose death
benefit Option 3 only at the time of your application. The death benefit we
will pay is reduced by any outstanding Policy loans and increased by any
unearned loan interest we may have already charged. Depending on the option you
choose, the death benefit we will pay is
. Option 1--The specified amount on the date of the insured person's death.
26
. Option 2--The sum of (a) the specified amount on the date of the insured
person's death and (b) the Policy's accumulation value as of the date of
death.
. Option 3--The sum of (a) the death benefit we would pay under Option 1
and (b) the cumulative amount of premiums you paid for the Policy and
any riders. The death benefit payable will be reduced by any amounts
waived under the Waiver of Monthly Deduction Rider and any partial
surrenders. Additional premiums you pay for the Policy and any riders
following a partial surrender are not considered part of the "cumulative
amount of premiums you paid" until the total value of the premiums paid
is equivalent to or greater than the amount surrendered.
See "Partial surrender" on page 42 for more information about the effect of
partial surrenders on the amount of the death benefit.
Under either Option 2 or Option 3, your death benefit will be higher than
under Option 1. However, the monthly insurance charge we deduct will also be
higher to compensate us for our additional risk. Because of this, your
accumulation value for the same amount of premium will be higher under Option 1
than under either Option 2 or Option 3.
Any premiums we receive after the insured person's death will be returned
and not included in your accumulation value.
Required minimum death benefit. We may be required under federal tax law to
pay a larger death benefit than what would be paid under your chosen death
benefit option. We refer to this larger benefit as the "required minimum death
benefit" as explained below.
Federal tax law requires a minimum death benefit (the required minimum death
benefit) in relation to the accumulation value for a Policy to qualify as life
insurance. We will automatically increase the death benefit of a Policy if
necessary to ensure that the Policy will continue to qualify as life insurance.
One of two tests under current federal tax law can be used: the "GUIDELINE
PREMIUM TEST" or the "CASH VALUE ACCUMULATION TEST." You must elect one of
these tests when you apply for a Policy. After we issue your Policy, the choice
may not be changed.
If you choose the guideline premium test, total premium payments paid in a
Policy year may not exceed the guideline premium payment limitations for life
insurance set forth under federal tax law. If you choose the cash value
accumulation test, there are no limits on the amount of premium you can pay in
a Policy year, as long as the death benefit is large enough compared to the
accumulation value to meet the test requirements.
The other major difference between the two tax tests involves the Policy's
required minimum death benefit. The required minimum death benefit is
calculated as shown in the tables that follow.
If you selected death benefit Option 1, Option 2 or Option 3 at any time
when the required minimum death benefit is more than the death benefit payable
under the option you selected, the death benefit payable would be the required
minimum death benefit.
Under federal tax law rules, if you selected either death benefit Option 1
or Option 3 and elected the cash value accumulation test, rather than the
guideline premium test, the payment of additional premiums may cause your
accumulation value to increase the required minimum death benefit.
27
Therefore, choosing the cash value accumulation test may make it more likely
that the required minimum death benefit will apply if you select death benefit
Option 1 or Option 3.
If you anticipate that your Policy may have a substantial accumulation value
in relation to its death benefit, you should be aware that the cash value
accumulation test may cause your Policy's death benefit to be higher than if
you had chosen the guideline premium test. To the extent that the cash value
accumulation test does result in a higher death benefit, the cost of insurance
charges deducted from your Policy will also tend to be higher. This compensates
us for the additional risk that we might have to pay the higher required
minimum death benefit.
If you have selected the cash value accumulation test, we calculate the
required minimum death benefit by multiplying your Policy's accumulation value
by a REQUIRED MINIMUM DEATH BENEFIT PERCENTAGE that will be set forth on page
27 of your Policy. The required minimum death benefit percentage varies based
on the age and sex of the insured person. Below is an example of applicable
required minimum death benefit percentages for the cash value accumulation
test. The percentages shown are for a male, non-tobacco, ages 40 to 99.
APPLICABLE PERCENTAGES UNDER
CASH VALUE ACCUMULATION TEST
----------------------------
INSURED
PERSON'S
ATTAINED AGE 40 45 50 55 60 65 70 75 99
% 344% 293% 252% 218% 191% 169% 152% 140% 104%
If you have selected the guideline premium test, we calculate the required
minimum death benefit by multiplying your Policy's accumulation value by an
applicable required minimum death benefit percentage. The applicable required
minimum death benefit percentage is 250% when the insured person's age is 40 or
less, and decreases each year thereafter to 100% when the insured person's age
is 95 or older. The applicable required minimum death benefit percentages under
the guideline premium test for certain ages between 40 and 95 are set forth in
the following table.
APPLICABLE PERCENTAGES UNDER
GUIDELINE PREMIUM TEST
----------------------
INSURED
PERSON'S
ATTAINED AGE 40 45 50 55 60 65 70 75 95+
% 250% 215% 185% 150% 130% 120% 115% 105% 100%
Your Policy calls the multipliers used for each test the "Death Benefit
Corridor Rate."
Base coverage and supplemental coverage. When you apply for a Policy, the
amount of insurance you select is called the "specified amount." The specified
amount may be made up of two types of coverage: base coverage, which will
always be present, and supplemental coverage, which may also be included. The
total of the two coverages cannot be less than the minimum of $50,000 and at
least 10% of the total must be base coverage when you purchase the Policy.
Generally, if we assess less than the maximum guaranteed charges under your
Policy and if you choose supplemental coverage instead of base coverage, then
in the early Policy years you will reduce your total charges and increase your
accumulation value and cash surrender value. The more supplemental coverage you
elect, the greater will be the amount of the reduction in charges and increase
in accumulation value.
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You should have an understanding of the significant differences between base
coverage and supplemental coverage before you complete your application. Here
are the features about supplemental coverage that differ from base coverage:
. In general, the larger percentage of supplemental coverage you choose
when your Policy is issued, the shorter the time the guarantee period
benefit will be in force;
. We pay a higher level of compensation for the sale of base coverage than
for supplemental coverage either when you purchase your Policy or when
you pay additional premiums at any time through the tenth Policy year
(we do not provide compensation for premiums we receive after the tenth
Policy year);
. Supplemental coverage has no surrender charges;
. The cost of insurance rate for supplemental coverage is always equal to
or less than the cost of insurance rate for an equivalent amount of base
coverage; and
. We do not collect the monthly charge for each $1,000 of specified amount
that is attributable to supplemental coverage.
You can change the percentage of base coverage when you increase the
specified amount, but at least 10% of the total specified amount after the
increase must remain as base coverage. There is no charge when you change the
percentages of base and supplemental coverages. However, if you increase your
Policy's base coverage, we will impose a new surrender charge only upon the
amount of the increase in base coverage. The new surrender charge applies for
the first 10 Policy years following the increase. The percentage that your base
and supplemental coverages represent of your specified amount will not change
whenever you decrease the specified amount. A partial surrender will reduce the
specified amount. In this case, we will deduct any surrender charge that
applies to the decrease in base coverage, but not to the decrease in
supplemental coverage since supplemental coverage has no surrender charge.
You should use the mix of base and supplemental coverage to emphasize your
own objectives. For instance, our guarantee of a minimum death benefit (through
the guarantee period benefit) may be essential to your planning. If this is the
case, you may wish to maximize the percentage amount of base coverage you
purchase. Policy owner objectives differ. Therefore, before deciding how much,
if any, supplemental coverage you should have, you should discuss with your AGL
representative what you believe to be your own objectives. Your representative
can provide you with further information and Policy illustrations showing how
your selection of base and supplemental coverages can affect your Policy values
under different assumptions.
PREMIUM PAYMENTS
Premium payments. We call the payments you make "premiums" or "premium
payments." The amount we require as your initial premium varies depending on
the specifics of your Policy and the insured person. If mandated under
applicable law, we may be required to reject a premium payment. Otherwise, with
a few exceptions mentioned below, you can make premium payments at any time and
in any amount. Premium payments we receive after your free look period, as
discussed on page 32, will be allocated upon receipt to the available
investment options you have chosen.
Premium payments and transaction requests in good order. We will accept the
Policy owner's instructions to allocate premium payments to investment options,
to make redemptions (including loans) or to transfer values among the Policy
owner's investment options, contingent upon the Policy owner's
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providing us with instructions in good order. This means that the Policy
owner's request must be accompanied by sufficient detail to enable us to
allocate, redeem or transfer assets properly.
When we receive a premium payment or transaction request in good order, it
will be treated as described under "Effective date of other premium payments
and requests that you make" on page 38 of this prospectus. If we receive an
instruction that is not in good order, the requested action will not be
completed, and any premium payments that cannot be allocated will be held in a
non-interest bearing account until we receive all necessary information.
We will attempt to obtain Policy owner guidance on requests not received in
good order for up to five business days following receipt. For instance, one of
our representatives may telephone the Policy owner to determine the intent of a
request. If a Policy owner's request is still not in good order after five
business days, we will cancel the request, and return any unallocated premiums
to the Policy owner along with the date the request was canceled.
Limits on premium payments. Federal tax law may limit the amount of premium
payments you can make (relative to the amount of your Policy's insurance
coverage) and may impose penalties on amounts you take out of your Policy if
you do not observe certain additional requirements. These tax law requirements
and a discussion of modified endowment contracts are summarized further under
"Federal Tax Considerations" beginning on page 53. We will monitor your premium
payments, however, to be sure that you do not exceed permitted amounts or
inadvertently incur any tax penalties. The tax law limits can vary as a result
of changes you make to your Policy. For example, a reduction in the specified
amount of your Policy can reduce the amount of premiums you can pay.
Also, in certain limited circumstances, additional premiums may cause the
death benefit to increase by more than they increase your accumulation value.
In such case, we may refuse to accept an additional premium if the insured
person does not provide us with satisfactory evidence that our requirements for
issuing insurance are still met. This increase in death benefit is on the same
terms (including additional charges) as any other specified amount increase you
request (as described under "Increase in coverage" on page 35.)
Checks. You may pay premium by checks drawn on a U.S. bank in U.S. dollars
and made payable to "American General Life Insurance Company," or "AGL."
Premiums after the initial premium should be sent directly to the appropriate
address shown on your billing statement. If you do not receive a billing
statement, send your premium directly to the address for premium payments shown
on page 5 of this prospectus. We also accept premium payments by bank draft,
wire or by exchange from another insurance company. Premium payments from
salary deduction plans may be made only if we agree. You may obtain further
information about how to make premium payments by any of these methods from
your AGL representative or from our Administrative Center shown under "Contact
Information" on page 5.
Planned periodic premiums. Page 3 of your Policy will specify a "Planned
Periodic Premium." This is the amount that you (within limits) choose to pay.
Our current practice is to bill monthly, quarterly, semi-annually or annually.
However, payment of these or any other specific amounts of premiums is not
mandatory. After payment of your initial premium, you need only invest enough
to ensure that your Policy's cash surrender value stays above zero or that the
guarantee period benefit (described under "Monthly guarantee premiums" on page
31) remains in effect ("Cash surrender value" is explained under "Full
surrenders" on page 7.) The less you invest, the more likely it is that your
Policy's cash surrender value could fall to zero as a result of the deductions
we periodically make from your accumulation value.
30
Monthly guarantee premiums. Page 3 of your Policy will specify a "Monthly
Guarantee Premium." If you pay these guarantee premiums, we will provide at
least an Option 1 death benefit, even if your policy's cash surrender value has
declined to zero.
We call this our "guarantee period benefit" and here are its terms and
conditions:
. On the first day of each POLICY MONTH that you are covered by the
guarantee period benefit, we determine if the cash surrender value (we
use your accumulation value less loans during your first five Policy
years) is sufficient to pay the monthly deduction. (Policy months are
measured from the "Date of Issue" that will also be shown on page 3 of
your Policy.)
. If the cash surrender value is insufficient, we determine if the
cumulative amount of premiums paid under the Policy, less any partial
surrenders and Policy loans, is at least equal to the sum of the monthly
guarantee premiums starting with the date of issue, including the
current Policy month.
. If the monthly guarantee premium requirement is met, the Policy will not
lapse. See "Policy Lapse and Reinstatement" on page 52.
. We continue to measure your cash surrender value and the sum of monthly
guarantee premiums for the length of time you are covered by the
guarantee period benefit.
The cost of providing the guarantee period benefit is, in part, dependent on
the level of the monthly guarantee premium and the duration of the guarantee
period. The more supplemental coverage you choose, the lower are your overall
Policy charges. Although overall Policy charges are lower, more supplemental
coverage will result in a higher monthly guarantee premium and a shorter
guarantee period.
The length of time you are covered by the guarantee period benefit varies on
account of two things (except in New Jersey, as described in the last paragraph
of this section):
. the insured person's age at the Policy's date of issue; and
. the amounts of base coverage and supplemental coverage you have chosen.
The maximum duration for the guarantee period - 10 years - happens in the
event you have chosen 100% base coverage and the insured person is no older
than age 50 at the Policy's date of issue. We reduce the maximum time for the
guarantee period by one year for each year the insured person is older than age
50 at the date of issue. The reductions stop after the insured person is age 55
or older at the date of issue. This means, for instance, that you will have a
guarantee period of 5 years if you choose 100% base coverage and the insured
person is age 55 at the Policy's date of issue.
The least amount of time for the guarantee period to be in effect - 3 years
- happens in the event you have chosen the maximum permitted 90% of
supplemental coverage and the insured person is older than age 50 at the date
of issue.
Whenever you increase or decrease your specified amount, change death
benefit options or add or delete a benefit rider, we calculate a new monthly
guarantee premium. The amount you must pay to keep the guarantee period benefit
in force will increase or decrease. We can calculate your new monthly guarantee
premium as a result of a Policy change before you make the change. Please
contact either your
31
AGL representative or the Administrative Center shown under "Contact
Information" on page 5 for this purpose.
. For increases in the specified amount, the new monthly guarantee premium
is calculated based on the insured's underwriting characteristics at the
time of the increase and the amount of the increase.
. For decreases in the specified amount, the monthly guarantee premium is
adjusted on a pro-rata basis. For instance, if the specified amount is
reduced by one-half, the monthly guarantee premium is reduced by
one-half.
. For the addition of a benefit rider, the monthly guarantee premium is
increased by the amount of the monthly deduction for the rider.
. For the deletion of a benefit rider, the monthly guarantee premium will
be decreased by the amount of the monthly deduction for the rider.
We provide the guarantee period benefit for 5 years for all Policies issued
in the State of New Jersey. The period of coverage for New Jersey Policies is
unaffected by the insured person's age at the Policy's date of issue or your
choice of base coverage and supplemental coverage.
Free look period. If for any reason you are not satisfied with your Policy,
you may return it to us and we will refund the greater of (i) any premium
payments received by us or (ii) your accumulation value plus any charges that
have been deducted. To exercise your right to return your Policy, you must mail
it directly to the Administrative Center address shown under "Contract
Information" on page 5 or return it to the AGL representative through whom you
purchased the Policy within 10 days after you receive it. In a few states, this
period may be longer. Because you have this right, we will invest your initial
net premium payment in the money market investment option from the date your
investment performance begins until the first business day that is at least 15
days later. Then we will automatically allocate your investment among the
available investment options in the ratios you have chosen. This reallocation
will not count against the 12 free transfers that you are permitted to make
each year. Any additional premium we receive during the 15-day period will also
be invested in the money market investment option and allocated to the
investment options at the same time as your initial net premium.
CHANGING YOUR INVESTMENT OPTION ALLOCATIONS
Future premium payments. You may at any time change the investment options
in which future premiums you pay will be invested. Your allocation must,
however, be in whole percentages that total 100%.
Transfers of existing accumulation value. You may transfer your existing
accumulation value from one investment option to another, subject to the
restrictions below and other restrictions described in this prospectus (see
"Market timing" on page 34, "Restrictions initiated by the Funds and
information sharing obligations" on page 35 and "Additional Rights That We
Have" on page 46).
. CHARGES. The first 12 transfers in a Policy year are free of charge. We
consider your instruction to transfer from or to more than one
investment option at a time to be one transfer. We will charge $25 for
each additional transfer.
. RESTRICTIONS ON TRANSFERS FROM VARIABLE INVESTMENT OPTIONS. You may make
transfers from the variable investment options at any time. There is no
maximum limit on the amount
32
you may transfer. The minimum amount you may transfer from a variable
investment option is $500, unless you are transferring the entire amount
you have in the option.
. RESTRICTIONS ON TRANSFERS FROM THE FIXED ACCOUNT. You may make transfers
from the Fixed Account only during the 60-day period following each
Policy anniversary (including the 60-day period following the date we
apply your initial premium to your Policy).
The maximum total amount you may transfer from the Fixed Account each
year is limited to the greater of "a" or "b" below:
a. 25% of the unloaned accumulation value you have in the Fixed Account
as of the Policy anniversary (for the first Policy year, the amount
of your initial premium you allocated to the Fixed Account); or
b. the total amount you transferred or surrendered from the Fixed
Account during the previous Policy year.
The minimum amount you may transfer from the Fixed Account is $500,
unless you are transferring the entire amount you have in the Fixed
Account.
Dollar cost averaging. DOLLAR COST AVERAGING is an investment strategy
designed to reduce the risks that result from market fluctuations. The strategy
spreads the allocation of your accumulation value among your chosen variable
investment options over a period of time. This allows you to reduce the risk of
investing most of your funds at a time when prices are high. The success of
this strategy depends on market trends and is not guaranteed. You should
carefully consider your financial ability to continue the program over a long
enough period of time to allocate accumulation value to the variable investment
options when their value is low as well as when it is high.
Under dollar cost averaging, we automatically make transfers of your
accumulation value from the variable investment option of your choice to one or
more of the other variable investment options that you choose. You tell us what
day of the month you want these transfers to be made (other than the 29th, 30th
or 31st of a month) and whether the transfers on that day should occur monthly,
quarterly, semi-annually or annually. We make the transfers at the end of the
VALUATION PERIOD containing the day of the month you select. (The term
"valuation period" is described on page 37.) You must have at least $5,000 of
accumulation value to start dollar cost averaging and each transfer under the
program must be at least $100. Dollar cost averaging ceases upon your request,
or if your accumulation value in the investment option from which you are
making transfers becomes exhausted. You may maintain only one dollar cost
averaging instruction with us at a time. You cannot use dollar cost averaging
at the same time you are using AUTOMATIC REBALANCING. Dollar cost averaging
transfers do not count against the 12 free transfers that you are permitted to
make each year. We do not charge you for using this service.
Automatic rebalancing. This feature automatically rebalances the proportion
of your accumulation value in each variable investment option under your Policy
to correspond to your then current premium allocation designation. Automatic
rebalancing does not guarantee gains, nor does it assure that you will not have
losses. You tell us whether you want us to do the rebalancing quarterly,
semi-annually or annually. Automatic rebalancing will occur as of the end of
the valuation period that contains the date of the month your Policy was
issued. For example, if your Policy is dated January 17, and you have requested
automatic rebalancing on a quarterly basis, automatic rebalancing will start on
April 17, and will occur quarterly thereafter. You must have a total
accumulation value of at least $5,000 to begin automatic rebalancing.
Rebalancing ends upon your request. You may maintain only one automatic
rebalancing instruction with us at a time. You cannot use automatic rebalancing
at the same
33
time you are using dollar cost averaging. Automatic rebalancing transfers do
not count against the 12 free transfers that you are permitted to make each
year. We do not charge you for using this service.
Market timing. The Policies are not designed for professional market timing
organizations or other entities or individuals using programmed and frequent
transfers involving large amounts. Market timing carries risks with it,
including:
. dilution in the value of Fund shares underlying investment options of
other Policy owners;
. interference with the efficient management of the Fund's portfolio; and
. increased administrative costs.
We have policies and procedures affecting your ability to make transfers
within your Policy. A transfer can be your allocation of all or a portion of a
new premium payment to an investment option. You can also transfer your
accumulation value in one investment option (all or a portion of the value) to
another investment option.
We are required to monitor the Policies to determine if a Policy owner
requests:
. a transfer out of a variable investment option within two calendar weeks
of an earlier transfer into that same variable investment option; or
. a transfer into a variable investment option within two calendar weeks
of an earlier transfer out of that same variable investment option; or
. a transfer out of a variable investment option followed by a transfer
into that same variable investment option, more than twice in any one
calendar quarter; or
. a transfer into a variable investment option followed by a transfer out
of that same variable investment option, more than twice in any one
calendar quarter.
If any of the above transactions occurs, we will suspend such Policy owner's
same day or overnight delivery transfer privileges (including website, e-mail
and facsimile communications) with notice to prevent market timing efforts that
could be harmful to other Policy owners or beneficiaries. Such notice of
suspension will take the form of either a letter mailed to your last known
address, or a telephone call from our Administrative Center to inform you that
effective immediately, your same day or overnight delivery transfer privileges
have been suspended. A Policy owner's first violation of this policy will
result in the suspension of Policy transfer privileges for ninety days. A
Policy owner's subsequent violation of this policy will result in the
suspension of Policy transfer privileges for six months.
In most cases, transfers into and out of the money market investment option
are not considered market timing; however, we examine all of the above
transactions without regard to any transfer into or out of the money market
investment option. We treat such transactions as if they are transfers directly
into and out of the same variable investment option. For instance:
(1) if a Policy owner requests a transfer out of any variable investment
option into the money market investment option, and
(2) the same Policy owner, within two calendar weeks requests a transfer
out of the money market investment option back into that same variable
investment option, then
34
(3) the second transaction above is considered market timing.
Transfers under dollar cost averaging, automatic rebalancing or any other
automatic transfer arrangements to which we have agreed are not affected by
these procedures.
The procedures above will be followed in all circumstances, and we will
treat all Policy owners the same.
In addition, Policy owners incur a $25 charge for each transfer in excess of
12 each Policy year.
Restrictions initiated by the Funds and information sharing obligations. The
Funds have policies and procedures restricting transfers into the Fund. For
this reason or for any other reason the Fund deems necessary, a Fund may
instruct us to reject a Policy owner's transfer request. Additionally, a Fund
may instruct us to restrict all purchases or transfers into the Fund by a
particular Policy owner. We will follow the Fund's instructions. The
availability of transfers from any investment option offered under the Policy
is unaffected by the Fund's policies and procedures.
Please read the Funds' prospectuses and supplements for information about
restrictions that may be initiated by the Funds.
In order to prevent market timing, the Funds have the right to request
information regarding Policy owner transaction activity. If a Fund requests, we
will provide mutually agreed upon information regarding Policy owner
transactions in the Fund.
CHANGING THE SPECIFIED AMOUNT OF INSURANCE
Increase in coverage. At any time while the insured person is living, you
may request an increase in the specified amount of coverage under your Policy.
You must, however, provide us with satisfactory evidence that the insured
person continues to meet our requirements for issuing insurance coverage.
We treat an increase in specified amount in many respects as if it were the
issuance of a new Policy. For example, the monthly insurance charge for the
increase will be based on the age, gender and premium class of the insured
person at the time of the increase. Also, a new amount of surrender charge
. applies to any amount of the increase that you request as base (rather
than supplemental) coverage;
. applies as if we were instead issuing the same amount of base coverage
as a new Platinum Investor III Policy; and
. applies to the amount of the increase for the 10 Policy years following
the increase.
Whenever you decide to increase your specified amount, you will be subject
to a new monthly charge per $1,000 of base coverage. The additional charge will
be applied to the increase in your base coverage portion of the increase in the
specified amount for the first 7 Policy years following the increase.
Increasing the specified amount may increase the amount of premium you would
need to pay to avoid a lapse of your Policy.
35
You are not required to increase your specified amount in any specific
percentage or ratio that your base and supplemental coverage bear to your
specified amount before the increase, with one exception. Base coverage must be
at least 10% of the total specified amount after the increase.
Decrease in coverage. After the first Policy year, you may request a
reduction in the specified amount of coverage, but not below certain minimums.
After any decrease, the specified amount cannot be less than the greater of:
. $50,000; and
. any minimum amount which, in view of the amount of premiums you have
paid, is necessary for the Policy to continue to meet the federal tax
law definition of life insurance.
We will apply a reduction in specified amount proportionately against the
specified amount provided under the original application and any specified
amount increases. The decrease in specified amount will decrease both your base
and supplemental coverage in the same ratio they bear to your specified amount
before the decrease. We will deduct from your accumulation value any surrender
charge that is due on account of the decrease. We will also reduce any
remaining surrender charge amount associated with the portion of your Policy's
base coverage that has been reduced. If there is not sufficient accumulation
value to pay the surrender charge at the time you request a reduction, the
decrease will not be allowed.
A reduction in specified amount will not reduce the monthly charge per
$1,000 of base coverage or the amount of time for which we assess this charge.
For instance, if you increase your base coverage and follow it by a decrease in
base coverage within 7 years of the increase, we will assess the monthly charge
per $1,000 of base coverage against the increase in base coverage for the full
7 years even though you have reduced the amount of base coverage.
CHANGING DEATH BENEFIT OPTIONS
Change of death benefit option. You may at any time before the death of the
insured person request us to change your choice of death benefit option from:
Option 1 to Option 2;
Option 2 to Option 1; or
Option 3 to Option 1.
No other changes are permitted. A change from Option 3 to Option 1 may be
subject to regulatory approval in your state.
. If you change from Option 1 to Option 2, we automatically reduce your
Policy's specified amount of insurance by the amount of your Policy's
accumulation value (but not below zero) at the time of the change. The
change will go into effect on the MONTHLY DEDUCTION DAY (see "Monthly
deduction days" on page 38 following the date we receive your request
for change. We will take the reduction proportionately from each
component of the Policy's specified amount. We will not charge a
surrender charge for this reduction in specified amount. The surrender
charge schedule will not be reduced on account of the reduction in
specified amount. The monthly charge per $1,000 of base coverage will
not change. At the time of the change of death benefit option, your
Policy's monthly insurance charge and surrender value will not change.
36
. If you change from Option 2 to Option 1, then as of the date of the
change we automatically increase your Policy's specified amount by the
amount of your Policy's accumulation value. We will apply the entire
increase in your specified amount to the last coverage added (either
base or supplemental) to your Policy, and which has not been removed by
a decrease in your Policy's specified amount. For the purpose of this
calculation, if base and supplemental coverages were issued on the same
date, we will consider the supplemental coverage to have been issued
later. The monthly charge per $1,000 of base coverage will not change.
At the time of the change of death benefit option, your Policy's monthly
insurance charge and surrender value will not change.
. If you change from Option 3 to Option 1, your Policy's specified amount
will not change. The monthly charge per $1,000 of base coverage and the
COST OF INSURANCE RATES will not change. Your Policy's monthly insurance
charge will decrease and the surrender value will increase.
Tax consequences of changes in insurance coverage. Please read "Tax Effects"
starting on page 53 of this prospectus to learn about possible tax consequences
of changing your insurance coverage under your Policy.
Effect of changes in insurance coverage on guarantee period. A change in
coverage does not result in termination of the guarantee period, so that if you
pay certain prescribed amounts of premiums, we will pay a death benefit even if
your Policy's cash surrender value declines to zero. The details of this
guarantee are discussed under "Monthly guarantee premiums," beginning on page
31.
EFFECTIVE DATE OF POLICY AND RELATED TRANSACTIONS
Valuation dates, times, and periods. We compute values under a Policy on
each day that the NYSE is open for business. We call each such day a "VALUATION
DATE" or a "business day."
We compute policy values as of the time the NYSE closes on each valuation
date, which usually is 3:00 p.m. Central time. We call this our "CLOSE OF
BUSINESS." We call the time from the close of business on one valuation date to
the close of business of the next valuation date a "valuation period." We are
closed only on those holidays the NYSE is closed.
Fund pricing. Each Fund produces a price per Fund share following each close
of the NYSE and provides that price to us. We then determine the Fund value at
which you may invest in the particular investment option, which reflects the
change in value of each Fund reduced by the daily charge and any other charges
that are applicable to your Policy.
Date of receipt. Generally we consider that we have received a premium
payment or another communication from you on the day we actually receive it in
good order at any of the addresses shown on page 5 of this prospectus. If we
receive it after the close of business on any valuation date, however, we
consider that we have received it on the following valuation date. Any premium
payments we receive after our close of business are held in our general account
until the next business day.
If we receive your premiums through payroll allotment, such as salary
deduction or salary reduction programs, we consider that we receive your
premium on the day we actually receive it, rather than the day the deduction
from your payroll occurs. This is important for you to know because your
premium receives no interest or earnings for the time between the deduction
from your payroll and our receipt of the payment. We do not accept military
allotment programs.
37
Commencement of insurance coverage. After you apply for a Policy, it can
sometimes take up to several weeks for us to gather and evaluate all the
information we need to determine whether to issue a Policy to you and, if so,
what the insured person's premium class should be. We will not pay a death
benefit under a Policy unless (a) it has been delivered to and accepted by the
owner and at least the initial premium has been paid, and (b) at the time of
such delivery and payment, there have been no adverse developments in the
insured person's health or risk of death. However, if you pay at least the
minimum first premium payment with your application for a Policy, we will
provide temporary coverage of up to $500,000 provided the insured person meets
certain medical and risk requirements. The terms and conditions of this
coverage are described in our "Limited Temporary Life Insurance Agreement,"
available to you when you apply for this Policy.
Date of issue; Policy months and years. We prepare the Policy only after we
approve an application for a Policy and assign the appropriate premium class.
The day we begin to deduct charges will appear on page 3 of your Policy and is
called the "Date of Issue." Policy months and years are measured from the date
of issue. To preserve a younger age at issue for the insured person, we may
assign a date of issue to a Policy that is up to 6 months earlier than
otherwise would apply.
Monthly deduction days. Each charge that we deduct monthly is assessed
against your accumulation value at the close of business on the date of issue
and at the end of each subsequent valuation period that includes the first day
of a Policy month. We call these "monthly deduction days."
Commencement of investment performance. We begin to credit an investment
return to the accumulation value resulting from your initial premium payment on
the later of (a) the date of issue, or (b) the date all requirements needed to
place the Policy in force have been reviewed and found to be satisfactory,
including underwriting approval and receipt of the necessary premium. In the
case of a back-dated Policy, we do not credit an investment return to the
accumulation value resulting from your initial premium payment until the date
stated in (b) above.
Effective date of other premium payments and requests that you make. Premium
payments (after the first) and transactions made in response to your requests
and elections are generally effected at the end of the valuation period in
which we receive the payment, request or election and based on prices and
values computed as of that same time. Exceptions to this general rule are as
follows:
. Increases or decreases you request in the specified amount of insurance,
REINSTATEMENT of a Policy that has lapsed, and changes in death benefit
option take effect on the Policy's monthly deduction day if your request
is approved on that day or on the next monthly deduction day following
our approval if we approve your request on any other day of the month;
. In most states, we may return premium payments, make a partial surrender
or reduce the death benefit if we determine that such premiums would
cause your Policy to become a modified endowment contract or to cease to
qualify as life insurance under federal income tax law or exceed the
maximum net amount at risk;
. If you exercise your right to return your Policy described under "Free
look period" on page 32 of this prospectus, your coverage will end when
you deliver it to your AGL representative, or if you mail it to us, the
date it is postmarked; and
. If you pay a premium at the same time that you make a Policy request
which requires our approval, your payment will be applied when received
rather than following the effective date of the requested change, but
only if your Policy is in force and the amount paid will
38
not cause you to exceed premium limitations under the Internal Revenue
Code of 1986, as amended (the "CODE"). If we do not approve your Policy
request, your premium payment will still be accepted in full or in part
(we will return to you the portion of your premium payment that would be
in violation of the maximum premium limitations under the Code). We will
not apply this procedure to premiums you pay in connection with
reinstatement requests.
REPORTS TO POLICY OWNERS
Shortly after the end of each Policy year, we will mail you a report that
includes information about your Policy's current death benefit, accumulation
value, cash surrender value and Policy loans. We will send you notices to
confirm premium payments, transfers and certain other Policy transactions. We
will mail to you at your last known address of record, these and any other
reports and communications required by law. You should give us prompt written
notice of any address change.
ADDITIONAL BENEFIT RIDERS
RIDERS
You may be eligible to add an additional rider benefit to your Policy. You
can request that your Policy include the additional rider benefits described
below. For most of the riders that you choose, a charge, which will be shown on
page 3 of your Policy, will be deducted from your accumulation value on each
monthly deduction day. Eligibility for and changes in these benefits are
subject to our rules and procedures as well as Internal Revenue Service ("IRS")
guidance and rules that pertain to the Code's definition of life insurance as
in effect from time to time. Not all riders are available in all states. More
details are included in the form of each rider, which we suggest that you
review if you choose any of these benefits. Some of the riders provide
guaranteed benefits that are obligations of our general account and not of the
Separate Account. See "Our general account" on page 25.
. Accidental Death Benefit Rider. This rider pays an additional death
benefit if the insured person dies from certain accidental causes. There
is a charge for this rider. You can purchase this rider only at the time
we issue your Policy. You may later elect to terminate this rider. If
you do so, the charge will cease.
. Children's Insurance Benefit Rider. This rider provides term life
insurance coverage on the eligible children of the person insured under
the Policy. There is a charge for this rider. This rider is convertible
into any other insurance (except for term coverage) available for
conversions, under our published rules at the time of conversion. You
may purchase this rider at the time we issue your Policy or at any time
thereafter. You may terminate the rider at any time. If you do so, the
charge will cease.
. Maturity Extension Rider. This rider gives you the option to extend the
Policy's MATURITY DATE beyond what it otherwise would be, at any time
before the original maturity date. Once you select this rider, if you
have not already elected to extend the maturity date, we will notify you
of this right 60 days before maturity. If you do not then elect to
extend the maturity date before the original maturity date, the rider
will terminate and the maturity date will not be extended. You have two
versions of this rider from which to choose, the Accumulation Value
version and the Death Benefit version. Either or both versions may not
be available in your state.
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THE ACCUMULATION VALUE VERSION provides for a death benefit after your
original maturity date that is equal to the accumulation value on the
date of the insured person's death. The death benefit will be reduced by
any outstanding Policy loan amount. There is no charge for this version
until you reach your original maturity date. After your original
maturity date, we will charge a monthly fee of no more than $10.
THE DEATH BENEFIT VERSION provides for a death benefit after your
original maturity date equal to the death benefit in effect on the day
prior to your original maturity date. If the death benefit is based
fully, or in part, on the accumulation value, we will adjust the death
benefit to reflect future changes in your accumulation value. The death
benefit will never be less than the accumulation value. The death
benefit will be reduced by any outstanding Policy loan amount.
We will charge you the following amounts under the death benefit version
. A monthly fee of no more than $30 for each $1,000 of the net amount
at risk. This fee begins 9 years before your original maturity date
and terminates on your original maturity date; and
. A monthly fee of no more than $10. This fee begins on your original
maturity date if you exercise your right under the rider to extend
your original maturity date.
Nine years and 60 days before your original maturity date, we will
notify you that you will incur these charges if you keep the rider. You
will then have until your original maturity date to terminate the rider
and with it, your right to extend your original maturity date. If you
terminate the rider at any time within this nine year and 60 day period,
there will be no further charges and you will have no remaining right to
receive a benefit under the rider.
Both versions of the rider may be added at any time to an existing Policy up
until the same nine year and 60 day period before your original maturity
date. In Illinois you may select either version of the rider only after we
issue your Policy.
There are features common to both riders in addition to the $10 maximum
monthly fee. Only the insurance coverage associated with the Policy will be
extended beyond your original maturity date. We do not allow additional
premium payments, or changes in specified amount after your original
maturity date. The only charge we continue to automatically deduct after the
original maturity date is the daily charge described on page 48. Once you
have exercised your right to extend your original maturity date, you cannot
revoke it. The monthly fee will continue. You can, however, surrender your
Policy at any time.
Extension of the maturity date beyond the insured person's age 100 may
result in current taxation of increases in your Policy's accumulation value
as a result of interest or investment experience after that time. You should
consult a qualified tax adviser before making such an extension.
.. Spouse Term Rider. This rider provides term life insurance on the life of
the spouse of the Policy's insured person. There is a charge for this rider.
This rider terminates no later than
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the Policy anniversary nearest the spouse's 75th birthday. You can
convert this rider into any other insurance, except term, under our
published rules at the time of conversion. You can purchase this rider
only at the time we issue your Policy. You may later elect to terminate
this rider. If you do so, the charge will cease.
. Terminal Illness Rider. This rider provides the Policy owner with the
right to request a benefit if the Policy's insured person is diagnosed
as having a terminal illness (as defined in the rider) and less than 12
months to live. This rider is not available in all states. There is a
charge for this rider. The maximum amount you may receive under this
rider before the insured person's death is 50% of the death benefit that
would be due under the Policy (excluding any rider benefits), not to
exceed $250,000. The amount of benefits paid under the rider, plus
interest on this amount to the next Policy anniversary, plus an
administrative fee (not to exceed $250), becomes a "LIEN" against the
Policy. The maximum interest rate will not exceed the greater of
. the Moody's corporate Bond Yield Average-Monthly Average Corporates
for the month of October preceding the calendar year for which the
loan interest rate is determined; or
. the interest rate used to calculate cash values in the Fixed Account
during the period for which the interest rate is determined, plus 1%.
A lien is a claim by AGL against all future Policy benefits. We will
continue to charge interest in advance on the total amount of the lien
and will add any unpaid interest to the total amount of the lien each
year. The cash surrender value of the Policy also will be reduced by the
amount of the lien. Any time the total lien, plus any other Policy
loans, exceeds the Policy's then current death benefit, the Policy will
terminate without further value. You can purchase this rider at any time
prior to the maturity date. You may terminate this rider at any time. If
you do so, the charge will cease.
. Waiver of Monthly Deduction Rider. This rider provides for a waiver of
all monthly charges assessed for both your Policy and riders that we
otherwise would deduct from your accumulation value, so long as the
insured person is totally disabled (as defined in the rider). This rider
is not available for Policies with an initial specified amount greater
than $5,000,000. There is a charge for this rider. While we are paying
benefits under this rider we will not permit you to request any increase
in the specified amount of your Policy's coverage. When we "pay
benefits" under this rider, we pay all monthly charges (except for loan
interest) for your Policy when they become due, and then deduct the same
charges from your Policy. Therefore, your Policy's accumulation value
does not change because of monthly charges. We perform these two
transactions at the same time. However, loan interest will not be paid
for you under this rider, and the Policy could, under certain
circumstances, lapse for nonpayment of loan interest. You can purchase
this rider on the life of an insured person who is younger than age 56.
You can purchase this rider only at the time we issue your Policy. You
may later elect to terminate this rider. If you do so, the charge will
cease.
TAX CONSEQUENCES OF ADDITIONAL RIDER BENEFITS.
Adding or deleting riders, or increasing or decreasing coverage under
existing riders can have tax consequences. See "Tax Effects" starting on page
53. You should consult a qualified tax adviser.
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POLICY TRANSACTIONS
The following transactions may have different effects on the accumulation
value, death benefit, specified amount or cost of insurance. You should
consider the net effects before requesting a Policy transaction. See "Policy
Features" on page 26. Certain transactions also include charges. For
information regarding other charges, see "Charges Under the Policy" on page 48.
E-DELIVERY, E-SERVICE, TELEPHONE TRANSACTIONS AND WRITTEN TRANSACTIONS
See page 19 for information regarding E-Delivery, E-Service, telephone
transactions and written transactions.
WITHDRAWING POLICY INVESTMENTS
Full surrender. You may at any time surrender your Policy in full. If you
do, we will pay you the accumulation value, less any Policy loans, plus any
unearned loan interest, and less any surrender charge that then applies. We
call this amount your "cash surrender value." Because of the surrender charge,
it is unlikely that a Platinum Investor III Policy will have any cash surrender
value during at least the first year.
Partial surrender. You may, at any time after the first Policy year, make a
partial surrender of your Policy's cash surrender value. A partial surrender
must be at least $500. We will automatically reduce your Policy's accumulation
value by the amount of your withdrawal and any related charges. We do not allow
partial surrenders that would reduce the death benefit below $50,000.
If the Option 1 or Option 3 death benefit is then in effect, we also will
reduce your Policy's specified amount by the amount of such withdrawal and
charges, but not below $50,000. We will take any such reduction in specified
amount in accordance with the description found under "Decrease in coverage" on
page 36.
You may choose the investment option or options from which money that you
withdraw will be taken; otherwise, we will allocate the partial surrender in
the same proportions as then apply for deducting monthly charges under your
Policy or, if that is not possible, in proportion to the amount of accumulation
value you then have in each investment option.
There is a maximum partial surrender processing fee equal to the lesser of
2% of the amount withdrawn or $25 for each partial surrender you make. This
charge currently is $10.
Exchange of Policy in certain states. Certain states require that a Policy
owner be given the right to exchange the Policy for a fixed benefit life
insurance policy, within either 18 or 24 months from the date of issue. This
right is subject to various conditions imposed by the states and us. In such
states, this right has been more fully described in your Policy or related
endorsements to comply with the applicable state requirements.
Policy loans. You may at any time borrow from us an amount up to your
Policy's cash surrender value less the interest that will be payable on your
loan to your next Policy anniversary. The minimum amount you can borrow is $500
or, if less, your Policy's cash surrender value less the loan interest payable
to your next Policy anniversary. These rules are not applicable in all states.
We remove from your investment options an amount equal to your loan and hold
that part of your accumulation value in the Fixed Account as collateral for the
loan. We will credit your Policy with
42
interest on this collateral amount on a monthly basis at a guaranteed annual
effective rate of 4.0% (rather than any amount you could otherwise earn in one
of our investment options), and we will charge you interest on your loan at an
annual effective rate of 4.75%. Loan interest is payable annually, on the
Policy anniversary, in advance, at a rate of 4.54%. Any amount not paid by its
due date will automatically be added to the loan balance as an additional loan.
If a new Policy loan is taken out on a date not coinciding with the Policy
anniversary date, the loan interest charged is calculated from the date the
loan is taken out to the next Policy anniversary. The following year, loan
interest is calculated on the entire loan amount until the next Policy
anniversary. Similarly, if the loan is paid off (in-part or in-whole) on a date
not coinciding with the Policy anniversary date, the total loan amount will
reflect an adjustment for the unearned loan interest. Disbursements from the
Policy also result in adjusted interest. For instance, if a death claim occurs
on a date not coinciding with the Policy anniversary date, and the Policy has
an outstanding Policy loan, the total loan amount with an adjustment for the
unearned loan interest will be subtracted from the death benefit.
Interest you pay on Policy loans will not, in most cases, be deductible on
your tax returns.
You may choose which of your investment options the loan will be taken from.
If you do not so specify, we will allocate the loan in the same way that
charges under your Policy are being allocated. If this is not possible, we will
make the loan pro-rata from each investment option that you then are using.
You may repay all or part (but not less than $100 unless it is the final
payment) of your loan at any time before the death of the insured person while
the Policy is in force. You must designate any loan repayment as such;
otherwise, we will treat it as a premium payment instead. Any loan repayments
go first to repay all loans that were taken from the Fixed Account. We will
invest any additional loan repayments you make in the investment options you
request. In the absence of such a request we will invest the repayment in the
same proportion as you then have selected for premium payments that we receive
from you. Any unpaid loan (increased by any unearned loan interest we may have
already charged) will be deducted from the proceeds we pay following the
insured person's death.
Preferred loan interest rate. We will charge a lower interest rate on loans
available after the first 10 Policy years. We call these "preferred loans." The
maximum amount eligible for preferred loans for any year is:
. 10% of your Policy's accumulation value (which includes any loan
collateral we are holding for your Policy loans) at the Policy
anniversary; or
. if less, your Policy's maximum remaining loan value at that Policy
anniversary.
We will always credit your preferred loan collateral amount at a guaranteed
annual effective rate of 4.0%. We intend to set the rate of interest you are
paying to the same 4.0% rate we credit to your preferred loan collateral
amount, resulting in a zero net cost (0.00%) of borrowing for that amount. We
have full discretion to vary the rate we charge you, provided that the rate:
. will always be greater than or equal to the guaranteed preferred loan
collateral rate of 4.0%, and
. will never exceed an annual effective rate of 4.25%.
Maturity of your Policy. If the insured person is living on the "Maturity
Date" shown on page 3 of your Policy, we will pay you the cash surrender value
of the Policy, and the Policy will end. The
43
maturity date can be no later than the Policy anniversary nearest the insured
person's 100th birthday, unless you have elected the Maturity Extension Rider.
See "Maturity Extension Rider" within the "Additional Benefit Riders" section
beginning on page 39.
Tax considerations. Please refer to "Federal Tax Considerations" on page 53
for information about the possible tax consequences to you when you receive any
loan, surrender, maturity benefit or other funds from your Policy. A Policy
loan may cause the Policy to lapse which may result in adverse tax consequences.
POLICY PAYMENTS
PAYMENT OPTIONS
The beneficiary will receive the full death benefit proceeds from the Policy
as a single sum, unless the beneficiary elects another method of payment within
60 days after we receive notification of the insured person's death. Likewise,
the Policy owner will receive the full proceeds that become payable upon full
surrender or the maturity date, unless the Policy owner elects another method
of payment within 60 days after we receive notification of full surrender or
the maturity date.
The payee can elect that all or part of such proceeds be applied to one or
more of the following payment options. If the payee dies before all guaranteed
payments are paid, the payee's heirs or estate will be paid the remaining
payments.
The payee can elect that all or part of such proceeds be applied to one or
more of the following payment options:
. Option 1 - Equal monthly payments for a specified period of time.
. Option 2 - Equal monthly payments of a selected amount of at least $60
per year for each $1,000 of proceeds until all amounts are paid out.
. Option 3 - Equal monthly payments for the payee's life, but with
payments guaranteed for a specified number of years. These payments are
based on annuity rates that are set forth in the Policy or, at the
payee's request, the annuity rates that we then are using.
. Option 4 - Proceeds left to accumulate at an interest rate of 3%
compounded annually for any period up to 30 years. At the payee's
request we will make payments to the payee monthly, quarterly,
semiannually, or annually. The payee can also request a partial
withdrawal of any amount of $500 or more. There is no charge for partial
withdrawals.
Additional payment options may also be available with our consent. We have
the right to reject any payment option if the payee is a corporation or other
entity. You can read more about each of these options in the Policy and in the
separate form of payment contract that we issue when any such option takes
effect.
Interest rates that we credit under each option will be at least 3%.
Change of payment option. The owner may give us written instructions to
change any payment option previously elected at any time while the Policy is in
force and before the start date of the payment option.
44
Tax impact. If a payment option is chosen, you or your beneficiary may have
adverse tax consequences. You should consult with a qualified tax adviser
before deciding whether to elect one or more payment options.
THE BENEFICIARY
You name your beneficiary when you apply for a Policy. The beneficiary is
entitled to the insurance benefits of the Policy. You may change the
beneficiary during the lifetime of the insured person unless your previous
designation of beneficiary provides otherwise. In this case the previous
beneficiary must give us permission to change the beneficiary and then we will
accept your instructions. A new beneficiary designation is effective as of the
date you sign it, but will not affect any payments we may make before we
receive it. If no beneficiary is living when the insured person dies, we will
pay the insurance proceeds to the owner or the owner's estate.
ASSIGNMENT OF A POLICY
You may assign (transfer) your rights in a Policy to someone else as
collateral for a loan or for some other reason. We will not be bound by an
assignment unless it is received in writing. You must provide us with two
copies of the assignment. We are not responsible for any payment we make or any
action we take before we receive a complete notice of the assignment in good
order. We are also not responsible for the validity of the assignment. An
absolute assignment is a change of ownership. Because there may be unfavorable
tax consequences, including recognition of taxable income and the loss of
income tax-free treatment for any death benefit payable to the beneficiary, you
should consult a qualified tax adviser before making an assignment.
PAYMENT OF PROCEEDS
General. We generally will pay any death benefit, maturity benefit, cash
surrender value or loan proceeds within seven days after we receive the last
required form or request (and any other documents that may be required for
payment of a death benefit). If we do not have information about the desired
manner of payment within 60 days after the date we receive notification of the
insured person's death, we will pay the proceeds as a single sum, normally
within seven days thereafter.
Delay of Fixed Account proceeds. We have the right, however, to defer
payment or transfers of amounts out of the Fixed Account for up to six months.
If we delay more than 30 days in paying you such amounts, we will pay interest
of at least 3% a year from the date we receive all items we require to make the
payment.
Delay for check clearance. We reserve the right to defer payment of that
portion of your accumulation value that is attributable to a payment made by
check for a reasonable period of time (not to exceed 15 days) to allow the
check to clear the banking system.
Delay of Separate Account VL-R proceeds. We reserve the right to defer
computation of values and payment of any death benefit, loan or other
distribution that comes from that portion of your accumulation value that is
allocated to Separate Account VL-R, if:
. the NYSE is closed other than weekend and holiday closings;
. trading on the NYSE is restricted;
45
. an emergency exists as determined by the SEC or other appropriate
regulatory authority such that disposal of securities or determination of
the accumulation value is not reasonably practicable;
. the SEC by order so permits for the protection of Policy owners; or
. we are on notice that the Policy is the subject of a court proceeding, an
arbitration, a regulatory matter or other legal action.
Transfers and allocations of accumulation value among the investment options
may also be postponed under these circumstances. If we need to defer
calculation of Separate Account VL-R values for any of the foregoing reasons,
all delayed transactions will be processed at the next values that we do
compute.
Delay to challenge coverage. We may challenge the validity of your insurance
Policy based on any material misstatements in your application or any
application for a change in coverage. However,
. We cannot challenge the Policy after it has been in effect, during the
insured person's lifetime, for two years from the date the Policy was
issued or restored after termination.
(Some states may require that we measure this time in another way. Some
states may also require that we calculate the amount we are required to
pay in another way.)
. We cannot challenge any Policy change that requires evidence of
insurability (such as an increase in specified amount) after the change
has been in effect for two years during the insured person's lifetime.
. We cannot challenge an additional benefit rider that provides benefits if
the insured person becomes totally disabled, after two years from the
later of the Policy's date of issue or the date the additional benefit
rider becomes effective.
Delay required under applicable law. We may be required under applicable law
to block a request for transfer or payment, including a Policy loan request,
under a Policy until we receive instructions from the appropriate regulator.
ADDITIONAL RIGHTS THAT WE HAVE
We have the right at any time to:
. transfer the entire balance in an investment option in accordance with
any transfer request you make that would reduce your accumulation value
for that option to below $500;
. transfer the entire balance in proportion to any other investment options
you then are using, if the accumulation value in an investment option is
below $500 for any other reason;
. end the automatic rebalancing feature if your accumulation value falls
below $5,000;
. replace the underlying Fund that any investment option uses with another
Fund, subject to SEC and other required regulatory approvals;
46
. add, delete or limit investment options, combine two or more investment
options, or withdraw assets relating to the Policies from one investment
option and put them into another, subject to SEC and other required
regulatory approvals;
. operate Separate Account VL-R under the direction of a committee or
discharge such a committee at any time;
. operate Separate Account VL-R, or one or more investment options, in any
other form the law allows, including a form that allows us to make direct
investments. Separate Account VL-R may be charged an advisory fee if its
investments are made directly rather than through another investment
company. In that case, we may make any legal investments we wish; or
. make other changes in the Policy that in our judgment are necessary or
appropriate to ensure that the Policy continues to qualify for tax
treatment as life insurance, or that do not reduce any cash surrender
value, death benefit, accumulation value, or other accrued rights or
benefits.
VARIATIONS IN POLICY OR INVESTMENT OPTION TERMS AND CONDITIONS
We also have the right to make some variations in the terms and conditions
of a Policy. Any variations will be made only in accordance with uniform rules
that we establish. We intend to comply with all applicable laws in making any
changes and, if necessary, we will seek Policy owner approval and SEC and other
regulatory approvals. Here are some of the potential variations:
Underwriting and premium classes. We may add or remove premium classes. We
currently have nine premium classes we use to decide how much the monthly
insurance charges under any particular Policy will be:
. Four Non-tobacco classes: preferred plus, preferred, standard and
special;
. Three Tobacco classes: preferred, standard and special; and
. Two Juvenile classes: juvenile and special juvenile.
Various factors such as the insured person's age, health history, occupation
and history of tobacco use, are used in considering the appropriate premium
class for the insured. Premium classes are described in your Policy. Policies
issued in New Jersey do not have the juvenile and special juvenile classes.
Policies purchased through "internal rollovers". We maintain published rules
that describe the procedures necessary to replace life insurance policies we
have issued. Not all types of other insurance are eligible to be replaced with
a Policy. Our published rules may be changed from time to time, but are evenly
applied to all our customers.
State law requirements. AGL is subject to the insurance laws and regulations
in every jurisdiction in which the Policies are sold. As a result, various time
periods and other terms and conditions described in this prospectus may vary
depending on where you reside. These variations will be reflected in your
Policy and related endorsements.
Expenses or risks. AGL may vary the charges and other terms within the
limits of the Policy where special circumstances result in sales,
administrative or other expenses, mortality risks or other risks that are
different from those normally associated with the Policy.
47
Underlying investments. You will be notified as required by law if there are
any material changes in the underlying investments of an investment option that
you are using.
CHARGES UNDER THE POLICY
Statutory premium tax charge. Unless your Policy was issued in Oregon, we
deduct from each premium a charge for the tax that is then applicable to us in
your state or other jurisdiction. These taxes, if any, currently range in the
United States from 0.5% to 3.5%. Please let us know if you move to another
jurisdiction, so we can adjust this charge if required. You are not permitted
to deduct the amount of these taxes on your income tax return. We use this
charge to offset our obligation to pay premium tax on the Policies.
Tax charge back. If you are a resident of Oregon at the time you purchase a
Policy, there is no premium tax charge. Instead, we will deduct from each
premium a tax charge back that is permissible under Oregon law. If you later
move from Oregon to a state that has a premium tax, we will not charge you a
premium tax. We deduct the tax charge back from each premium you pay,
regardless of the state in which you reside at the time you pay the premium.
The current tax charge back is 1.78% of each premium. We may change the tax
charge back amount but any change will only apply to new Policies we issue. We
use the charge partly to offset our obligation to pay premium taxes on the same
Policy if you move to another state. We also use the charge to pay for the cost
of additional administrative services we provide under these Policies.
Premium expense charge. After we deduct premium tax (or a tax charge back if
we issued your Policy in Oregon) from each premium payment, we currently deduct
5.0% from the remaining amount. We may increase this charge for all years, but
it will never exceed 7.5%. AGL receives this charge to cover sales expenses,
including commissions.
Daily charge (mortality and expense risk fee). We will deduct a daily charge
at an annual effective rate of 0.70% (7/10 of 1%) of your accumulation value
that is then being invested in any of the variable investment options. After a
Policy has been in effect for 10 years, however, we will reduce this rate to an
annual effective rate of 0.45%, and after 20 years, to an annual effective rate
of 0.10%. We guarantee these rate reductions. Since the Policies were first
offered only in the year 2000, the reduction has not yet taken effect under any
outstanding Policies. AGL receives this charge to pay for our mortality and
expense risks.
Fees and expenses and money market investment options. During periods of low
short-term interest rates, and in part due to Policy fees and expenses that are
assessed as frequently as daily, the yield of the money market investment
option may become extremely low and possibly negative. If the daily dividends
paid by the underlying mutual fund for the money market investment option are
less than the Policy's fees and expenses, the money market investment option's
unit value will decrease. In the case of negative yields, your accumulation
value in the money market investment option will lose value.
Flat monthly charge. We will deduct $6 from your accumulation value each
month. We may lower this charge but it is guaranteed to never exceed $6. The
flat monthly charge is the Monthly Administration Fee shown on page 3A of your
Policy. AGL receives this charge to pay for the cost of administrative services
we provide under the Policies, such as regulatory mailings and responding to
Policy owners' requests.
Monthly charge per $1,000 of base coverage. We deduct a charge monthly from
your accumulation value for the first 7 Policy years. This monthly charge also
applies to the amount of any increase in base coverage during the 7 Policy
years following the increase. This charge varies according
48
to the age, gender and premium class of the insured person, as well as the
amount of coverage. The dollar amount of this charge changes with each increase
in your Policy's base coverage. (We describe your base coverage and specified
amount under "Your specified amount of insurance" on page 26 and "Base coverage
and supplemental coverage" on page 28.) This charge can range from a maximum of
$1.25 for each $1,000 of the base coverage portion of the specified amount to a
minimum of $0.03 for each $1,000 of base coverage. The representative charge
(referred to as "Example" in the Tables of Charges on page 14) is $0.16 for
each $1,000 of base coverage. The initial amount of this charge is shown on
page 3A of your Policy and is called "Monthly Expense Charge for First Seven
Years." Page 4 of your Policy contains a table of the guaranteed rates for this
charge. AGL receives this charge to pay for underwriting costs and other costs
of issuing the Policies, and also to help pay for the administrative services
we provide under the Policies.
Monthly insurance charge. Every month we will deduct from your accumulation
value a charge based on the cost of insurance rates applicable to your Policy
on the date of the deduction and our "net amount at risk" on that date. Our net
amount at risk is the difference between (a) the death benefit that would be
payable before reduction by policy loans if the insured person died on that
date and (b) the then total accumulation value under the Policy. For otherwise
identical Policies:
. greater amounts at risk result in a higher monthly insurance charge; and
. higher cost of insurance rates also result in a higher monthly insurance
charge.
Keep in mind that investment performance of the investment options in which
you have accumulation value will affect the total amount of your accumulation
value. Therefore your monthly insurance charge can be greater or less,
depending on investment performance.
Our cost of insurance rates are guaranteed not to exceed those that will be
specified in your Policy. Our current rates are lower than the guaranteed
maximum rates for insured persons in most age, gender and premium classes,
although we have the right at any time to raise these rates to not more than
the guaranteed maximum.
In general the longer you own your Policy, the higher the cost of insurance
rate will be as the insured person grows older. Also our cost of insurance
rates will generally be lower if the insured person is a female than if a male.
Similarly, our current cost of insurance rates are generally lower for
non-tobacco users than tobacco users, and for persons considered to be in
excellent health. On the other hand, insured persons who present particular
health, occupational or non-work related risks may require higher cost of
insurance rates and other additional charges based on the specified amount of
insurance coverage under their Policies.
Finally, our current cost of insurance rates for the same insured person
differ depending on the specified amount in force on the day the charge is
deducted. We have different rates we apply for specified amounts. The highest
rates begin with the minimum specified amount. The rates decline on a graduated
schedule as the specified amount increases. Your agent can discuss the schedule
with you. Our cost of insurance rates are generally higher under a Policy that
has been in force for some period of time than they would be under an otherwise
identical Policy purchased more recently on the same insured person.
AGL receives this charge to fund the death benefits we pay under the
Policies.
Monthly charges for additional benefit riders. We will deduct charges
monthly from your accumulation value, if you select additional benefit riders.
The charges for any rider you select will vary
49
by Policy within a range based on either the personal characteristics of the
insured person or the specific coverage you choose under the rider. The riders
we currently offer are accidental death benefit rider, children's insurance
benefit rider, two versions of maturity extension rider, spouse term rider,
terminal illness rider and waiver of monthly deduction rider. The riders are
described beginning on page 39, under "Additional Benefit Riders." The specific
charges for any riders you choose are shown on page 3 of your Policy. AGL
receives these charges to pay for the benefits under the riders and to help
offset the risks we assume.
Surrender charge. The Policies have a surrender charge that applies for a
maximum of the first 10 Policy years (and for a maximum of the first 10 Policy
years after any increase in the Policy's base coverage). We will apply the
surrender charge only to the base coverage portion of the specified amount.
The amount of the surrender charge depends on the age and other insurance
characteristics of the insured person. Your Policy's surrender charge will be
found in the table beginning on page 27 of the Policy. As shown in the Tables
of Charges beginning on page 11, the maximum surrender charge is $48 per $1,000
of the base coverage portion of the specified amount (or any increase in the
base coverage portion of the specified amount). The minimum surrender charge is
$7 per $1,000 of the base coverage (or any increase in the base coverage). The
representative surrender charge (referred to as "Example" in the Tables of
Charges) is $18 per $1,000 of base coverage (or any increase in the base
coverage).
The surrender charge decreases on an annual basis beginning in the fourth
year of its 10 year period referred to above until, in the eleventh year, it is
zero (or the eleventh year following any increase in the Policy's base
coverage). These decreases are also based on the age and other insurance
characteristics of the insured person.
The following chart illustrates how the surrender charge declines over the
first 10 Policy years. The chart is for a 40 year old male, who is the same
person to whom we refer in the Tables of Charges beginning on page 11 under
"Example Charge." Surrender charges may differ for other insured persons
because the amount of the annual reduction in the surrender charge may differ.
SURRENDER CHARGE FOR A 40 YEAR OLD MALE
POLICY YEAR 1 2 3 4 5 6 7 8 9 10 11
SURRENDER CHARGE PER $1,000 OF BASE
COVERAGE $18 $18 $18 $16 $14 $11 $9 $7 $5 $2 $0
We will deduct the entire amount of any then applicable surrender charge
from the accumulation value at the time of a full surrender. Upon a requested
decrease in a Policy's base coverage portion of the specified amount, we will
deduct any remaining amount of the surrender charge that was associated with
the base coverage that is canceled. This includes any decrease that results
from any requested partial surrender. See "Partial surrender" beginning on page
42 and "Change of death benefit option" beginning on page 36.
For those Policies that lapse in the first 10 Policy years, AGL receives
surrender charges to help recover sales expenses, which are higher for base
coverage than for supplemental coverage. Higher amounts of base coverage result
in higher premiums and higher charges, including higher surrender charges.
Depending on the age and health risk of the insured person when the Policy is
issued, more premium may be required to pay for all Policy charges. As a
result, we use the insured person's age, sex and premium class to help
determine the appropriate rate of surrender charge per $1,000 of base coverage
to help us offset these higher sales charges.
50
Partial surrender processing fee. We will charge a maximum fee equal to the
lesser of 2% of the amount withdrawn or $25 for each partial surrender you
make. This charge is currently $10. AGL receives this charge to help pay for
the expense of making a partial surrender.
Transfer fee. We will charge a $25 transfer fee for each transfer between
investment options that exceeds 12 each Policy Year. This charge will be
deducted from the investment options in the same ratio as the requested
transfer. AGL receives this charge to help pay for the expense of making the
requested transfer.
Illustrations. If you request illustrations more than once in any Policy
year, we may charge a maximum fee of $25 for the illustration. AGL receives
this charge to help pay for the expenses of providing additional illustrations.
Policy loans. We will charge you interest on any loan at an annual effective
rate of 4.75%. The loan interest charged on a preferred loan (available after
the first 10 Policy years) will never exceed an annual effective rate of 4.25%.
AGL receives these charges to help pay for the expenses of administering and
providing for Policy loans. See "Policy loans" beginning on page 42.
Charge for taxes. We can adjust charges in the future on account of taxes we
incur or reserves we set aside for taxes in connection with the Policies. This
would reduce the investment experience of your accumulation value. In no event
will any adjusted charge exceed the maximum guaranteed charge shown in the
Tables of Charges on pages 11 - 16. All maximum guaranteed charges also appear
in your Policy.
For a further discussion regarding these charges we will deduct from your
investment in a Policy, see "More About Policy Charges" on page 51.
Allocation of charges. You may choose the investment options from which we
deduct all monthly charges and any applicable surrender charges. If you do not
have enough accumulation value in those investment options, we will deduct
these charges in the same ratio the charges bear to the unloaned accumulation
value you then have in each investment option.
MORE ABOUT POLICY CHARGES
Purpose of our charges. The charges under the Policy are designed to cover,
in total, our direct and indirect costs of selling, administering and providing
benefits under the Policy. They are also designed, in total, to compensate us
for the risks we assume and services that we provide under the Policy. These
include:
. mortality risks (such as the risk that insured persons will, on average,
die before we expect, thereby increasing the amount of claims we must
pay);
. sales risks (such as the risk that the number of Policies we sell and
the premiums we receive net of withdrawals, are less than we expect,
thereby depriving us of expected economies of scale);
. regulatory risks (such as the risk that tax or other regulations may be
changed in ways adverse to issuers of variable universal life insurance
policies); and
. expense risks (such as the risk that the costs of administrative
services that the Policy requires us to provide will exceed what we
currently project).
51
The current monthly insurance charge has been designed primarily to provide
funds out of which we can make payments of death benefits under the Policy as
the insured person dies.
General. If the charges that we collect from the Policies exceed our total
costs in connection with the Policies, we will earn a profit. Otherwise we will
incur a loss. We reserve the right to increase the charges to the maximum
amounts on Policies issued in the future.
Although the paragraphs above describe the primary purposes for which
charges under the Policies have been designed, these purposes are subject to
considerable change over the life of a Policy. We can retain or use the
revenues from any charge for any purpose.
ACCUMULATION VALUE
Your accumulation value. From each premium payment you make, we deduct the
charges that we describe on page 48 under "Statutory premium tax charge" (or
"Tax charge back" if you are a resident of Oregon when you purchase your
Policy) and "Other deductions from each premium payment." We invest the rest in
one or more of the investment options listed in the chart on page 20 of this
prospectus, as well as the Fixed Account. We call the amount that is at any
time invested under your Policy (including any loan collateral we are holding
for your Policy loans) your "accumulation value."
Your investment options. We invest the accumulation value that you have
allocated to any variable investment option in shares of a corresponding Fund.
Over time, your accumulation value in any such investment option will increase
or decrease in accordance with the investment experience of the Fund. Your
accumulation value will also be reduced by Fund charges and certain other
charges that we deduct from your Policy. We describe these charges beginning on
page 48 under "Charges Under the Policy."
You can review other important information about the Funds that you can
choose in the separate prospectuses for those Funds. You can request additional
free copies of these prospectuses from your AGL representative or from the
Administrative Center. See "Contact Information" on page 5.
We invest any accumulation value you have allocated to the Fixed Account as
part of our general assets. We credit interest on that accumulation value at a
rate which we declare from time to time. We guarantee that the interest will be
credited at an annual effective rate of at least 4%. Although this interest
increases the amount of any accumulation value that you have in the Fixed
Account, such accumulation value will also be reduced by any charges that are
allocated to this option under the procedures described under "Allocation of
charges" on page 51. The "daily charge" described on page 48 and the fees and
expenses of the Funds discussed on page 16 do not apply to the Fixed Account.
Policies are "non-participating." You will not be entitled to any dividends
from AGL.
POLICY LAPSE AND REINSTATEMENT
If your Policy's cash surrender value (the Policy's accumulation value less
Policy loans and loan interest during the first 5 Policy years) falls to an
amount insufficient to cover the monthly charges, you must pay additional
premium in order to keep your Policy in force. We will notify you by letter
that you have 61 days from the due date of the premium to pay the necessary
charges to avoid lapse of the Policy. You are not required to repay any
outstanding Policy loan in order to reinstate your Policy. If the loan is not
repaid, however, it will be reinstated with your Policy. If the insured person
dies during the grace period we will pay the death benefit reduced by the
charges that are owed at the time of death. The grace period begins with the
first day of the Policy month for which all charges could not be paid. If we do
not
52
receive your payment by the end of the grace period, your Policy and all riders
will end without value and all coverage under your Policy will cease. Although
you can apply to have your Policy "reinstated," you must do this within 5 years
(or, if earlier, before the Policy's maturity date), and you must present
evidence that the insured person still meets our requirements for issuing
coverage. You will find additional information in the Policy about the values
and terms of the Policy after it is reinstated.
FEDERAL TAX CONSIDERATIONS
Generally, the death benefit paid under a Policy is not subject to income
tax. Earnings on your accumulation value are not subject to income tax as long
as we do not pay them out to you. If we do pay any amount of your Policy's
accumulation value upon surrender, partial surrender, or maturity of your
Policy, all or part of that distribution may be treated as a return of the
premiums you paid, which is not subject to income tax.
Amounts you receive as Policy loans are not taxable to you, unless you have
paid such a large amount of premiums that your Policy becomes what the tax law
calls a "modified endowment contract." In that case, the loan will be taxed as
if it were a partial surrender. Furthermore, loans, partial surrenders and
other distributions from a modified endowment contract may require you to pay
additional taxes and penalties that otherwise would not apply. If your Policy
lapses, you may have to pay income tax on a portion of any outstanding loan.
TAX EFFECTS
Discussions regarding the tax treatment of any life insurance policy are
intended for general purposes only and are not intended as tax advice, either
general or individualized, nor should they be interpreted to provide any
predictions or guarantees of a particular tax treatment. This discussion
generally is based on current federal income tax law and interpretations, and
may include areas of those rules that are more or less clear or certain. Tax
laws are subject to legislative modification, and while many such modifications
will have only a prospective application, it is important to recognize that a
change could have retroactive effect as well. You should seek competent tax or
legal advice, as you deem necessary or appropriate, regarding your own
circumstances.
This discussion assumes that the policy owner is a natural person who is a U.S.
citizen and resident. The consequences for corporate taxpayers, non-U.S.
residents or non-U.S. citizens, may be different. The following discussion of
federal income tax treatment is general in nature and is not intended as tax
advice.
General. The Policy will be treated as "life insurance" for federal income
tax purposes (a) if it meets the definition of life insurance under
Section 7702 of the Code and (b) for as long as the investments made by the
underlying Funds satisfy certain investment diversification requirements under
Section 817(h) of the Code. We believe that the Policy will meet these
requirements at issue and that:
. the death benefit received by the beneficiary under your Policy will
generally not be subject to federal income tax; and
. increases in your Policy's accumulation value as a result of interest or
investment experience will not be subject to federal income tax unless
and until there is a distribution from your Policy, such as a surrender
or a partial surrender.
The federal income tax consequences of a distribution from your Policy can
be affected by whether your Policy is determined to be a "modified endowment
contract," as explained in the following
53
discussion. In all cases, however, the character of all income that is
described as taxable to the payee will be ordinary income (as opposed to
capital gain).
Testing for modified endowment contract status. The Code provides for a
"SEVEN-PAY TEST." This test determines if your Policy will be a "modified
endowment contract."
If, at any time during the first seven Policy years:
. you have paid a cumulative amount of premiums;
. the cumulative amount exceeds the premiums you would have paid by the
same time under a similar fixed-benefit life insurance policy; and
. the fixed benefit policy was designed (based on certain assumptions
mandated under the Code) to provide for paid-up future benefits
("paid-up" means no future premium payments are required) after the
payment of seven level annual premiums;
then your Policy will be a modified endowment contract.
Whenever there is a "material change" under a policy, the policy will
generally be (a) treated as a new contract for purposes of determining whether
the policy is a modified endowment contract and (b) subjected to a new
seven-pay period and a new seven-pay limit. The new seven-pay limit would be
determined taking into account, under a prescribed formula, the accumulation
value of the policy at the time of such change. A materially changed policy
would be considered a modified endowment contract if it failed to satisfy the
new seven-pay limit at any time during the new seven-pay period. A "material
change" for these purposes could occur as a result of a change in death benefit
option. A material change will occur as a result of an increase in your
Policy's specified amount, and certain other changes.
If your Policy's benefits are reduced during the first seven Policy years
(or within seven years after a material change), the calculated seven-pay
premium limit will be redetermined based on the reduced level of benefits and
applied retroactively for purposes of the seven-pay test. (Such a reduction in
benefits could include, for example, a decrease in the specified amount that
you request or that results from a partial surrender). If the premiums
previously paid are greater than the recalculated seven-payment premium level
limit, the Policy will become a modified endowment contract.
We will monitor your Policy and attempt to notify you on a timely basis to
prevent additional premium payments from causing your Policy to become a
modified endowment contract.
A life insurance policy that is received in a tax free exchange under
Section 1035 of the Code for a modified endowment contract will also be
considered a modified endowment contract.
Other effects of Policy changes. Changes made to your Policy (for example, a
decrease in specified amount that you request or that results from a partial
surrender that you request) may also have other effects on your Policy. Such
effects may include impacting the maximum amount of premiums that can be paid
under your Policy, as well as the maximum amount of accumulation value that may
be maintained under your Policy. Under Notice 2006-95 published by the Internal
Revenue Service, certain policy changes, not expressly provided for in your
Policy, may have adverse federal income tax effects. You should consult your
own competent, professional tax advisor on this issue.
Rider benefits. We believe that premium payments and any death benefits or
other benefits to be paid under any rider you may purchase under your Policy
will not disqualify your Policy as life insurance
54
for tax purposes. However, the tax law related to rider benefits is complex and
some uncertainty exists. You should consult a qualified tax adviser regarding
the impact of any rider you may purchase.
Taxation of pre-death distributions if your Policy is not a modified
endowment contract. As long as your Policy remains in force during the insured
person's lifetime and not as a modified endowment contract, a Policy loan will
be treated as indebtedness, and no part of the loan proceeds will be subject to
current federal income tax. Interest on the Policy loan generally will not be
tax deductible.
After the first 15 Policy years, the proceeds from a partial surrender will
not be subject to federal income tax except to the extent such proceeds exceed
your "basis" in your Policy. (Your basis generally will equal the premiums you
have paid, less the amount of any previous distributions from your Policy that
were not taxable.) During the first 15 Policy years, however, the proceeds from
a partial surrender could be subject to federal income tax, under a complex
formula, to the extent that your accumulation value exceeds your basis in your
Policy.
On the maturity date or upon full surrender, any excess in the amount of
proceeds we pay (including amounts we use to discharge any Policy loan) over
your basis in the Policy, will be subject to federal income tax. In addition,
if a Policy ends after a grace period while there is a Policy loan, the
cancellation of such loan and any accrued loan interest will be treated as a
distribution and could be subject to federal income tax under the above rules.
Finally, if you make an assignment of rights or benefits under your Policy you
may be deemed to have received a distribution from your Policy, all or part of
which may be taxable.
Taxation of pre-death distributions if your Policy is a modified endowment
contract. If your Policy is a modified endowment contract, any distribution
from your Policy while the insured person is still living will be taxed on an
"income-first" basis. Distributions:
. include loans (including any increase in the loan amount to pay interest
on an existing loan, or an assignment or pledge to secure a loan) and
partial surrenders;
. will be considered taxable income to you to the extent your accumulation
value exceeds your basis in the Policy; and
. have their taxability determined by aggregating all modified endowment
contracts issued by the same insurer (or its affiliates) to the same
owner (excluding certain qualified plans) during any calendar year.
For modified endowment contracts, your basis:
. is similar to the basis described above for other policies; and
. will be increased by the amount of any prior loan under your Policy that
was considered taxable income to you.
A 10% penalty tax also will apply to the taxable portion of most
distributions from a policy that is a modified endowment contract. The penalty
tax will not, however, apply:
. to taxpayers 59 1/2 years of age or older;
. in the case of a disability (as defined in the Code); or
55
. to distributions received as part of a series of substantially equal
periodic annuity payments for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer
and his or her beneficiary.
If your Policy ends after a grace period while there is a Policy loan, the
cancellation of the loan will be treated as a distribution to the extent not
previously treated as such and could be subject to tax, including the 10%
penalty tax, as described above. In addition, on the maturity date or upon a
full surrender, any excess of the proceeds we pay (including any amounts we use
to discharge any Policy loan) over your basis in the Policy, will be subject to
federal income tax and, unless one of the above exceptions applies, the 10%
penalty tax.
Distributions that occur during a Policy year in which your Policy becomes a
modified endowment contract, and during any subsequent Policy years, will be
taxed as described in the two preceding paragraphs. In addition, distributions
from a policy within two years before it becomes a modified endowment contract
also will be subject to tax in this manner. This means that a distribution made
from a policy that is not a modified endowment contract could later become
taxable as a distribution from a modified endowment contract.
Policy lapses and reinstatements. A Policy which has lapsed may have the tax
consequences described above, even though you may be able to reinstate that
Policy. For tax purposes, some reinstatements may be treated as the purchase of
a new insurance contract.
Diversification and investor control. Under Section 817(h) of the Code, the
Treasury Department has issued regulations that implement investment
diversification requirements. Our failure to comply with these regulations
would disqualify your Policy as a life insurance policy under Section 7702 of
the Code. If this were to occur, you would be subject to federal income tax on
the income under the Policy for the period of the disqualification and for
subsequent periods. Also, if the insured person died during such period of
disqualification or subsequent periods, a portion of the death benefit proceeds
would be taxable to the beneficiary. Separate Account VL-R, through the Funds,
intends to comply with these requirements. Although we do not have direct
control over the investments or activities of the Funds, we will enter into
agreements with them requiring the Funds to comply with the diversification
requirements of the Section 817(h) Treasury Regulations.
The Treasury Department has provided only limited guidance describing the
circumstances in which the ability of a policy owner to direct his or her
investment to particular Funds within Separate Account VL-R may cause the
policy owner, rather than the insurance company, to be treated as the owner of
the assets in the account. Due to the lack of specific guidance on investor
control, there is some uncertainty about when a policy owner is considered the
owner of the assets for tax purposes. If you were considered the owner of the
assets of Separate Account VL-R, income and gains from the account would be
included in your gross income for federal income tax purposes. Under current
law, however, we believe that AGL, and not the owner of a Policy, would be
considered the owner of the assets of Separate Account VL-R. However, we
reserve the right to make changes that we deem necessary to insure that the
Policy qualifies as a life insurance contract.
Estate and generation skipping taxes. If the insured person is the Policy's
owner, the death benefit under the Policy will generally be includable in the
owner's estate for purposes of federal estate tax. If the owner is not the
insured person, under certain conditions, only an amount approximately equal to
the cash surrender value of the Policy would be includable. In addition, an
unlimited marital deduction may be available for federal estate tax purposes.
56
The enactment of the American Taxpayer Relief Act of 2012 ("ATRA-2012")
brought forth some certainty with regard to the estate and generation skipping
transfer ("GST") tax rates and exemptions. ATRA-2012 generally extends current
estate and gift tax exemptions, which were around $5.12 million, increased for
inflation to $5.25 million (or twice that amount for married couples) for 2013.
ATRA-2012 also increased the top tax rate on transfers above the exemption
amount from 35 percent to a new maximum tax rate of 40 percent.
As a general rule, if a "transfer" is made to a person two or more
generations younger than the Policy's owner, a generation skipping tax may be
payable at rates similar to the maximum estate tax rate in effect at the time.
The generation skipping tax provisions generally apply to "transfers" that
would be subject to the gift and estate tax rules. You should consult with a
qualified tax adviser for specific information, especially where benefits are
passing to younger generations.
The particular situation of each Policy owner, insured person or beneficiary
will determine how ownership or receipt of Policy proceeds will be treated for
purposes of federal estate and generation skipping taxes, as well as state and
local estate, inheritance and other taxes.
Life insurance in split dollar arrangements. The IRS and Treasury have
issued regulations on split dollar life insurance arrangements. In general, a
split dollar insurance arrangement involves two parties agreeing to split the
premium and/or benefits of a life insurance policy. These arrangements are
often used as a type of employee compensation or for making gifts among family
members. The regulations provide two mutually exclusive regimes for taxing
split dollar life insurance arrangements: the "economic benefit" regime and the
"loan" regime. The economic benefit regime, under which the non-owner of the
policy is treated as receiving certain economic benefits from its owner,
applies to endorsement arrangements and most non-equity split dollar life
insurance arrangements. The loan regime applies to collateral assignment
arrangements and other arrangements in which the non-owner could be treated as
loaning amounts to the owner. These final regulations apply to any split dollar
life insurance arrangement entered into after September 17, 2003. Additionally,
these regulations apply to any split dollar life insurance arrangements entered
into before September 17, 2003, if the arrangement is materially modified after
September 17, 2003.
In addition, it should be noted that split dollar arrangements characterized
as loans for tax purposes may be affected by the Corporate Responsibility Act
of 2002 also referred to as the Sarbanes-Oxley Act of 2002 (the "Act"). The Act
prohibits loans from companies publicly traded in the United States to their
executives and officers. The status of split dollar arrangements under the Act
is uncertain, in part because the SEC may view the tax treatment of such
arrangements as instructive.
Purchasers of life insurance policies are strongly advised to consult with a
qualified tax adviser to determine the tax treatment resulting from a split
dollar arrangement.
Pension and profit-sharing plans. If a life insurance policy is purchased by
a trust or other entity that forms part of a pension or profit-sharing plan
qualified under Section 401(a) of the Code for the benefit of participants
covered under the plan, the federal income tax treatment of such policies will
be somewhat different from that described above.
The reasonable net premium cost for such amount of insurance that is
purchased as part of a pension or profit-sharing plan is required to be
included annually in the plan participant's gross income. This cost (generally
referred to as the "P.S. 58" cost) is reported to the participant annually. If
the plan participant dies while covered by the plan and the policy proceeds are
paid to the participant's beneficiary, then the excess of the death benefit
over the policy's accumulation value will not be subject to federal income tax.
However, the policy's accumulation value will generally be taxable to the
extent it
57
exceeds the participant's cost basis in the policy. The participant's cost
basis will generally include the costs of insurance previously reported as
income to the participant. Special rules may apply if the participant had
borrowed from the policy or was an owner-employee under the plan. The rules for
determining "P.S. 58" costs are currently provided under Notice 2002-8, 2002-1
CB 398.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased
by a tax qualified plan. You should consult a qualified tax adviser.
Other employee benefit programs. Complex rules may also apply when a policy
is held by an employer or a trust, or acquired by an employee, in connection
with the provision of other employee benefits. These policy owners must
consider whether the policy was applied for by or issued to a person having an
insurable interest under applicable state law and with the insured person's
consent. The lack of an insurable interest or consent may, among other things,
affect the qualification of the policy as life insurance for federal income tax
purposes and the right of the beneficiary to receive a death benefit.
ERISA. Employers and employer-created trusts may be subject to reporting,
disclosure and fiduciary obligations under the Employee Retirement Income
Security Act of 1974, as amended. You should consult a qualified legal adviser.
Our taxes. We report the operations of Separate Account VL-R in our federal
income tax return, but we currently pay no income tax on Separate Account
VL-R's investment income and capital gains, because these items are, for tax
purposes, reflected in our variable universal life insurance policy reserves.
We currently make no charge to any Separate Account VL-R division for taxes. We
reserve the right to make a charge in the future for taxes incurred; for
example, a charge to Separate Account VL-R for income taxes we incur that are
allocable to the Policy.
We may have to pay state, local or other taxes in addition to applicable
taxes based on premiums. At present, these taxes are not substantial. If they
increase, we may make charges for such taxes when they are attributable to
Separate Account VL-R or allocable to the Policy.
Certain Funds in which your accumulation value is invested may elect to pass
through to AGL taxes withheld by foreign taxing jurisdictions on foreign source
income. Such an election will result in additional taxable income and income
tax to AGL. The amount of additional income tax, however, may be more than
offset by credits for the foreign taxes withheld which are also passed through.
These credits may provide a benefit to AGL.
When we withhold income taxes. Generally, unless you provide us with an
election to the contrary before we make the distribution, we are required to
withhold income tax from any proceeds we distribute as part of a taxable
transaction under your Policy. In some cases, where generation skipping taxes
may apply, we may also be required to withhold for such taxes unless we are
provided satisfactory written notification that no such taxes are due.
In the case of non-resident aliens who own a Policy, the withholding rules
may be different. With respect to distributions from modified endowment
contracts, non-resident aliens are generally subject to federal income tax
withholding at a statutory rate of 30% of the distributed amount. In some
cases, the non-resident alien may be subject to lower or even no withholding if
the United States has entered into a tax treaty with his or her country of
residence.
Tax changes. The U.S. Congress frequently considers legislation that, if
enacted, could change the tax treatment of life insurance policies. In
addition, the Treasury Department may amend existing
58
regulations, issue regulations on the qualification of life insurance and
modified endowment contracts, or adopt new interpretations of existing law.
State and local tax law or, if you are not a U.S. citizen and resident, foreign
tax law, may also affect the tax consequences to you, the insured person or
your beneficiary, and are subject to change. Any changes in federal, state,
local or foreign tax law or interpretation could have a retroactive effect. We
suggest you consult a qualified tax adviser.
LEGAL PROCEEDINGS
The Company received and responded to industry-wide regulatory inquiries,
including a multi-state audit and market conduct examination covering
compliance with unclaimed property laws and a directive from the New York
Department of Financial Services regarding claims settlement practices and
other related state regulatory inquiries. AIG paid an $11 million regulatory
assessment to the various state insurance departments that are parties to a
regulatory settlement to defray costs of their examinations and monitoring. The
Company paid $7.0 million of this amount. Although the Company has enhanced its
claims practices to include use of the Social Security Administration Death
Master File (SSDMF), it is possible that the settlement remediation
requirements, remaining inquiries, other regulatory activity or litigation
could result in the payment of additional amounts. AIG has also received a
demand letter from a purported AIG shareholder requesting that the Board of
Directors investigate these matters, and bring appropriate legal proceedings
against any person identified by the investigation as engaging in misconduct.
The Company believes it has adequately reserved for such claims, but there can
be no assurance that the ultimate cost will not vary, perhaps materially, from
its estimate.
In addition, the state of West Virginia has two lawsuits pending against the
Company relating to alleged violations of the West Virginia Uniform Unclaimed
Property Act, in connection with policies issued by the Company and by American
General Life and Accident Insurance Company (which merged into the Company on
December 31, 2012). The State of West Virginia has also filed similar lawsuits
against other insurers.
In addition, the Company invested a total of $490.7 million in WG Trading
Company, L.P. ("WG Trading") in two separate transactions. The Company received
back a total amount of $567.2 million from these investments. In August 2010, a
court-appointed Receiver filed a lawsuit against the Company and other
defendants seeking to recover any funds distributed in excess of the entities'
investments. The Receiver asserts that WG Trading and WG Trading Investors,
L.P. were operated as a "ponzi" scheme.
There are no pending legal proceedings affecting the Separate Account.
Various lawsuits against AGL and US Life have arisen in the ordinary course of
business. In addition, various federal, state and other regulatory agencies may
from time to time review, examine or inquire into the operations, practices and
procedures of AGL and US Life, such as through financial examinations, market
conduct exams or regulatory inquiries.
As of April 30, 2013, the Company believes it is not likely that contingent
liabilities arising from the above matters will have a material adverse effect
on the financial condition of the Company.
FINANCIAL STATEMENTS
The Financial Statements of AGL, the Separate Account and American Home can
be found in the Statement of Additional Information. You may obtain a free copy
of these Financial Statements if you write us at our Administrative Center, at
VUL Administration, P.O. Box 4880, Houston, Texas 77210-4880, or call us at
1-800-340-2765.
59
REGISTRATION STATEMENTS
Registration statements under the Securities Act of 1933, as amended,
related to the Policies offered by this prospectus are on file with the SEC.
This prospectus does not contain all of the information contained in the
registration statements and exhibits. For further information regarding the
Separate Account, AGL and its general account, the variable investment options
and the Policy, please refer to the registration statements and exhibits.
60
INDEX OF SPECIAL WORDS AND PHRASES
PAGE TO
SEE IN THIS
DEFINED TERM PROSPECTUS
------------ -----------
accumulation value.................................................... 6
Administrative Center................................................. 18
automatic rebalancing................................................. 33
base coverage......................................................... 28
basis................................................................. 55
Beneficiary........................................................... 45
cash surrender value.................................................. 7
cash value accumulation test.......................................... 27
close of business..................................................... 37
Code.................................................................. 39
Contact Information................................................... 5
cost of insurance rates............................................... 49
daily charge.......................................................... 48
date of issue......................................................... 38
death benefit......................................................... 6
dollar cost averaging................................................. 33
Fixed Account......................................................... 25
full surrender........................................................ 7
free look............................................................. 32
Fund, Funds........................................................... 6
grace period.......................................................... 9
guarantee period benefit.............................................. 26
guideline premium test................................................ 27
insured person........................................................ 1
investment options.................................................... 21
lapse................................................................. 9
lien.................................................................. 41
loan (see "Policy loans" in this Index)............................... 42
loan interest......................................................... 42
Maturity, maturity date............................................... 43
modified endowment contract........................................... 53
monthly deduction days................................................ 38
monthly guarantee premium............................................. 31
monthly insurance charge.............................................. 49
net amount at risk.................................................... 13
Option 1, Option 2 and Option 3....................................... 6
partial surrender..................................................... 42
payment options....................................................... 44
planned periodic premiums............................................. 30
Policy loans.......................................................... 42
Policy month, year.................................................... 38
preferred loans....................................................... 43
premium class......................................................... 47
premium payments...................................................... 29
reinstate, reinstatement.............................................. 52
required minimum death benefit........................................ 27
61
INDEX OF SPECIAL WORDS AND PHRASES
PAGE TO
SEE IN THIS
DEFINED TERM PROSPECTUS
------------ -----------
required minimum death benefit percentage............................. 28
Separate Account VL-R................................................. 17
seven-pay test........................................................ 54
specified amount...................................................... 6
supplemental coverage................................................. 28
surrender............................................................. 10
transfers............................................................. 7
valuation date........................................................ 37
valuation period...................................................... 37
variable investment options........................................... 20
62
Rev 4/2013
THIS DOCUMENT IS NOT PART OF ANY PROSPECTUS
PRIVACY NOTICE
WHAT DOES AMERICAN GENERAL LIFE COMPANIES ("AGLC") DO WITH YOUR
FACTS PERSONAL INFORMATION?
Financial companies choose how they share your personal
information. Federal law gives consumers the right to limit some
WHY? but not all sharing. Federal law also requires us to tell you
how we collect, share, and protect your personal information.
Please read this notice carefully to understand what we do.
The types of personal information we collect and share depend on
the product or service you have with us. This information can
include:
. Social Security number and Medical Information
WHAT? . Income and Credit History
. Payment History and Employment Information
When you are NO LONGER our customer, we continue to share your
information as described in this notice.
All financial companies need to share customers' personal
information to run their everyday business. In the section
HOW? below, we list the reasons financial companies can share their
customers' personal information; the reasons AGLC chooses to
share; and whether you can limit this sharing.
REASONS WE CAN SHARE YOUR PERSONAL INFORMATION DOES AGLC CAN YOU LIMIT
SHARE? THIS SHARING?
----------------------------------------------------- --------- --------------
FOR OUR EVERYDAY BUSINESS PURPOSES--such as to
process your transactions, maintain your account(s),
respond to court orders and legal investigations, or
report to credit bureaus Yes No
FOR OUR MARKETING PURPOSES--to offer our
products and services to you Yes No
FOR JOINT MARKETING WITH OTHER FINANCIAL COMPANIES Yes No
FOR OUR AFFILIATES' EVERYDAY BUSINESS PURPOSES--
information about your transactions and experiences No We don't share
FOR OUR AFFILIATES' EVERYDAY BUSINESS PURPOSES--
information about your creditworthiness No We don't share
FOR NONAFFILIATES TO MARKET TO YOU No We don't share
QUESTIONS? CALL 800-340-2765 OR GO TO WWW.AMERICANGENERAL.COM
Page 2 Rev 4/2013
WHO WE ARE
WHO IS PROVIDING THIS NOTICE? American General Life Companies (a complete
list is described below)
WHAT WE DO
HOW DOES AGLC To protect your personal information from
PROTECT MY PERSONAL unauthorized access and use, we use security
INFORMATION? measures that comply with federal law. These
measures include computer safeguards and
secured files and buildings. We restrict
access to employees, representatives,
agents, or selected third parties who have
been trained to handle nonpublic personal
information.
HOW DOES AGLC We collect your personal information, for
COLLECT MY PERSONAL example, when you
INFORMATION? . apply for insurance or pay insurance
premiums
. file an insurance claim or give us your
income information
. provide employment information
We also collect your personal information
from others, such as credit bureaus,
affiliates, or other companies.
WHY CAN'T I LIMIT ALL SHARING? Federal law gives you the right to limit only
. sharing for affiliates' everyday business
purposes--information about your
creditworthiness
. affiliates from using your information to
market to you
. sharing for nonaffiliates to market to you
State laws and individual companies may give
you additional rights to limit sharing.
See below for more on your rights under
state law.
DEFINITIONS
AFFILIATES Companies related by common ownership or
control. They can be financial and
nonfinancial companies.
. OUR AFFILIATES INCLUDE THE MEMBER
COMPANIES OF AMERICAN INTERNATIONAL
GROUP, INC.
NONAFFILIATES Companies not related by common ownership or
control.
They can be financial and nonfinancial
companies.
. AMERICAN GENERAL LIFE COMPANIES DOES NOT
SHARE WITH NONAFFILIATES SO THEY CAN
MARKET TO YOU.
JOINT MARKETING A formal agreement between nonaffiliated
financial companies that together market
financial products or services to you.
. OUR JOINT MARKETING PARTNERS INCLUDE
COMPANIES WITH WHICH WE JOINTLY OFFER
INSURANCE PRODUCTS, SUCH AS A BANK.
OTHER IMPORTANT INFORMATION
THIS NOTICE IS PROVIDED BY AMERICAN GENERAL LIFE COMPANIES FOR AMERICAN GENERAL
LIFE INSURANCE COMPANY AND THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY
OF NEW YORK.
CALIFORNIA, NEW MEXICO AND VERMONT RESIDENTS ONLY:
Following the law of your state, we will not disclose nonpublic personal
financial information about you to nonaffiliated third parties (other than as
permitted by law) unless you authorize us to make that disclosure. Your
authorization must be in writing. If you wish to authorize us to disclose your
nonpublic personal financial information to nonaffiliated third parties, you
may write to us: P.O. Box 4880, Houston, TX 77210-4880.
NEVADA RESIDENTS ONLY:
We are providing this notice pursuant to Nevada state law NRS 228.600. You may
elect to be placed on our internal Do Not Call list by calling 800-340-2765.
Nevada law requires that we also provide you with the following contact
information: Bureau of Consumer Protection, Office of the Nevada Attorney
General, 555 E. Washington Street, Suite 3900, Las Vegas, NV 89101; Phone
number: 702-486-3132; email: BCPIFO@ag.state.nv.us. You may contact our
customer service department by calling 800-340-2765 or write to us at: P.O. Box
4880, Houston, TX 77210-4880, or email us at customerservice@aglife.com to
obtain further information concerning the provisions of this section.
You have the right to see and, if necessary, correct personal data. This
requires a written request, both to see your personal data and to request
correction. We do not have to change our records if we do not agree with your
correction, but we will place your statement in our file. If you would like a
more detailed description of our information practices and your rights, please
write to us: P.O. Box 4880, Houston, TX 77210-4880.
THIS DOCUMENT IS NOT PART OF ANY PROSPECTUS
[GRAPHIC]
Enroll in VUL eDelivery -
the natural choice
Every day the choices we make impact those around us. How about
making a choice that impacts our environment? When you enroll in VUL
eDelivery, you do that.
American General Life Companies has partnered with the National
Forest Foundation and for every enrollment in VUL eDelivery, a tree
will be planted in appreciation.
VUL eDelivery is an electronic service enabling Need further convincing?
you to receive email notifications when your By choosing VUL eDelivery,
account-related documents are available to view you can:
online.
. Preserve the environment
It's fast, simple and saves our environment! To . Reduce paperwork clutter
enroll in VUL eDelivery, call Customer Service . Receive documents faster
or log in to eService at
www.americangeneral.com, select "My Profile" Sign up for VUL eDelivery
and edit your communication preference. Once and make the natural choice.
you've subscribed to VUL eDelivery, you will
get a change confirmation email.
[Logo] National Forest Foundation [Logo] American General Life Companies
Not available for all products. American General Life Companies,
www.americangeneral.com, is the marketing name for a group of affiliated
domestic life insurers including American General Life Insurance Company (AGL)
and The United States Life Insurance Company in the City of New York (US Life).
Variable universal life insurance policies issued by AGL or US Life are
distributed by American General Equity Services Corporation, member FINRA. AGL
does not solicit business in the state of New York. Policies and riders not
available in all states. For more information contact Customer Service at P.O.
Box 4880, Houston, Texas 77210-4880, phone number 800.340.2765 or for hearing
impaired 888.436.5256.
AGLC105386 REV0113
For more information on the National Forest Foundation please visit
www.nationalforests.org.
AMERICAN GENERAL
LIFE COMPANIES
For E-SERVICE and
For additional information about the Platinum E-DELIVERY, or to view and
Investor(R) III Policies and the Separate Account, Print Policy or Fund
you may request a copy of the Statement of prospectuses visit us at
Additional Information (the "SAI"), dated May 1, WWW.AMERICANGENERAL.COM
2013. We have filed the SAI with the SEC and have
incorporated it by reference into this prospectus.
You may obtain a free copy of the SAI and the
Policy or Fund Prospectuses if you write us at our
Administrative Center, which is located at VUL
Administration, P.O. Box 4880, Houston, Texas
77210-4880 or call us at 1-800-340-2765. You may
also obtain the SAI from your AGL representative
through which the Policies may be purchased.
Additional information about the Platinum Investor
III Policies, including personalized illustrations
of death benefits, cash surrender values, and
accumulation values is available without charge to
individuals considering purchasing a Policy, upon
request to the same address or phone number
printed above. We may charge current Policy owners
$25 per illustration if they request more than one
personalized illustration in a Policy year.
Information about the Separate Account, including
the SAI, can also be reviewed and copied at the
SEC's Office of Investor Education and Advocacy in
Washington, D.C. Inquiries on the operations of
the Office of Investor Education and Advocacy may
be made by calling the SEC at 1-202-942-8090.
Reports and other information about the Separate
Account are available on the SEC's Internet site
at http://www.sec.gov and copies of this
information may be obtained, upon payment of a
duplicating fee, by writing the Office of Investor
Education and Advocacy of the SEC, 100 F Street
N.E., Washington, D.C. 20549.
Policies issued by:
AMERICAN GENERAL LIFE INSURANCE COMPANY
2727-A Allen Parkway, Houston, TX 77019
PLATINUM INVESTOR III FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE
Policy Form Number 00600
Not available in the state of New York
DISTRIBUTED BY AMERICAN GENERAL EQUITY SERVICES
CORPORATION
Member FINRA
The underwriting risks, financial obligations and
support functions associated with the products
issued by American General Life Insurance Company
("AGL") are its responsibility. AGL is responsible
for its own financial condition and contractual
obligations. American General Life Companies,
www.americangeneral.com, is the marketing name for
a group of affiliated domestic life insurers,
including AGL. AGL does not solicit business in
the state of New York. The Policies are not
available in all states.
(C) 2013. AMERICAN INTERNATIONAL GROUP, INC. ALL ICA File No. 811-08561
RIGHTS RESERVED
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
PLATINUM INVESTOR(R) III
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: 1-888-436-5256
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2013
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 May 1, 2013, describing the Platinum Investor III 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" or
"Company") 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................................... 7
Cost of insurance rates................................... 7
Special purchase plans.................................... 7
Underwriting procedures and cost of insurance charges..... 7
Certain arrangements...................................... 8
More About the Fixed Account.................................. 8
Our general account....................................... 8
How we declare interest................................... 8
Adjustments to Death Benefit.................................. 8
Suicide................................................... 8
Wrong age or gender....................................... 9
Death during grace period................................. 9
ACTUARIAL EXPERT................................................. 9
MATERIAL CONFLICTS............................................... 9
FINANCIAL STATEMENTS............................................. 10
Separate Account Financial Statements......................... 10
AGL Consolidated Financial Statements......................... 10
American Home Statutory Basis Financial Statements............ 10
American International Group, Inc. Financial Information...... 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 the State 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"), a Delaware corporation.
AIG is a leading international insurance organization serving customers in
more than 130 countries. AIG companies serve commercial, institutional and
individual customers through one of the most extensive worldwide
property-casualty networks of any insurer. In addition, AIG companies are
leading providers of life insurance and retirement services in the United
States.
American General Life Companies, www.americangeneral.com, is the marketing
name for a group of affiliated domestic life insurers, including AGL. The
commitments under the Contracts are AGL's, and American International Group,
Inc. has no legal obligation to back those commitments.
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 99 separate "divisions," 57 of which are available under the
Policies offered by the prospectus as variable "investment options" (14 of
these 57 investment options are not available to all Policy owners). All of
these 57 divisions and the remaining 42 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 prior to December 29, 2006
at 4:00 p.m. Eastern time.
3
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 office is located at 175 Water Street, 18th Floor, New
York, New York 10038. 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 American International Group,
Inc. and an affiliate of AGL.
SERVICES
AGL and American General Life Companies, LLC ("AGLC"), were previously
parties to a services agreement. AGL and AGLC are each indirect wholly-owned
subsidiaries of American International Group, Inc. and therefore affiliates of
one another. AGLC was 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 provided shared services to AGL and certain other life
insurance companies under the American International Group, Inc. holding
company system at cost. Those services include data processing systems,
customer services, product development, actuarial, internal auditing,
accounting and legal services. During 2011 and 2010, AGL paid AGLC for these
services $345,841,461 and $349,841,461, respectively.
AGLC was merged into AGL at the end of 2011. AIG now provides all of the
services that were previously provided by AGLC. During 2012, AGL paid AIG for
these services $30,173,049.
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
As of the date of this SAI, the principal underwriter and distributor of the
Policies for the Separate Account is American General Equity Services
Corporation ("AGESC"). AGESC, an affiliate of AGL, is located at 2727-A Allen
Parkway, Houston, Texas 77019. On February 4, 2013, AGESC entered into an
agreement of merger with SunAmerica Capital Services, Inc. ("SACS"), which
provides that upon the occurrence of certain conditions AGESC will merge with
and into SACS (the "Merger"). It is anticipated that the closing date of the
Merger will be on or about May 31, 2013. Upon such date, SACS will become the
distributor of the Policies for the Separate Account. SACS, also an affiliate
of AGL, is located at Harborside Financial Center, 3200 Plaza 5, Jersey City,
New Jersey 07311-4922.
AGESC also acts as principal underwriter for AGL's other separate accounts
and for the separate accounts of certain AGL affiliates. AGESC and SACS are
registered broker-dealers under the Securities Exchange Act of 1934, as amended
and a member of the Financial Industry
4
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 universal life insurance. The
broker-dealers are ordinarily required to be registered with the SEC and must
be members of FINRA.
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;
. 0.25% of the Policy's accumulation value (reduced by any outstanding
loans) in the investment options in each of Policy years 2 through 20;
. 0.15% of the Policy's accumulation value (reduced by any outstanding
loans) in the investment options in each Policy year after Policy year
20;
. a comparable amount of compensation to broker-dealers or banks with
respect to any increase in the specified amount of coverage that you
request; and
. any amounts that we may pay for broker-dealers or banks expense
allowances, bonuses, wholesaler fees, training allowances or additional
compensation for the Policies.
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.
5
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
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 universal
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
The purpose of this section is to provide you with information to help
clarify certain discussion found in the related prospectus. Many topics, such
as Policy sales loads and increases
6
in your Policy's death benefit, have been fully described in the related
prospectus. For any topics that we do not discuss in this SAI, please see the
related prospectus.
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.
SPECIAL PURCHASE PLANS. Special purchase plans provide for variations in, or
elimination of, certain Policy charges, and would be available to a defined
group of individuals. We currently do not provide for or support any special
purchase plans.
UNDERWRITING PROCEDURES AND COST OF INSURANCE CHARGES. Cost of insurance
charges for the Policies will not be the same for all Policy owners. The chief
reason is that the principle of pooling and distribution of mortality risks is
based upon the assumption that each Policy owner pays a cost of insurance
charge related to the insured'.s mortality risk which is actuarially determined
based upon factors such as age, sex and risk class of the insured and the face
amount size band of the Policy. In the context of life insurance, a uniform
mortality charge (the "cost of insurance charge") for all insureds would
discriminate unfairly in favor of those insureds representing greater mortality
risks to the disadvantage of those representing lesser risks. Accordingly,
although there will be a uniform "public offering price" for all Policy owners,
because premiums are flexible and amounts allocated to the Separate Account
will be subject to some charges that are the same for all owners, there will be
a different "price" for each actuarial category of Policy owners because
different cost of insurance rates will apply. The "price" will also vary based
on net amount at risk. The Policies will be offered and sold pursuant to this
cost of insurance schedule and our underwriting standards and in accordance
with state insurance laws. Such laws prohibit unfair discrimination among
insureds, but recognize that premiums must be based upon factors such as age,
sex, health and occupation. A table showing the maximum cost of insurance
charges will be delivered as part of the Policy.
Our underwriting procedures are designed to treat applicants for Policies in
a uniform manner. Collection of required medical information is conducted in a
confidential manner. We maintain underwriting standards designed to avoid
unfair or inconsistent decisions about which underwriting class should apply to
a particular proposed insured person. In some group or employment- related
situations, we may offer what we call simplified or guaranteed issue
underwriting classes. These underwriting classes provide for brief or no
medical underwriting.
7
Our offer to insure a person under either class results in cost of insurance
charges that are the same for each insured person.
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 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.
Unlike the Separate Account, the assets in the general account may be used to
pay any liabilities of AGL in addition to those arising from the Policies.
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 the insured person 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 the insured person is living at the time
of the increase. In this case, if the insured person commits suicide during the
first two years following the increase, we will
8
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 the insured person was
misstated on your application for a Policy (or for any increase in benefits),
we will adjust any death benefit to be what the monthly insurance charge
deducted for the current month would have purchased based on the correct
information.
DEATH DURING GRACE PERIOD. We will deduct from the insurance proceeds any
monthly charges that remain unpaid because the insured person died during a
grace period.
ACTUARIAL EXPERT
Actuarial matters have been examined by Tim Donovan, who is an actuary of
AGL. An opinion on actuarial matters, provided by Wayne A. Barnard, Senior Vice
President of AGL, 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 universal 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 universal 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
9
ignore voting instructions, we give you a summary of our actions in the next
semi-annual report to owners.
FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP, located at 1201 Louisiana Street, Suite 2900,
Houston, Texas 77002, is the independent registered public accounting firm for
the Separate Account VL-R and AGL. PricewaterhouseCoopers LLP is also the
independent registered public accounting firm of AIG and American Home.
SEPARATE ACCOUNT FINANCIAL STATEMENTS
The financial statements of Separate Account VL-R as of December 31, 2012
and the results of its operations and the changes in its net assets for each of
the periods indicated, included in this Statement of Additional Information
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
an independent registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
AGL CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of AGL as of December 31, 2012 and
2011 and for each of the three years in the period ended December 31, 2012
included in this Statement of Additional Information have been so included in
reliance on the report of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
AMERICAN HOME STATUTORY BASIS FINANCIAL STATEMENTS
The statutory financial statements of American Home as of December 31, 2012
and 2011 and for each of the three years in the period ended December 31, 2012
included in this Statement of Additional Information have been so included in
reliance on the report of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
AMERICAN INTERNATIONAL GROUP, INC. FINANCIAL INFORMATION
On March 30, 2011, American International Group, Inc. and the Company
entered into an Unconditional Capital Maintenance Agreement. As a result, the
financial statements of American International Group, Inc. are incorporated by
reference below. American International Group, Inc. does not underwrite any
contracts referenced herein.
The following financial statements are incorporated by reference in the
Statement of Additional Information in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting:
10
. Consolidated Financial Statements and Financial Statement Schedules and
management's assessment of the effectiveness of internal control over
financial reporting (which is included in Management's Report on
Internal Control over Financial Reporting) which appears in American
International Group, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 2012
The following financial statements are also incorporated by reference in the
Statement of Additional Information in reliance on the report of
PricewaterhouseCoopers, independent accountants, given on the authority of said
firm as experts in auditing and accounting:
. Consolidated Financial Statements of AIA Group Limited incorporated by
reference to American International Group, Inc.'s Annual Report on Form
10-K for the year ended December 31, 2012.
American International Group, Inc. does not underwrite any insurance policy
referenced herein.
You should consider the consolidated 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, as guarantor to
meet its obligations under the guarantee of insurance obligations under
Policies issued prior to December 29, 2006 at 4:00 p.m. Eastern Time ("Point of
Termination"). Policies with an issue date after the Point of Termination are
not covered by the American Home guarantee.
11
[LOGO OF AMERICAN GENERAL LIFE COMPANIES]
Variable Universal Life Insurance
Separate Account VL-R
2012
ANNUAL REPORT
December 31, 2012
American General Life Insurance Company
[LOGO OF PRICEWATERHOUSECOOPERS]
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 statements of assets and liabilities,
including the schedules of portfolio investments, and the related statements of
operations and of changes in net assets present fairly, in all material
respects, the financial position of each of the Divisions listed in Note 1 of
American General Life Insurance Company Separate Account VL-R at December 31,
2012, the results of its operations for the year then ended and the changes in
its net assets for each of the two years in the period then ended, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the management
of American General Life Insurance Company; 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 investment securities at December 31, 2012 by correspondence
with the mutual fund companies, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
April 26, 2013
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2012
Investment Due from (to) American
securities - at General Life Insurance
Divisions fair value Company NET ASSETS
--------- --------------- ---------------------- -----------
Alger Capital Appreciation Portfolio - Class I-2 Shares $ 3,881,078 $-- $ 3,881,078
Alger Mid Cap Growth Portfolio - Class I-2 Shares 2,301,200 -- 2,301,200
American Century VP Value Fund - Class I 12,587,820 -- 12,587,820
Credit Suisse U.S. Equity Flex I Portfolio -- -- --
Dreyfus IP MidCap Stock Portfolio - Initial Shares 3,735,622 -- 3,735,622
Dreyfus VIF International Value Portfolio - Initial Shares 99,312 -- 99,312
Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares 7,380,409 -- 7,380,409
Dreyfus VIF Quality Bond Portfolio - Initial Shares 7,079,426 -- 7,079,426
Fidelity VIP Asset Manager Portfolio - Service Class 2 4,353,982 -- 4,353,982
Fidelity VIP Contrafund Portfolio - Service Class 2 25,979,429 -- 25,979,429
Fidelity VIP Equity-Income Portfolio - Service Class 2 15,225,678 -- 15,225,678
Fidelity VIP Freedom 2020 Portfolio - Service Class 2 369,414 -- 369,414
Fidelity VIP Freedom 2025 Portfolio - Service Class 2 515,350 -- 515,350
Fidelity VIP Freedom 2030 Portfolio - Service Class 2 724,478 -- 724,478
Fidelity VIP Growth Portfolio - Service Class 2 12,864,156 -- 12,864,156
Fidelity VIP Mid Cap Portfolio - Service Class 2 8,103,313 -- 8,103,313
Franklin Templeton Franklin Small Cap Value Securities Fund - Class 2 6,804,660 -- 6,804,660
Franklin Templeton Franklin Small-Mid Cap Growth Securities Fund -
Class 2 31,091 -- 31,091
Franklin Templeton Franklin U.S. Government Fund - Class 2 4,173,166 -- 4,173,166
Franklin Templeton Mutual Shares Securities Fund - Class 2 6,241,600 -- 6,241,600
Franklin Templeton Templeton Foreign Securities Fund - Class 2 6,170,381 -- 6,170,381
Goldman Sachs VIT Strategic Growth Fund - Institutional Shares 5,592,047 -- 5,592,047
Invesco V.I. Core Equity Fund - Series I 7,754,263 -- 7,754,263
Invesco V.I. Global Real Estate Fund - Series I 97,299 -- 97,299
Invesco V.I. Government Securities Fund - Series I 91,887 -- 91,887
Invesco V.I. High Yield Fund - Series I 2,269,149 -- 2,269,149
Invesco V.I. International Growth Fund - Series I 8,335,300 -- 8,335,300
Invesco Van Kampen V.I. American Franchise Fund - Series I 5,234 -- 5,234
Invesco Van Kampen V.I. Government Fund - Series I -- -- --
Invesco Van Kampen V.I. Growth and Income Fund - Series I 7,796,561 -- 7,796,561
Invesco Van Kampen V.I. High Yield Fund - Series I -- -- --
Janus Aspen Enterprise Portfolio - Service Shares 4,068,669 -- 4,068,669
Janus Aspen Forty Portfolio - Service Shares 309,675 -- 309,675
Janus Aspen Overseas Portfolio - Service Shares 9,503,268 -- 9,503,268
Janus Aspen Worldwide Portfolio - Service Shares 2,642,859 -- 2,642,859
JPMorgan Insurance Trust Core Bond Portfolio - Class 1 81,396 -- 81,396
JPMorgan Insurance Trust International Equity Portfolio - Class 1 54,352 -- 54,352
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 710,812 -- 710,812
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 2,763,083 -- 2,763,083
MFS VIT Core Equity Series - Initial Class 3,169,925 -- 3,169,925
MFS VIT Growth Series - Initial Class 8,544,313 -- 8,544,313
MFS VIT New Discovery Series - Initial Class 4,558,624 -- 4,558,624
MFS VIT Research Series - Initial Class 2,043,000 -- 2,043,000
MFS VIT Total Return Series - Initial Class 446,828 -- 446,828
Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I 4,618,123 -- 4,618,123
Neuberger Berman AMT Large Cap Value Portfolio - Class I 28,183 -- 28,183
Neuberger Berman AMT Socially Responsive Portfolio - Class I 48,236 -- 48,236
Oppenheimer Balanced Fund/VA - Non-Service Shares 1,389,796 -- 1,389,796
Oppenheimer Global Securities Fund/VA - Non-Service Shares 5,596,885 -- 5,596,885
Oppenheimer Global Strategic Income Fund/VA (Non-Service) 44,134 -- 44,134
PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative
Class 1,542,031 -- 1,542,031
PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class 54,581 -- 54,581
PIMCO VIT Real Return Portfolio - Administrative Class 14,799,219 -- 14,799,219
See accompanying notes.
VL-R - 2
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF ASSETS AND LIABILITIES - CONTINUED
DECEMBER 31, 2012
Investment Due from (to) American
securities - at General Life Insurance
Divisions fair value Company NET ASSETS
--------- --------------- ---------------------- -----------
PIMCO VIT Short-Term Portfolio - Administrative Class $ 6,644,323 $-- $ 6,644,323
PIMCO VIT Total Return Portfolio - Administrative Class 17,972,323 -- 17,972,323
Pioneer Fund VCT Portfolio - Class I 1,516,410 -- 1,516,410
Pioneer Growth Opportunities VCT Portfolio - Class I 2,379,278 -- 2,379,278
Pioneer Mid Cap Value VCT Portfolio - Class I 873,297 -- 873,297
Putnam VT Diversified Income Fund - Class IB 6,829,890 -- 6,829,890
Putnam VT Growth and Income Fund - Class IB 9,733,019 -- 9,733,019
Putnam VT International Value Fund - Class IB 4,530,628 -- 4,530,628
Putnam VT Multi-Cap Growth Fund - Class IB 31,738 -- 31,738
Putnam VT Small Cap Value Fund - Class IB 186,076 -- 186,076
Putnam VT Voyager Fund - Class IB 114,313 -- 114,313
SunAmerica Aggressive Growth Portfolio - Class 1 1,081,476 -- 1,081,476
SunAmerica Balanced Portfolio - Class 1 1,698,860 -- 1,698,860
UIF Growth Portfolio - Class I Shares 2,534,261 -- 2,534,261
VALIC Company I International Equities Fund 2,344,533 -- 2,344,533
VALIC Company I Mid Cap Index Fund 12,752,712 -- 12,752,712
VALIC Company I Money Market I Fund 13,944,313 -- 13,944,313
VALIC Company I Nasdaq-100 Index Fund 3,855,505 -- 3,855,505
VALIC Company I Science & Technology Fund 1,294,304 -- 1,294,304
VALIC Company I Small Cap Index Fund 5,593,379 -- 5,593,379
VALIC Company I Stock Index Fund 17,797,241 -- 17,797,241
Vanguard VIF High Yield Bond Portfolio 7,537,292 -- 7,537,292
Vanguard VIF REIT Index Portfolio 12,444,603 -- 12,444,603
See accompanying notes.
VL-R - 3
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
A B A+B=C D E F C+D+E+F
INCREASE
Mortality and Net change (DECREASE) IN
Dividends expense risk NET Capital gain in unrealized NET ASSETS
from and INVESTMENT Net realized distributions appreciation RESULTING
mutual administrative INCOME gain (loss) on from mutual (depreciation) FROM
Divisions funds charges (LOSS) investments funds of investments OPERATIONS
--------- --------- -------------- ---------- -------------- ------------- -------------- -------------
Alger Capital Appreciation
Portfolio - Class I- 2 Shares $ 39,624 $ (25,293) $ 14,331 $ 96,651 $ 1,338 $ 467,970 $ 580,290
Alger Mid Cap Growth Portfolio -
Class I-2 Shares -- (16,156) (16,156) 50,433 -- 308,991 343,268
American Century VP Value Fund -
Class I 243,280 (77,693) 165,587 487,521 -- 974,608 1,627,716
Credit Suisse U.S. Equity Flex I
Portfolio -- -- -- -- -- -- --
Dreyfus IP MidCap Stock Portfolio
- Initial Shares 16,405 (21,280) (4,875) 185,408 -- 444,703 625,236
Dreyfus VIF International Value
Portfolio - Initial Shares 2,512 (373) 2,139 (1,670) -- 10,288 10,757
Dreyfus VIF Opportunistic Small
Cap Portfolio - Initial Shares -- (36,374) (36,374) 156,088 -- 1,091,602 1,211,316
Dreyfus VIF Quality Bond Portfolio
- Initial Shares 213,904 (40,160) 173,744 83,100 -- 187,780 444,624
Fidelity VIP Asset Manager
Portfolio - Service Class 2 55,336 (27,227) 28,109 38,673 32,232 375,230 474,244
Fidelity VIP Contrafund Portfolio
- Service Class 2 288,577 (157,028) 131,549 707,386 -- 2,821,514 3,660,449
Fidelity VIP Equity-Income
Portfolio - Service Class 2 429,947 (86,899) 343,048 339,204 948,378 561,150 2,191,780
Fidelity VIP Freedom 2020
Portfolio - Service Class 2 6,519 (1,910) 4,609 2,585 4,226 28,574 39,994
Fidelity VIP Freedom 2025
Portfolio - Service Class 2 8,147 (2,486) 5,661 2,528 4,938 40,427 53,554
Fidelity VIP Freedom 2030
Portfolio - Service Class 2 13,564 (4,155) 9,409 12,565 6,548 72,988 101,510
Fidelity VIP Growth Portfolio -
Service Class 2 45,915 (80,613) (34,698) 593,570 -- 1,135,163 1,694,035
Fidelity VIP Mid Cap Portfolio -
Service Class 2 31,212 (52,298) (21,086) (24,516) 647,033 408,550 1,009,981
Franklin Templeton Franklin Small
Cap Value Securities Fund -
Class 2 50,821 (42,247) 8,574 (105,776) -- 1,139,560 1,042,358
Franklin Templeton Franklin
Small-Mid Cap Growth Securities
Fund - Class 2 -- (185) (185) 760 2,230 185 2,990
Franklin Templeton Franklin U.S.
Government Fund - Class 2 113,343 (28,521) 84,822 8,142 -- (41,913) 51,051
Franklin Templeton Mutual Shares
Securities Fund - Class 2 125,661 (39,577) 86,084 149,947 -- 549,812 785,843
Franklin Templeton Templeton
Foreign Securities Fund - Class 2 178,380 (37,615) 140,765 (12,150) -- 825,231 953,846
Goldman Sachs VIT Strategic Growth
Fund - Institutional Shares 38,172 (13,993) 24,179 44,733 -- 884,730 953,642
Invesco V.I. Core Equity Fund -
Series I 74,553 (39,859) 34,694 237,295 -- 702,358 974,347
Invesco V.I. Global Real Estate
Fund - Series I 503 (209) 294 1,123 -- 19,095 20,512
Invesco V.I. Government Securities
Fund - Series I 2,935 (584) 2,351 2,589 -- (3,190) 1,750
Invesco V.I. High Yield Fund -
Series I 108,406 (14,234) 94,172 6,550 -- 218,377 319,099
Invesco V.I. International Growth
Fund - Series I 117,294 (47,519) 69,775 70,746 -- 964,075 1,104,596
Invesco Van Kampen V.I. American
Franchise Fund - Series I -- (34) (34) 231 -- 490 687
Invesco Van Kampen V.I. Government
Fund - Series I -- -- -- -- -- -- --
Invesco Van Kampen V.I. Growth and
Income Fund - Series I 116,771 (47,319) 69,452 217,091 -- 721,508 1,008,051
Invesco Van Kampen V.I. High Yield
Fund - Series I -- -- -- -- -- -- --
Janus Aspen Enterprise Portfolio -
Service Shares -- (24,034) (24,034) 176,370 -- 464,505 616,841
Janus Aspen Forty Portfolio -
Service Shares 1,709 (1,216) 493 1,927 -- 53,650 56,070
Janus Aspen Overseas Portfolio -
Service Shares 56,976 (56,745) 231 (1,207,404) 1,003,932 1,307,579 1,104,338
Janus Aspen Worldwide Portfolio -
Service Shares 19,802 (14,759) 5,043 (43,262) -- 495,584 457,365
JPMorgan Insurance Trust Core Bond
Portfolio - Class 1 3,397 (406) 2,991 24 -- 615 3,630
JPMorgan Insurance Trust
International Equity Portfolio -
Class 1 1,071 (225) 846 16 -- 8,502 9,364
JPMorgan Insurance Trust Mid Cap
Value Portfolio - Class 1 7,349 (4,551) 2,798 35,129 -- 84,908 122,835
See accompanying notes.
VL-R - 4
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF OPERATIONS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 2012
A B A+B=C D E F C+D+E+F
INCREASE
Mortality and Net change (DECREASE) IN
Dividends expense risk NET Net realized Capital gain in unrealized NET ASSETS
from and INVESTMENT gain (loss) distributions appreciation RESULTING
mutual administrative INCOME on from mutual (depreciation) FROM
Divisions funds charges (LOSS) investments funds of investments OPERATIONS
--------- --------- -------------- ---------- ------------ ------------- -------------- -------------
JPMorgan Insurance Trust Small Cap
Core Portfolio - Class 1 $ 5,444 $ (17,634) $(12,190) $ 83,815 $ -- $ 388,676 $ 460,301
MFS VIT Core Equity Series -
Initial Class 24,386 (17,680) 6,706 128,570 -- 321,344 456,620
MFS VIT Growth Series - Initial
Class -- (45,466) (45,466) 300,233 -- 1,065,529 1,320,296
MFS VIT New Discovery Series -
Initial Class -- (27,439) (27,439) (151,562) 414,688 579,282 814,969
MFS VIT Research Series - Initial
Class 15,768 (11,571) 4,197 83,292 -- 215,783 303,272
MFS VIT Total Return Series -
Initial Class 13,177 (3,068) 10,109 10,788 -- 26,702 47,599
Neuberger Berman AMT Mid- Cap
Growth Portfolio - Class I -- (27,849) (27,849) 208,813 -- 330,861 511,825
Neuberger Berman AMT Large Cap
Value Portfolio - Class I 117 (146) (29) (340) -- 4,470 4,101
Neuberger Berman AMT Socially
Responsive Portfolio - Class I 103 (251) (148) 49 -- 4,168 4,069
Oppenheimer Balanced Fund/VA -
Non-Service Shares 17,065 (8,769) 8,296 16,678 -- 118,298 143,272
Oppenheimer Global Strategic
Income Fund/VA (Non- Service) -- (56) (56) 2 -- 775 721
Oppenheimer Global Securities
Fund/VA - Non-Service Shares 114,064 (34,733) 79,331 93,718 -- 806,359 979,408
Oppenheimer High Income Fund/VA -
Non-Service Shares 6,977 (140) 6,837 (8,324) -- 4,863 3,376
PIMCO VIT CommodityRealReturn
Strategy Portfolio -
Administrative Class 44,154 (10,388) 33,766 (111,495) 50,180 101,531 73,982
PIMCO VIT Global Bond Portfolio
(Unhedged) - Administrative Class 874 (228) 646 522 3,118 (870) 3,416
PIMCO VIT Real Return Portfolio -
Administrative Class 158,560 (91,428) 67,132 385,685 741,649 (33,066) 1,161,400
PIMCO VIT Short-Term Portfolio -
Administrative Class 60,271 (42,631) 17,640 (7,474) 12,143 130,381 152,690
PIMCO VIT Total Return Portfolio -
Administrative Class 453,877 (110,492) 343,385 4,272 336,656 814,235 1,498,548
Pioneer Fund VCT Portfolio -
Class I 24,098 (7,555) 16,543 (11,300) 51,889 85,850 142,982
Pioneer Growth Opportunities VCT
Portfolio - Class I -- (13,286) (13,286) 88,881 -- 87,808 163,403
Pioneer Mid Cap Value VCT
Portfolio - Class I 8,943 (6,072) 2,871 21,776 -- 58,415 83,062
Putnam VT Diversified Income Fund
- Class IB 366,303 (32,050) 334,253 (120,921) -- 474,465 687,797
Putnam VT Growth and Income Fund -
Class IB 161,280 (48,863) 112,417 207,138 -- 1,272,680 1,592,235
Putnam VT International Value Fund
- Class IB 125,372 (25,593) 99,779 (40,930) -- 749,909 808,758
Putnam VT Multi-Cap Growth Fund -
Class IB 79 (188) (109) 2,110 -- 2,797 4,798
Putnam VT Small Cap Value Fund -
Class IB 799 (937) (138) 6,068 -- 21,710 27,640
Putnam VT Voyager Fund - Class IB 513 (888) (375) (4,845) -- 21,083 15,863
SunAmerica Aggressive Growth
Portfolio - Class 1 -- (7,312) (7,312) 85,992 -- 87,816 166,496
SunAmerica Balanced Portfolio -
Class 1 22,808 (11,226) 11,582 83,806 -- 95,493 190,881
UIF Growth Portfolio - Class I
Shares -- (13,360) (13,360) 43,318 117,813 173,495 321,266
VALIC Company I International
Equities Fund 61,603 (13,114) 48,489 (48,725) -- 338,431 338,195
VALIC Company I Mid Cap Index Fund 125,914 (72,042) 53,872 132,679 440,630 1,327,855 1,955,036
VALIC Company I Money Market I Fund 1,484 (85,469) (83,985) -- -- (2) (83,987)
VALIC Company I Nasdaq-100 Index
Fund 17,856 (23,049) (5,193) 71,245 91,280 455,943 613,275
VALIC Company I Science &
Technology Fund -- (7,439) (7,439) 22,416 -- 122,205 137,182
VALIC Company I Small Cap Index
Fund 70,365 (36,113) 34,252 215,056 -- 601,579 850,887
VALIC Company I Stock Index Fund 304,762 (96,202) 208,560 276,804 270,628 1,725,998 2,481,990
Vanguard VIF High Yield Bond
Portfolio 392,029 (45,424) 346,605 62,943 -- 502,801 912,349
Vanguard VIF REIT Index Portfolio 241,320 (78,232) 163,088 490,344 419,461 790,800 1,863,693
See accompanying notes.
VL-R - 5
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
SCHEDULES OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2012
Net Asset Value of
Value Per Shares at Cost of
Divisions Shares Share Fair Value Shares Held Level/ (1)/
--------- --------- --------- ----------- ----------- ----------
Alger Capital Appreciation Portfolio - Class I-2 Shares 63,823 $60.81 $ 3,881,078 $ 3,369,398 1
Alger Mid Cap Growth Portfolio - Class I-2 Shares 169,830 13.55 2,301,200 2,083,711 1
American Century VP Value Fund - Class I 1,930,647 6.52 12,587,820 11,176,033 1
Dreyfus IP MidCap Stock Portfolio - Initial Shares 238,241 15.68 3,735,622 3,199,903 1
Dreyfus VIF International Value Portfolio - Initial Shares 10,113 9.82 99,312 103,064 1
Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares 233,115 31.66 7,380,409 6,722,535 1
Dreyfus VIF Quality Bond Portfolio - Initial Shares 571,844 12.38 7,079,426 6,741,500 1
Fidelity VIP Asset Manager Portfolio - Service Class 2 291,822 14.92 4,353,982 4,176,424 1
Fidelity VIP Contrafund Portfolio - Service Class 2 999,209 26.00 25,979,429 23,134,571 1
Fidelity VIP Equity-Income Portfolio - Service Class 2 776,028 19.62 15,225,678 14,355,549 1
Fidelity VIP Freedom 2020 Portfolio - Service Class 2 33,102 11.16 369,414 351,299 1
Fidelity VIP Freedom 2025 Portfolio - Service Class 2 46,261 11.14 515,350 484,215 1
Fidelity VIP Freedom 2030 Portfolio - Service Class 2 66,895 10.83 724,478 673,089 1
Fidelity VIP Growth Portfolio - Service Class 2 308,937 41.64 12,864,156 11,470,357 1
Fidelity VIP Mid Cap Portfolio - Service Class 2 270,291 29.98 8,103,313 8,395,389 1
Franklin Templeton Franklin Small Cap Value Securities
Fund - Class 2 373,267 18.23 6,804,660 6,356,346 1
Franklin Templeton Franklin Small-Mid Cap Growth
Securities Fund - Class 2 1,478 21.04 31,091 30,576 1
Franklin Templeton Franklin U.S. Government Fund - Class 2 313,536 13.31 4,173,166 4,151,061 1
Franklin Templeton Mutual Shares Securities Fund - Class 2 362,462 17.22 6,241,600 5,704,881 1
Franklin Templeton Templeton Foreign Securities Fund -
Class 2 429,393 14.37 6,170,381 5,803,220 1
Goldman Sachs VIT Strategic Growth Fund - Institutional
Shares 403,467 13.86 5,592,047 4,648,576 1
Invesco V.I. Core Equity Fund - Series I 257,275 30.14 7,754,263 6,844,630 1
Invesco V.I. Global Real Estate Fund - Series I 6,290 15.47 97,299 83,665 1
Invesco V.I. Government Securities Fund - Series I 7,410 12.40 91,887 90,370 1
Invesco V.I. High Yield Fund - Series I 404,483 5.61 2,269,149 2,120,157 1
Invesco V.I. International Growth Fund - Series I 277,566 30.03 8,335,300 7,693,856 1
Invesco Van Kampen V.I. American Franchise Fund -
Series I 144 36.28 5,234 4,800 1
Invesco Van Kampen V.I. Growth and Income Fund - Series I 388,468 20.07 7,796,561 6,943,346 1
Janus Aspen Enterprise Portfolio - Service Shares 94,226 43.18 4,068,669 3,541,388 1
Janus Aspen Forty Portfolio - Service Shares 7,688 40.28 309,675 266,304 1
Janus Aspen Overseas Portfolio - Service Shares 256,637 37.03 9,503,268 11,787,242 1
Janus Aspen Worldwide Portfolio - Service Shares 87,166 30.32 2,642,859 2,454,677 1
JPMorgan Insurance Trust Core Bond Portfolio - Class 1 6,910 11.78 81,396 79,930 1
JPMorgan Insurance Trust International Equity Portfolio -
Class 1 5,167 10.52 54,352 49,830 1
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 87,003 8.17 710,812 590,792 1
JPMorgan Insurance Trust Small Cap Core Portfolio -
Class 1 162,630 16.99 2,763,083 2,360,624 1
MFS VIT Core Equity Series - Initial Class 179,294 17.68 3,169,925 2,806,308 1
MFS VIT Growth Series - Initial Class 296,369 28.83 8,544,313 7,261,643 1
MFS VIT New Discovery Series - Initial Class 289,989 15.72 4,558,624 4,752,573 1
MFS VIT Research Series - Initial Class 93,501 21.85 2,043,000 1,791,598 1
MFS VIT Total Return Series - Initial Class 22,286 20.05 446,828 411,405 1
Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I 149,116 30.97 4,618,123 4,139,330 1
Neuberger Berman AMT Large Cap Value Portfolio - Class I 2,430 11.60 28,183 24,538 1
Neuberger Berman AMT Socially Responsive Portfolio -
Class I 3,036 15.89 48,236 43,734 1
Oppenheimer Balanced Fund/VA - Non-Service Shares 111,006 12.52 1,389,796 1,260,460 1
Oppenheimer Global Strategic Income Fund/VA (Non-
Service) 7,784 5.67 44,134 43,359 1
Oppenheimer Global Securities Fund/VA - Non-Service
Shares 171,947 32.55 5,596,885 5,034,949 1
Oppenheimer High Income Fund/VA - Non-Service Shares 1
PIMCO VIT CommodityRealReturn Strategy Portfolio -
Administrative Class 216,274 7.13 1,542,031 1,740,970 1
PIMCO VIT Global Bond Portfolio (Unhedged) -
Administrative Class 3,978 13.72 54,581 55,130 1
PIMCO VIT Real Return Portfolio - Administrative Class 1,038,542 14.25 14,799,219 14,474,577 1
PIMCO VIT Short-Term Portfolio - Administrative Class 645,707 10.29 6,644,323 6,591,844 1
PIMCO VIT Total Return Portfolio - Administrative Class 1,556,045 11.55 17,972,323 17,660,032 1
Pioneer Fund VCT Portfolio - Class I 72,556 20.90 1,516,410 1,523,614 1
See accompanying notes.
VL-R - 6
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
SCHEDULES OF PORTFOLIO INVESTMENTS - CONTINUED
DECEMBER 31, 2012
Net Asset Value of
Value Per Shares at Cost of
Divisions Shares Share Fair Value Shares Held Level/ (1)/
--------- ---------- --------- ----------- ----------- ----------
Pioneer Growth Opportunities VCT Portfolio - Class I 98,848 $24.07 $ 2,379,278 $ 2,229,713 1
Pioneer Mid Cap Value VCT Portfolio - Class I 50,132 17.42 873,297 823,075 1
Putnam VT Diversified Income Fund - Class IB 942,054 7.25 6,829,890 7,092,401 1
Putnam VT Growth and Income Fund - Class IB 542,834 17.93 9,733,019 8,474,090 1
Putnam VT International Value Fund - Class IB 487,164 9.30 4,530,628 4,239,191 1
Putnam VT Multi-Cap Growth Fund - Class IB 1,414 22.45 31,738 29,876 1
Putnam VT Small Cap Value Fund - Class IB 12,170 15.29 186,076 162,495 1
Putnam VT Voyager Fund - Class IB 3,160 36.17 114,313 113,471 1
SunAmerica Aggressive Growth Portfolio - Class 1 95,911 11.28 1,081,476 940,125 1
SunAmerica Balanced Portfolio - Class 1 105,506 16.10 1,698,860 1,554,328 1
UIF Growth Portfolio - Class I Shares 115,509 21.94 2,534,261 2,414,878 1
VALIC Company I International Equities Fund 380,606 6.16 2,344,533 2,304,161 1
VALIC Company I Mid Cap Index Fund 608,431 20.96 12,752,712 12,237,611 1
VALIC Company I Money Market I Fund 13,944,313 1.00 13,944,313 13,944,315 1
VALIC Company I Nasdaq-100 Index Fund 620,854 6.21 3,855,505 3,740,807 1
VALIC Company I Science & Technology Fund 76,586 16.90 1,294,304 1,243,180 1
VALIC Company I Small Cap Index Fund 359,010 15.58 5,593,379 5,055,018 1
VALIC Company I Stock Index Fund 681,887 26.10 17,797,241 16,828,589 1
Vanguard VIF High Yield Bond Portfolio 904,837 8.33 7,537,292 6,988,592 1
Vanguard VIF REIT Index Portfolio 1,026,782 12.12 12,444,603 10,840,391 1
/(1)/Represents the level within the fair value hierarchy under which the
portfolio is classified as defined in ASC 820 and descreibed in Note 3 to
the financial statements.
See accompanying notes.
VL-R - 7
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
------------------------------------------------------
Alger Capital Alger Mid
Appreciation Cap Growth American
Portfolio - Portfolio - Century VP Credit Suisse
Class I-2 Class I-2 Value Fund - U.S. Equity
Shares Shares Class I Flex I Portfolio
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 14,331 $ (16,156) $ 165,587 $ --
Net realized gain (loss) on investments 96,651 50,433 487,521 --
Capital gain distributions from mutual funds 1,338 -- -- --
Net change in unrealized appreciation (depreciation) of
investments 467,970 308,991 974,608 --
---------- ---------- ----------- -----------
Increase (decrease) in net assets resulting from operations 580,290 343,268 1,627,716 --
---------- ---------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 310,548 266,844 1,159,245 --
Net transfers from (to) other Divisions or fixed rate option 22,632 (441,740) (28,831) --
Internal rollovers -- -- -- --
Cost of insurance and other charges (169,489) (144,195) (739,083) --
Administrative charges (15,707) (13,663) (56,355) --
Policy loans (6,306) (24,578) (82,182) --
Death benefits (12,055) (3,759) (17,448) --
Withdrawals (132,846) (125,487) (1,030,956) --
---------- ---------- ----------- -----------
Increase (decrease) in net assets resulting from principal
transactions (3,223) (486,578) (795,610) --
---------- ---------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 577,067 (143,310) 832,106 --
NET ASSETS:
Beginning of year 3,304,011 2,444,510 11,755,714 --
---------- ---------- ----------- -----------
End of year $3,881,078 $2,301,200 $12,587,820 $ --
========== ========== =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ (19,902) $ (9,295) $ 168,128 $ 212
Net realized gain (loss) on investments 131,979 24,995 204,970 (26,929)
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation (depreciation) of
investments (121,577) (249,698) (364,250) (74,900)
---------- ---------- ----------- -----------
Increase (decrease) in net assets resulting from operations (9,500) (233,998) 8,848 (101,617)
---------- ---------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 340,218 312,132 1,366,629 153,490
Net transfers from (to) other Divisions or fixed rate option 214,393 (38,107) (119,227) (1,348,084)
Internal rollovers 1,233 -- 247 --
Cost of insurance and other charges (205,269) (191,178) (892,465) (89,798)
Administrative charges (17,312) (15,911) (69,292) (7,685)
Policy loans (35,324) (25,813) (145,212) (17,458)
Death benefits (35) -- (58,303) (35)
Withdrawals (373,802) (213,849) (1,232,812) (70,943)
---------- ---------- ----------- -----------
Increase (decrease) in net assets resulting from principal
transactions (75,898) (172,726) (1,150,435) (1,380,513)
---------- ---------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (85,398) (406,724) (1,141,587) (1,482,130)
NET ASSETS:
Beginning of year 3,389,409 2,851,234 12,897,301 1,482,130
---------- ---------- ----------- -----------
End of year $3,304,011 $2,444,510 $11,755,714 $ --
========== ========== =========== ===========
See accompanying notes.
VL-R - 8
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
---------------------------------------------------------
Dreyfus VIF
International Dreyfus VIF
Dreyfus IP Value Opportunistic Dreyfus VIF
MidCap Stock Portfolio - Small Cap Quality Bond
Portfolio - Initial Portfolio - Portfolio -
Initial Shares Shares Initial Shares Initial Shares
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ (4,875) $ 2,139 $ (36,374) $ 173,744
Net realized gain (loss) on investments 185,408 (1,670) 156,088 83,100
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation (depreciation) of
investments 444,703 10,288 1,091,602 187,780
---------- -------- ----------- -----------
Increase (decrease) in net assets resulting from operations 625,236 10,757 1,211,316 444,624
---------- -------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 317,967 22,758 634,689 459,274
Net transfers from (to) other Divisions or fixed rate option (104,368) 1,108 792,593 (146,948)
Internal rollovers -- -- -- --
Cost of insurance and other charges (194,530) (13,800) (527,854) (557,189)
Administrative charges (15,131) (1,138) (27,559) (21,322)
Policy loans (45,950) (1,203) (56,238) (6,869)
Death benefits (7,699) -- (6,297) (22,529)
Withdrawals (211,358) (2,415) (630,930) (325,004)
---------- -------- ----------- -----------
Increase (decrease) in net assets resulting from principal
transactions (261,069) 5,310 178,404 (620,587)
---------- -------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 364,167 16,067 1,389,720 (175,963)
NET ASSETS:
Beginning of year 3,371,455 83,245 5,990,689 7,255,389
---------- -------- ----------- -----------
End of year $3,735,622 $ 99,312 $ 7,380,409 $ 7,079,426
========== ======== =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ (4,618) $ 1,769 $ (13,191) $ 245,354
Net realized gain (loss) on investments 108,794 307 72,120 19,634
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation (depreciation) of
investments (103,100) (21,447) (1,087,022) 227,355
---------- -------- ----------- -----------
Increase (decrease) in net assets resulting from operations 1,076 (19,371) (1,028,093) 492,343
---------- -------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 366,180 26,449 716,879 485,426
Net transfers from (to) other Divisions or fixed rate option (269,267) 1,705 (145,472) (610,698)
Internal rollovers -- 340 4,150 --
Cost of insurance and other charges (214,246) (17,072) (567,015) (527,053)
Administrative charges (17,539) (1,339) (31,287) (23,658)
Policy loans (30,600) (3,494) (77,469) (78,007)
Death benefits (39,459) -- (16,710) (18,005)
Withdrawals (326,338) (19,035) (528,425) (569,658)
---------- -------- ----------- -----------
Increase (decrease) in net assets resulting from principal
transactions (531,269) (12,446) (645,349) (1,341,653)
---------- -------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (530,193) (31,817) (1,673,442) (849,310)
NET ASSETS:
Beginning of year 3,901,648 115,062 7,664,131 8,104,699
---------- -------- ----------- -----------
End of year $3,371,455 $ 83,245 $ 5,990,689 $ 7,255,389
========== ======== =========== ===========
See accompanying notes.
VL-R - 9
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
----------------------------------------------------
Fidelity VIP Fidelity VIP
Asset Fidelity VIP Fidelity VIP Freedom
Manager Contrafund Equity- Income 2020
Portfolio - Portfolio - Portfolio - Portfolio -
Service Service Service Service
Class 2 Class 2 Class 2 Class 2
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 28,109 $ 131,549 $ 343,048 $ 4,609
Net realized gain (loss) on investments 38,673 707,386 339,204 2,585
Capital gain distributions from mutual funds 32,232 -- 948,378 4,226
Net change in unrealized appreciation (depreciation) of
investments 375,230 2,821,514 561,150 28,574
---------- ----------- ----------- --------
Increase (decrease) in net assets resulting from operations 474,244 3,660,449 2,191,780 39,994
---------- ----------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 387,166 2,107,002 1,330,676 63,286
Net transfers from (to) other Divisions or fixed rate option 2,359 (393,728) (63,288) 1,537
Internal rollovers -- -- -- --
Cost of insurance and other charges (313,780) (1,379,211) (869,600) (36,586)
Administrative charges (18,653) (102,126) (64,329) (3,164)
Policy loans (9,357) (208,377) 4,957 975
Death benefits (4,181) (44,608) (46,033) --
Withdrawals (419,597) (1,686,087) (952,837) (16,613)
---------- ----------- ----------- --------
Increase (decrease) in net assets resulting from principal
transactions (376,043) (1,707,135) (660,454) 9,435
---------- ----------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS 98,201 1,953,314 1,531,326 49,429
NET ASSETS:
Beginning of year 4,255,781 24,026,115 13,694,352 319,985
---------- ----------- ----------- --------
End of year $4,353,982 $25,979,429 $15,225,678 $369,414
========== =========== =========== ========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 46,785 $ 26,484 $ 234,001 $ 4,875
Net realized gain (loss) on investments 5,715 676,086 383,729 692
Capital gain distributions from mutual funds 21,901 -- -- 1,229
Net change in unrealized appreciation (depreciation) of
investments (224,291) (1,550,091) (609,455) (12,676)
---------- ----------- ----------- --------
Increase (decrease) in net assets resulting from operations (149,890) (847,521) 8,275 (5,880)
---------- ----------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 505,013 2,499,292 1,508,896 70,930
Net transfers from (to) other Divisions or fixed rate option (19,871) (2,497,191) (385,366) 110,633
Internal rollovers -- 5,598 4,581 4,365
Cost of insurance and other charges (358,560) (1,618,221) (995,629) (40,375)
Administrative charges (25,013) (125,278) (76,219) (3,764)
Policy loans (79,790) (452,901) (206,632) (4,939)
Death benefits (11,033) (79,838) (53,415) --
Withdrawals (372,199) (2,271,584) (1,206,295) (6,401)
---------- ----------- ----------- --------
Increase (decrease) in net assets resulting from principal
transactions (361,453) (4,540,123) (1,410,079) 130,449
---------- ----------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS (511,343) (5,387,644) (1,401,804) 124,569
NET ASSETS:
Beginning of year 4,767,124 29,413,759 15,096,156 195,416
---------- ----------- ----------- --------
End of year $4,255,781 $24,026,115 $13,694,352 $319,985
========== =========== =========== ========
See accompanying notes.
VL-R - 10
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
--------------------------------------------------------------------------
Fidelity VIP Fidelity VIP
Freedom 2025 Freedom 2030 Fidelity VIP Fidelity VIP Mid
Portfolio - Service Portfolio - Service Growth Portfolio - Cap Portfolio -
Class 2 Class 2 Service Class 2 Service Class 2
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 5,661 $ 9,409 $ (34,698) $ (21,086)
Net realized gain (loss) on investments 2,528 12,565 593,570 (24,516)
Capital gain distributions from mutual funds 4,938 6,548 -- 647,033
Net change in unrealized appreciation
(depreciation) of investments 40,427 72,988 1,135,163 408,550
-------- --------- ----------- -----------
Increase (decrease) in net assets resulting from
operations 53,554 101,510 1,694,035 1,009,981
-------- --------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 59,630 134,489 1,162,569 821,773
Net transfers from (to) other Divisions or
fixed rate option 138,605 1,294 (985,619) (181,724)
Internal rollovers -- -- -- --
Cost of insurance and other charges (42,730) (47,004) (737,414) (426,084)
Administrative charges (2,982) (6,768) (56,651) (41,932)
Policy loans (4,461) (25,206) (73,554) (100,952)
Death benefits -- -- (29,087) (3,487)
Withdrawals (2,075) (150,736) (1,111,925) (509,454)
-------- --------- ----------- -----------
Increase (decrease) in net assets resulting from
principal transactions 145,987 (93,931) (1,831,681) (441,860)
-------- --------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 199,541 7,579 (137,646) 568,121
NET ASSETS:
Beginning of year 315,809 716,899 13,001,802 7,535,192
-------- --------- ----------- -----------
End of year $515,350 $ 724,478 $12,864,156 $ 8,103,313
======== ========= =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 4,345 $ 9,506 $ (73,385) $ (55,093)
Net realized gain (loss) on investments 824 3,306 334,411 (447)
Capital gain distributions from mutual funds 1,023 2,174 47,142 14,497
Net change in unrealized appreciation
(depreciation) of investments (13,792) (38,657) (429,541) (946,445)
-------- --------- ----------- -----------
Increase (decrease) in net assets resulting from
operations (7,600) (23,671) (121,373) (987,488)
-------- --------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 49,784 146,142 1,351,967 985,500
Net transfers from (to) other Divisions or
fixed rate option 100,834 62,360 451,573 (312,556)
Internal rollovers -- -- -- 5,784
Cost of insurance and other charges (38,609) (68,351) (842,421) (547,878)
Administrative charges (2,489) (7,451) (67,475) (51,830)
Policy loans (17,647) (11,770) (135,429) (227,435)
Death benefits -- -- (35,714) (6)
Withdrawals (2,330) (49,595) (984,326) (778,491)
-------- --------- ----------- -----------
Increase (decrease) in net assets resulting from
principal transactions 89,543 71,335 (261,825) (926,912)
-------- --------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 81,943 47,664 (383,198) (1,914,400)
NET ASSETS:
Beginning of year 233,866 669,235 13,385,000 9,449,592
-------- --------- ----------- -----------
End of year $315,809 $ 716,899 $13,001,802 $ 7,535,192
======== ========= =========== ===========
See accompanying notes.
VL-R - 11
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
----------------------------------------------------------------------
Franklin
Templeton Franklin
Franklin Templeton Franklin Small-Mid Templeton Franklin
Franklin Small Cap Cap Growth Franklin U.S. Templeton Mutual
Value Securities Securities Fund - Government Fund Shares Securities
Fund - Class 2 Class 2 - Class 2 Fund - Class 2
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 8,574 $ (185) $ 84,822 $ 86,084
Net realized gain (loss) on investments (105,776) 760 8,142 149,947
Capital gain distributions from mutual funds -- 2,230 -- --
Net change in unrealized appreciation
(depreciation) of investments 1,139,560 185 (41,913) 549,812
----------- -------- ---------- -----------
Increase (decrease) in net assets resulting from
operations 1,042,358 2,990 51,051 785,843
----------- -------- ---------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 534,959 107 338,827 508,810
Net transfers from (to) other Divisions or fixed
rate option (103,490) 142 19,017 47,118
Internal rollovers -- -- -- --
Cost of insurance and other charges (306,703) (1,773) (216,863) (333,678)
Administrative charges (26,915) -- (18,618) (25,348)
Policy loans (51,348) -- (84,249) (100,099)
Death benefits -- -- (2,066) (2,742)
Withdrawals (423,310) -- (233,839) (562,042)
----------- -------- ---------- -----------
Increase (decrease) in net assets resulting from
principal transactions (376,807) (1,524) (197,791) (467,981)
----------- -------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 665,551 1,466 (146,740) 317,862
NET ASSETS:
Beginning of year 6,139,109 29,625 4,319,906 5,923,738
----------- -------- ---------- -----------
End of year $ 6,804,660 $ 31,091 $4,173,166 $ 6,241,600
=========== ======== ========== ===========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 5,719 $ (284) $ 111,247 $ 108,531
Net realized gain (loss) on investments (1,250,030) 4,862 2,191 271,010
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments 892,823 (3,806) 105,618 (443,095)
----------- -------- ---------- -----------
Increase (decrease) in net assets resulting from
operations (351,488) 772 219,056 (63,554)
----------- -------- ---------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 677,694 107 500,845 676,774
Net transfers from (to) other Divisions or fixed
rate option (2,907,840) (48,175) (49,494) (2,535,381)
Internal rollovers 278 -- -- --
Cost of insurance and other charges (394,855) (1,768) (286,717) (416,035)
Administrative charges (36,294) -- (26,651) (33,716)
Policy loans (256,765) 37 (121,901) (193,456)
Death benefits (1,004) (2,842) (797) (29,986)
Withdrawals (328,853) (242) (568,046) (643,944)
----------- -------- ---------- -----------
Increase (decrease) in net assets resulting from
principal transactions (3,247,639) (52,883) (552,761) (3,175,744)
----------- -------- ---------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,599,127) (52,111) (333,705) (3,239,298)
NET ASSETS:
Beginning of year 9,738,236 81,736 4,653,611 9,163,036
----------- -------- ---------- -----------
End of year $ 6,139,109 $ 29,625 $4,319,906 $ 5,923,738
=========== ======== ========== ===========
See accompanying notes.
VL-R - 12
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
-------------------------------------------------------------------
Franklin Goldman Sachs
Templeton VIT Strategic
Templeton Foreign Growth Fund - Invesco V.I. Core Invesco V.I.
Securities Fund - Institutional Equity Fund - Global Real Estate
Class 2 Shares Series I Fund - Series I
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 140,765 $ 24,179 $ 34,694 $ 294
Net realized gain (loss) on investments (12,150) 44,733 237,295 1,123
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments 825,231 884,730 702,358 19,095
----------- ---------- ----------- --------
Increase (decrease) in net assets resulting from
operations 953,846 953,642 974,347 20,512
----------- ---------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 490,940 -- 756,914 25,490
Net transfers from (to) other Divisions or fixed rate
option (120,803) -- (201,673) (4,146)
Internal rollovers -- -- -- --
Cost of insurance and other charges (334,622) (311,800) (644,465) (10,801)
Administrative charges (23,033) (132) (28,251) (1,275)
Policy loans (16,919) (180) (71,279) (877)
Death benefits (3,113) -- (53,914) --
Withdrawals (386,358) (81) (605,206) (1,638)
----------- ---------- ----------- --------
Increase (decrease) in net assets resulting from
principal transactions (393,908) (312,193) (847,874) 6,753
----------- ---------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS 559,938 641,449 126,473 27,265
NET ASSETS:
Beginning of year 5,610,443 4,950,598 7,627,790 70,034
----------- ---------- ----------- --------
End of year $ 6,170,381 $5,592,047 $ 7,754,263 $ 97,299
=========== ========== =========== ========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 68,323 $ 10,284 $ 32,822 $ 2,817
Net realized gain (loss) on investments 102,891 13,823 235,623 347
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments (908,925) (172,546) (294,536) (8,708)
----------- ---------- ----------- --------
Increase (decrease) in net assets resulting from
operations (737,711) (148,439) (26,091) (5,544)
----------- ---------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 561,707 -- 816,094 28,122
Net transfers from (to) other Divisions or fixed rate
option 48,412 (131) (392,101) 59
Internal rollovers -- -- -- --
Cost of insurance and other charges (400,562) (261,498) (734,339) (12,367)
Administrative charges (28,090) (128) (32,072) (1,407)
Policy loans (92,068) (183) (18,300) (1,350)
Death benefits (10,703) -- (68,760) --
Withdrawals (471,752) (2,091) (698,495) (4,414)
----------- ---------- ----------- --------
Increase (decrease) in net assets resulting from
principal transactions (393,056) (264,031) (1,127,973) 8,643
----------- ---------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,130,767) (412,470) (1,154,064) 3,099
NET ASSETS:
Beginning of year 6,741,210 5,363,068 8,781,854 66,935
----------- ---------- ----------- --------
End of year $ 5,610,443 $4,950,598 $ 7,627,790 $ 70,034
=========== ========== =========== ========
See accompanying notes.
VL-R - 13
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
-------------------------------------------------------------------
Invesco V.I. Invesco V.I. Invesco Van
Government Invesco V.I. High International Kampen V.I.
Securities Fund - Yield Fund - Growth Fund - American Franchise
Series I Series I Series I Fund - Series I
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 2,351 $ 94,172 $ 69,775 $ (34)
Net realized gain (loss) on investments 2,589 6,550 70,746 231
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation (depreciation)
of investments (3,190) 218,377 964,075 490
------- ---------- ----------- --------
Increase (decrease) in net assets resulting from
operations 1,750 319,099 1,104,596 687
------- ---------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 960 110,087 773,013 --
Net transfers from (to) other Divisions or fixed rate
option (80) (40,547) (163,480) (1)
Internal rollovers -- -- -- --
Cost of insurance and other charges (8,494) (46,813) (514,574) (845)
Administrative charges -- (5,115) (35,019) --
Policy loans (413) 5,054 (61,701) --
Death benefits -- (3,591) (9,594) --
Withdrawals (233) (46,635) (475,675) --
------- ---------- ----------- --------
Increase (decrease) in net assets resulting from principal
transactions (8,260) (27,560) (487,030) (846)
------- ---------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,510) 291,539 617,566 (159)
NET ASSETS:
Beginning of year 98,397 1,977,610 7,717,734 5,393
------- ---------- ----------- --------
End of year $91,887 $2,269,149 $ 8,335,300 $ 5,234
======= ========== =========== ========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ (476) $ (8,911) $ 80,825 $ (71)
Net realized gain (loss) on investments 1,885 (5,190) 162,189 2,710
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation (depreciation)
of investments 4,708 (69,386) (860,837) (1,556)
------- ---------- ----------- --------
Increase (decrease) in net assets resulting from
operations 6,117 (83,487) (617,823) 1,083
------- ---------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 730 86,611 910,951 --
Net transfers from (to) other Divisions or fixed rate
option 91,043 2,059,784 (701,661) --
Internal rollovers -- -- 4,490 --
Cost of insurance and other charges (6,070) (39,911) (633,537) (1,135)
Administrative charges -- (4,030) (42,104) --
Policy loans 13,496 (3,613) (161,832) 37
Death benefits -- (328) (25,854) --
Withdrawals (6,919) (37,416) (854,138) (34,544)
------- ---------- ----------- --------
Increase (decrease) in net assets resulting from principal
transactions 92,280 2,061,097 (1,503,685) (35,642)
------- ---------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS 98,397 1,977,610 (2,121,508) (34,559)
NET ASSETS:
Beginning of year -- -- 9,839,242 39,952
------- ---------- ----------- --------
End of year $98,397 $1,977,610 $ 7,717,734 $ 5,393
======= ========== =========== ========
See accompanying notes.
VL-R - 14
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
--------------------------------------------------------------------
Invesco Van
Invesco Van Kampen V.I. Invesco Van
Kampen V.I. Growth and Kampen V.I. High Janus Aspen
Government Fund Income Fund - Yield Fund - Enterprise Portfolio -
- Series I Series I Series I Service Shares
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ -- $ 69,452 $ -- $ (24,034)
Net realized gain (loss) on investments -- 217,091 -- 176,370
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments -- 721,508 -- 464,505
-------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
operations -- 1,008,051 -- 616,841
-------- ----------- ----------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums -- 640,113 -- 313,113
Net transfers from (to) other Divisions or fixed rate
option -- (131,551) -- (97,630)
Internal rollovers -- -- -- --
Cost of insurance and other charges -- (457,833) -- (183,693)
Administrative charges -- (30,183) -- (15,289)
Policy loans -- (51,818) -- (46,829)
Death benefits -- (3,406) -- (2,578)
Withdrawals -- (649,391) -- (376,454)
-------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
principal transactions -- (684,069) -- (409,360)
-------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS -- 323,982 -- 207,481
NET ASSETS:
Beginning of year -- 7,472,579 -- 3,861,188
-------- ----------- ----------- ----------
End of year $ -- $ 7,796,561 $ -- $4,068,669
======== =========== =========== ==========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 3,879 $ 44,287 $ 224,511 $ (26,544)
Net realized gain (loss) on investments (4,315) 327,315 (95,649) 150,195
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments 1,189 (539,204) (29,826) (199,841)
-------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
operations 753 (167,602) 99,036 (76,190)
-------- ----------- ----------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 1,715 736,651 20,758 364,547
Net transfers from (to) other Divisions or fixed rate
option (90,943) (2,506,196) (2,033,665) (81,105)
Internal rollovers -- 4,150 -- --
Cost of insurance and other charges (3,289) (531,005) (24,614) (202,599)
Administrative charges -- (35,435) (866) (18,379)
Policy loans 585 (164,923) (12,267) (71,501)
Death benefits -- (14,913) -- (4,360)
Withdrawals (356) (518,170) (15,385) (333,998)
-------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
principal transactions (92,288) (3,029,841) (2,066,039) (347,395)
-------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (91,535) (3,197,443) (1,967,003) (423,585)
NET ASSETS:
Beginning of year 91,535 10,670,022 1,967,003 4,284,773
-------- ----------- ----------- ----------
End of year $ -- $ 7,472,579 $ -- $3,861,188
======== =========== =========== ==========
See accompanying notes.
VL-R - 15
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
-----------------------------------------------------------------------------
Janus Aspen JPMorgan
Janus Aspen Forty Janus Aspen Worldwide Insurance Trust
Portfolio - Service Overseas Portfolio Portfolio - Service Core Bond
Shares - Service Shares Shares Portfolio - Class 1
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 493 $ 231 $ 5,043 $ 2,991
Net realized gain (loss) on investments 1,927 (1,207,404) (43,262) 24
Capital gain distributions from mutual funds -- 1,003,932 -- --
Net change in unrealized appreciation
(depreciation) of investments 53,650 1,307,579 495,584 615
-------- ----------- ----------- --------
Increase (decrease) in net assets resulting from
operations 56,070 1,104,338 457,365 3,630
-------- ----------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 33,301 993,419 274,480 17,191
Net transfers from (to) other Divisions or
fixed rate option (509) (600,654) (196,966) (3,305)
Internal rollovers -- -- -- --
Cost of insurance and other charges (17,232) (559,404) (161,925) (9,567)
Administrative charges (1,665) (47,364) (13,304) (859)
Policy loans -- (105,305) (18,147) (612)
Death benefits -- (31,768) (3,814) --
Withdrawals (514) (613,991) (223,519) (2,050)
-------- ----------- ----------- --------
Increase (decrease) in net assets resulting from
principal transactions 13,381 (965,067) (343,195) 798
-------- ----------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS 69,451 139,271 114,170 4,428
NET ASSETS:
Beginning of year 240,224 9,363,997 2,528,689 76,968
-------- ----------- ----------- --------
End of year $309,675 $ 9,503,268 $ 2,642,859 $ 81,396
======== =========== =========== ========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ (400) $ (33,237) $ (5,623) $ 3,471
Net realized gain (loss) on investments 942 (618,610) 24,612 (163)
Capital gain distributions from mutual funds -- 128,506 -- --
Net change in unrealized appreciation
(depreciation) of investments (18,368) (4,277,403) (451,568) 1,628
-------- ----------- ----------- --------
Increase (decrease) in net assets resulting from
operations (17,826) (4,800,744) (432,579) 4,936
-------- ----------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 47,749 1,196,308 316,163 19,977
Net transfers from (to) other Divisions or
fixed rate option (622) (1,107,124) (32,652) 1,296
Internal rollovers -- -- -- 216
Cost of insurance and other charges (21,239) (700,244) (188,538) (12,131)
Administrative charges (2,387) (60,698) (15,419) (1,009)
Policy loans -- (249,209) (28,056) --
Death benefits -- (3,411) (6,278) --
Withdrawals (7,333) (958,462) (671,830) (5,911)
-------- ----------- ----------- --------
Increase (decrease) in net assets resulting from
principal transactions 16,168 (1,882,840) (626,610) 2,438
-------- ----------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,658) (6,683,584) (1,059,189) 7,374
NET ASSETS:
Beginning of year 241,882 16,047,581 3,587,878 69,594
-------- ----------- ----------- --------
End of year $240,224 $ 9,363,997 $ 2,528,689 $ 76,968
======== =========== =========== ========
See accompanying notes.
VL-R - 16
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
-------------------------------------------------------------------------
JPMorgan
Insurance Trust JPMorgan JPMorgan
International Insurance Trust Insurance Trust MFS VIT Core
Equity Portfolio - Mid Cap Value Small Cap Core Equity Series -
Class 1 Portfolio - Class 1 Portfolio - Class 1 Initial Class
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 846 $ 2,798 $ (12,190) $ 6,706
Net realized gain (loss) on investments 16 35,129 83,815 128,570
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments 8,502 84,908 388,676 321,344
-------- ----------- ---------- ----------
Increase (decrease) in net assets resulting from
operations 9,364 122,835 460,301 456,620
-------- ----------- ---------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 10,834 -- 299,716 289,995
Net transfers from (to) other Divisions or
fixed rate option 519 (5,110) (48,542) (88,721)
Internal rollovers -- -- -- --
Cost of insurance and other charges (9,345) (18,949) (158,478) (204,628)
Administrative charges (542) (19) (14,685) (13,746)
Policy loans (1,461) (5,190) (21,515) (16,404)
Death benefits -- -- (14,144) (12,349)
Withdrawals (215) (28,488) (184,020) (266,272)
-------- ----------- ---------- ----------
Increase (decrease) in net assets resulting from
principal transactions (210) (57,756) (141,668) (312,125)
-------- ----------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 9,154 65,079 318,633 144,495
NET ASSETS:
Beginning of year 45,198 645,733 2,444,450 3,025,430
-------- ----------- ---------- ----------
End of year $ 54,352 $ 710,812 $2,763,083 $3,169,925
======== =========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 815 $ 13,110 $ (14,385) $ 10,569
Net realized gain (loss) on investments 1,911 110,808 31,620 100,412
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments (8,552) (93,396) (158,851) (158,177)
-------- ----------- ---------- ----------
Increase (decrease) in net assets resulting from
operations (5,826) 30,522 (141,616) (47,196)
-------- ----------- ---------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 12,884 -- 340,006 338,574
Net transfers from (to) other Divisions or
fixed rate option (1,675) (1,488,441) 34,832 (83,505)
Internal rollovers 1,048 -- -- --
Cost of insurance and other charges (13,114) (17,996) (199,479) (222,360)
Administrative charges (697) (20) (16,679) (16,801)
Policy loans (8,578) (87,608) (37,786) (18,505)
Death benefits -- -- -- (46,988)
Withdrawals (10,031) (72,768) (208,698) (341,489)
-------- ----------- ---------- ----------
Increase (decrease) in net assets resulting from
principal transactions (20,163) (1,666,833) (87,804) (391,074)
-------- ----------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (25,989) (1,636,311) (229,420) (438,270)
NET ASSETS:
Beginning of year 71,187 2,282,044 2,673,870 3,463,700
-------- ----------- ---------- ----------
End of year $ 45,198 $ 645,733 $2,444,450 $3,025,430
======== =========== ========== ==========
See accompanying notes.
VL-R - 17
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
--------------------------------------------------------------------
MFS VIT Growth MFS VIT New MFS VIT MFS VIT Total
Series - Initial Discovery Series - Research Series - Return Series -
Class Initial Class Initial Class Initial Class
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ (45,466) $ (27,439) $ 4,197 $ 10,109
Net realized gain (loss) on investments 300,233 (151,562) 83,292 10,788
Capital gain distributions from mutual funds -- 414,688 -- --
Net change in unrealized appreciation (depreciation)
of investments 1,065,529 579,282 215,783 26,702
----------- ----------- ----------- --------
Increase (decrease) in net assets resulting from
operations 1,320,296 814,969 303,272 47,599
----------- ----------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 767,786 348,537 210,383 933
Net transfers from (to) other Divisions or fixed rate
option (357,382) (20,818) (23,399) (2,309)
Internal rollovers -- -- -- --
Cost of insurance and other charges (648,541) (227,203) (153,396) (38,451)
Administrative charges (28,606) (17,180) (10,064) --
Policy loans (86,986) (6,098) (4,126) (34)
Death benefits (10,652) (11,235) (48,525) --
Withdrawals (628,040) (391,562) (109,773) (35,459)
----------- ----------- ----------- --------
Increase (decrease) in net assets resulting from principal
transactions (992,421) (325,559) (138,900) (75,320)
----------- ----------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS 327,875 489,410 164,372 (27,721)
NET ASSETS:
Beginning of year 8,216,438 4,069,214 1,878,628 474,549
----------- ----------- ----------- --------
End of year $ 8,544,313 $ 4,558,624 $ 2,043,000 $446,828
=========== =========== =========== ========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ (36,102) $ (34,567) $ 79 $ 9,262
Net realized gain (loss) on investments 239,785 50,032 281,778 5,748
Capital gain distributions from mutual funds -- 617,915 -- --
Net change in unrealized appreciation (depreciation)
of investments (270,045) (1,174,997) (264,829) (8,842)
----------- ----------- ----------- --------
Increase (decrease) in net assets resulting from
operations (66,362) (541,617) 17,028 6,168
----------- ----------- ----------- --------
PRINCIPAL TRANSACTIONS:
Net premiums 853,015 396,753 239,738 17,833
Net transfers from (to) other Divisions or fixed rate
option (912,826) (273,492) (2,906,263) 20,390
Internal rollovers -- -- -- --
Cost of insurance and other charges (752,733) (263,020) (171,399) (37,108)
Administrative charges (32,765) (19,620) (11,483) --
Policy loans (77,374) (73,110) (78,038) 108
Death benefits (88,837) -- (34,380) (9,327)
Withdrawals (921,461) (674,180) (144,294) (45,709)
----------- ----------- ----------- --------
Increase (decrease) in net assets resulting from principal
transactions (1,932,981) (906,669) (3,106,119) (53,813)
----------- ----------- ----------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,999,343) (1,448,286) (3,089,091) (47,645)
NET ASSETS:
Beginning of year 10,215,781 5,517,500 4,967,719 522,194
----------- ----------- ----------- --------
End of year $ 8,216,438 $ 4,069,214 $ 1,878,628 $474,549
=========== =========== =========== ========
See accompanying notes.
VL-R - 18
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
------------------------------------------------------------------------------
Neuberger Neuberger Neuberger Berman Oppenheimer
Berman AMT Mid- Berman AMT AMT Socially Global Strategic
Cap Growth Large Cap Value Responsive Portfolio - Income Fund/VA
Portfolio - Class I Portfolio - Class I Class I (Non-Service)
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ (27,849) $ (29) $ (148) $ (56)
Net realized gain (loss) on
investments 208,813 (340) 49 2
Capital gain distributions from
mutual funds -- -- -- --
Net change in unrealized
appreciation (depreciation) of
investments 330,861 4,470 4,168 775
---------- -------- ------- -------
Increase (decrease) in net assets
resulting from operations 511,825 4,101 4,069 721
---------- -------- ------- -------
PRINCIPAL TRANSACTIONS:
Net premiums 390,078 79 8,612 667
Net transfers from (to) other
Divisions or fixed rate option 87,562 (79) 18 43,104
Internal rollovers -- -- -- --
Cost of insurance and other charges (255,329) (2,847) (686) (386)
Administrative charges (18,766) -- (713) --
Policy loans (41,222) (57) -- 28
Death benefits (17,999) -- -- --
Withdrawals (280,697) -- -- --
---------- -------- ------- -------
Increase (decrease) in net assets
resulting from principal transactions (136,373) (2,904) 7,231 43,413
---------- -------- ------- -------
TOTAL INCREASE (DECREASE) IN NET ASSETS 375,452 1,197 11,300 44,134
NET ASSETS:
Beginning of year 4,242,671 26,986 36,936 --
---------- -------- ------- -------
End of year $4,618,123 $ 28,183 $48,236 $44,134
========== ======== ======= =======
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ (30,927) $ (246) $ (73)
Net realized gain (loss) on
investments 193,051 5,315 40
Capital gain distributions from
mutual funds -- -- --
Net change in unrealized
appreciation (depreciation) of
investments (153,594) (6,308) (1,350)
---------- -------- ------- -------
Increase (decrease) in net assets
resulting from operations 8,530 (1,239) (1,383)
---------- -------- ------- -------
PRINCIPAL TRANSACTIONS:
Net premiums 457,659 79 8,625
Net transfers from (to) other
Divisions or fixed rate option (401,425) (45,817) 123
Internal rollovers -- -- --
Cost of insurance and other charges (288,596) (2,594) (762)
Administrative charges (23,373) -- (695)
Policy loans (55,008) 285 --
Death benefits (52,838) -- --
Withdrawals (541,075) -- --
---------- -------- ------- -------
Increase (decrease) in net assets
resulting from principal transactions (904,656) (48,047) 7,291
---------- -------- ------- -------
TOTAL INCREASE (DECREASE) IN NET ASSETS (896,126) (49,286) 5,908
NET ASSETS:
Beginning of year 5,138,797 76,272 31,028
---------- -------- ------- -------
End of year $4,242,671 $ 26,986 $36,936
========== ======== ======= =======
See accompanying notes.
VL-R - 19
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
----------------------------------------------------------------
PIMCO VIT
CommodityReal
Oppenheimer Oppenheimer Oppenheimer High Return Strategy
Balanced Global Securities Income Fund/VA - Portfolio -
Fund/VA - Non- Fund/VA - Non- Non-Service Administrative
Service Shares Service Shares Shares Class
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 8,296 $ 79,331 $ 6,837 $ 33,766
Net realized gain (loss) on investments 16,678 93,718 (8,324) (111,495)
Capital gain distributions from mutual funds -- -- -- 50,180
Net change in unrealized appreciation (depreciation)
of investments 118,298 806,359 4,863 101,531
---------- ---------- -------- -----------
Increase (decrease) in net assets resulting from
operations 143,272 979,408 3,376 73,982
---------- ---------- -------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 226,489 599,838 4,183 172,726
Net transfers from (to) other Divisions or fixed rate
option 4,037 (153,798) (64,349) (4,327)
Internal rollovers -- -- -- --
Cost of insurance and other charges (92,954) (296,818) (2,596) (98,953)
Administrative charges (11,552) (30,615) -- (8,843)
Policy loans (9,268) (41,020) 149 (20,561)
Death benefits (469) (2,193) -- (3,970)
Withdrawals (110,662) (352,664) (1) (206,564)
---------- ---------- -------- -----------
Increase (decrease) in net assets resulting from principal
transactions 5,621 (277,270) (62,614) (170,492)
---------- ---------- -------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 148,893 702,138 (59,238) (96,510)
NET ASSETS:
Beginning of year 1,240,903 4,894,747 59,238 1,638,541
---------- ---------- -------- -----------
End of year $1,389,796 $5,596,885 $ -- $ 1,542,031
========== ========== ======== ===========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 21,857 $ 34,956 $ 5,106 $ 395,961
Net realized gain (loss) on investments 16,250 89,846 3,352 33,381
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation (depreciation)
of investments (31,595) (555,632) (7,399) (472,456)
---------- ---------- -------- -----------
Increase (decrease) in net assets resulting from
operations 6,512 (430,830) 1,059 (43,114)
---------- ---------- -------- -----------
PRINCIPAL TRANSACTIONS:
Net premiums 205,996 685,304 6,083 239,488
Net transfers from (to) other Divisions or fixed rate
option (127,937) 247,916 (2,658) (1,697,655)
Internal rollovers -- -- -- 155
Cost of insurance and other charges (132,028) (378,664) (4,825) (121,208)
Administrative charges (10,515) (35,059) -- (12,445)
Policy loans (16,679) (75,609) 171 (168,488)
Death benefits (20,128) (566) (1,295) --
Withdrawals (152,875) (908,127) (76,899) (95,784)
---------- ---------- -------- -----------
Increase (decrease) in net assets resulting from principal
transactions (254,166) (464,805) (79,423) (1,855,937)
---------- ---------- -------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (247,654) (895,635) (78,364) (1,899,051)
NET ASSETS:
Beginning of year 1,488,557 5,790,382 137,602 3,537,592
---------- ---------- -------- -----------
End of year $1,240,903 $4,894,747 $ 59,238 $ 1,638,541
========== ========== ======== ===========
See accompanying notes.
VL-R - 20
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
----------------------------------------------------------------------
PIMCO VIT Global
Bond Portfolio PIMCO VIT Real PIMCO VIT Short- PIMCO VIT Total
(Unhedged) - Return Portfolio - Term Portfolio - Return Portfolio -
Administrative Administrative Administrative Administrative
Class Class Class Class
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 646 $ 67,132 $ 17,640 $ 343,385
Net realized gain (loss) on investments 522 385,685 (7,474) 4,272
Capital gain distributions from mutual
funds 3,118 741,649 12,143 336,656
Net change in unrealized appreciation
(depreciation) of investments (870) (33,066) 130,381 814,235
-------- ----------- ------------ ------------
Increase (decrease) in net assets resulting
from operations 3,416 1,161,400 152,690 1,498,548
-------- ----------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Net premiums 15,086 966,390 410,418 1,332,873
Net transfers from (to) other Divisions
or fixed rate option (4,047) 534,386 318,843 1,600,329
Internal rollovers -- -- -- --
Cost of insurance and other charges (8,238) (778,626) (283,447) (1,011,309)
Administrative charges (755) (45,969) (20,497) (65,090)
Policy loans -- (165,786) (20,419) (93,951)
Death benefits -- (36,735) (27,876) (25,650)
Withdrawals (437) (1,089,142) (3,699,081) (1,847,458)
-------- ----------- ------------ ------------
Increase (decrease) in net assets resulting
from principal transactions 1,609 (615,482) (3,322,059) (110,256)
-------- ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 5,025 545,918 (3,169,369) 1,388,292
NET ASSETS:
Beginning of year 49,556 14,253,301 9,813,692 16,584,031
-------- ----------- ------------ ------------
End of year $ 54,581 $14,799,219 $ 6,644,323 $ 17,972,323
======== =========== ============ ============
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 1,430 $ 209,050 $ 30,019 $ 470,506
Net realized gain (loss) on investments 1,031 75,546 (128,842) (342,781)
Capital gain distributions from mutual
funds 1,091 412,995 20,383 242,071
Net change in unrealized appreciation
(depreciation) of investments 1,236 780,044 (67,891) 588,135
-------- ----------- ------------ ------------
Increase (decrease) in net assets resulting
from operations 4,788 1,477,635 (146,331) 957,931
-------- ----------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Net premiums 14,795 1,220,463 440,963 1,671,410
Net transfers from (to) other Divisions
or fixed rate option (56) (315,044) 20,981,816 (11,743,158)
Internal rollovers -- -- 186 216
Cost of insurance and other charges (12,466) (894,888) (326,678) (1,207,234)
Administrative charges (740) (61,286) (21,945) (84,193)
Policy loans -- (251,189) (37,039) (841,449)
Death benefits -- (64,183) (1,678) (102,112)
Withdrawals (35,742) (1,097,592) (16,291,047) (1,723,503)
-------- ----------- ------------ ------------
Increase (decrease) in net assets resulting
from principal transactions (34,209) (1,463,719) 4,744,578 (14,030,023)
-------- ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (29,421) 13,916 4,598,247 (13,072,092)
NET ASSETS:
Beginning of year 78,977 14,239,385 5,215,445 29,656,123
-------- ----------- ------------ ------------
End of year $ 49,556 $14,253,301 $ 9,813,692 $ 16,584,031
======== =========== ============ ============
See accompanying notes.
VL-R - 21
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
-------------------------------------------------------------------------
Pioneer Mid Cap
Pioneer Growth Value VCT Putnam VT
Pioneer Fund VCT Opportunities VCT Portfolio - Diversified Income
Portfolio - Class I Portfolio - Class I Class I Fund - Class IB
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 16,543 $ (13,286) $ 2,871 $ 334,253
Net realized gain (loss) on investments (11,300) 88,881 21,776 (120,921)
Capital gain distributions from mutual funds 51,889 -- -- --
Net change in unrealized appreciation
(depreciation) of investments 85,850 87,808 58,415 474,465
---------- ---------- -------- ----------
Increase (decrease) in net assets resulting from
operations 142,982 163,403 83,062 687,797
---------- ---------- -------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 102,284 188,892 88,167 273,074
Net transfers from (to) other Divisions or
fixed rate option (8,173) (106,927) (33,421) 123,414
Internal rollovers -- -- -- --
Cost of insurance and other charges (96,808) (173,079) (40,043) (297,571)
Administrative charges (3,474) (7,298) (4,452) (14,210)
Policy loans (9,278) (21,103) (22,440) 18,515
Death benefits (7,015) (4,281) -- (368)
Withdrawals (104,556) (142,815) (18,072) (228,402)
---------- ---------- -------- ----------
Increase (decrease) in net assets resulting from
principal transactions (127,020) (266,611) (30,261) (125,548)
---------- ---------- -------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 15,962 (103,208) 52,801 562,249
NET ASSETS:
Beginning of year 1,500,448 2,482,486 820,496 6,267,641
---------- ---------- -------- ----------
End of year $1,516,410 $2,379,278 $873,297 $6,829,890
========== ========== ======== ==========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 18,380 $ (16,744) $ 528 $ 647,779
Net realized gain (loss) on investments 9,902 62,967 6,805 (125,979)
Capital gain distributions from mutual funds 106,837 -- -- --
Net change in unrealized appreciation
(depreciation) of investments (215,753) (118,841) (47,509) (747,116)
---------- ---------- -------- ----------
Increase (decrease) in net assets resulting from
operations (80,634) (72,618) (40,176) (225,316)
---------- ---------- -------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 120,764 200,620 113,793 260,390
Net transfers from (to) other Divisions or
fixed rate option (288,756) (286,876) 158,366 (229,581)
Internal rollovers -- -- -- --
Cost of insurance and other charges (126,708) (199,023) (46,400) (338,151)
Administrative charges (4,213) (7,789) (5,747) (13,381)
Policy loans 8,242 8,641 (8,495) (40,075)
Death benefits (90,588) (9,225) -- (4,802)
Withdrawals (133,626) (206,778) (19,821) (283,365)
---------- ---------- -------- ----------
Increase (decrease) in net assets resulting from
principal transactions (514,885) (500,430) 191,696 (648,965)
---------- ---------- -------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (595,519) (573,048) 151,520 (874,281)
NET ASSETS:
Beginning of year 2,095,967 3,055,534 668,976 7,141,922
---------- ---------- -------- ----------
End of year $1,500,448 $2,482,486 $820,496 $6,267,641
========== ========== ======== ==========
See accompanying notes.
VL-R - 22
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
-------------------------------------------------------------------
Putnam VT
Growth and Putnam VT Putnam VT Multi- Putnam VT Small
Income Fund - International Value Cap Growth Fund - Cap Value Fund -
Class IB Fund - Class IB Class IB Class IB
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 112,417 $ 99,779 $ (109) $ (138)
Net realized gain (loss) on investments 207,138 (40,930) 2,110 6,068
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments 1,272,680 749,909 2,797 21,710
----------- ----------- --------- ---------
Increase (decrease) in net assets resulting from
operations 1,592,235 808,758 4,798 27,640
----------- ----------- --------- ---------
PRINCIPAL TRANSACTIONS:
Net premiums 797,415 545,525 -- 5,317
Net transfers from (to) other Divisions or fixed rate
option (95,822) (121,466) 73 337
Internal rollovers -- -- -- --
Cost of insurance and other charges (682,559) (348,914) (1,379) (9,904)
Administrative charges (36,874) (25,525) -- (256)
Policy loans (49,895) 21,819 (97) (116)
Death benefits (40,203) (7,564) -- --
Withdrawals (646,177) (342,556) (2,293) (3,925)
----------- ----------- --------- ---------
Increase (decrease) in net assets resulting from
principal transactions (754,115) (278,681) (3,696) (8,547)
----------- ----------- --------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS 838,120 530,077 1,102 19,093
NET ASSETS:
Beginning of year 8,894,899 4,000,551 30,636 166,983
----------- ----------- --------- ---------
End of year $ 9,733,019 $ 4,530,628 $ 31,738 $ 186,076
=========== =========== ========= =========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 67,041 $ 99,009 $ (528) $ (197)
Net realized gain (loss) on investments 202,902 59,580 2,224 1,369
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments (739,386) (831,714) (10,141) (18,271)
----------- ----------- --------- ---------
Increase (decrease) in net assets resulting from
operations (469,443) (673,125) (8,445) (17,099)
----------- ----------- --------- ---------
PRINCIPAL TRANSACTIONS:
Net premiums 939,679 626,740 3,201 8,159
Net transfers from (to) other Divisions or fixed rate
option (97,591) (212,918) (10,393) 2,946
Internal rollovers -- -- -- --
Cost of insurance and other charges (742,586) (451,017) (2,537) (13,274)
Administrative charges (43,836) (29,919) -- (284)
Policy loans (83,772) (22,143) (22) (69)
Death benefits (114,058) (172,375) -- (948)
Withdrawals (823,676) (503,571) (131,610) (121,404)
----------- ----------- --------- ---------
Increase (decrease) in net assets resulting from
principal transactions (965,840) (765,203) (141,361) (124,874)
----------- ----------- --------- ---------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,435,283) (1,438,328) (149,806) (141,973)
NET ASSETS:
Beginning of year 10,330,182 5,438,879 180,442 308,956
----------- ----------- --------- ---------
End of year $ 8,894,899 $ 4,000,551 $ 30,636 $ 166,983
=========== =========== ========= =========
See accompanying notes.
VL-R - 23
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
-------------------------------------------------------------------------
SunAmerica
Putnam VT Aggressive SunAmerica UIF Growth
Voyager Fund - Growth Portfolio - Balanced Portfolio - Portfolio - Class I
Class IB Class 1 Class 1 Shares
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ (375) $ (7,312) $ 11,582 $ (13,360)
Net realized gain (loss) on investments (4,845) 85,992 83,806 43,318
Capital gain distributions from mutual funds -- -- -- 117,813
Net change in unrealized appreciation
(depreciation) of investments 21,083 87,816 95,493 173,495
--------- ---------- ---------- ----------
Increase (decrease) in net assets resulting from
operations 15,863 166,496 190,881 321,266
--------- ---------- ---------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 1,147 155,197 169,329 237,807
Net transfers from (to) other Divisions or
fixed rate option (37,198) (219,941) 6,765 (4,811)
Internal rollovers -- -- -- --
Cost of insurance and other charges (8,811) (68,904) (145,372) (208,189)
Administrative charges -- (7,733) (8,393) (7,487)
Policy loans (67) (18,680) (18,960) (16,630)
Death benefits -- -- (4,426) --
Withdrawals -- (64,501) (75,159) (175,811)
--------- ---------- ---------- ----------
Increase (decrease) in net assets resulting from
principal transactions (44,929) (224,562) (76,216) (175,121)
--------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (29,066) (58,066) 114,665 146,145
NET ASSETS:
Beginning of year 143,379 1,139,542 1,584,195 2,388,116
--------- ---------- ---------- ----------
End of year $ 114,313 $1,081,476 $1,698,860 $2,534,261
========= ========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ (2,059) $ (6,542) $ 17,000 $ (11,851)
Net realized gain (loss) on investments (12,050) 11,417 15,359 59,601
Capital gain distributions from mutual funds -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments (41,199) (10,656) (4,962) (103,642)
--------- ---------- ---------- ----------
Increase (decrease) in net assets resulting from
operations (55,308) (5,781) 27,397 (55,892)
--------- ---------- ---------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 4,348 171,710 259,003 251,823
Net transfers from (to) other Divisions or
fixed rate option 1,586 259,806 63,812 (73,041)
Internal rollovers -- -- -- 4,150
Cost of insurance and other charges (11,112) (98,067) (141,856) (229,107)
Administrative charges -- (8,544) (12,930) (8,206)
Policy loans 6 (16,430) (18,545) (42,598)
Death benefits -- (86) -- (111,488)
Withdrawals (150,341) (70,545) (88,071) (265,367)
--------- ---------- ---------- ----------
Increase (decrease) in net assets resulting from
principal transactions (155,513) 237,844 61,413 (473,834)
--------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (210,821) 232,063 88,810 (529,726)
NET ASSETS:
Beginning of year 354,200 907,479 1,495,385 2,917,842
--------- ---------- ---------- ----------
End of year $ 143,379 $1,139,542 $1,584,195 $2,388,116
========= ========== ========== ==========
See accompanying notes.
VL-R - 24
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
---------------------------------------------------------------
VALIC Company I VALIC Company I VALIC Company I VALIC Company I
International Mid Cap Index Money Market I Nasdaq-100 Index
Equities Fund Fund Fund Fund
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 48,489 $ 53,872 $ (83,985) $ (5,193)
Net realized gain (loss) on investments (48,725) 132,679 -- 71,245
Capital gain distributions from mutual funds -- 440,630 -- 91,280
Net change in unrealized appreciation
(depreciation) of investments 338,431 1,327,855 (2) 455,943
----------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
operations 338,195 1,955,036 (83,987) 613,275
----------- ----------- ----------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 208,080 956,318 2,546,338 333,520
Net transfers from (to) other Divisions or fixed rate
option (7,798) (610,121) 1,929,133 (160,222)
Internal rollovers -- -- -- --
Cost of insurance and other charges (126,740) (749,756) (2,044,366) (186,993)
Administrative charges (10,071) (42,492) (98,802) (15,599)
Policy loans (14,547) (81,418) 68,409 (86,197)
Death benefits (377) (34,691) (114,921) (13,784)
Withdrawals (127,444) (847,634) (5,446,505) (239,838)
----------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
principal transactions (78,897) (1,409,794) (3,160,714) (369,113)
----------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 259,298 545,242 (3,244,701) 244,162
NET ASSETS:
Beginning of year 2,085,235 12,207,470 17,189,014 3,611,343
----------- ----------- ----------- ----------
End of year $ 2,344,533 $12,752,712 $13,944,313 $3,855,505
=========== =========== =========== ==========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 48,125 $ 35,173 $ (91,458) $ (10,533)
Net realized gain (loss) on investments 53,859 370,471 -- 133,318
Capital gain distributions from mutual funds -- 756,929 -- 439,335
Net change in unrealized appreciation
(depreciation) of investments (422,428) (1,466,098) -- (466,467)
----------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
operations (320,444) (303,525) (91,458) 95,653
----------- ----------- ----------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 266,972 1,020,232 3,042,033 352,526
Net transfers from (to) other Divisions or fixed rate
option (288,554) (924,695) 5,831,419 (259,866)
Internal rollovers -- 4,150 -- --
Cost of insurance and other charges (171,921) (862,586) (2,492,125) (220,918)
Administrative charges (12,761) (45,303) (123,344) (16,530)
Policy loans (28,182) (156,865) (16,390) (56,714)
Death benefits (4,909) (67,054) (7,946) (34,011)
Withdrawals (633,664) (847,389) (5,729,784) (244,257)
----------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
principal transactions (873,019) (1,879,510) 503,863 (479,770)
----------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,193,463) (2,183,035) 412,405 (384,117)
NET ASSETS:
Beginning of year 3,278,698 14,390,505 16,776,609 3,995,460
----------- ----------- ----------- ----------
End of year $ 2,085,235 $12,207,470 $17,189,014 $3,611,343
=========== =========== =========== ==========
See accompanying notes.
VL-R - 25
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
-----------------------------------------------------------------
VALIC Company I VALIC Company I Vanguard VIF High
Science & Small Cap Index VALIC Company I Yield Bond
Technology Fund Fund Stock Index Fund Portfolio
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ (7,439) $ 34,252 $ 208,560 $ 346,605
Net realized gain (loss) on investments 22,416 215,056 276,804 62,943
Capital gain distributions from mutual funds -- -- 270,628 --
Net change in unrealized appreciation
(depreciation) of investments 122,205 601,579 1,725,998 502,801
---------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
operations 137,182 850,887 2,481,990 912,349
---------- ----------- ----------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 126,643 523,669 1,383,715 686,091
Net transfers from (to) other Divisions or fixed
rate option (9,055) (937,446) (189,862) 148,026
Internal rollovers -- -- -- --
Cost of insurance and other charges (69,134) (277,157) (1,373,049) (367,543)
Administrative charges (5,946) (25,896) (59,171) (32,787)
Policy loans (27,782) (39,082) (217,094) (37,514)
Death benefits -- (4,554) (42,642) (26,277)
Withdrawals (46,934) (555,905) (1,131,189) (462,464)
---------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
principal transactions (32,208) (1,316,371) (1,629,292) (92,468)
---------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 104,974 (465,484) 852,698 819,881
NET ASSETS:
Beginning of year 1,189,330 6,058,863 16,944,543 6,717,411
---------- ----------- ----------- ----------
End of year $1,294,304 $ 5,593,379 $17,797,241 $7,537,292
========== =========== =========== ==========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ (8,175) $ 20,429 $ 182,615 $ 457,174
Net realized gain (loss) on investments 50,250 100,225 513,122 (21,557)
Capital gain distributions from mutual funds -- -- 989,702 --
Net change in unrealized appreciation
(depreciation) of investments (125,593) (454,117) (1,323,733) (15,591)
---------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
operations (83,518) (333,463) 361,706 420,026
---------- ----------- ----------- ----------
PRINCIPAL TRANSACTIONS:
Net premiums 160,812 528,123 1,530,114 731,427
Net transfers from (to) other Divisions or fixed
rate option (20,128) 75,035 (3,952,474) (83,776)
Internal rollovers -- -- -- 155
Cost of insurance and other charges (79,177) (376,417) (1,578,433) (420,795)
Administrative charges (7,671) (25,658) (65,779) (36,132)
Policy loans (3,876) (147,514) (221,903) (106,963)
Death benefits -- (41,094) (39,113) (2,092)
Withdrawals (117,967) (283,345) (1,071,560) (636,123)
---------- ----------- ----------- ----------
Increase (decrease) in net assets resulting from
principal transactions (68,007) (270,870) (5,399,148) (554,299)
---------- ----------- ----------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (151,525) (604,333) (5,037,442) (134,273)
NET ASSETS:
Beginning of year 1,340,855 6,663,196 21,981,985 6,851,684
---------- ----------- ----------- ----------
End of year $1,189,330 $ 6,058,863 $16,944,543 $6,717,411
========== =========== =========== ==========
See accompanying notes.
VL-R - 26
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
Divisions
------------
Vanguard VIF
REIT Index
Portfolio
FOR THE YEAR ENDED DECEMBER 31, 2012
OPERATIONS:
Net investment income (loss) $ 163,088
Net realized gain (loss) on investments 490,344
Capital gain distributions from mutual funds 419,461
Net change in unrealized appreciation (depreciation) of investments 790,800
-----------
Increase (decrease) in net assets resulting from operations 1,863,693
-----------
PRINCIPAL TRANSACTIONS:
Net premiums 1,152,779
Net transfers from (to) other Divisions or fixed rate option (66,384)
Internal rollovers --
Cost of insurance and other charges (677,609)
Administrative charges (56,057)
Policy loans (130,973)
Death benefits (20,751)
Withdrawals (1,011,914)
-----------
Increase (decrease) in net assets resulting from principal transactions (810,909)
-----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,052,784
NET ASSETS:
Beginning of year 11,391,819
-----------
End of year $12,444,603
===========
FOR THE YEAR ENDED DECEMBER 31, 2011
OPERATIONS:
Net investment income (loss) $ 126,660
Net realized gain (loss) on investments 302,985
Capital gain distributions from mutual funds 144,513
Net change in unrealized appreciation (depreciation) of investments 329,480
-----------
Increase (decrease) in net assets resulting from operations 903,638
-----------
PRINCIPAL TRANSACTIONS:
Net premiums 1,346,406
Net transfers from (to) other Divisions or fixed rate option (1,886,820)
Internal rollovers --
Cost of insurance and other charges (773,126)
Administrative charges (66,228)
Policy loans (219,527)
Death benefits (6,847)
Withdrawals (1,152,646)
-----------
Increase (decrease) in net assets resulting from principal transactions (2,758,788)
-----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,855,150)
NET ASSETS:
Beginning of year 13,246,969
-----------
End of year $11,391,819
===========
See accompanying notes.
VL-R - 27
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - 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, 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, AG Corporate Investor, AG Income
Advantage VUL, Income Advantage Select, Protection Advantage Select, Survivor
Advantage, and Corporate Investor Select. These products are no longer
available 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" that 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 (INVESCO VARIABLE INSURANCE FUNDS): (5)
Invesco V.I. Core Equity Fund - Series I (2) (6)
Invesco V.I. Global Real Estate Fund - Series I (7)
Invesco V.I. Government Securities Fund - Series I
Invesco V.I. High Yield Fund - Series I (16)
Invesco V.I. International Growth Fund - Series I (8)
Invesco Van Kampen V.I. American Franchise Fund - Series I (10) (15)
Invesco Van Kampen V.I. Government Fund - Series I (11)
Invesco Van Kampen V.I. Growth and Income Fund - Series I (12)
Invesco Van Kampen V.I. High Yield Fund - Series I (2) (13)
THE ALGER PORTFOLIOS ("ALGER"):
Alger Capital Appreciation Portfolio - Class I-2 Shares
Alger Mid Cap Growth Portfolio - Class I-2 Shares
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. ("AMERICAN CENTURY VP"):
American Century VP Value Fund - Class I
CREDIT SUISSE TRUST ("CREDIT SUISSE"):
Credit Suisse U.S. Equity Flex I Portfolio (18)
DREYFUS INVESTMENT PORTFOLIOS ("DREYFUS IP"):
Dreyfus IP MidCap Stock Portfolio - Initial Shares (2)
DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS VIF"):
Dreyfus VIF International Value Portfolio - Initial Shares
Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares (2) (4)
Dreyfus VIF Quality Bond Portfolio - Initial Shares (2)
FIDELITY(R) VARIABLE INSURANCE PRODUCTS ("FIDELITY(R) VIP"):
Fidelity(R) VIP Asset Manager/SM/ Portfolio - Service Class 2
Fidelity(R) VIP Contrafund(R) Portfolio - Service Class 2
Fidelity(R) VIP Equity-Income Portfolio - Service Class 2
Fidelity(R) VIP Freedom 2020 Portfolio - Service Class 2
Fidelity(R) VIP Freedom 2025 Portfolio - Service Class 2
Fidelity(R) VIP Freedom 2030 Portfolio - Service Class 2
Fidelity(R) VIP Growth Portfolio - Service Class 2
Fidelity(R) VIP Mid Cap Portfolio - Service Class 2
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST ("FRANKLIN TEMPLETON"):
Franklin Templeton Franklin Small Cap Value Securities Fund - Class 2
Franklin Templeton Franklin Small-Mid Cap Growth Securities Fund - Class 2
VL-R - 28
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 1 - ORGANIZATION - CONTINUED
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST ("FRANKLIN TEMPLETON"): -
CONTINUED
Franklin Templeton Franklin U.S. Government Fund - Class 2
Franklin Templeton Mutual Shares Securities Fund - Class 2
Franklin Templeton Templeton Foreign Securities Fund - Class 2
GOLDMAN SACHS VARIABLE INSURANCE TRUST ("GOLDMAN SACHS VIT"):
Goldman Sachs VIT Strategic Growth Fund - Institutional Shares (1) (9)
JANUS ASPEN SERIES ("JANUS ASPEN"):
Janus Aspen Enterprise Portfolio - Service Shares
Janus Aspen Forty Portfolio - Service Shares
Janus Aspen Overseas Portfolio - Service Shares
Janus Aspen Worldwide Portfolio - Service Shares (2)
JPMORGAN INSURANCE TRUST:
JPMorgan Insurance Trust Core Bond Portfolio - Class 1
JPMorgan Insurance Trust International Equity Portfolio - Class 1
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 (2)
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1
MFS(R) VARIABLE INSURANCE TRUST/SM/ ("MFS(R) VIT"):
MFS(R) VIT Core Equity Series - Initial Class (2)
MFS(R) VIT Growth Series - Initial Class (2)
MFS(R) VIT New Discovery Series - Initial Class
MFS(R) VIT Research Series - Initial Class
MFS(R) VIT Total Return Series - Initial Class
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST ("NEUBERGER BERMAN AMT"):
Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I
Neuberger Berman AMT Large Cap Value Portfolio - Class I(16)
Neuberger Berman AMT Socially Responsive Portfolio - Class I
OPPENHEIMER VARIABLE ACCOUNT FUNDS ("OPPENHEIMER"):
Oppenheimer Balanced Fund/VA - Non-Service Shares
Oppenheimer Global Securities Fund/VA - Non-Service Shares
Oppenheimer Global Strategic Income Fund/VA (Non-Service) (19)
PIMCO VARIABLE INSURANCE TRUST ("PIMCO VIT"):
PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class
PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class
PIMCO VIT Real Return Portfolio - Administrative Class
PIMCO VIT Short-Term Portfolio - Administrative Class
PIMCO VIT Total Return Portfolio - Administrative Class
PIONEER VARIABLE CONTRACTS TRUST ("PIONEER"):
Pioneer Fund VCT Portfolio - Class I
Pioneer Growth Opportunities VCT Portfolio - Class I
Pioneer Mid Cap Value VCT Portfolio - Class I
PUTNAM VARIABLE TRUST ("PUTNAM VT"):
Putnam VT Diversified Income Fund - Class IB
Putnam VT Growth and Income Fund - Class IB
Putnam VT International Value Fund - Class IB (3)
Putnam VT Multi-Cap Growth Fund - Class IB (14)
Putnam VT Small Cap Value Fund - Class IB
Putnam VT Vista Fund - Class IB (14)
VL-R - 29
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 1 - ORGANIZATION - CONTINUED
PUTNAM VARIABLE TRUST ("PUTNAM VT"): - CONTINUED
Putnam VT Voyager Fund - Class IB
SUNAMERICA SERIES TRUST ("SUNAMERICA"):
SunAmerica Aggressive Growth Portfolio - Class 1
SunAmerica Balanced Portfolio - Class 1
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. ("UIF"):
UIF Growth Portfolio - Class I Shares (2) (17)
VALIC COMPANY I:
VALIC Company I International Equities Fund
VALIC Company I Mid Cap Index Fund
VALIC Company I Money Market I Fund
VALIC Company I Nasdaq-100(R) Index Fund
VALIC Company I Science & Technology Fund
VALIC Company I Small Cap Index Fund
VALIC Company I Stock Index Fund
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, 2003, Goldman Sachs VIT Capital Growth Fund -
Institutional Shares is not available for new investments in existing
policies.
(2) Effective May 1, 2006, this division is no longer offered as an investment
option for applicable 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 policies.
(3) Effective February 1, 2010, Putnam VT International Growth and Income Fund
changed its name to Putnam VT International Value Fund.
(4) Effective April 19, 2010, Dreyfus VIF Developing Leaders Portfolio -
Initial Shares changed its name to Dreyfus VIF Opportunistic Small Cap
Portfolio - Initial Shares.
(5) Effective April 30, 2010, AIM Variable Insurance Funds changed its name to
AIM Variable Insurance Funds (Invesco Variable Insurance Funds).
(6) Effective April 30, 2010, AIM V.I. Core Equity Fund - Series I changed its
name to Invesco V.I. Core Equity Fund - Series I.
(7) Effective April 30, 2010, AIM V.I. Global Real Estate Fund - Series I
changed its name to Invesco V.I. Global Real Estate Fund - Series I.
(8) Effective April 30, 2010, AIM V.I. International Growth Fund - Series I
changed its name to Invesco V.I. International Growth Fund - Series I.
(9) Effective April 30, 2010, Goldman Sachs VIT Capital Growth Fund -
Institutional Shares changed its name to Goldman Sachs VIT Strategic
Growth Fund - Institutional Shares.
(10) Effective June 1, 2010, Van Kampen LIT Capital Growth Portfolio - Class I
was acquired by the Invesco Van Kampen V.I. Capital Growth Fund - Series I.
(11) Effective June 1, 2010, Van Kampen LIT Government Portfolio - Class I was
acquired by the Invesco Van Kampen V.I. Government Fund - Series I.
(12) Effective June 1, 2010, Van Kampen LIT Growth and Income Portfolio -
Class I was acquired by the Invesco Van Kampen V.I. Growth and Income Fund
- Series I.
(13) Effective June 1, 2010, UIF High Yield Portfolio - Class I was acquired by
the Invesco Van Kampen V.I. High Yield Fund - Series I.
(14) Effective September 24, 2010, Putnam VT Vista Fund - Class IB merged into
Putnam VT New Opportunities Fund - Class IB, which subsequently changed
it's name to Putnam VT Multi-Cap Growth Fund - Class IB.
VL-R - 30
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 1 - ORGANIZATION - CONTINUED
(15) Effective April 29, 2011, Invesco Van Kampen V.I. Government Fund -
Series I was acquired by Invesco V.I. Government Securities Fund -
Series I.
(16) Effective April 29, 2011, Invesco Van Kampen V.I. High Yield Fund -
Series I was acquired by Invesco V.I. High Yield Fund - Series I.
(17) Effective May 2, 2011, UIF Capital Growth Portfolio - Class I changed its
name to UIF Growth Portfolio - Class I.
(18) Effective October 21, 2011, Credit Suisse U.S. Equity Flex I Portfolio was
closed and liquidated.
(19) The Oppenheimer High Income Fund/VA merged into the Oppenheimer Global
Strategic Income Fund/VA on October 26, 2012.
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 Statements of Changes in Net Assets.
NOTE 2 - 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.
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 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.
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.
VL-R - 31
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION -
CONTINUED
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 Statements of
Changes in Net Assets under principal transactions.
NOTE 3 - FAIR VALUE MEASUREMENTS
Assets and liabilities recorded at fair value in the Separate Account balance
sheet are measured and classified in a hierarchy for disclosure purposes
consisting of three "levels" based on the observability of inputs available in
the marketplace used to measure the fair values as discussed below. In certain
cases, the inputs used to measure fair value may fall into different levels of
the fair value hierarchy. In such cases, the level in the fair value hierarchy
within which the fair value measurement in its entirety falls is determined
based on the lowest level input that is significant to the fair value
measurement in its entirety. The Separate Account's assessment of the
significance of a particular input to the fair value measurement in its
entirety requires judgments. In making the assessment, the Separate Account
considers factors specific to the asset or liability.
Level 1-- Fair value measurements that are quoted prices (unadjusted) in active
markets that the Separate Account has the ability to access for identical
assets or liabilities. Market price data generally is obtained from exchange or
dealer markets. The Separate Account does not adjust the quoted price for such
instruments. Assets and liabilities measured at fair value on a recurring basis
and classified as Level 1 include government and agency securities, actively
traded listed common stocks and derivative contracts, most separate account
assets and most mutual funds.
Level 2-- Fair value measurements based on inputs other than quoted prices
included in Level 1 that are observable for the asset or liability, either
directly or indirectly. Level 2 inputs include quoted prices for similar assets
and liability in active markets, and inputs other than quoted prices that are
observable for the asset or liability, such as interest rates and yield curves
that are observable at commonly quoted intervals. Assets and liabilities
measured at fair value on a recurring basis and classified as Level 2 generally
include certain government securities, most investment-grade and high-yield
corporate bonds, certain asset backed securities, certain listed equities,
state, municipal and provincial obligations, hybrid securities, and derivative
contracts.
Level 3-- Fair value measurements based on valuation techniques that use
significant inputs that are unobservable. These measurements include
circumstances in which there is little, if any, market activity for the asset
or liability. Assets and liabilities measured at fair value on a recurring
basis and classified as Level 3 principally include certain fixed income
securities and equities.
The Separate Account assets measured at fair value as of December 31, 2012
consist of investments in registered mutual funds that generally trade daily
and are measured at fair value using quoted prices in active markets for
identical assets, which are classified as Level 1. See the Schedule of
Portfolio Investments for the table presenting information about assets
measured at fair value on a recurring basis at December 31, 2012, and
respective hierarchy levels. As all assets of the Separate Account are
classified as Level 1, no reconciliation of Level 3 assets and change in
unrealized gains (losses) for Level 3 assets still held as of December 31,
2012, is presented.
VL-R - 32
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 4 - 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 AG Corporate Investor,
Corporate America, and Corporate Investor Select 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. A summary of premium expense charges for AG Corporate Investor,
Corporate America, and Corporate Investor Select policies follows:
POLICIES PREMIUM EXPENSE
-------- ---------------------------------------------------
AG Corporate Investor 4% up to the "target premium" and 5% on any premium
amounts in excess of the "target premium" for
policy years 1-3. 9% up to the "target premium" and
5% on any premium amounts in excess of the "target
premium" for policy years 4-7. 5% of all premium
payments in policy years 8 and thereafter.
Corporate America 9% up to the "target premium" and 5% on any premium
amounts in excess of the "target premium" for
policy years 1-7. 5% of all premium payments in
policy years 8 and thereafter.
Corporate Investor Select 4% up to the "target premium" and 5% on any premium
amounts in excess of the "target premium" for
policy years 1-3. 9% up to the "target premium" and
5% on any premium amounts in excess of the "target
premium" for policy years 4-7. 5% of all premium
payments in policy years 8 and thereafter.
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 AG
Corporate Investor, Corporate America, Corporate Investor Select, 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
-------- ---------------
AG Income Advantage VUL 5.00%
Income Advantage Select 5.00%
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%
Protection Advantage Select 5.00%
Survivor Advantage 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:
MORTALITY AND EXPENSE SECOND REDUCTION IN
RISK AND ADMINISTRATIVE FIRST REDUCTION IN MORTALITY AND MORTALITY AND EXPENSE
CHARGES MAXIMUM EXPENSE RISK AND RISK AND ADMINISTRATIVE
POLICIES ANNUAL RATE ADMINISTRATIVE CHARGES RATE CHARGES RATE
-------- ----------------------- -------------------------------- -----------------------------
AG Corporate Investor 0.65% 0.25% after 10th policy year 0.25% after 20th policy year
AG Income Advantage VUL 0.70% 0.35% after 10th policy year 0.20% after 20th policy year
AG Legacy Plus 0.90% 0.25% after 10th policy year 0.25% after 20th policy year
Corporate America 0.35% 0.10% after 10th policy year 0.10% after 20th policy year
Corporate America (reduced
surrender charge) 0.65% 0.25% after 10th policy year 0.25% after 20th policy year
Corporate Investor Select 0.65% 0.25% after 10th policy year 0.25% after 20th policy year
Income Advantage Select 0.70% 0.35% after 10th policy year 0.20% after 20th policy year
Legacy Plus 0.75% 0.25% after 10th policy year 0.25% after 20th policy year
Platinum Investor I and II 0.75% 0.25% after 10th policy year 0.25% after 20th policy year
Platinum Investor III 0.70% 0.25% after 10th policy year 0.35% after 20th policy year
Platinum Investor IV 0.70% 0.35% after 10th policy year 0.25% after 20th policy year
Platinum Investor FlexDirector 0.70% 0.25% after 10th policy year 0.35% after 20th policy year
Platinum Investor PLUS 0.70% 0.25% after 10th policy year 0.35% after 20th policy year
Platinum Investor Survivor 0.40% 0.20% after 10th policy year 0.10% after 30th policy year
Platinum Investor Survivor II 0.75% 0.25% after 15th policy year 0.35% after 30th policy year
Platinum Investor VIP 0.70% 0.35% after 10th policy year 0.20% after 20th policy year
Protection Advantage Select 0.70% 0.35% after 10th policy year 0.20% after 20th policy year
Survivor Advantage 0.70% 0.35% after 10th policy year 0.20% after 20th policy year
VL-R - 33
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 4 - 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 Statements 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
administration 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 Statements 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 Statements 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 Statements 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 Statements
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 Statements 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 - 34
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
For the year ended December 31, 2012, the aggregate cost of purchases and
proceeds from the sales of investments were:
Cost of Proceeds
Divisions Purchases from Sales
--------- ---------- ----------
Alger Capital Appreciation Portfolio - Class I-2 Shares $ 634,295 $ 621,850
Alger Mid Cap Growth Portfolio - Class I-2 Shares 423,459 926,195
American Century VP Value Fund - Class I 3,619,160 4,249,183
Credit Suisse U.S. Equity Flex I Portfolio
Dreyfus IP MidCap Stock Portfolio - Initial Shares 1,077,974 1,343,917
Dreyfus VIF International Value Portfolio - Initial Shares 19,036 11,586
Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares 3,492,847 3,350,816
Dreyfus VIF Quality Bond Portfolio - Initial Shares 1,562,879 2,009,723
Fidelity VIP Asset Manager Portfolio - Service Class 2 1,394,151 1,709,852
Fidelity VIP Contrafund Portfolio - Service Class 2 4,733,698 6,309,285
Fidelity VIP Equity-Income Portfolio - Service Class 2 4,195,368 3,564,397
Fidelity VIP Freedom 2020 Portfolio - Service Class 2 104,899 86,628
Fidelity VIP Freedom 2025 Portfolio - Service Class 2 286,338 129,752
Fidelity VIP Freedom 2030 Portfolio - Service Class 2 183,866 261,839
Fidelity VIP Growth Portfolio - Service Class 2 2,474,002 4,340,382
Fidelity VIP Mid Cap Portfolio - Service Class 2 1,922,205 1,738,118
Franklin Templeton Franklin Small Cap Value Securities Fund - Class 2 1,068,528 1,436,760
Franklin Templeton Franklin Small-Mid Cap Growth Securities Fund - Class 2 8,361 7,839
Franklin Templeton Franklin U.S. Government Fund - Class 2 643,189 756,157
Franklin Templeton Mutual Shares Securities Fund - Class 2 1,473,503 1,855,400
Franklin Templeton Templeton Foreign Securities Fund - Class 2 1,150,285 1,403,428
Goldman Sachs VIT Strategic Growth Fund - Institutional Shares 49,649 337,662
Invesco V.I. Core Equity Fund - Series I 1,363,689 2,176,869
Invesco V.I. Global Real Estate Fund - Series I 21,822 14,775
Invesco V.I. Government Securities Fund - Series I 30,884 36,792
Invesco V.I. High Yield Fund - Series I 277,073 210,460
Invesco V.I. International Growth Fund - Series I 1,655,338 2,072,594
Invesco Van Kampen V.I. American Franchise Fund - Series I 1,424 2,302
Invesco Van Kampen V.I. Government Fund - Series I
Invesco Van Kampen V.I. Growth and Income Fund - Series I 1,451,845 2,066,462
Invesco Van Kampen V.I. High Yield Fund - Series I
Janus Aspen Enterprise Portfolio - Service Shares 1,393,829 1,827,221
Janus Aspen Forty Portfolio - Service Shares 30,229 16,355
Janus Aspen Overseas Portfolio - Service Shares 3,170,853 3,131,755
Janus Aspen Worldwide Portfolio - Service Shares 722,182 1,060,333
JPMorgan Insurance Trust Core Bond Portfolio - Class 1 16,522 12,733
JPMorgan Insurance Trust International Equity Portfolio - Class 1 9,648 9,012
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 152,393 207,350
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 599,203 753,062
MFS VIT Core Equity Series - Initial Class 831,304 1,136,723
MFS VIT Growth Series - Initial Class 1,239,594 2,277,480
MFS VIT New Discovery Series - Initial Class 1,457,106 1,395,415
MFS VIT Research Series - Initial Class 540,596 675,299
MFS VIT Total Return Series - Initial Class 127,206 192,417
Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I 1,313,839 1,478,060
Neuberger Berman AMT Large Cap Value Portfolio - Class I 210 3,144
Neuberger Berman AMT Socially Responsive Portfolio - Class I 7,661 578
Oppenheimer Global Strategic Income Fund/VA (Non-Service) 43,633 277
Oppenheimer Balanced Fund/VA - Non-Service Shares 249,283 235,367
Oppenheimer Global Securities Fund/VA - Non-Service Shares 1,515,905 1,713,844
Oppenheimer High Income Fund/VA - Non-Service Shares 42,627 98,404
PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 559,099 645,647
VL-R - 35
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS - CONTINUED
For the year ended December 31, 2012, the aggregate cost of purchases and
proceeds from the sales of investments were:
Cost of Proceeds from
Divisions Purchases Sales
--------- ---------- -------------
PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class $ 16,510 $ 11,137
PIMCO VIT Real Return Portfolio - Administrative Class 6,831,760 6,638,462
PIMCO VIT Short-Term Portfolio - Administrative Class 2,327,742 5,620,017
PIMCO VIT Total Return Portfolio - Administrative Class 5,828,688 5,258,903
Pioneer Fund VCT Portfolio - Class I 275,735 334,321
Pioneer Growth Opportunities VCT Portfolio - Class I 692,914 972,812
Pioneer Mid Cap Value VCT Portfolio - Class I 267,691 295,080
Putnam VT Diversified Income Fund - Class IB 1,334,061 1,125,357
Putnam VT Growth and Income Fund - Class IB 1,668,641 2,310,338
Putnam VT International Value Fund - Class IB 1,076,538 1,255,441
Putnam VT Multi-Cap Growth Fund - Class IB 20,148 23,954
Putnam VT Small Cap Value Fund - Class IB 63,737 72,422
Putnam VT Voyager Fund - Class IB 21,215 66,518
SunAmerica Aggressive Growth Portfolio - Class 1 282,080 513,956
SunAmerica Balanced Portfolio - Class 1 643,558 708,192
UIF Growth Portfolio - Class I Shares 544,760 615,429
VALIC Company I International Equities Fund 679,326 709,733
VALIC Company I Mid Cap Index Fund 2,580,029 3,495,322
VALIC Company I Money Market I Fund 7,406,873 10,651,572
VALIC Company I Nasdaq-100 Index Fund 1,121,645 1,404,672
VALIC Company I Science & Technology Fund 293,260 332,907
VALIC Company I Small Cap Index Fund 1,592,018 2,874,136
VALIC Company I Stock Index Fund 4,049,604 5,199,705
Vanguard VIF High Yield Bond Portfolio 1,977,435 1,723,298
Vanguard VIF REIT Index Portfolio 3,291,033 3,519,393
VL-R - 36
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Alger Capital Appreciation Portfolio - Class I-2 Shares
AG Income Advantage VUL 768 (1,394) (626)
Corporate America (reduced surrender charge) 733 (375) 358
Income Advantage Select 270 (579) (309)
Platinum Investor I & II 12 (5) 7
Platinum Investor I & II (first reduction in expense ratio) 1 (15) (14)
Platinum Investor III 2,856 (16,300) (13,444)
Platinum Investor III (first reduction in expense ratio) 29,562 (2,615) 26,947
Platinum Investor IV 1,529 (1,427) 102
Platinum Investor FlexDirector 18 (8) 10
Platinum Investor PLUS 1,362 (2,557) (1,195)
Platinum Investor Survivor (first reduction in expense ratio) 498 (92) 406
Platinum Investor Survivor II 144 (141) 3
Platinum Investor Plus (first reduction in expense ratio) 2,628 (8) 2,620
Platinum Investor VIP 2,999 (2,582) 417
Platinum Investor VIP (with GMWB rider) 422 (446) (24)
Protection Advantage Select 1,741 (1,260) 481
Alger Mid Cap Growth Portfolio - Class I-2 Shares
AG Income Advantage VUL 4,445 (2,512) 1,933
AG Income Advantage VUL (with GMWB rider) -- (17) (17)
Corporate America (reduced surrender charge) 575 (1,410) (835)
Income Advantage Select 100 (64) 36
Platinum Investor I & II 29 (5,480) (5,451)
Platinum Investor I & II (first reduction in expense ratio) 10,398 (211) 10,187
Platinum Investor III 3,137 (12,396) (9,259)
Platinum Investor III (first reduction in expense ratio) 13,529 (5,990) 7,539
Platinum Investor IV 1,944 (1,582) 362
Platinum Investor FlexDirector 21 (276) (255)
Platinum Investor PLUS 1,244 (1,421) (177)
Platinum Investor Plus (first reduction in expense ratio) 842 (10) 832
Platinum Investor Survivor (first reduction in expense ratio) 311 (617) (306)
Platinum Investor Survivor II 896 (22,306) (21,410)
Platinum Investor VIP 4,631 (6,903) (2,272)
Platinum Investor VIP (with GMWB rider) 32 (6) 26
Protection Advantage Select 580 (470) 110
American Century VP Value Fund - Class I
AG Income Advantage VUL 2,829 (2,167) 662
AG Legacy Plus 43 (4,497) (4,454)
AG Legacy Plus (first reduction in expense ratio) 6,725 (1,083) 5,642
Corporate America (reduced surrender charge) 1,301 (11,890) (10,589)
Income Advantage Select 220 (104) 116
Platinum Investor I & II 137 (8,664) (8,527)
Platinum Investor I & II (first reduction in expense ratio) 22,945 (13,691) 9,254
Platinum Investor III 1,889 (145,012) (143,123)
Platinum Investor III (first reduction in expense ratio) 198,000 (18,289) 179,711
Platinum Investor IV 4,147 (8,565) (4,418)
Platinum Investor FlexDirector 24 (532) (508)
Platinum Investor PLUS 1,859 (14,969) (13,110)
Platinum Investor Plus (first reduction in expense ratio) 12,838 (19) 12,819
Platinum Investor Survivor -- (1,155) (1,155)
Platinum Investor Survivor (first reduction in expense ratio) 31,285 (3,804) 27,481
Platinum Investor Survivor II 8,077 (11,521) (3,444)
Platinum Investor VIP 8,945 (8,972) (27)
Protection Advantage Select 1,036 (873) 163
VL-R - 37
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Dreyfus IP MidCap Stock Portfolio - Initial Shares
Platinum Investor I & II (first reduction in expense ratio) 3,218 (11,418) (8,200)
Platinum Investor III 2,222 (61,384) (59,162)
Platinum Investor III (first reduction in expense ratio) 77,547 (8,623) 68,924
Platinum Investor IV 1,788 (1,579) 209
Platinum Investor FlexDirector -- (2) (2)
Platinum Investor PLUS 815 (7,101) (6,286)
Platinum Investor Plus (first reduction in expense ratio) 7,326 (4) 7,322
Platinum Investor Survivor (first reduction in expense ratio) 529 (171) 358
Platinum Investor Survivor II 752 (726) 26
Dreyfus VIF International Value Portfolio - Initial Shares
AG Income Advantage VUL 493 (137) 356
AG Income Advantage VUL (with GMWB rider) -- (18) (18)
Income Advantage Select 454 (248) 206
Protection Advantage Select 1,025 (937) 88
Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares
Corporate America 45 (184) (139)
Platinum Investor I & II 416 (7,865) (7,449)
Platinum Investor I & II (first reduction in expense ratio) 222,907 (158,097) 64,810
Platinum Investor III 2,316 (124,718) (122,402)
Platinum Investor III (first reduction in expense ratio) 106,425 (19,822) 86,603
Platinum Investor IV 2,651 (1,655) 996
Platinum Investor FlexDirector 1 (264) (263)
Platinum Investor PLUS 2,106 (12,203) (10,097)
Platinum Investor Plus (first reduction in expense ratio) 8,221 (20) 8,201
Platinum Investor Survivor -- (84) (84)
Platinum Investor Survivor (first reduction in expense ratio) 976 (3,844) (2,868)
Platinum Investor Survivor II 1,422 (1,273) 149
Dreyfus VIF Quality Bond Portfolio - Initial Shares
Corporate America 17 (70) (53)
Corporate America (reduced surrender charge) 1 (641) (640)
Platinum Investor I & II 785 (2,330) (1,545)
Platinum Investor I & II (first reduction in expense ratio) 8,319 (27,426) (19,107)
Platinum Investor III 2,745 (70,110) (67,365)
Platinum Investor III (first reduction in expense ratio) 82,922 (16,534) 66,388
Platinum Investor IV 2,713 (1,784) 929
Platinum Investor Plus (first reduction in expense ratio) 3,153 (22) 3,131
Platinum Investor PLUS 1,004 (5,505) (4,501)
Platinum Investor Survivor (first reduction in expense ratio) 714 (506) 208
Platinum Investor Survivor II 323 (448) (125)
Fidelity VIP Asset Manager Portfolio - Service Class 2
AG Income Advantage VUL 332 (217) 115
AG Legacy Plus 409 (3,048) (2,639)
AG Legacy Plus 3,052 (288) 2,764
Corporate America (reduced surrender charge) -- (337) (337)
Income Advantage Select 82 (131) (49)
Platinum Investor I & II 610 (2,564) (1,954)
Platinum Investor I & II (first reduction in expense ratio) 9,188 (9,117) 71
Platinum Investor III 2,194 (92,096) (89,902)
Platinum Investor III (first reduction in expense ratio) 97,064 (8,674) 88,390
Platinum Investor IV 614 (855) (241)
Platinum Investor FlexDirector 10 (80) (70)
Platinum Investor PLUS 862 (6,078) (5,216)
Platinum Investor Plus (first reduction in expense ratio) 1,499 (5) 1,494
Platinum Investor Survivor 41 (67) (26)
Platinum Investor Survivor (first reduction in expense ratio) 717 (260) 457
Platinum Investor Survivor II 683 (476) 207
Platinum Investor VIP 1,840 (1,685) 155
Protection Advantage Select 2,514 (3,166) (652)
Fidelity VIP Contrafund Portfolio - Service Class 2
AG Income Advantage VUL 2,693 (2,185) 508
VL-R - 38
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
AG Legacy Plus 372 (12,245) (11,873)
AG Legacy Plus (first reduction in expense ratio) 18,587 (728) 17,859
Corporate America (reduced surrender charge) 3,230 (9,112) (5,882)
Corporate Investor Select 22 (25) (3)
Income Advantage Select 574 (688) (114)
Platinum Investor I & II 1,623 (21,050) (19,427)
Platinum Investor I & II (first reduction in expense ratio) 34,026 (33,535) 491
Platinum Investor III 3,073 (243,909) (240,836)
Platinum Investor III (first reduction in expense ratio) 295,731 (28,094) 267,637
Platinum Investor IV 10,157 (9,913) 244
Platinum Investor FlexDirector 128 (2,001) (1,873)
Platinum Investor PLUS 3,911 (17,919) (14,008)
Platinum Investor Plus (first reduction in expense ratio) 15,591 (19) 15,572
Platinum Investor Survivor -- (2,750) (2,750)
Platinum Investor Survivor (first reduction in expense ratio) 9,195 (15,580) (6,385)
Platinum Investor Survivor II 4,173 (8,733) (4,560)
Platinum Investor VIP 19,505 (22,269) (2,764)
Platinum Investor VIP (with GMWB rider) 73 (22) 51
Protection Advantage Select 1,265 (1,959) (694)
Fidelity VIP Equity-Income Portfolio - Service Class 2
AG Income Advantage VUL 3,015 (5,543) (2,528)
AG Legacy Plus 511 (9,062) (8,551)
AG Legacy Plus (first reduction in expense ratio) 8,407 (933) 7,474
Corporate America (reduced surrender charge) 2,282 (3,225) (943)
Corporate Investor Select 23 (35) (12)
Income Advantage Select 350 (307) 43
Platinum Investor I & II 2,459 (7,565) (5,106)
Platinum Investor I & II (first reduction in expense ratio) 5,754 (26,872) (21,118)
Platinum Investor III 2,635 (168,347) (165,712)
Fidelity VIP Equity-Income Portfolio - Service Class 2 - continued
Platinum Investor III (first reduction in expense ratio) 193,770 (16,880) 176,890
Platinum Investor IV 4,105 (5,066) (961)
Platinum Investor FlexDirector 270 (899) (629)
Platinum Investor PLUS 3,065 (16,915) (13,850)
Platinum Investor Plus (first reduction in expense ratio) 15,498 (41) 15,457
Platinum Investor Survivor 99 (2,202) (2,103)
Platinum Investor Survivor (first reduction in expense ratio) 8,431 (9,636) (1,205)
Platinum Investor Survivor II 11,735 (3,789) 7,946
Platinum Investor VIP 16,947 (12,447) 4,500
Platinum Investor VIP (with GMWB rider) 233 (340) (107)
Protection Advantage Select 1,322 (1,028) 294
Fidelity VIP Freedom 2020 Portfolio - Service Class 2
AG Income Advantage VUL 1,755 (1,429) 326
Corporate Investor Select 1 (10) (9)
Income Advantage Select 70 (59) 11
Platinum Investor I & II (first reduction in expense ratio) 1 (637) (636)
Platinum Investor III 985 (3,437) (2,452)
Platinum Investor III (first reduction in expense ratio) 3,067 (391) 2,676
Platinum Investor IV 63 (40) 23
Platinum Investor FlexDirector 65 (46) 19
Platinum Investor VIP 1,493 (726) 767
Protection Advantage Select 1,195 (891) 304
Fidelity VIP Freedom 2025 Portfolio - Service Class 2
AG Income Advantage VUL 19,624 (8,503) 11,121
Corporate America (reduced surrender charge) 1,157 (2,430) (1,273)
Income Advantage Select 11 (7) 4
Platinum Investor I & II (first reduction in expense ratio) 11 (430) (419)
Platinum Investor III 546 (43) 503
Platinum Investor III (first reduction in expense ratio) 142 (530) (388)
Platinum Investor IV 22 (7) 15
Platinum Investor VIP 1,330 (441) 889
Platinum Investor VIP (with GMWB rider) 52 (9) 43
Platinum Investor Survivor II 3,487 -- 3,487
VL-R - 39
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Protection Advantage Select 67 (107) (40)
Fidelity VIP Freedom 2030 Portfolio - Service Class 2
AG Income Advantage VUL 1,667 (273) 1,394
Income Advantage Select 841 (91) 750
Platinum Investor III 1,084 (8,244) (7,160)
Platinum Investor III (first reduction in expense ratio) 6,415 (2,461) 3,954
Platinum Investor IV 103 (63) 40
Platinum Investor PLUS 78 (179) (101)
Platinum Investor Plus (first reduction in expense ratio) 201 -- 201
Platinum Investor Survivor II -- (10,481) (10,481)
Platinum Investor VIP 4,335 (1,189) 3,146
Platinum Investor VIP (with GMWB rider) 75 (14) 61
Protection Advantage Select 687 (377) 310
Fidelity VIP Growth Portfolio - Service Class 2
AG Income Advantage VUL 2,621 (6,033) (3,412)
AG Legacy Plus 32 (2,582) (2,550)
AG Legacy Plus (first reduction in expense ratio) 2,152 (593) 1,559
Corporate America (reduced surrender charge) 1,064 (2,634) (1,570)
Income Advantage Select 159 (237) (78)
Platinum Investor I & II 1,927 (17,777) (15,850)
Platinum Investor I & II (first reduction in expense ratio) 6,276 (14,485) (8,209)
Fidelity VIP Growth Portfolio - Service Class 2 - continued
Platinum Investor III 3,675 (265,848) (262,173)
Platinum Investor III (first reduction in expense ratio) 189,587 (18,657) 170,930
Platinum Investor IV 4,367 (6,680) (2,313)
Platinum Investor FlexDirector 29 (3,446) (3,417)
Platinum Investor PLUS 3,112 (83,337) (80,225)
Platinum Investor Plus (first reduction in expense ratio) 10,072 (23) 10,049
Platinum Investor Survivor -- (1) (1)
Platinum Investor Survivor (first reduction in expense ratio) 1,950 (2,106) (156)
Platinum Investor Survivor II 1,317 (2,812) (1,495)
Platinum Investor VIP 12,457 (11,097) 1,360
Protection Advantage Select 1,765 (975) 790
Fidelity VIP Mid Cap Portfolio - Service Class 2
AG Income Advantage VUL 4,801 (4,849) (48)
Corporate America (reduced surrender charge) 2,169 (8,765) (6,596)
Corporate Investor Select 21 (32) (11)
Income Advantage Select 395 (988) (593)
Income Advantage Select (with GMWB rider) 8 (5) 3
Platinum Investor I & II 32 (50) (18)
Platinum Investor I & II (first reduction in expense ratio) 438 (470) (32)
Platinum Investor III 3,147 (22,406) (19,259)
Platinum Investor III (first reduction in expense ratio) 57,357 (16,361) 40,996
Platinum Investor IV 8,185 (11,859) (3,674)
Platinum Investor FlexDirector 48 (64) (16)
Platinum Investor PLUS 1,529 (1,961) (432)
Platinum Investor Plus (first reduction in expense ratio) 2,018 (2) 2,016
Platinum Investor Survivor -- (1,099) (1,099)
Platinum Investor Survivor (first reduction in expense ratio) 3,547 (13,985) (10,438)
Platinum Investor Survivor II 1,189 (3,070) (1,881)
Platinum Investor VIP 15,684 (17,240) (1,556)
Platinum Investor VIP (with GMWB rider) 98 (199) (101)
Protection Advantage Select 1,543 (822) 721
Franklin Templeton Franklin Small Cap Value Securities Fund - Class 2
AG Income Advantage VUL 2,532 (3,591) (1,059)
Corporate America (reduced surrender charge) 1,966 (8,195) (6,229)
Income Advantage Select 424 (581) (157)
Income Advantage Select (with GMWB rider) 8 (5) 3
Platinum Investor I & II 23 (5,139) (5,116)
Platinum Investor I & II (first reduction in expense ratio) 9,817 (754) 9,063
Platinum Investor III 3,240 (22,547) (19,307)
Platinum Investor III (first reduction in expense ratio) 43,251 (13,083) 30,168
Platinum Investor IV 3,979 (4,200) (221)
VL-R - 40
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Platinum Investor FlexDirector 25 (1,626) (1,601)
Platinum Investor PLUS 1,081 (3,560) (2,479)
Platinum Investor Plus (first reduction in expense ratio) 643 (1) 642
Platinum Investor Survivor -- (422) (422)
Platinum Investor Survivor (first reduction in expense ratio) 2,561 (2,589) (28)
Platinum Investor Survivor II 655 (1,823) (1,168)
Platinum Investor VIP 14,282 (18,825) (4,543)
Platinum Investor VIP (with GMWB rider) 70 (141) (71)
Protection Advantage Select 1,422 (828) 594
Franklin Templeton Franklin Small-Mid Cap Growth Securities Fund - Class 2
AG Legacy Plus 12 (674) (662)
AG Legacy Plus (first reduction in expense ratio) 519 (109) 410
Franklin Templeton Franklin U.S. Government Fund - Class 2
Corporate America (reduced surrender charge) 3,737 (507) 3,230
Franklin Templeton Franklin U.S. Government Fund - Class 2 - continued
Platinum Investor I & II 122 (1,751) (1,629)
Platinum Investor I & II (first reduction in expense ratio) 4,342 (3,834) 508
Platinum Investor III 4,245 (22,839) (18,594)
Platinum Investor III (first reduction in expense ratio) 16,207 (2,018) 14,189
Platinum Investor IV 3,550 (8,409) (4,859)
Platinum Investor FlexDirector 16 (45) (29)
Platinum Investor PLUS 1,656 (2,814) (1,158)
Platinum Investor Plus (first reduction in expense ratio) 1,335 (9) 1,326
Platinum Investor Survivor (first reduction in expense ratio) 4,509 (366) 4,143
Platinum Investor Survivor II 673 (4,951) (4,278)
Platinum Investor VIP 1,941 (3,716) (1,775)
Franklin Templeton Mutual Shares Securities Fund - Class 2
AG Income Advantage VUL 1,120 (707) 413
Corporate America (reduced surrender charge) 1,707 (413) 1,294
Income Advantage Select 151 (306) (155)
Platinum Investor I & II 618 (640) (22)
Platinum Investor I & II (first reduction in expense ratio) 2,079 (7,123) (5,044)
Platinum Investor III 6,322 (89,237) (82,915)
Platinum Investor III (first reduction in expense ratio) 100,596 (16,098) 84,498
Platinum Investor IV 3,964 (1,477) 2,487
Platinum Investor FlexDirector 60 (284) (224)
Platinum Investor PLUS 1,355 (8,956) (7,601)
Platinum Investor Plus (first reduction in expense ratio) 6,025 (20) 6,005
Platinum Investor Survivor -- (130) (130)
Platinum Investor Survivor (first reduction in expense ratio) 982 (641) 341
Platinum Investor Survivor II 917 (1,423) (506)
Platinum Investor VIP 5,813 (4,287) 1,526
Platinum Investor VIP (with GMWB rider) -- (38) (38)
Protection Advantage Select 1,101 (2,135) (1,034)
Franklin Templeton Templeton Foreign Securities Fund - Class 2
AG Legacy Plus 186 (2,982) (2,796)
AG Legacy Plus (first reduction in expense ratio) 2,952 (672) 2,280
Corporate America (reduced surrender charge) 4,749 (5,769) (1,020)
Platinum Investor I & II 45 (539) (494)
Platinum Investor I & II (first reduction in expense ratio) 2,454 (10,949) (8,495)
Platinum Investor III 5,999 (54,057) (48,058)
Platinum Investor III (first reduction in expense ratio) 61,037 (4,703) 56,334
Platinum Investor IV 2,694 (2,237) 457
Platinum Investor FlexDirector 453 (1,179) (726)
Platinum Investor PLUS 1,615 (7,043) (5,428)
Platinum Investor Plus (first reduction in expense ratio) 4,778 (7) 4,771
Platinum Investor Survivor (first reduction in expense ratio) 2,783 (1,056) 1,727
Platinum Investor Survivor II 3,077 (3,543) (466)
Platinum Investor VIP 8,088 (7,509) 579
Goldman Sachs VIT Strategic Growth Fund - Institutional Shares
Platinum Investor I & II (first reduction in expense ratio) 1 (161) (160)
Platinum Investor III -- (926) (926)
Platinum Investor III (first reduction in expense ratio) 957 (187) 770
VL-R - 41
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Platinum Investor PLUS -- (104) (104)
Platinum Investor Plus (first reduction in expense ratio) 137 -- 137
Platinum Investor Survivor (first reduction in expense ratio) 1 (28,458) (28,457)
Platinum Investor Survivor II -- (293) (293)
Invesco V.I. Core Equity Fund - Series I
Corporate America 39 (163) (124)
Corporate America (reduced surrender charge) 1,015 (52) 963
Platinum Investor I & II 385 (1,811) (1,426)
Platinum Investor I & II (first reduction in expense ratio) 11,125 (46,477) (35,352)
Platinum Investor III 991 (102,425) (101,434)
Platinum Investor III (first reduction in expense ratio) 101,908 (22,297) 79,611
Platinum Investor IV 1,650 (4,562) (2,912)
Platinum Investor FlexDirector -- (2) (2)
Platinum Investor PLUS 906 (4,044) (3,138)
Platinum Investor Plus (first reduction in expense ratio) 1,631 (8) 1,623
Platinum Investor Survivor -- (89) (89)
Platinum Investor Survivor (first reduction in expense ratio) 2,476 (5,188) (2,712)
Platinum Investor Survivor II 138 (523) (385)
Invesco V.I. Global Real Estate Fund - Series I
AG Income Advantage VUL 342 (202) 140
Income Advantage Select 1,136 (775) 361
Protection Advantage Select 169 (127) 42
Invesco V.I. Government Securities Fund - Series I
AG Legacy Plus 76 (2,921) (2,845)
AG Legacy Plus (first reduction in expense ratio) 2,531 (460) 2,071
Invesco V.I. High Yield Fund - Series I
Platinum Investor Plus (first reduction in expense ratio) 215 (1) 214
Platinum Investor I & II (first reduction in expense ratio) 1,102 (7,865) (6,763)
Platinum Investor III 3,117 (8,075) (4,958)
Platinum Investor III (first reduction in expense ratio) 6,300 (1,513) 4,787
Platinum Investor IV 334 (214) 120
Platinum Investor FlexDirector -- (22) (22)
Platinum Investor PLUS 745 (732) 13
Platinum Investor Survivor (first reduction in expense ratio) 461 -- 461
Platinum Investor Survivor -- (478) (478)
Platinum Investor Survivor II 3,821 (100) 3,721
Invesco V.I. International Growth Fund - Series I
AG Income Advantage VUL 3,121 (4,566) (1,445)
AG Legacy Plus 83 (2,479) (2,396)
AG Legacy Plus (first reduction in expense ratio) 2,807 (224) 2,583
Corporate America 27 (112) (85)
Corporate America (reduced surrender charge) 1,318 (4,127) (2,809)
Corporate Investor Select 24 (37) (13)
Income Advantage Select 853 (722) 131
Platinum Investor I & II 263 (1,695) (1,432)
Platinum Investor I & II (first reduction in expense ratio) 10,335 (42,796) (32,461)
Platinum Investor III 2,928 (66,343) (63,415)
Platinum Investor III (first reduction in expense ratio) 104,895 (16,152) 88,743
Platinum Investor IV 2,798 (1,928) 870
Platinum Investor FlexDirector 78 (849) (771)
Platinum Investor PLUS 987 (3,987) (3,000)
Platinum Investor Plus (first reduction in expense ratio) 4,990 (5) 4,985
Platinum Investor Survivor -- (1,963) (1,963)
Platinum Investor Survivor (first reduction in expense ratio) 3,589 (8,333) (4,744)
Platinum Investor Survivor II 3,538 (2,307) 1,231
Platinum Investor VIP 7,252 (6,866) 386
Platinum Investor VIP (with GMWB rider) 178 (378) (200)
Protection Advantage Select 1,151 (507) 644
Invesco Van Kampen V.I. American Franchise Fund - Series I
AG Legacy Plus -- (235) (235)
Invesco Van Kampen V.I. American Franchise Fund - Series I - continued
AG Legacy Plus (first reduction in expense ratio) 126 (69) 57
Invesco Van Kampen V.I. Growth and Income Fund - Series I
VL-R - 42
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
AG Income Advantage VUL 2,405 (3,127) (722)
AG Income Advantage VUL (with GMWB rider) -- (19) (19)
Corporate America (reduced surrender charge) 4 (5,143) (5,139)
Income Advantage Select 175 (406) (231)
Platinum Investor I & II 171 (9,921) (9,750)
Platinum Investor I & II (first reduction in expense ratio) 16,138 (10,185) 5,953
Platinum Investor III 4,295 (72,122) (67,827)
Platinum Investor III (first reduction in expense ratio) 77,957 (23,838) 54,119
Platinum Investor IV 4,526 (5,234) (708)
Platinum Investor FlexDirector 6 (427) (421)
Platinum Investor PLUS 1,549 (7,376) (5,827)
Platinum Investor Plus (first reduction in expense ratio) 7,096 (25) 7,071
Platinum Investor Survivor -- (963) (963)
Platinum Investor Survivor (first reduction in expense ratio) 1,904 (2,686) (782)
Platinum Investor Survivor II 340 (3,569) (3,229)
Platinum Investor VIP 6,408 (4,265) 2,143
Protection Advantage Select 1,418 (1,938) (520)
Janus Aspen Enterprise Portfolio - Service Shares
AG Income Advantage VUL 384 (801) (417)
Corporate America (reduced surrender charge) 773 (929) (156)
Income Advantage Select 181 (185) (4)
Platinum Investor I & II 563 (563) --
Platinum Investor I & II (first reduction in expense ratio) 41,550 (46,476) (4,926)
Platinum Investor III 2,811 (87,371) (84,560)
Platinum Investor III (first reduction in expense ratio) 65,388 (31,004) 34,384
Platinum Investor IV 773 (311) 462
Platinum Investor FlexDirector 35 (16) 19
Platinum Investor PLUS 617 (4,669) (4,052)
Platinum Investor Plus (first reduction in expense ratio) 6,666 (16) 6,650
Platinum Investor Survivor (first reduction in expense ratio) 301 (936) (635)
Platinum Investor Survivor II 268 (74) 194
Platinum Investor VIP 7,504 (6,418) 1,086
Protection Advantage Select 244 (516) (272)
Janus Aspen Forty Portfolio - Service Shares
AG Income Advantage VUL 604 (173) 431
AG Income Advantage VUL (with GMWB rider) -- (16) (16)
Income Advantage Select 768 (333) 435
Janus Aspen Forty Portfolio - Service Shares - continued
Protection Advantage Select 1,096 (872) 224
Janus Aspen Overseas Portfolio - Service Shares
AG Income Advantage VUL 3,750 (5,437) (1,687)
Corporate America (reduced surrender charge) 1,998 (5,373) (3,375)
Platinum Investor I & II 1,674 (22,357) (20,683)
Platinum Investor I & II (first reduction in expense ratio) 70,796 (63,012) 7,784
Platinum Investor III 4,718 (74,848) (70,130)
Platinum Investor III (first reduction in expense ratio) 115,488 (30,252) 85,236
Platinum Investor IV 5,314 (6,569) (1,255)
Platinum Investor FlexDirector 416 (645) (229)
Platinum Investor PLUS 1,054 (3,097) (2,043)
Platinum Investor Plus (first reduction in expense ratio) 5,882 (21) 5,861
Platinum Investor Survivor 38 (1,270) (1,232)
Platinum Investor Survivor (first reduction in expense ratio) 11,180 (48,287) (37,107)
Platinum Investor Survivor II 2,195 (4,459) (2,264)
Platinum Investor VIP 16,210 (12,590) 3,620
Platinum Investor VIP (with GMWB rider) 1,526 (40) 1,486
Protection Advantage Select 2,767 (1,512) 1,255
Janus Aspen Worldwide Portfolio - Service Shares
Corporate America (reduced surrender charge) -- (44) (44)
Platinum Investor I & II 1,038 (2,208) (1,170)
Platinum Investor I & II (first reduction in expense ratio) 1,167 (5,302) (4,135)
Platinum Investor III 2,689 (100,501) (97,812)
Platinum Investor III (first reduction in expense ratio) 71,279 (24,127) 47,152
Platinum Investor IV 1,056 (1,402) (346)
VL-R - 43
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Platinum Investor PLUS 831 (3,553) (2,722)
Platinum Investor Plus (first reduction in expense ratio) 2,739 (8) 2,731
Platinum Investor Survivor (first reduction in expense ratio) 611 (318) 293
Platinum Investor Survivor II 627 (3,203) (2,576)
JPMorgan Insurance Trust Core Bond Portfolio - Class 1
AG Income Advantage VUL 161 (206) (45)
Income Advantage Select 143 (243) (100)
Protection Advantage Select 734 (529) 205
JPMorgan Insurance Trust International Equity Portfolio - Class 1
AG Income Advantage VUL 290 (116) 174
AG Income Advantage VUL (with GMWB rider) -- (19) (19)
Income Advantage Select 204 (222) (18)
Protection Advantage Select 421 (548) (127)
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1
Platinum Investor I & II -- (214) (214)
Platinum Investor I & II (first reduction in expense ratio) 1 (79) (78)
Platinum Investor III 1 (9,204) (9,203)
Platinum Investor III (first reduction in expense ratio) 7,819 (202) 7,617
Platinum Investor IV 1 (194) (193)
Platinum Investor PLUS 13 (1,061) (1,048)
Platinum Investor Plus (first reduction in expense ratio) 10 -- 10
Platinum Investor Survivor (first reduction in expense ratio) -- (14) (14)
Platinum Investor Survivor II 1 (131) (130)
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1
Platinum Investor I & II 472 (212) 260
Platinum Investor I & II (first reduction in expense ratio) 2,477 (2,635) (158)
Platinum Investor III 3,131 (33,080) (29,949)
Platinum Investor III (first reduction in expense ratio) 35,098 (9,341) 25,757
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 - continued
Platinum Investor IV 1,758 (779) 979
Platinum Investor FlexDirector 50 (32) 18
Platinum Investor PLUS 659 (1,745) (1,086)
Platinum Investor Plus (first reduction in expense ratio) 1,533 (1) 1,532
Platinum Investor Survivor (first reduction in expense ratio) 87 (12) 75
Platinum Investor Survivor II 782 (3,406) (2,624)
Platinum Investor VIP 6,944 (5,611) 1,333
MFS VIT Core Equity Series - Initial Class
Corporate America (reduced surrender charge) -- -- --
Platinum Investor I & II 1,341 (7,282) (5,941)
Platinum Investor I & II (first reduction in expense ratio) 6,111 (2,800) 3,311
Platinum Investor III 2,073 (87,004) (84,931)
Platinum Investor III (first reduction in expense ratio) 60,052 (10,553) 49,499
Platinum Investor IV 993 (1,410) (417)
Platinum Investor PLUS 1,361 (8,143) (6,782)
Platinum Investor Plus (first reduction in expense ratio) 3,604 (30) 3,574
Platinum Investor Survivor 65 (109) (44)
Platinum Investor Survivor (first reduction in expense ratio) 1,345 (4,733) (3,388)
Platinum Investor Survivor II 1 (20) (19)
MFS VIT Growth Series - Initial Class
AG Legacy Plus 3 (907) (904)
AG Legacy Plus (first reduction in expense ratio) 856 (219) 637
Corporate America (reduced surrender charge) -- (323) (323)
Platinum Investor I & II 1,197 (1,197) --
Platinum Investor I & II (first reduction in expense ratio) 13,421 (51,006) (37,585)
Platinum Investor III 2,763 (133,424) (130,661)
Platinum Investor III (first reduction in expense ratio) 84,230 (26,868) 57,362
Platinum Investor IV 670 (749) (79)
Platinum Investor FlexDirector 153 (477) (324)
Platinum Investor PLUS 1,192 (7,879) (6,687)
Platinum Investor Plus (first reduction in expense ratio) 7,488 (13) 7,475
Platinum Investor Survivor -- (135) (135)
Platinum Investor Survivor (first reduction in expense ratio) 1,361 (8,768) (7,407)
Platinum Investor Survivor II 14 (35) (21)
VL-R - 44
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
MFS VIT New Discovery Series - Initial Class
AG Income Advantage VUL 216 (382) (166)
AG Legacy Plus 1 (2,328) (2,327)
AG Legacy Plus (first reduction in expense ratio) 1,222 (86) 1,136
Corporate America (reduced surrender charge) 54 (382) (328)
Income Advantage Select 163 (180) (17)
Platinum Investor I & II 496 (230) 266
Platinum Investor I & II (first reduction in expense ratio) 392 (3,883) (3,491)
Platinum Investor III 2,714 (73,335) (70,621)
Platinum Investor III (first reduction in expense ratio) 57,055 (8,006) 49,049
Platinum Investor IV 1,076 (1,279) (203)
Platinum Investor FlexDirector 44 (158) (114)
Platinum Investor PLUS 1,386 (6,228) (4,842)
Platinum Investor Plus (first reduction in expense ratio) 7,087 (21) 7,066
Platinum Investor Survivor (first reduction in expense ratio) 519 (1,270) (751)
Platinum Investor Survivor II 432 (267) 165
Platinum Investor VIP 2,432 (2,917) (485)
Platinum Investor VIP (with GMWB rider) -- (7) (7)
Protection Advantage Select 342 (217) 125
MFS VIT Research Series - Initial Class
AG Income Advantage VUL 396 (126) 270
Income Advantage Select 424 (438) (14)
Platinum Investor I & II -- (49) (49)
Platinum Investor I & II (first reduction in expense ratio) 470 (4,476) (4,006)
Platinum Investor III 1,734 (43,224) (41,490)
Platinum Investor III (first reduction in expense ratio) 37,422 (7,609) 29,813
Platinum Investor IV 420 (289) 131
Platinum Investor PLUS 862 (3,068) (2,206)
Platinum Investor Plus (first reduction in expense ratio) 3,194 (11) 3,183
Platinum Investor Survivor (first reduction in expense ratio) 878 (804) 74
Platinum Investor Survivor II 27 (61) (34)
Platinum Investor VIP 1,434 (1,476) (42)
Protection Advantage Select 463 (409) 54
MFS VIT Total Return Series - Initial Class
AG Legacy Plus 113 (21,022) (20,909)
AG Legacy Plus (first reduction in expense ratio) 10,554 (2,643) 7,911
Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I
AG Income Advantage VUL 107 (537) (430)
Corporate America (reduced surrender charge) 1,112 (731) 381
Income Advantage Select 610 (190) 420
Platinum Investor I & II 1,027 (1,074) (47)
Platinum Investor I & II (first reduction in expense ratio) 8,379 (7,033) 1,346
Platinum Investor III 2,738 (87,394) (84,656)
Platinum Investor III (first reduction in expense ratio) 66,538 (8,317) 58,221
Platinum Investor IV 1,436 (864) 572
Platinum Investor FlexDirector 2 (226) (224)
Platinum Investor PLUS 1,031 (5,274) (4,243)
Platinum Investor Plus (first reduction in expense ratio) 3,299 (15) 3,284
Platinum Investor Survivor (first reduction in expense ratio) 19,626 (1,754) 17,872
Platinum Investor Survivor II 373 (6,703) (6,330)
Platinum Investor VIP 8,054 (7,674) 380
Platinum Investor VIP (with GMWB rider) 23 (4) 19
Protection Advantage Select 530 (779) (249)
Neuberger Berman AMT Large Cap Value Portfolio - Class I
AG Legacy Plus 2 (6) (4)
AG Legacy Plus (first reduction in expense ratio) 9 (362) (353)
Neuberger Berman AMT Socially Responsive Portfolio - Class I
AG Income Advantage VUL 57 (5) 52
Corporate America (reduced surrender charge) 662 (18) 644
Income Advantage Select 11 (2) 9
Protection Advantage Select 31 (8) 23
Oppenheimer Balanced Fund/VA - Non-Service Shares
AG Income Advantage VUL 304 (146) 158
VL-R - 45
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Income Advantage Select 108 (151) (43)
Platinum Investor I & II 87 (52) 35
Platinum Investor I & II (first reduction in expense ratio) 194 (488) (294)
Platinum Investor III 4,964 (7,849) (2,885)
Platinum Investor III (first reduction in expense ratio) 6,948 (244) 6,704
Platinum Investor IV 5,923 (2,222) 3,701
Platinum Investor FlexDirector 40 (2,881) (2,841)
Oppenheimer Balanced Fund/VA - Non-Service Shares - continued
Platinum Investor PLUS 391 (2,977) (2,586)
Platinum Investor Plus (first reduction in expense ratio) 120 (1) 119
Platinum Investor Survivor (first reduction in expense ratio) 74 (9) 65
Platinum Investor Survivor II 623 (345) 278
Platinum Investor VIP 4,030 (2,973) 1,057
Protection Advantage Select 304 (687) (383)
Oppenheimer Global Securities Fund/VA - Non-Service Shares
AG Income Advantage VUL 4,029 (3,670) 359
Corporate America (reduced surrender charge) 866 (4,080) (3,214)
Corporate Investor Select 35 (53) (18)
Income Advantage Select 331 (456) (125)
Platinum Investor I & II 246 (14,532) (14,286)
Platinum Investor I & II (first reduction in expense ratio) 25,545 (357) 25,188
Platinum Investor III 4,992 (35,452) (30,460)
Platinum Investor III (first reduction in expense ratio) 66,268 (6,586) 59,682
Platinum Investor IV 5,501 (4,895) 606
Platinum Investor FlexDirector 27 (56) (29)
Platinum Investor PLUS 1,515 (3,768) (2,253)
Platinum Investor Plus (first reduction in expense ratio) 1,810 (1) 1,809
Platinum Investor Survivor -- (392) (392)
Platinum Investor Survivor (first reduction in expense ratio) 1,218 (3,216) (1,998)
Platinum Investor Survivor II 1,799 (2,719) (920)
Platinum Investor VIP 9,096 (9,891) (795)
Platinum Investor VIP (with GMWB rider) 78 (14) 64
Protection Advantage Select 808 (874) (66)
Oppenheimer High Income Fund/VA - Non-Service Shares
AG Legacy Plus -- (13,633) (13,633)
AG Legacy Plus (first reduction in expense ratio) -- (1,701) (1,701)
Oppenheimer Global Strategic Income Fund/VA (Non-Service)
AG Legacy Plus (first reduction in expense ratio) 543 (20) 523
AG Legacy Plus 3,821 (3) 3,818
PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class
AG Income Advantage VUL 731 (566) 165
AG Income Advantage VUL (with GMWB rider) -- (6) (6)
Corporate America (reduced surrender charge) 520 (1,735) (1,215)
Income Advantage Select 505 (469) 36
Platinum Investor I & II 1 (302) (301)
Platinum Investor I & II (first reduction in expense ratio) 589 (436) 153
Platinum Investor III 2,444 (27,709) (25,265)
Platinum Investor III (first reduction in expense ratio) 29,064 (6,391) 22,673
Platinum Investor IV 1,721 (1,559) 162
Platinum Investor FlexDirector 392 (111) 281
Platinum Investor PLUS 1,450 (2,399) (949)
Platinum Investor Plus (first reduction in expense ratio) 1,971 (1) 1,970
Platinum Investor Survivor II 5,863 (1,430) 4,433
Platinum Investor VIP 5,592 (16,220) (10,628)
Platinum Investor VIP (with GMWB rider) 47 (97) (50)
Protection Advantage Select 1,377 (604) 773
PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class
AG Income Advantage VUL 33 (28) 5
Income Advantage Select 288 (402) (114)
Protection Advantage Select 570 (317) 253
PIMCO VIT Real Return Portfolio - Administrative Class
AG Income Advantage VUL 551 (693) (142)
AG Legacy Plus 3,239 (7,011) (3,772)
VL-R - 46
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
AG Legacy Plus (first reduction in expense ratio) 10,115 (268) 9,847
Corporate America (reduced surrender charge) 740 (1,314) (574)
Corporate Investor Select 12 (19) (7)
Income Advantage Select 177 (274) (97)
Platinum Investor I & II 186 (3,524) (3,338)
Platinum Investor I & II (first reduction in expense ratio) 213,731 (202,988) 10,743
Platinum Investor III 4,477 (108,101) (103,624)
Platinum Investor III (first reduction in expense ratio) 169,231 (22,499) 146,732
Platinum Investor IV 7,140 (10,756) (3,616)
Platinum Investor FlexDirector 53 (34) 19
Platinum Investor PLUS 2,717 (10,038) (7,321)
Platinum Investor Plus (first reduction in expense ratio) 7,801 (33) 7,768
Platinum Investor Survivor 8 (160) (152)
Platinum Investor Survivor (first reduction in expense ratio) 5,166 (2,686) 2,480
Platinum Investor Survivor II 6,747 (6,955) (208)
Platinum Investor VIP 7,132 (18,082) (10,950)
Protection Advantage Select 456 (564) (108)
PIMCO VIT Short-Term Portfolio - Administrative Class
AG Income Advantage VUL 1,411 (345) 1,066
AG Income Advantage VUL (with GMWB rider) 1 (11) (10)
Corporate America (reduced surrender charge) 94 (1,742) (1,648)
Corporate Investor Select -- (14) (14)
Income Advantage Select 199 (107) 92
Platinum Investor I & II 553 (553) --
Platinum Investor I & II (first reduction in expense ratio) 8,002 (123,365) (115,363)
Platinum Investor III 15,404 (223,418) (208,014)
Platinum Investor III (first reduction in expense ratio) 142,031 (96,512) 45,519
Platinum Investor IV 4,268 (3,308) 960
Platinum Investor FlexDirector 609 (627) (18)
Platinum Investor PLUS 4,391 (5,601) (1,210)
Platinum Investor Plus (first reduction in expense ratio) 2,050 (5) 2,045
Platinum Investor Survivor 27 (1,226) (1,199)
Platinum Investor Survivor (first reduction in expense ratio) 11,899 (831) 11,068
Platinum Investor Survivor II 5,239 (4,828) 411
Platinum Investor VIP 6,310 (3,360) 2,950
Platinum Investor VIP (with GMWB rider) 138 (290) (152)
Protection Advantage Select 254 (167) 87
PIMCO VIT Total Return Portfolio - Administrative Class
AG Income Advantage VUL 3,094 (3,376) (282)
AG Income Advantage VUL (with GMWB rider) -- (9) (9)
AG Legacy Plus 508 (9,889) (9,381)
AG Legacy Plus (first reduction in expense ratio) 12,227 (1,099) 11,128
Corporate America (reduced surrender charge) 4,153 (3,639) 514
Corporate Investor Select 28 (32) (4)
Income Advantage Select 319 (629) (310)
Platinum Investor I & II 269 (4,264) (3,995)
Platinum Investor I & II (first reduction in expense ratio) 18,227 (20,200) (1,973)
Platinum Investor III 6,456 (130,932) (124,476)
Platinum Investor III (first reduction in expense ratio) 174,714 (13,258) 161,456
Platinum Investor IV 5,917 (12,370) (6,453)
Platinum Investor FlexDirector 924 (1,139) (215)
Platinum Investor PLUS 3,411 (17,013) (13,602)
Platinum Investor Plus (first reduction in expense ratio) 11,518 (24) 11,494
Platinum Investor Survivor 9 (2,666) (2,657)
Platinum Investor Survivor (first reduction in expense ratio) 8,613 (6,376) 2,237
Platinum Investor Survivor II 77,109 (50,218) 26,891
Platinum Investor VIP 14,842 (4,862) 9,980
PIMCO VIT Total Return Portfolio - Administrative Class - continued
Platinum Investor VIP (with GMWB rider) 175 (392) (217)
Protection Advantage Select 2,499 (2,551) (52)
Pioneer Fund VCT Portfolio - Class I
Platinum Investor I & II 224 (307) (83)
Platinum Investor I & II (first reduction in expense ratio) 2,947 (7,309) (4,362)
VL-R - 47
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Platinum Investor III 331 (12,589) (12,258)
Platinum Investor III (first reduction in expense ratio) 16,125 (7,545) 8,580
Platinum Investor PLUS 29 (278) (249)
Platinum Investor Plus (first reduction in expense ratio) 169 (2) 167
Platinum Investor Survivor (first reduction in expense ratio) 473 (1,887) (1,414)
Platinum Investor Survivor II -- (19) (19)
Pioneer Growth Opportunities VCT Portfolio - Class I
Corporate America 26 (105) (79)
Platinum Investor I & II 339 (334) 5
Platinum Investor I & II (first reduction in expense ratio) 2,585 (14,360) (11,775)
Platinum Investor III 421 (52,100) (51,679)
Platinum Investor III (first reduction in expense ratio) 50,118 (8,036) 42,082
Platinum Investor PLUS 311 (2,788) (2,477)
Platinum Investor Plus (first reduction in expense ratio) 2,575 (9) 2,566
Platinum Investor Survivor (first reduction in expense ratio) 327 (120) 207
Platinum Investor Survivor II -- (10) (10)
Pioneer Mid Cap Value VCT Portfolio - Class I
AG Income Advantage VUL 191 (61) 130
Corporate America (reduced surrender charge) 8 (1,946) (1,938)
Income Advantage Select 138 (70) 68
Platinum Investor I & II 28 (30) (2)
Platinum Investor I & II (first reduction in expense ratio) 1 (15) (14)
Platinum Investor III 1,561 (16,090) (14,529)
Platinum Investor III (first reduction in expense ratio) 15,981 (255) 15,726
Platinum Investor IV 321 (234) 87
Platinum Investor FlexDirector 298 (397) (99)
Platinum Investor PLUS 268 (207) 61
Platinum Investor Plus (first reduction in expense ratio) 185 (1) 184
Platinum Investor Survivor II 766 (277) 489
Platinum Investor VIP 4,225 (6,848) (2,623)
Platinum Investor VIP (with GMWB rider) 439 (272) 167
Protection Advantage Select 452 (234) 218
Putnam VT Diversified Income Fund - Class IB
AG Income Advantage VUL 168 (290) (122)
AG Legacy Plus 549 (2,443) (1,894)
AG Legacy Plus (first reduction in expense ratio) 295 (101) 194
Corporate America 1 (6,251) (6,250)
Corporate America (reduced surrender charge) 3,500 (4,297) (797)
Income Advantage Select 103 (307) (204)
Income Advantage Select (with GMWB rider) 9 (5) 4
Platinum Investor I & II 717 (837) (120)
Platinum Investor I & II (first reduction in expense ratio) 2,635 (6,680) (4,045)
Platinum Investor III 1,934 (31,983) (30,049)
Platinum Investor III (first reduction in expense ratio) 57,720 (4,331) 53,389
Platinum Investor IV 834 (1,205) (371)
Platinum Investor FlexDirector 5 (6) (1)
Platinum Investor PLUS 354 (1,603) (1,249)
Platinum Investor Plus (first reduction in expense ratio) 1,253 (6) 1,247
Putnam VT Diversified Income Fund - Class IB - continued
Platinum Investor Survivor (first reduction in expense ratio) 176 (56) 120
Platinum Investor Survivor II 1,030 (101) 929
Platinum Investor VIP 3,749 (3,010) 739
Protection Advantage Select 126 (207) (81)
Putnam VT Growth and Income Fund - Class IB
Corporate America -- (10,034) (10,034)
Corporate America (reduced surrender charge) 1,039 (1,519) (480)
Platinum Investor I & II 469 (5,282) (4,813)
Platinum Investor I & II (first reduction in expense ratio) 4,373 (19,623) (15,250)
Platinum Investor III 2,835 (139,580) (136,745)
Platinum Investor III (first reduction in expense ratio) 125,855 (14,658) 111,197
Platinum Investor IV 4,087 (4,671) (584)
Platinum Investor PLUS 1,684 (7,387) (5,703)
Platinum Investor Plus (first reduction in expense ratio) 3,951 (24) 3,927
VL-R - 48
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Platinum Investor Survivor 47 (92) (45)
Platinum Investor Survivor (first reduction in expense ratio) 752 (3,034) (2,282)
Platinum Investor Survivor II 1,765 (1,209) 556
Putnam VT International Value Fund - Class IB
Corporate America (reduced surrender charge) 1,649 (5,023) (3,374)
Platinum Investor I & II 747 (1,455) (708)
Platinum Investor I & II (first reduction in expense ratio) 8,992 (26,451) (17,459)
Platinum Investor III 3,845 (53,390) (49,545)
Platinum Investor III (first reduction in expense ratio) 76,463 (13,828) 62,635
Platinum Investor IV 2,871 (3,385) (514)
Platinum Investor FlexDirector 8 (62) (54)
Platinum Investor PLUS 1,170 (3,796) (2,626)
Platinum Investor Plus (first reduction in expense ratio) 2,954 (25) 2,929
Platinum Investor Survivor 51 (577) (526)
Platinum Investor Survivor (first reduction in expense ratio) 1,863 (4,467) (2,604)
Platinum Investor Survivor II 3,867 (139) 3,728
Platinum Investor VIP 17,172 (15,110) 2,062
Platinum Investor VIP (with GMWB rider) 102 (19) 83
Putnam VT Multi-Cap Growth Fund - Class IB
AG Legacy Plus -- (1,729) (1,729)
AG Legacy Plus (first reduction in expense ratio) 1,668 (255) 1,413
Putnam VT Small Cap Value Fund - Class IB
AG Income Advantage VUL 142 (151) (9)
AG Legacy Plus 15 (2,964) (2,949)
AG Legacy Plus (first reduction in expense ratio) 5,525 (477) 5,048
Income Advantage Select 63 (24) 39
Protection Advantage Select 147 (114) 33
Putnam VT Voyager Fund - Class IB
AG Legacy Plus 143 (8,864) (8,721)
AG Legacy Plus (first reduction in expense ratio) 1,676 (290) 1,386
SunAmerica Aggressive Growth Portfolio - Class 1
AG Income Advantage VUL 125 (143) (18)
Income Advantage Select 81 (152) (71)
Platinum Investor I & II (first reduction in expense ratio) 285 (22,553) (22,268)
Platinum Investor III 2,815 (11,145) (8,330)
Platinum Investor III (first reduction in expense ratio) 10,455 (3,581) 6,874
Platinum Investor IV 1,072 (700) 372
Platinum Investor FlexDirector 37 (19) 18
SunAmerica Aggressive Growth Portfolio - Class 1 - continued
Platinum Investor PLUS 694 (2,504) (1,810)
Platinum Investor Plus (first reduction in expense ratio) 2,839 (12) 2,827
Platinum Investor Survivor II 21 -- 21
Platinum Investor VIP 10,881 (9,840) 1,041
Protection Advantage Select 31 (34) (3)
SunAmerica Balanced Portfolio - Class 1
AG Income Advantage VUL 124 (45) 79
Income Advantage Select 146 (189) (43)
Platinum Investor I & II (first reduction in expense ratio) 1,622 (1,270) 352
Platinum Investor III 2,432 (34,414) (31,982)
Platinum Investor III (first reduction in expense ratio) 38,009 (1,729) 36,280
Platinum Investor IV 1,104 (475) 629
Platinum Investor FlexDirector 3 (3) --
Platinum Investor PLUS 1,427 (7,409) (5,982)
Platinum Investor Plus (first reduction in expense ratio) 6,024 (60) 5,964
Platinum Investor Survivor II 112 (56) 56
Platinum Investor VIP 920 (5,144) (4,224)
Protection Advantage Select 169 (138) 31
UIF Growth Portfolio - Class I Shares
Platinum Investor I & II 363 (363) --
Platinum Investor I & II (first reduction in expense ratio) 8,470 (20,399) (11,929)
Platinum Investor III 2,395 (25,375) (22,980)
Platinum Investor III (first reduction in expense ratio) 21,027 (2,646) 18,381
Platinum Investor IV 246 (363) (117)
VL-R - 49
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Units Net Increase
Divisions Units Issued Redeemed (Decrease)
--------- ------------ ------------------ ------------
Platinum Investor PLUS 437 (632) (195)
Platinum Investor Plus (first reduction in expense ratio) 428 (1) 427
Platinum Investor Survivor -- (1,366) (1,366)
Platinum Investor Survivor (first reduction in expense ratio) 1,817 (3,196) (1,379)
Platinum Investor Survivor II 1,678 (20) 1,658
VALIC Company I International Equities Fund
AG Income Advantage VUL 898 (528) 370
AG Legacy Plus -- (220) (220)
AG Legacy Plus (first reduction in expense ratio) 244 (214) 30
Corporate America (reduced surrender charge) 290 (118) 172
Income Advantage Select 134 (30) 104
Platinum Investor I & II 1,584 (19,207) (17,623)
Platinum Investor I & II (first reduction in expense ratio) 31,436 (6,448) 24,988
Platinum Investor III 1,595 (27,610) (26,015)
Platinum Investor III (first reduction in expense ratio) 31,487 (2,411) 29,076
Platinum Investor IV 1,724 (1,541) 183
Platinum Investor FlexDirector -- (56) (56)
Platinum Investor PLUS 1,106 (2,180) (1,074)
Platinum Investor Plus (first reduction in expense ratio) 980 (1) 979
Platinum Investor Survivor (first reduction in expense ratio) 424 (5,320) (4,896)
Platinum Investor Survivor II 544 (1,514) (970)
Platinum Investor VIP 5,300 (1,468) 3,832
Protection Advantage Select 487 (517) (30)
VALIC Company I Mid Cap Index Fund
AG Income Advantage VUL 2,327 (278) 2,049
AG Legacy Plus 30 (1,327) (1,297)
AG Legacy Plus (first reduction in expense ratio) 1,891 (367) 1,524
Corporate America 30 (125) (95)
Corporate America (reduced surrender charge) 264 (83) 181
Income Advantage Select 106 (38) 68
VALIC Company I Mid Cap Index Fund - continued
Platinum Investor I & II 603 (1,155) (552)
Platinum Investor I & II (first reduction in expense ratio) 9,132 (36,838) (27,706)
Platinum Investor III 1,578 (94,440) (92,862)
Platinum Investor III (first reduction in expense ratio) 127,849 (23,687) 104,162
Platinum Investor IV 2,261 (3,550) (1,289)
Platinum Investor FlexDirector 24 (24) --
Platinum Investor PLUS 1,493 (5,818) (4,325)
Platinum Investor Plus (first reduction in expense ratio) 4,736 (15) 4,721
Platinum Investor Survivor (first reduction in expense ratio) 1,001 (12,887) (11,886)
Platinum Investor Survivor II 2,596 (20,399) (17,803)
Platinum Investor VIP 13,767 (13,898) (131)
Platinum Investor VIP (with GMWB rider) 68 (12) 56
Protection Advantage Select 333 (258) 75
VALIC Company I Money Market I Fund
AG Income Advantage VUL 4,318 (6,211) (1,893)
AG Income Advantage VUL (with GMWB rider) -- (10) (10)
AG Legacy Plus 191 (2,039) (1,848)
AG Legacy Plus (first reduction in expense ratio) 1,461 (311) 1,150
Corporate America (reduced surrender charge) 28,120 (21,809) 6,311
Income Advantage Select 1,792 (1,129) 663
Platinum Investor I & II 4,286 (30,510) (26,224)
Platinum Investor I & II (first reduction in expense ratio) 199,345 (428,950) (229,605)
Platinum Investor III 56,983 (165,673) (108,690)
Platinum Investor III (first reduction in expense ratio) 197,936 (70,828) 127,108
Platinum Investor IV 12,176 (11,033) 1,143
Platinum Investor FlexDirector 435 (274) 161
Platinum Investor PLUS 84,417 (90,321) (5,904)
Platinum Investor Plus (first reduction in expense ratio) 7,128 (68) 7,060
Platinum Investor Survivor 536 (619) (83)
Platinum Investor Survivor (first reduction in expense ratio) 14,639 (47,524) (32,885)
Platinum Investor Survivor II 7,001 (7,906) (905)
Platinum Investor VIP 81,419 (118,467) (37,048)
VL-R - 50
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Platinum Investor VIP (with GMWB rider) 63 (131) (68)
Protection Advantage Select 14,907 (4,272) 10,635
VALIC Company I Nasdaq-100 Index Fund
AG Income Advantage VUL 432 (907) (475)
Income Advantage Select 16 (8) 8
Platinum Investor I & II 990 (884) 106
Platinum Investor I & II (first reduction in expense ratio) 4,935 (21,438) (16,503)
Platinum Investor III 9,872 (124,408) (114,536)
Platinum Investor III (first reduction in expense ratio) 55,559 (7,803) 47,756
Platinum Investor IV 1,079 (411) 668
Platinum Investor FlexDirector 4 (6) (2)
Platinum Investor PLUS 1,380 (2,466) (1,086)
Platinum Investor Plus (first reduction in expense ratio) 2,187 (6) 2,181
Platinum Investor Survivor -- (139) (139)
Platinum Investor Survivor (first reduction in expense ratio) 84 (98) (14)
Platinum Investor Survivor II 2,439 (76) 2,363
Platinum Investor VIP 1,619 (854) 765
Protection Advantage Select 1,015 (649) 366
VALIC Company I Science & Technology Fund
AG Income Advantage VUL 282 (14) 268
Income Advantage Select 7 (3) 4
VALIC Company I Science & Technology Fund - continued
Platinum Investor I & II 73 (50) 23
Platinum Investor I & II (first reduction in expense ratio) 1,178 (4,666) (3,488)
Platinum Investor III 3,842 (42,517) (38,675)
Platinum Investor III (first reduction in expense ratio) 18,895 (1,804) 17,091
Platinum Investor IV 483 (253) 230
Platinum Investor FlexDirector 18 (15) 3
Platinum Investor PLUS 314 (519) (205)
Platinum Investor Plus (first reduction in expense ratio) 556 (7) 549
Platinum Investor Survivor (first reduction in expense ratio) 429 (92) 337
Platinum Investor Survivor II 410 (37) 373
Platinum Investor VIP 776 (637) 139
Protection Advantage Select 63 (23) 40
VALIC Company I Small Cap Index Fund
AG Income Advantage VUL 2,395 (698) 1,697
Corporate America (reduced surrender charge) 2,297 (3,591) (1,294)
Corporate Investor Select 22 (33) (11)
Income Advantage Select 60 (33) 27
Platinum Investor I & II 1,004 (1,062) (58)
Platinum Investor I & II (first reduction in expense ratio) 2,297 (50,837) (48,540)
Platinum Investor III 1,603 (68,018) (66,415)
Platinum Investor III (first reduction in expense ratio) 93,591 (34,646) 58,945
Platinum Investor IV 1,824 (1,707) 117
Platinum Investor FlexDirector 47 (124) (77)
Platinum Investor PLUS 1,444 (3,594) (2,150)
Platinum Investor Plus (first reduction in expense ratio) 2,080 (13) 2,067
Platinum Investor Survivor 42 (918) (876)
Platinum Investor Survivor (first reduction in expense ratio) 1,950 (1,078) 872
Platinum Investor Survivor II 4,129 (22,502) (18,373)
Platinum Investor VIP 15,195 (12,790) 2,405
Protection Advantage Select 981 (445) 536
VALIC Company I Stock Index Fund
AG Income Advantage VUL 364 (1,031) (667)
AG Legacy Plus 84 (15,781) (15,697)
AG Legacy Plus (first reduction in expense ratio) 14,942 (485) 14,457
Corporate America 61 (253) (192)
Corporate America (reduced surrender charge) 5,918 (8,105) (2,187)
Corporate Investor Select 23 (36) (13)
Income Advantage Select 1,203 (791) 412
Platinum Investor I & II 1,589 (17,781) (16,192)
Platinum Investor I & II (first reduction in expense ratio) 29,060 (71,608) (42,548)
Platinum Investor III 3,110 (244,272) (241,162)
VL-R - 51
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2012.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Platinum Investor III (first reduction in expense ratio) 213,667 (62,969) 150,698
Platinum Investor IV 3,104 (3,669) (565)
Platinum Investor FlexDirector 28 (189) (161)
Platinum Investor PLUS 3,682 (5,724) (2,042)
Platinum Investor Plus (first reduction in expense ratio) 3,782 (266) 3,516
Platinum Investor Survivor 299 (10,303) (10,004)
Platinum Investor Survivor (first reduction in expense ratio) 13,468 (12,035) 1,433
Platinum Investor Survivor II 10,141 (3,248) 6,893
Platinum Investor VIP 19,454 (12,699) 6,755
Protection Advantage Select 975 (879) 96
Vanguard VIF High Yield Bond Portfolio
AG Income Advantage VUL 2,835 (2,190) 645
Corporate America (reduced surrender charge) 1,438 (1,163) 275
Vanguard VIF High Yield Bond Portfolio - continued
Corporate Investor Select 20 (31) (11)
Income Advantage Select 153 (538) (385)
Platinum Investor I & II 148 (249) (101)
Platinum Investor I & II (first reduction in expense ratio) 8,903 (11,084) (2,181)
Platinum Investor III 3,266 (50,675) (47,409)
Platinum Investor III (first reduction in expense ratio) 60,654 (7,668) 52,986
Platinum Investor IV 5,694 (4,142) 1,552
Platinum Investor FlexDirector 9 (237) (228)
Platinum Investor PLUS 1,917 (7,208) (5,291)
Platinum Investor Plus (first reduction in expense ratio) 2,439 (5) 2,434
Platinum Investor Survivor 10 (767) (757)
Platinum Investor Survivor (first reduction in expense ratio) 6,156 (994) 5,162
Platinum Investor Survivor II 10,529 (5,059) 5,470
Platinum Investor VIP 5,024 (3,331) 1,693
Platinum Investor VIP (with GMWB rider) 28 (60) (32)
Protection Advantage Select 424 (422) 2
Vanguard VIF REIT Index Portfolio
AG Income Advantage VUL 2,001 (3,123) (1,122)
AG Income Advantage VUL (with GMWB rider) -- (6) (6)
Corporate America (reduced surrender charge) 1,272 (4,065) (2,793)
Income Advantage Select 338 (369) (31)
Income Advantage Select (with GMWB rider) 8 (5) 3
Platinum Investor I & II 235 (290) (55)
Platinum Investor I & II (first reduction in expense ratio) 9,802 (15,743) (5,941)
Platinum Investor III 2,825 (66,183) (63,358)
Platinum Investor III (first reduction in expense ratio) 161,399 (16,216) 145,183
Platinum Investor IV 6,055 (5,858) 197
Platinum Investor FlexDirector 238 (790) (552)
Platinum Investor PLUS 1,919 (18,990) (17,071)
Platinum Investor Plus (first reduction in expense ratio) 13,461 (12) 13,449
Platinum Investor Survivor 12 (753) (741)
Platinum Investor Survivor (first reduction in expense ratio) 2,737 (1,499) 1,238
Platinum Investor Survivor II 2,663 (2,571) 92
Platinum Investor VIP 9,347 (9,167) 180
Platinum Investor VIP (with GMWB rider) 83 (113) (30)
Protection Advantage Select 879 (844) 35
VL-R - 52
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Alger Capital Appreciation Portfolio - Class I-2 Shares
AG Income Advantage VUL 1,176 (767) 409
Corporate America (reduced surrender charge) 1,031 (14,889) (13,858)
Income Advantage Select 480 (439) 41
Platinum Investor I & II 14 (23) (9)
Platinum Investor I & II (first reduction in expense ratio) -- (17) (17)
Platinum Investor III 51,705 (49,611) 2,094
Platinum Investor III (first reduction in expense ratio) 24,242 (9,483) 14,759
Platinum Investor IV 2,252 (1,670) 582
Platinum Investor FlexDirector 46 (464) (418)
Platinum Investor PLUS 1,341 (3,358) (2,017)
Platinum Investor Survivor -- (1,136) (1,136)
Platinum Investor Survivor (first reduction in expense ratio) 20,167 (20,184) (17)
Platinum Investor Survivor II 1,065 (934) 131
Platinum Investor VIP 5,405 (9,463) (4,058)
Platinum Investor VIP (with GMWB rider) 465 (427) 38
Protection Advantage Select 1,863 (1,045) 818
Alger Mid Cap Growth Portfolio - Class I-2 Shares
AG Income Advantage VUL 1,059 (626) 433
AG Income Advantage VUL (with GMWB rider) -- (40) (40)
Corporate America (reduced surrender charge) 4,151 (10,291) (6,140)
Income Advantage Select 136 (110) 26
Platinum Investor I & II 30 (341) (311)
Platinum Investor III 4,943 (13,854) (8,911)
Platinum Investor III (first reduction in expense ratio) 12,621 (2,143) 10,478
Platinum Investor IV 2,970 (1,815) 1,155
Platinum Investor FlexDirector 26 (733) (707)
Platinum Investor PLUS 949 (1,922) (973)
Platinum Investor Survivor (first reduction in expense ratio) 1,134 (574) 560
Platinum Investor Survivor II 1,139 (1,373) (234)
Platinum Investor VIP 5,502 (5,507) (5)
Platinum Investor VIP (with GMWB rider) 31 (102) (71)
Protection Advantage Select 721 (1,416) (695)
American Century VP Value Fund - Class I
AG Income Advantage VUL 1,570 (645) 925
AG Legacy Plus 97 (7,902) (7,805)
AG Legacy Plus (first reduction in expense ratio) 10,968 (1,280) 9,688
Corporate America (reduced surrender charge) 3,636 (6,375) (2,739)
Income Advantage Select 277 (191) 86
Platinum Investor I & II 5,622 (41,383) (35,761)
Platinum Investor I & II (first reduction in expense ratio) 72,676 (38,707) 33,969
Platinum Investor III 45,100 (150,946) (105,846)
Platinum Investor III (first reduction in expense ratio) 122,006 (7,491) 114,515
Platinum Investor IV 8,335 (11,253) (2,918)
Platinum Investor FlexDirector 40 (94) (54)
Platinum Investor PLUS 3,876 (8,816) (4,940)
Platinum Investor Survivor 704 (9,986) (9,282)
Platinum Investor Survivor (first reduction in expense ratio) 15,818 (6,177) 9,641
Platinum Investor Survivor II 5,291 (8,227) (2,936)
Platinum Investor VIP 17,804 (18,105) (301)
Protection Advantage Select 1,500 (703) 797
Credit Suisse U.S. Equity Flex I Portfolio
AG Income Advantage VUL 137 (997) (860)
VL-R - 53
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Credit Suisse U.S. Equity Flex I Portfolio - continued
AG Income Advantage VUL (with GMWB rider) -- (265) (265)
Corporate America (reduced surrender charge) 133 (349) (216)
Income Advantage Select 57 (631) (574)
Platinum Investor I & II 389 (3,741) (3,352)
Platinum Investor I & II (first reduction in expense ratio) 4,219 (8,533) (4,314)
Platinum Investor III 5,619 (121,802) (116,183)
Platinum Investor III (first reduction in expense ratio) 19,522 (21,649) (2,127)
Platinum Investor IV 3,693 (16,536) (12,843)
Platinum Investor FlexDirector 225 (3,225) (3,000)
Platinum Investor PLUS 2,050 (12,743) (10,693)
Platinum Investor Survivor 171 (2,522) (2,351)
Platinum Investor Survivor (first reduction in expense ratio) 726 (1,768) (1,042)
Platinum Investor Survivor II 890 (4,943) (4,053)
Platinum Investor VIP 1,777 (23,521) (21,744)
Protection Advantage Select 425 (1,250) (825)
Dreyfus IP MidCap Stock Portfolio - Initial Shares
Platinum Investor I & II 2,698 (5,624) (2,926)
Platinum Investor I & II (first reduction in expense ratio) 25,378 (45,347) (19,969)
Platinum Investor III 8,200 (72,592) (64,392)
Platinum Investor III (first reduction in expense ratio) 73,702 (8,026) 65,676
Platinum Investor IV 5,675 (4,858) 817
Platinum Investor FlexDirector 3 (3) --
Platinum Investor PLUS 1,170 (2,281) (1,111)
Platinum Investor Survivor 11 (750) (739)
Platinum Investor Survivor (first reduction in expense ratio) 1,566 (136) 1,430
Platinum Investor Survivor II 266 (2,238) (1,972)
Dreyfus VIF International Value Portfolio - Initial Shares
AG Income Advantage VUL 525 (2,620) (2,095)
AG Income Advantage VUL (with GMWB rider) 1 (34) (33)
Income Advantage Select 557 (629) (72)
Protection Advantage Select 1,195 (553) 642
Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares
Corporate America 652 (766) (114)
Platinum Investor I & II 13,959 (29,747) (15,788)
Platinum Investor I & II (first reduction in expense ratio) 35,171 (36,667) (1,496)
Platinum Investor III 18,386 (148,437) (130,051)
Platinum Investor III (first reduction in expense ratio) 102,269 (8,401) 93,868
Platinum Investor IV 4,681 (1,983) 2,698
Platinum Investor FlexDirector -- (504) (504)
Platinum Investor PLUS 3,409 (7,155) (3,746)
Platinum Investor Survivor 1,266 (12,530) (11,264)
Platinum Investor Survivor (first reduction in expense ratio) 12,418 (6,500) 5,918
Platinum Investor Survivor II 82 (561) (479)
Dreyfus VIF Quality Bond Portfolio - Initial Shares
Corporate America 401 (447) (46)
Corporate America (reduced surrender charge) 1,629 (5,272) (3,643)
Platinum Investor I & II 1,910 (23,803) (21,893)
Platinum Investor I & II (first reduction in expense ratio) 59,734 (107,270) (47,536)
Platinum Investor III 14,575 (75,653) (61,078)
Platinum Investor III (first reduction in expense ratio) 67,458 (4,590) 62,868
Platinum Investor IV 1,096 (8,616) (7,520)
Platinum Investor FlexDirector 11 (271) (260)
VL-R - 54
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Dreyfus VIF Quality Bond Portfolio - Initial Shares - continued
Platinum Investor PLUS 4,767 (3,775) 992
Platinum Investor Survivor 228 (2,617) (2,389)
Platinum Investor Survivor (first reduction in expense ratio) 4,305 (390) 3,915
Platinum Investor Survivor II 768 (582) 186
Fidelity VIP Asset Manager Portfolio - Service Class 2
AG Income Advantage VUL 532 (94) 438
AG Legacy Plus 57 (3,146) (3,089)
AG Legacy Plus (first reduction in expense ratio) 2,683 (8) 2,675
Corporate America (reduced surrender charge) 3,159 (253) 2,906
Income Advantage Select 88 (216) (128)
Platinum Investor I & II 8,591 (27,749) (19,158)
Platinum Investor I & II (first reduction in expense ratio) 29,640 (13,060) 16,580
Platinum Investor III 26,731 (78,790) (52,059)
Platinum Investor III (first reduction in expense ratio) 45,143 (1,339) 43,804
Platinum Investor IV 1,002 (1,689) (687)
Platinum Investor FlexDirector 12 (61) (49)
Platinum Investor PLUS 1,440 (4,256) (2,816)
Platinum Investor Survivor 182 (1,824) (1,642)
Platinum Investor Survivor (first reduction in expense ratio) 2,010 (366) 1,644
Platinum Investor Survivor II 2,866 (2,956) (90)
Platinum Investor VIP 2,834 (3,961) (1,127)
Protection Advantage Select 2,460 (2,067) 393
Fidelity VIP Contrafund Portfolio - Service Class 2
AG Income Advantage VUL 3,749 (6,736) (2,987)
AG Legacy Plus 7,968 (16,321) (8,353)
AG Legacy Plus (first reduction in expense ratio) 5,763 (567) 5,196
Corporate America (reduced surrender charge) 10,506 (20,921) (10,415)
Corporate Investor Select 97 (21) 76
Income Advantage Select 1,050 (1,511) (461)
Platinum Investor I & II 16,712 (61,923) (45,211)
Platinum Investor I & II (first reduction in expense ratio) 123,969 (125,504) (1,535)
Platinum Investor III 59,678 (431,599) (371,921)
Platinum Investor III (first reduction in expense ratio) 276,998 (45,432) 231,566
Platinum Investor IV 16,662 (23,390) (6,728)
Platinum Investor FlexDirector 328 (1,823) (1,495)
Platinum Investor PLUS 6,595 (12,779) (6,184)
Platinum Investor Survivor 1,908 (63,786) (61,878)
Platinum Investor Survivor (first reduction in expense ratio) 98,637 (28,625) 70,012
Platinum Investor Survivor II 4,817 (6,691) (1,874)
Platinum Investor VIP 33,639 (35,813) (2,174)
Platinum Investor VIP (with GMWB rider) 77 (208) (131)
Protection Advantage Select 3,545 (4,047) (502)
Fidelity VIP Equity-Income Portfolio - Service Class 2
AG Income Advantage VUL 2,670 (7,704) (5,034)
AG Legacy Plus 307 (14,965) (14,658)
AG Legacy Plus (first reduction in expense ratio) 8,438 (1,526) 6,912
Corporate America (reduced surrender charge) 11,657 (22,545) (10,888)
Corporate Investor Select 102 (30) 72
Income Advantage Select 753 (635) 118
Platinum Investor I & II 18,653 (53,598) (34,945)
Platinum Investor I & II (first reduction in expense ratio) 65,977 (45,281) 20,696
Platinum Investor III 52,095 (290,150) (238,055)
VL-R - 55
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Fidelity VIP Equity-Income Portfolio - Service Class 2 - continued
Platinum Investor III (first reduction in expense ratio) 271,001 (33,256) 237,745
Platinum Investor IV 5,857 (11,342) (5,485)
Platinum Investor FlexDirector 939 (1,211) (272)
Platinum Investor PLUS 5,469 (12,229) (6,760)
Platinum Investor Survivor 2,568 (62,670) (60,102)
Platinum Investor Survivor (first reduction in expense ratio) 79,916 (9,862) 70,054
Platinum Investor Survivor II 1,964 (4,751) (2,787)
Platinum Investor VIP 15,977 (13,349) 2,628
Platinum Investor VIP (with GMWB rider) 210 (214) (4)
Protection Advantage Select 1,697 (1,401) 296
Fidelity VIP Freedom 2020 Portfolio - Service Class 2
AG Income Advantage VUL 1,845 (413) 1,432
Corporate Investor Select -- (8) (8)
Income Advantage Select 380 (437) (57)
Platinum Investor I & II (first reduction in expense ratio) 7,553 (511) 7,042
Platinum Investor III 1,161 (819) 342
Platinum Investor III (first reduction in expense ratio) 143 (93) 50
Platinum Investor IV 61 (17) 44
Platinum Investor FlexDirector 70 (130) (60)
Platinum Investor VIP 4,460 (656) 3,804
Protection Advantage Select 1,838 (1,898) (60)
Fidelity VIP Freedom 2025 Portfolio - Service Class 2
AG Income Advantage VUL 726 (1,881) (1,155)
Corporate America (reduced surrender charge) 1,299 (2,601) (1,302)
Income Advantage Select 19 (11) 8
Platinum Investor I & II (first reduction in expense ratio) 6,148 (113) 6,035
Platinum Investor III 870 (1,130) (260)
Platinum Investor III (first reduction in expense ratio) 4,978 (737) 4,241
Platinum Investor IV 34 (14) 20
Platinum Investor VIP 1,363 (1,164) 199
Platinum Investor VIP (with GMWB rider) 54 (163) (109)
Platinum Investor Survivor II 1,312 -- 1,312
Protection Advantage Select 132 (243) (111)
Fidelity VIP Freedom 2030 Portfolio - Service Class 2
AG Income Advantage VUL 1,863 (702) 1,161
Income Advantage Select 984 (221) 763
Platinum Investor III 7,218 (9,363) (2,145)
Platinum Investor III (first reduction in expense ratio) 6,702 (742) 5,960
Platinum Investor IV 128 (48) 80
Platinum Investor PLUS 99 (229) (130)
Platinum Investor Survivor II 169 (150) 19
Platinum Investor VIP 4,894 (3,405) 1,489
Platinum Investor VIP (with GMWB rider) 78 (177) (99)
Protection Advantage Select 800 (594) 206
Fidelity VIP Growth Portfolio - Service Class 2
AG Income Advantage VUL 3,449 (3,757) (308)
AG Legacy Plus 150 (8,957) (8,807)
AG Legacy Plus (first reduction in expense ratio) 5,862 (18) 5,844
Corporate America (reduced surrender charge) 3,287 (20,034) (16,747)
Income Advantage Select 192 (445) (253)
Platinum Investor I & II 5,674 (34,159) (28,485)
Platinum Investor I & II (first reduction in expense ratio) 31,408 (8,699) 22,709
VL-R - 56
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Units Accumulation Units Net Increase
Divisions Issued Redeemed (Decrease)
--------- ------------------ ------------------ ------------
Fidelity VIP Growth Portfolio - Service Class 2 - continued
Platinum Investor III 85,968 (409,539) (323,571)
Platinum Investor III (first reduction in expense ratio) 216,608 (17,101) 199,507
Platinum Investor IV 7,217 (8,161) (944)
Platinum Investor FlexDirector 261 (610) (349)
Platinum Investor PLUS 72,770 (12,297) 60,473
Platinum Investor Survivor 1,503 (31,320) (29,817)
Platinum Investor Survivor (first reduction in expense ratio) 28,661 (7,785) 20,876
Platinum Investor Survivor II 2,519 (8,352) (5,833)
Platinum Investor VIP 13,038 (8,710) 4,328
Protection Advantage Select 2,325 (1,437) 888
Fidelity VIP Mid Cap Portfolio - Service Class 2
AG Income Advantage VUL 2,071 (8,322) (6,251)
Corporate America (reduced surrender charge) 4,779 (8,850) (4,071)
Corporate Investor Select 87 (27) 60
Income Advantage Select 757 (1,378) (621)
Income Advantage Select (with GMWB rider) 9 (15) (6)
Platinum Investor I & II 33 (1,172) (1,139)
Platinum Investor I & II (first reduction in expense ratio) 2,820 (95) 2,725
Platinum Investor III 19,599 (54,579) (34,980)
Platinum Investor III (first reduction in expense ratio) 49,051 (4,255) 44,796
Platinum Investor IV 11,737 (17,590) (5,853)
Platinum Investor FlexDirector 287 (452) (165)
Platinum Investor PLUS 1,598 (3,470) (1,872)
Platinum Investor Survivor 388 (9,455) (9,067)
Platinum Investor Survivor (first reduction in expense ratio) 23,130 (4,674) 18,456
Platinum Investor Survivor II 1,514 (2,541) (1,027)
Platinum Investor VIP 20,899 (29,128) (8,229)
Platinum Investor VIP (with GMWB rider) 75 (10) 65
Protection Advantage Select 1,508 (806) 702
Franklin Templeton Franklin Small Cap Value Securities Fund - Class 2
AG Income Advantage VUL 3,348 (4,071) (723)
Corporate America (reduced surrender charge) 4,006 (2,140) 1,866
Income Advantage Select 588 (895) (307)
Income Advantage Select (with GMWB rider) 8 (18) (10)
Platinum Investor I & II 64 (1,177) (1,113)
Platinum Investor I & II (first reduction in expense ratio) 2,134 (120) 2,014
Platinum Investor III 16,698 (167,838) (151,140)
Platinum Investor III (first reduction in expense ratio) 24,541 (15,362) 9,179
Platinum Investor IV 9,063 (15,788) (6,725)
Platinum Investor FlexDirector 117 (318) (201)
Platinum Investor PLUS 1,653 (2,612) (959)
Platinum Investor Survivor 510 (11,036) (10,526)
Platinum Investor Survivor (first reduction in expense ratio) 33,679 (18,714) 14,965
Platinum Investor Survivor II 1,663 (1,548) 115
Platinum Investor VIP 19,934 (19,168) 766
Platinum Investor VIP (with GMWB rider) 57 (21) 36
Protection Advantage Select 1,499 (1,216) 283
Franklin Templeton Franklin Small-Mid Cap Growth Securities Fund -
Class 2
AG Legacy Plus 35 (7,433) (7,398)
AG Legacy Plus (first reduction in expense ratio) 1,485 (18) 1,467
Franklin Templeton Franklin U.S. Government Fund - Class 2
Corporate America (reduced surrender charge) 3,982 (3,326) 656
VL-R - 57
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Franklin Templeton Franklin U.S. Government Fund - Class 2 - continued
Platinum Investor I & II 170 (4,014) (3,844)
Platinum Investor I & II (first reduction in expense ratio) 15,688 (11,608) 4,080
Platinum Investor III 14,117 (26,911) (12,794)
Platinum Investor III (first reduction in expense ratio) 12,296 (3,863) 8,433
Platinum Investor IV 5,963 (14,589) (8,626)
Platinum Investor FlexDirector 71 (391) (320)
Platinum Investor PLUS 2,810 (29,501) (26,691)
Platinum Investor Survivor 1 (3,753) (3,752)
Platinum Investor Survivor (first reduction in expense ratio) 5,296 (158) 5,138
Platinum Investor Survivor II 1,277 (848) 429
Platinum Investor VIP 8,660 (6,071) 2,589
Franklin Templeton Mutual Shares Securities Fund - Class 2
AG Income Advantage VUL 5,298 (2,154) 3,144
Corporate America (reduced surrender charge) 2,740 (73) 2,667
Income Advantage Select 197 (794) (597)
Platinum Investor I & II 2,877 (27,282) (24,405)
Platinum Investor I & II (first reduction in expense ratio) 71,517 (79,786) (8,269)
Platinum Investor III 20,349 (223,111) (202,762)
Platinum Investor III (first reduction in expense ratio) 35,313 (10,579) 24,734
Platinum Investor IV 7,041 (9,710) (2,669)
Platinum Investor FlexDirector 92 (1,677) (1,585)
Platinum Investor PLUS 3,302 (4,481) (1,179)
Platinum Investor Survivor 3,869 (4,091) (222)
Platinum Investor Survivor (first reduction in expense ratio) 7,548 (20,977) (13,429)
Platinum Investor Survivor II 2,061 (1,270) 791
Platinum Investor VIP 15,082 (15,362) (280)
Platinum Investor VIP (with GMWB rider) -- (108) (108)
Protection Advantage Select 4,412 (2,060) 2,352
Franklin Templeton Templeton Foreign Securities Fund - Class 2
AG Legacy Plus 824 (3,194) (2,370)
AG Legacy Plus (first reduction in expense ratio) 2,062 (618) 1,444
Corporate America (reduced surrender charge) 2,235 (1,239) 996
Platinum Investor I & II 1,626 (6,346) (4,720)
Platinum Investor I & II (first reduction in expense ratio) 9,901 (11,556) (1,655)
Platinum Investor III 49,896 (86,888) (36,992)
Platinum Investor III (first reduction in expense ratio) 45,392 (11,555) 33,837
Platinum Investor IV 4,160 (5,144) (984)
Platinum Investor FlexDirector 892 (1,079) (187)
Platinum Investor PLUS 3,760 (2,755) 1,005
Platinum Investor Survivor 708 (7,047) (6,339)
Platinum Investor Survivor (first reduction in expense ratio) 10,873 (126) 10,747
Platinum Investor Survivor II 3,090 (7,939) (4,849)
Platinum Investor VIP 14,147 (9,505) 4,642
Goldman Sachs VIT Strategic Growth Fund - Institutional Shares
Platinum Investor I & II 1 (3,946) (3,945)
Platinum Investor I & II (first reduction in expense ratio) 4,206 (118) 4,088
Platinum Investor III 1 (4,754) (4,753)
Platinum Investor III (first reduction in expense ratio) 4,794 (190) 4,604
Platinum Investor PLUS -- (1) (1)
Platinum Investor Survivor (first reduction in expense ratio) -- (26,576) (26,576)
Platinum Investor Survivor II -- (226) (226)
VL-R - 58
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Invesco V.I. Core Equity Fund - Series I
Corporate America 559 (664) (105)
Corporate America (reduced surrender charge) 1,094 (490) 604
Platinum Investor I & II 6,304 (39,884) (33,580)
Platinum Investor I & II (first reduction in expense ratio) 57,724 (101,429) (43,705)
Platinum Investor III 14,147 (148,544) (134,397)
Platinum Investor III (first reduction in expense ratio) 137,200 (5,819) 131,381
Platinum Investor IV 1,723 (2,764) (1,041)
Platinum Investor FlexDirector 4 (3) 1
Platinum Investor PLUS 1,337 (2,590) (1,253)
Platinum Investor Survivor 2,175 (22,871) (20,696)
Platinum Investor Survivor (first reduction in expense ratio) 27,196 (2,911) 24,285
Platinum Investor Survivor II 236 (6,902) (6,666)
Invesco V.I. Global Real Estate Fund - Series I
AG Income Advantage VUL 501 (932) (431)
Income Advantage Select 1,251 (513) 738
Protection Advantage Select 251 (140) 111
Invesco V.I. Government Securities Fund - Series I
AG Legacy Plus 9,405 (3,627) 5,778
AG Legacy Plus (first reduction in expense ratio) 3,534 (70) 3,464
Invesco V.I. High Yield Fund - Series I
Platinum Investor I & II 6,982 (6,982) --
Platinum Investor I & II (first reduction in expense ratio) 54,212 (4,626) 49,586
Platinum Investor III 29,218 (6,464) 22,754
Platinum Investor III (first reduction in expense ratio) 7,961 (1,108) 6,853
Platinum Investor IV 4,138 (161) 3,977
Platinum Investor FlexDirector 44 (22) 22
Platinum Investor PLUS 4,206 (424) 3,782
Platinum Investor Survivor 478 -- 478
Platinum Investor Survivor II 118,643 (342) 118,301
Invesco V.I. International Growth Fund - Series I
AG Income Advantage VUL 3,907 (3,001) 906
AG Legacy Plus 495 (11,875) (11,380)
AG Legacy Plus (first reduction in expense ratio) 2,100 (3,318) (1,218)
Corporate America 691 (759) (68)
Corporate America (reduced surrender charge) 6,134 (13,415) (7,281)
Corporate Investor Select 100 (30) 70
Income Advantage Select 1,035 (561) 474
Platinum Investor I & II 5,918 (14,588) (8,670)
Platinum Investor I & II (first reduction in expense ratio) 55,176 (71,988) (16,812)
Platinum Investor III 37,497 (127,258) (89,761)
Platinum Investor III (first reduction in expense ratio) 64,369 (6,154) 58,215
Platinum Investor IV 5,563 (6,317) (754)
Platinum Investor FlexDirector 102 (946) (844)
Platinum Investor PLUS 1,339 (2,642) (1,303)
Platinum Investor Survivor 3,855 (20,380) (16,525)
Platinum Investor Survivor (first reduction in expense ratio) 31,542 (26,841) 4,701
Platinum Investor Survivor II 3,160 (1,531) 1,629
Platinum Investor VIP 13,228 (18,385) (5,157)
Platinum Investor VIP (with GMWB rider) 139 (50) 89
Protection Advantage Select 1,538 (1,106) 432
Invesco Van Kampen V.I. Capital Growth Fund - Series I
AG Legacy Plus -- (1,535) (1,535)
VL-R - 59
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Invesco Van Kampen V.I. Capital Growth Fund - Series I - continued
AG Legacy Plus (first reduction in expense ratio) 249 (2,668) (2,419)
Invesco Van Kampen V.I. Government Fund - Series I
AG Legacy Plus 169 (6,143) (5,974)
AG Legacy Plus (first reduction in expense ratio) 944 (944) --
Invesco Van Kampen V.I. Growth and Income Fund - Series I
AG Income Advantage VUL 2,696 (3,220) (524)
AG Income Advantage VUL (with GMWB rider) -- (45) (45)
Corporate America (reduced surrender charge) 608 (2,141) (1,533)
Income Advantage Select 250 (563) (313)
Platinum Investor I & II 5,190 (13,088) (7,898)
Platinum Investor I & II (first reduction in expense ratio) 42,945 (108,322) (65,377)
Platinum Investor III 16,932 (180,218) (163,286)
Platinum Investor III (first reduction in expense ratio) 50,241 (11,905) 38,336
Platinum Investor IV 8,840 (11,824) (2,984)
Platinum Investor FlexDirector 7 (121) (114)
Platinum Investor PLUS 2,745 (2,649) 96
Platinum Investor Survivor 65 (7,274) (7,209)
Platinum Investor Survivor (first reduction in expense ratio) 10,303 (16,092) (5,789)
Platinum Investor Survivor II 2,241 (4,641) (2,400)
Platinum Investor VIP 8,293 (10,789) (2,496)
Protection Advantage Select 3,019 (2,475) 544
Invesco Van Kampen V.I. High Yield Fund - Series I
Platinum Investor I & II 6 (5,026) (5,020)
Platinum Investor I & II (first reduction in expense ratio) 1,373 (39,476) (38,103)
Platinum Investor III 3,339 (19,801) (16,462)
Platinum Investor III (first reduction in expense ratio) 2,357 (2,422) (65)
Platinum Investor IV 376 (3,142) (2,766)
Platinum Investor FlexDirector -- (35) (35)
Platinum Investor PLUS 105 (2,303) (2,198)
Platinum Investor Survivor -- (316) (316)
Platinum Investor Survivor (first reduction in expense ratio) -- (333) (333)
Platinum Investor Survivor II 9 (64,581) (64,572)
Janus Aspen Enterprise Portfolio - Service Shares
AG Income Advantage VUL 802 (290) 512
Corporate America (reduced surrender charge) 784 (1,307) (523)
Income Advantage Select 218 (92) 126
Platinum Investor I & II 1,505 (13,542) (12,037)
Platinum Investor I & II (first reduction in expense ratio) 12,894 (2,646) 10,248
Platinum Investor III 50,896 (216,821) (165,925)
Platinum Investor III (first reduction in expense ratio) 106,269 (4,875) 101,394
Platinum Investor IV 2,804 (4,356) (1,552)
Platinum Investor FlexDirector 15 (33) (18)
Platinum Investor PLUS 1,063 (3,536) (2,473)
Platinum Investor Survivor 7 (3,060) (3,053)
Platinum Investor Survivor (first reduction in expense ratio) 3,365 (218) 3,147
Platinum Investor Survivor II 409 (30) 379
Platinum Investor VIP 3,512 (3,336) 176
Protection Advantage Select 520 (573) (53)
Janus Aspen Forty Portfolio - Service Shares
AG Income Advantage VUL 1,295 (449) 846
AG Income Advantage VUL (with GMWB rider) -- (39) (39)
Income Advantage Select 1,017 (988) 29
VL-R - 60
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Janus Aspen Forty Portfolio - Service Shares - continued
Protection Advantage Select 2,124 (992) 1,132
Janus Aspen Overseas Portfolio - Service Shares
AG Income Advantage VUL 3,629 (7,609) (3,980)
Corporate America (reduced surrender charge) 5,762 (8,410) (2,648)
Platinum Investor I & II 3,000 (13,951) (10,951)
Platinum Investor I & II (first reduction in expense ratio) 32,607 (24,469) 8,138
Platinum Investor III 27,131 (174,322) (147,191)
Platinum Investor III (first reduction in expense ratio) 193,141 (21,270) 171,871
Platinum Investor IV 5,720 (7,914) (2,194)
Platinum Investor FlexDirector 1,678 (543) 1,135
Platinum Investor PLUS 1,659 (31,061) (29,402)
Platinum Investor Survivor 3,993 (39,214) (35,221)
Platinum Investor Survivor (first reduction in expense ratio) 83,547 (8,381) 75,166
Platinum Investor Survivor II 2,727 (1,338) 1,389
Platinum Investor VIP 25,314 (23,393) 1,921
Platinum Investor VIP (with GMWB rider) 1,108 (225) 883
Protection Advantage Select 2,373 (1,986) 387
Janus Aspen Worldwide Portfolio - Service Shares
Corporate America (reduced surrender charge) -- (37) (37)
Platinum Investor I & II 1,583 (91,139) (89,556)
Platinum Investor I & II (first reduction in expense ratio) 27,226 (5,392) 21,834
Platinum Investor III 16,130 (132,289) (116,159)
Platinum Investor III (first reduction in expense ratio) 84,333 (6,003) 78,330
Platinum Investor IV 1,352 (1,013) 339
Platinum Investor PLUS 1,291 (2,025) (734)
Platinum Investor Survivor 14 (3,526) (3,512)
Platinum Investor Survivor (first reduction in expense ratio) 3,751 (849) 2,902
Platinum Investor Survivor II 236 (3,646) (3,410)
JPMorgan Insurance Trust Core Bond Portfolio - Class 1
AG Income Advantage VUL 308 (364) (56)
Income Advantage Select 268 (204) 64
Protection Advantage Select 932 (731) 201
JPMorgan Insurance Trust International Equity Portfolio - Class 1
AG Income Advantage VUL 237 (1,392) (1,155)
AG Income Advantage VUL (with GMWB rider) -- (40) (40)
Income Advantage Select 289 (827) (538)
Protection Advantage Select 458 (734) (276)
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1
Platinum Investor I & II -- (4,223) (4,223)
Platinum Investor I & II (first reduction in expense ratio) 3,986 (10) 3,976
Platinum Investor III 587 (100,913) (100,326)
Platinum Investor III (first reduction in expense ratio) 3,268 (4,835) (1,567)
Platinum Investor IV 2 (733) (731)
Platinum Investor PLUS 6 (623) (617)
Platinum Investor Survivor 11 (23) (12)
Platinum Investor Survivor (first reduction in expense ratio) 12 (19) (7)
Platinum Investor Survivor II -- (118) (118)
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1
Platinum Investor I & II 804 (1,590) (786)
Platinum Investor I & II (first reduction in expense ratio) 5,291 (5,129) 162
Platinum Investor III 10,300 (26,666) (16,366)
Platinum Investor III (first reduction in expense ratio) 15,196 (1,195) 14,001
VL-R - 61
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 - continued
Platinum Investor IV 4,126 (5,495) (1,369)
Platinum Investor FlexDirector 66 (337) (271)
Platinum Investor PLUS 1,176 (1,295) (119)
Platinum Investor Survivor 4 (8) (4)
Platinum Investor Survivor (first reduction in expense ratio) 82 (417) (335)
Platinum Investor Survivor II 2,148 (4,291) (2,143)
Platinum Investor VIP 12,632 (8,492) 4,140
MFS VIT Core Equity Series - Initial Class
Corporate America (reduced surrender charge) 307 (2,565) (2,258)
Platinum Investor I & II 2,820 (23,049) (20,229)
Platinum Investor I & II (first reduction in expense ratio) 18,014 (3,405) 14,609
Platinum Investor III 12,271 (161,174) (148,903)
Platinum Investor III (first reduction in expense ratio) 97,453 (8,615) 88,838
Platinum Investor IV 1,279 (457) 822
Platinum Investor PLUS 2,179 (5,068) (2,889)
Platinum Investor Survivor 957 (19,319) (18,362)
Platinum Investor Survivor (first reduction in expense ratio) 15,692 (420) 15,272
Platinum Investor Survivor II 301 (2,024) (1,723)
MFS VIT Growth Series - Initial Class
AG Legacy Plus 61 (1,614) (1,553)
AG Legacy Plus (first reduction in expense ratio) 1,904 (1,295) 609
Corporate America (reduced surrender charge) 275 (2,185) (1,910)
Platinum Investor I & II 24,365 (52,036) (27,671)
Platinum Investor I & II (first reduction in expense ratio) 57,727 (127,618) (69,891)
Platinum Investor III 18,191 (287,049) (268,858)
Platinum Investor III (first reduction in expense ratio) 139,336 (7,764) 131,572
Platinum Investor IV 1,277 (1,454) (177)
Platinum Investor FlexDirector 669 (658) 11
Platinum Investor PLUS 2,160 (5,719) (3,559)
Platinum Investor Survivor 6,268 (31,112) (24,844)
Platinum Investor Survivor (first reduction in expense ratio) 17,960 (2,089) 15,871
Platinum Investor Survivor II 153 (1,175) (1,022)
MFS VIT New Discovery Series - Initial Class
AG Income Advantage VUL 362 (436) (74)
AG Legacy Plus 5,027 (16,381) (11,354)
AG Legacy Plus (first reduction in expense ratio) 315 -- 315
Corporate America (reduced surrender charge) 656 (928) (272)
Income Advantage Select 104 (72) 32
Platinum Investor I & II 800 (16,279) (15,479)
Platinum Investor I & II (first reduction in expense ratio) 48,707 (49,205) (498)
Platinum Investor III 49,135 (144,385) (95,250)
Platinum Investor III (first reduction in expense ratio) 46,325 (6,989) 39,336
Platinum Investor IV 5,338 (3,774) 1,564
Platinum Investor FlexDirector 765 (80) 685
Platinum Investor PLUS 4,356 (3,353) 1,003
Platinum Investor Survivor 97 (6,616) (6,519)
Platinum Investor Survivor (first reduction in expense ratio) 15,707 (9,487) 6,220
Platinum Investor Survivor II 1,208 (660) 548
Platinum Investor VIP 5,237 (2,377) 2,860
Platinum Investor VIP (with GMWB rider) -- (14) (14)
Protection Advantage Select 333 (236) 97
VL-R - 62
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
MFS VIT Research Series - Initial Class
AG Income Advantage VUL 427 (289) 138
Corporate America (reduced surrender charge) 36 (48) (12)
Income Advantage Select 541 (341) 200
Platinum Investor I & II 2,081 (7,426) (5,345)
Platinum Investor I & II (first reduction in expense ratio) 24,123 (29,535) (5,412)
Platinum Investor III 9,816 (350,863) (341,047)
Platinum Investor III (first reduction in expense ratio) 46,395 (9,081) 37,314
Platinum Investor IV 824 (1,184) (360)
Platinum Investor FlexDirector 3 (18) (15)
Platinum Investor PLUS 752 (1,367) (615)
Platinum Investor Survivor 12 (7,047) (7,035)
Platinum Investor Survivor (first reduction in expense ratio) 13,316 (18,650) (5,334)
Platinum Investor Survivor II 28 (53) (25)
Platinum Investor VIP 1,893 (3,561) (1,668)
Protection Advantage Select 571 (680) (109)
MFS VIT Total Return Series - Initial Class
AG Legacy Plus 2,806 (27,160) (24,354)
AG Legacy Plus (first reduction in expense ratio) 12,464 (442) 12,022
Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I
AG Income Advantage VUL 879 (611) 268
Corporate America (reduced surrender charge) 1,787 (1,489) 298
Income Advantage Select 735 (290) 445
Platinum Investor I & II 2,287 (10,049) (7,762)
Platinum Investor I & II (first reduction in expense ratio) 23,883 (33,123) (9,240)
Platinum Investor III 14,548 (139,525) (124,977)
Platinum Investor III (first reduction in expense ratio) 55,688 (4,553) 51,135
Platinum Investor IV 4,788 (5,913) (1,125)
Platinum Investor FlexDirector 6 (301) (295)
Platinum Investor PLUS 1,904 (7,038) (5,134)
Platinum Investor Survivor 480 (18,497) (18,017)
Platinum Investor Survivor (first reduction in expense ratio) 19,061 (7,387) 11,674
Platinum Investor Survivor II 2,138 (1,942) 196
Platinum Investor VIP 11,136 (6,572) 4,564
Platinum Investor VIP (with GMWB rider) 25 (75) (50)
Protection Advantage Select 1,305 (833) 472
Neuberger Berman AMT Partners Portfolio - Class I
AG Legacy Plus 35 (5,458) (5,423)
AG Legacy Plus (first reduction in expense ratio) 3,322 (71) 3,251
Neuberger Berman AMT Socially Responsive Portfolio - Class I
AG Income Advantage VUL 58 (11) 47
Corporate America (reduced surrender charge) 695 (19) 676
Income Advantage Select 11 (5) 6
Protection Advantage Select 38 (14) 24
Oppenheimer Balanced Fund/VA - Non-Service Shares
AG Income Advantage VUL 214 (457) (243)
Income Advantage Select 92 (665) (573)
Platinum Investor I & II 265 (2,142) (1,877)
Platinum Investor I & II (first reduction in expense ratio) 2,457 (9,393) (6,936)
Platinum Investor III 5,383 (14,193) (8,810)
Platinum Investor III (first reduction in expense ratio) 2,661 (71) 2,590
Platinum Investor IV 2,223 (4,945) (2,722)
Platinum Investor FlexDirector 343 (808) (465)
VL-R - 63
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Oppenheimer Balanced Fund/VA - Non-Service Shares - continued
Platinum Investor PLUS 555 (812) (257)
Platinum Investor Survivor (first reduction in expense ratio) 64 (8) 56
Platinum Investor Survivor II 1,227 (3,617) (2,390)
Platinum Investor VIP 4,943 (7,850) (2,907)
Platinum Investor VIP (with GMWB rider) 1 (16) (15)
Protection Advantage Select 711 (461) 250
Oppenheimer Global Securities Fund/VA - Non-Service Shares
AG Income Advantage VUL 1,918 (3,478) (1,560)
Corporate America (reduced surrender charge) 1,714 (2,739) (1,025)
Corporate Investor Select 141 (42) 99
Income Advantage Select 383 (552) (169)
Platinum Investor I & II 161 (24,723) (24,562)
Platinum Investor I & II (first reduction in expense ratio) 3,490 (36) 3,454
Platinum Investor III 27,234 (30,282) (3,048)
Platinum Investor III (first reduction in expense ratio) 18,750 (2,276) 16,474
Platinum Investor IV 6,132 (6,413) (281)
Platinum Investor FlexDirector 39 (66) (27)
Platinum Investor PLUS 1,374 (2,222) (848)
Platinum Investor Survivor -- (25) (25)
Platinum Investor Survivor (first reduction in expense ratio) 378 (246) 132
Platinum Investor Survivor II 2,797 (2,046) 751
Platinum Investor VIP 14,604 (12,527) 2,077
Platinum Investor VIP (with GMWB rider) 78 (181) (103)
Protection Advantage Select 1,941 (737) 1,204
Oppenheimer High Income Fund/VA - Non-Service Shares
AG Legacy Plus 1,297 (3,271) (1,974)
AG Legacy Plus (first reduction in expense ratio) 1,738 (24,447) (22,709)
PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class
AG Income Advantage VUL 780 (792) (12)
AG Income Advantage VUL (with GMWB rider) -- (13) (13)
Corporate America (reduced surrender charge) 2,286 (1,010) 1,276
Income Advantage Select 433 (235) 198
Platinum Investor I & II 1,277 (1,839) (562)
Platinum Investor I & II (first reduction in expense ratio) 28,262 (27,337) 925
Platinum Investor III 46,947 (194,072) (147,125)
Platinum Investor III (first reduction in expense ratio) 29,876 (20,042) 9,834
Platinum Investor IV 5,499 (1,748) 3,751
Platinum Investor FlexDirector 398 (203) 195
Platinum Investor PLUS 795 (390) 405
Platinum Investor Survivor II 2,000 (36,598) (34,598)
Platinum Investor VIP 25,627 (12,897) 12,730
Platinum Investor VIP (with GMWB rider) 35 (4) 31
Protection Advantage Select 1,523 (559) 964
PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class
AG Income Advantage VUL 93 (2,721) (2,628)
Income Advantage Select 397 (335) 62
Protection Advantage Select 377 (315) 62
PIMCO VIT Real Return Portfolio - Administrative Class
AG Income Advantage VUL 907 (774) 133
AG Legacy Plus 126 (13,820) (13,694)
AG Legacy Plus (first reduction in expense ratio) 6,123 (22) 6,101
Corporate America (reduced surrender charge) 4,227 (12,675) (8,448)
VL-R - 64
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
PIMCO VIT Real Return Portfolio - Administrative Class - continued
Corporate Investor Select 58 (18) 40
Income Advantage Select 334 (986) (652)
Platinum Investor I & II 3,656 (26,573) (22,917)
Platinum Investor I & II (first reduction in expense ratio) 174,695 (169,362) 5,333
Platinum Investor III 35,106 (123,334) (88,228)
Platinum Investor III (first reduction in expense ratio) 114,576 (13,065) 101,511
Platinum Investor IV 7,114 (15,176) (8,062)
Platinum Investor FlexDirector 7 (88) (81)
Platinum Investor PLUS 3,957 (6,470) (2,513)
Platinum Investor Survivor 401 (6,038) (5,637)
Platinum Investor Survivor (first reduction in expense ratio) 12,701 (6,974) 5,727
Platinum Investor Survivor II 2,959 (4,541) (1,582)
Platinum Investor VIP 20,006 (10,243) 9,763
Protection Advantage Select 693 (591) 102
PIMCO VIT Short-Term Portfolio - Administrative Class
AG Income Advantage VUL 1,005 (1,539) (534)
AG Income Advantage VUL (with GMWB rider) -- (25) (25)
Corporate America (reduced surrender charge) 93 (2,886) (2,793)
Corporate Investor Select -- (11) (11)
Income Advantage Select 228 (423) (195)
Platinum Investor I & II 4,580 (23,647) (19,067)
Platinum Investor I & II (first reduction in expense ratio) 214,205 (82,535) 131,670
Platinum Investor III 1,274,017 (1,109,681) 164,336
Platinum Investor III (first reduction in expense ratio) 168,951 (91,161) 77,790
Platinum Investor IV 5,187 (4,137) 1,050
Platinum Investor FlexDirector 412 (864) (452)
Platinum Investor PLUS 3,223 (6,969) (3,746)
Platinum Investor Survivor 158 (28,224) (28,066)
Platinum Investor Survivor (first reduction in expense ratio) 129,897 (102,527) 27,370
Platinum Investor Survivor II 60,088 (6,957) 53,131
Platinum Investor VIP 14,874 (17,095) (2,221)
Platinum Investor VIP (with GMWB rider) 106 (14) 92
Protection Advantage Select 319 (353) (34)
PIMCO VIT Total Return Portfolio - Administrative Class
AG Income Advantage VUL 1,419 (1,973) (554)
AG Income Advantage VUL (with GMWB rider) 1 (23) (22)
AG Legacy Plus 225 (6,361) (6,136)
AG Legacy Plus (first reduction in expense ratio) 5,265 (23) 5,242
Corporate America (reduced surrender charge) 8,478 (19,598) (11,120)
Corporate Investor Select 125 (27) 98
Income Advantage Select 572 (1,312) (740)
Platinum Investor I & II 9,596 (31,763) (22,167)
Platinum Investor I & II (first reduction in expense ratio) 118,431 (207,429) (88,998)
Platinum Investor III 73,854 (705,628) (631,774)
Platinum Investor III (first reduction in expense ratio) 170,850 (72,366) 98,484
Platinum Investor IV 17,750 (22,612) (4,862)
Platinum Investor FlexDirector 1,295 (1,760) (465)
Platinum Investor PLUS 6,486 (8,659) (2,173)
Platinum Investor Survivor 1,451 (29,712) (28,261)
Platinum Investor Survivor (first reduction in expense ratio) 63,732 (97,095) (33,363)
Platinum Investor Survivor II 4,808 (6,159) (1,351)
Platinum Investor VIP 26,324 (34,841) (8,517)
VL-R - 65
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
PIMCO VIT Total Return Portfolio - Administrative Class - continued
Platinum Investor VIP (with GMWB rider) 144 (63) 81
Protection Advantage Select 5,958 (3,143) 2,815
Pioneer Fund VCT Portfolio - Class I
Platinum Investor I & II 3,503 (11,897) (8,394)
Platinum Investor I & II (first reduction in expense ratio) 19,041 (55,658) (36,617)
Platinum Investor III 1,622 (19,959) (18,337)
Platinum Investor III (first reduction in expense ratio) 20,327 (3,366) 16,961
Platinum Investor PLUS 48 (532) (484)
Platinum Investor Survivor 134 (2,467) (2,333)
Platinum Investor Survivor (first reduction in expense ratio) 3,458 (106) 3,352
Platinum Investor Survivor II 1 (220) (219)
Pioneer Growth Opportunities VCT Portfolio - Class I
Corporate America 534 (600) (66)
Platinum Investor I & II 3,338 (10,987) (7,649)
Platinum Investor I & II (first reduction in expense ratio) 15,250 (42,606) (27,356)
Platinum Investor III 5,488 (40,423) (34,935)
Platinum Investor III (first reduction in expense ratio) 30,418 (1,648) 28,770
Platinum Investor PLUS 1,027 (1,770) (743)
Platinum Investor Survivor 61 (1,351) (1,290)
Platinum Investor Survivor (first reduction in expense ratio) 1,743 (259) 1,484
Platinum Investor Survivor II -- (133) (133)
Pioneer Mid Cap Value VCT Portfolio - Class I
AG Income Advantage VUL 197 (268) (71)
Corporate America (reduced surrender charge) 1,268 (727) 541
Income Advantage Select 130 (70) 60
Platinum Investor I & II 31 (16) 15
Platinum Investor I & II (first reduction in expense ratio) -- (14) (14)
Platinum Investor III 14,589 (1,414) 13,175
Platinum Investor III (first reduction in expense ratio) 3,273 (532) 2,741
Platinum Investor IV 1,229 (1,046) 183
Platinum Investor FlexDirector 1,129 (375) 754
Platinum Investor PLUS 428 (446) (18)
Platinum Investor Survivor II 2,309 (1,332) 977
Platinum Investor VIP 6,241 (5,672) 569
Platinum Investor VIP (with GMWB rider) 486 (203) 283
Protection Advantage Select 520 (235) 285
Putnam VT Diversified Income Fund - Class IB
AG Income Advantage VUL 357 (1,787) (1,430)
AG Legacy Plus 141 (3,652) (3,511)
AG Legacy Plus (first reduction in expense ratio) 1,629 (15) 1,614
Corporate America -- (5,643) (5,643)
Corporate America (reduced surrender charge) 2,866 (11,029) (8,163)
Income Advantage Select 68 (287) (219)
Income Advantage Select (with GMWB rider) 9 (18) (9)
Platinum Investor I & II 1,052 (2,092) (1,040)
Platinum Investor I & II (first reduction in expense ratio) 4,399 (7,973) (3,574)
Platinum Investor III 17,940 (53,314) (35,374)
Platinum Investor III (first reduction in expense ratio) 38,202 (1,979) 36,223
Platinum Investor IV 1,411 (2,058) (647)
Platinum Investor FlexDirector 53 (1) 52
Platinum Investor PLUS 480 (1,253) (773)
Platinum Investor Survivor -- (762) (762)
VL-R - 66
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Putnam VT Diversified Income Fund - Class IB - continued
Platinum Investor Survivor (first reduction in expense ratio) 1,298 (24) 1,274
Platinum Investor Survivor II 1,068 (489) 579
Platinum Investor VIP 4,051 (8,408) (4,357)
Protection Advantage Select 247 (228) 19
Putnam VT Growth and Income Fund - Class IB
Corporate America 2 (9,519) (9,517)
Corporate America (reduced surrender charge) 1,322 (1,273) 49
Platinum Investor I & II 23,843 (65,718) (41,875)
Platinum Investor I & II (first reduction in expense ratio) 73,929 (52,851) 21,078
Platinum Investor III 39,968 (188,861) (148,893)
Platinum Investor III (first reduction in expense ratio) 123,542 (10,567) 112,975
Platinum Investor IV 6,007 (5,462) 545
Platinum Investor FlexDirector 19 (407) (388)
Platinum Investor PLUS 3,020 (3,398) (378)
Platinum Investor Survivor 4,604 (16,124) (11,520)
Platinum Investor Survivor (first reduction in expense ratio) 12,875 (7,703) 5,172
Platinum Investor Survivor II 1,098 (2,986) (1,888)
Putnam VT International Value Fund - Class IB
Corporate America (reduced surrender charge) 3,684 (1,405) 2,279
Platinum Investor I & II 12,657 (30,338) (17,681)
Platinum Investor I & II (first reduction in expense ratio) 43,930 (86,664) (42,734)
Platinum Investor III 10,522 (70,312) (59,790)
Platinum Investor III (first reduction in expense ratio) 74,770 (3,449) 71,321
Platinum Investor IV 2,912 (3,797) (885)
Platinum Investor FlexDirector 11 (111) (100)
Platinum Investor PLUS 1,418 (1,913) (495)
Platinum Investor Survivor 1,775 (5,651) (3,876)
Platinum Investor Survivor (first reduction in expense ratio) 7,222 (6,088) 1,134
Platinum Investor Survivor II 294 (490) (196)
Platinum Investor VIP 14,245 (10,249) 3,996
Platinum Investor VIP (with GMWB rider) 99 (234) (135)
Putnam VT Multi-Cap Growth Fund - Class IB
AG Legacy Plus 426 (13,483) (13,057)
AG Legacy Plus (first reduction in expense ratio) 973 (998) (25)
Putnam VT Small Cap Value Fund - Class IB
AG Income Advantage VUL 232 (3,426) (3,194)
AG Legacy Plus 654 (8,850) (8,196)
AG Legacy Plus (first reduction in expense ratio) 7,677 (1,279) 6,398
Income Advantage Select 75 (39) 36
Protection Advantage Select 129 (75) 54
Putnam VT Voyager Fund - Class IB
AG Legacy Plus 7,668 (32,875) (25,207)
AG Legacy Plus (first reduction in expense ratio) 3,005 (1,089) 1,916
SunAmerica Aggressive Growth Portfolio - Class 1
AG Income Advantage VUL 1,636 (226) 1,410
Income Advantage Select 105 (259) (154)
Platinum Investor I & II 196 (196) --
Platinum Investor I & II (first reduction in expense ratio) 22,508 (3,000) 19,508
Platinum Investor III 5,614 (6,091) (477)
Platinum Investor III (first reduction in expense ratio) 3,696 (825) 2,871
Platinum Investor IV 1,627 (2,279) (652)
Platinum Investor FlexDirector 5 (29) (24)
VL-R - 67
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
SunAmerica Aggressive Growth Portfolio - Class 1 - continued
Platinum Investor PLUS 935 (1,893) (958)
Platinum Investor Survivor II 24 (49) (25)
Platinum Investor VIP 14,447 (3,994) 10,453
Protection Advantage Select 46 (50) (4)
SunAmerica Balanced Portfolio - Class 1
AG Income Advantage VUL 82 (123) (41)
Income Advantage Select 76 (629) (553)
Platinum Investor I & II 8 (290) (282)
Platinum Investor I & II (first reduction in expense ratio) 2,445 (1,651) 794
Platinum Investor III 20,800 (19,647) 1,153
Platinum Investor III (first reduction in expense ratio) 6,040 (3,919) 2,121
Platinum Investor IV 879 (702) 177
Platinum Investor FlexDirector 4 (3) 1
Platinum Investor PLUS 1,878 (1,974) (96)
Platinum Investor Survivor II 599 (317) 282
Platinum Investor VIP 5,960 (3,687) 2,273
Protection Advantage Select 232 (193) 39
UIF Growth Portfolio - Class I Shares
Platinum Investor I & II 7,554 (17,937) (10,383)
Platinum Investor I & II (first reduction in expense ratio) 25,201 (46,074) (20,873)
Platinum Investor III 4,305 (20,006) (15,701)
Platinum Investor III (first reduction in expense ratio) 10,107 (1,366) 8,741
Platinum Investor IV 1,035 (1,398) (363)
Platinum Investor PLUS 455 (505) (50)
Platinum Investor Survivor 153 (3,959) (3,806)
Platinum Investor Survivor (first reduction in expense ratio) 3,734 (157) 3,577
Platinum Investor Survivor II -- (165) (165)
VALIC Company I International Equities Fund
AG Income Advantage VUL 995 (1,812) (817)
AG Legacy Plus 5,414 (13,304) (7,890)
AG Legacy Plus (first reduction in expense ratio) 2,026 (41) 1,985
Corporate America (reduced surrender charge) 256 (99) 157
Income Advantage Select 174 (90) 84
Platinum Investor I & II 3,288 (40,363) (37,075)
Platinum Investor I & II (first reduction in expense ratio) 12,654 (13,010) (356)
Platinum Investor III 8,005 (55,967) (47,962)
Platinum Investor III (first reduction in expense ratio) 25,306 (2,655) 22,651
Platinum Investor IV 1,798 (2,118) (320)
Platinum Investor FlexDirector 1 (57) (56)
Platinum Investor PLUS 2,802 (1,102) 1,700
Platinum Investor Survivor 88 (8,831) (8,743)
Platinum Investor Survivor (first reduction in expense ratio) 10,805 (96) 10,709
Platinum Investor Survivor II 1,094 (1,777) (683)
Platinum Investor VIP 6,574 (7,155) (581)
Protection Advantage Select 400 (432) (32)
VALIC Company I Mid Cap Index Fund
AG Income Advantage VUL 535 (1,214) (679)
AG Legacy Plus 162 (8,425) (8,263)
AG Legacy Plus (first reduction in expense ratio) 4,022 (1,151) 2,871
Corporate America 916 (996) (80)
Corporate America (reduced surrender charge) 501 (3,088) (2,587)
Income Advantage Select 117 (50) 67
VL-R - 68
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
VALIC Company I Mid Cap Index Fund - continued
Platinum Investor I & II 3,286 (22,947) (19,661)
Platinum Investor I & II (first reduction in expense ratio) 79,527 (92,695) (13,168)
Platinum Investor III 24,934 (171,322) (146,388)
Platinum Investor III (first reduction in expense ratio) 179,808 (13,322) 166,486
Platinum Investor IV 2,870 (3,071) (201)
Platinum Investor FlexDirector 43 (23) 20
Platinum Investor PLUS 2,580 (2,894) (314)
Platinum Investor Survivor 100 (13,616) (13,516)
Platinum Investor Survivor (first reduction in expense ratio) 24,955 (5,969) 18,986
Platinum Investor Survivor II 874 (2,549) (1,675)
Platinum Investor VIP 17,451 (28,286) (10,835)
Platinum Investor VIP (with GMWB rider) 71 (169) (98)
Protection Advantage Select 128 (620) (492)
VALIC Company I Money Market I Fund
AG Income Advantage VUL 6,461 (8,145) (1,684)
AG Income Advantage VUL (with GMWB rider) 190 (1) 189
AG Legacy Plus 6,476 (12,924) (6,448)
AG Legacy Plus (first reduction in expense ratio) 1,646 (62) 1,584
Corporate America 425 (4,272) (3,847)
Corporate America (reduced surrender charge) 22,391 (198,886) (176,495)
Income Advantage Select 3,398 (3,566) (168)
Platinum Investor I & II 41,971 (99,559) (57,588)
Platinum Investor I & II (first reduction in expense ratio) 402,791 (170,729) 232,062
Platinum Investor III 280,912 (364,418) (83,506)
Platinum Investor III (first reduction in expense ratio) 209,114 (70,145) 138,969
Platinum Investor IV 49,316 (57,904) (8,588)
Platinum Investor FlexDirector 2,434 (1,984) 450
Platinum Investor PLUS 43,688 (35,325) 8,363
Platinum Investor Survivor 1,431 (69,049) (67,618)
Platinum Investor Survivor (first reduction in expense ratio) 152,843 (96,185) 56,658
Platinum Investor Survivor II 9,627 (2,875) 6,752
Platinum Investor VIP 143,370 (83,208) 60,162
Platinum Investor VIP (with GMWB rider) 47 (6) 41
Protection Advantage Select 15,477 (3,980) 11,497
VALIC Company I Nasdaq-100 Index Fund
AG Income Advantage VUL 844 (4,608) (3,764)
Income Advantage Select 17 (12) 5
Platinum Investor I & II 3,782 (13,276) (9,494)
Platinum Investor I & II (first reduction in expense ratio) 45,188 (40,902) 4,286
Platinum Investor III 39,018 (159,808) (120,790)
Platinum Investor III (first reduction in expense ratio) 60,028 (3,301) 56,727
Platinum Investor IV 850 (663) 187
Platinum Investor FlexDirector 17 (57) (40)
Platinum Investor PLUS 1,163 (2,200) (1,037)
Platinum Investor Survivor 3,197 (8,552) (5,355)
Platinum Investor Survivor (first reduction in expense ratio) 3,078 (2,773) 305
Platinum Investor Survivor II 380 (19,504) (19,124)
Platinum Investor VIP 2,447 (1,272) 1,175
Protection Advantage Select 1,183 (700) 483
VALIC Company I Science & Technology Fund
AG Income Advantage VUL 363 (26) 337
Income Advantage Select 7 (4) 3
VL-R - 69
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
VALIC Company I Science & Technology Fund - continued
Platinum Investor I & II 172 (5,004) (4,832)
Platinum Investor I & II (first reduction in expense ratio) 6,523 (4,545) 1,978
Platinum Investor III 17,311 (96,961) (79,650)
Platinum Investor III (first reduction in expense ratio) 30,135 (1,652) 28,483
Platinum Investor IV 783 (320) 463
Platinum Investor FlexDirector 409 (120) 289
Platinum Investor PLUS 495 (789) (294)
Platinum Investor Survivor 1 (4,794) (4,793)
Platinum Investor Survivor (first reduction in expense ratio) 2,629 (32) 2,597
Platinum Investor Survivor II 3,064 (1,481) 1,583
Platinum Investor VIP 3,473 (2,764) 709
Protection Advantage Select 74 (537) (463)
VALIC Company I Small Cap Index Fund
AG Income Advantage VUL 501 (4,462) (3,961)
Corporate America (reduced surrender charge) 3,585 (8,556) (4,971)
Corporate Investor Select 93 (29) 64
Income Advantage Select 78 (57) 21
Platinum Investor I & II 2,537 (4,445) (1,908)
Platinum Investor I & II (first reduction in expense ratio) 42,235 (15,017) 27,218
Platinum Investor III 21,619 (84,669) (63,050)
Platinum Investor III (first reduction in expense ratio) 66,108 (1,455) 64,653
Platinum Investor IV 3,022 (5,360) (2,338)
Platinum Investor FlexDirector 173 (108) 65
Platinum Investor PLUS 2,071 (2,429) (358)
Platinum Investor Survivor 75 (3,566) (3,491)
Platinum Investor Survivor (first reduction in expense ratio) 5,315 (1,363) 3,952
Platinum Investor Survivor II 1,364 (2,626) (1,262)
Platinum Investor VIP 21,757 (28,587) (6,830)
Protection Advantage Select 1,024 (593) 431
VALIC Company I Stock Index Fund
AG Income Advantage VUL 570 (9,148) (8,578)
AG Legacy Plus 9,118 (19,665) (10,547)
AG Legacy Plus (first reduction in expense ratio) 4,684 (3,391) 1,293
Corporate America 1,005 (1,178) (173)
Corporate America (reduced surrender charge) 4,666 (23,133) (18,467)
Corporate Investor Select 106 (31) 75
Income Advantage Select 4,131 (965) 3,166
Platinum Investor I & II 12,667 (69,249) (56,582)
Platinum Investor I & II (first reduction in expense ratio) 125,276 (272,671) (147,395)
Platinum Investor III 34,992 (483,927) (448,935)
Platinum Investor III (first reduction in expense ratio) 215,932 (15,457) 200,475
Platinum Investor IV 7,943 (9,421) (1,478)
Platinum Investor FlexDirector 41 (386) (345)
Platinum Investor PLUS 4,832 (22,101) (17,269)
Platinum Investor Survivor 1,250 (91,394) (90,144)
Platinum Investor Survivor (first reduction in expense ratio) 90,133 (7,301) 82,832
Platinum Investor Survivor II 7,207 (2,397) 4,810
Platinum Investor VIP 23,032 (38,803) (15,771)
Protection Advantage Select 1,161 (818) 343
Vanguard VIF High Yield Bond Portfolio
AG Income Advantage VUL 2,128 (5,203) (3,075)
Corporate America (reduced surrender charge) 2,158 (10,831) (8,673)
VL-R - 70
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - SUMMARY OF CHANGES IN UNITS - CONTINUED
Summary of Changes in Units for the year ended December 31, 2011.
Accumulation Accumulation Net Increase
Divisions Units Issued Units Redeemed (Decrease)
--------- ------------ -------------- ------------
Vanguard VIF High Yield Bond Portfolio - continued
Corporate Investor Select 91 (28) 63
Income Advantage Select 266 (556) (290)
Platinum Investor I & II 5,727 (11,141) (5,414)
Platinum Investor I & II (first reduction in expense ratio) 21,608 (18,093) 3,515
Platinum Investor III 36,604 (87,599) (50,995)
Platinum Investor III (first reduction in expense ratio) 53,156 (5,312) 47,844
Platinum Investor IV 4,059 (7,792) (3,733)
Platinum Investor FlexDirector 21 (202) (181)
Platinum Investor PLUS 2,211 (4,328) (2,117)
Platinum Investor Survivor 843 (11,351) (10,508)
Platinum Investor Survivor (first reduction in expense ratio) 16,443 (2,695) 13,748
Platinum Investor Survivor II 5,096 (2,826) 2,270
Platinum Investor VIP 9,355 (6,095) 3,260
Platinum Investor VIP (with GMWB rider) 23 (3) 20
Protection Advantage Select 605 (338) 267
Vanguard VIF REIT Index Portfolio
AG Income Advantage VUL 2,035 (3,480) (1,445)
AG Income Advantage VUL (with GMWB rider) -- (17) (17)
Corporate America (reduced surrender charge) 4,168 (9,053) (4,885)
Income Advantage Select 435 (363) 72
Income Advantage Select (with GMWB rider) 9 (17) (8)
Platinum Investor I & II 4,006 (9,910) (5,904)
Platinum Investor I & II (first reduction in expense ratio) 29,655 (50,270) (20,615)
Platinum Investor III 14,552 (124,602) (110,050)
Platinum Investor III (first reduction in expense ratio) 93,350 (13,410) 79,940
Platinum Investor IV 10,120 (9,935) 185
Platinum Investor FlexDirector 959 (1,470) (511)
Platinum Investor PLUS 14,007 (5,441) 8,566
Platinum Investor Survivor 890 (3,588) (2,698)
Platinum Investor Survivor (first reduction in expense ratio) 9,311 (16,100) (6,789)
Platinum Investor Survivor II 1,397 (3,970) (2,573)
Platinum Investor VIP 18,507 (16,280) 2,227
Platinum Investor VIP (with GMWB rider) 83 (56) 27
Protection Advantage Select 2,187 (787) 1,400
VL-R - 71
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
--------------------------------------- ----------------------------------------------------------------------
Investment
Unit Value Income Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ----------------- ----------- ---------------------- ---------------------- ----------------------
Alger Capital Appreciation Portfolio - Class I-2 Shares
-------------------------------------------------------
2012 210,287 $10.89 to $24.88 $ 3,881,078 1.10% 0.20% to 1.45% 16.59% to 18.31%
2011 194,548 9.22 to 21.73 3,304,011 0.11% 0.20% to 1.45% -1.73% to -0.50%
2010 197,206 9.27 to 21.89 3,389,409 0.15% to 2.14% 0.20% to 1.45% -0.28% to 14.78%
2009 197,008 8.15 to 19.27 3,075,839 0.00% 0.20% to 1.45% 48.93% to 77.76%
2008 177,973 5.40 to 12.81 1,959,122 0.00% 0.20% to 1.45% -45.93% to -35.55%
Alger Mid Cap Growth Portfolio - Class I-2 Shares
-------------------------------------------------
2012 178,218 $ 7.54 to $18.44 $ 2,301,200 0.00% 0.20% to 1.45% 14.53% to 16.22%
2011 197,175 6.55 to 15.98 2,444,510 0.35% 0.20% to 1.45% -9.59% to -8.46%
2010 202,610 7.21 to 17.95 2,851,234 0.00% 0.20% to 1.45% 5.88% to 19.14%
2009 186,401 6.10 to 15.09 2,181,171 0.00% 0.20% to 1.45% 29.07% to 51.40%
2008 189,177 4.06 to 9.99 1,502,289 0.00% to 0.23% 0.20% to 1.45% -58.67% to 5.85%
American Century VP Value Fund - Class I
----------------------------------------
2012 934,942 $10.69 to $21.59 $12,587,820 2.00% 0.20% to 0.75% 13.72% to 14.58%
2011 888,449 9.35 to 18.99 11,755,714 2.04% 0.20% to 0.75% 0.26% to 0.81%
2010 891,410 9.27 to 18.94 12,897,301 1.89% to 2.33% 0.20% to 1.45% 1.32% to 16.28%
2009 940,091 8.19 to 16.82 12,490,548 3.73% to 5.59% 0.20% to 1.45% 18.14% to 19.62%
2008 1,069,442 6.85 to 14.14 12,200,867 0.00% to 2.87% 0.20% to 1.45% -27.83% to 3.76%
Credit Suisse U.S. Equity Flex I Portfolio /(13)/
-------------------------------------------------
2012 -- $ -- $ -- 0.00% 0.00% 0.00% 0.00% 0.00%
2011 -- -- -- 1.12% 0.20% to 0.95% -7.17% to -6.60%
2010 184,442 7.25 to 13.24 1,482,130 0.00% to 0.25% 0.20% to 0.95% 1.55% to 19.17%
2009 195,596 6.38 to 11.59 1,375,258 0.32% to 1.87% 0.20% to 0.95% 23.49% to 39.10%
2008 217,635 5.15 to 9.31 1,221,680 0.00% to 0.14% 0.20% to 0.95% -35.09% to 9.88%
Dreyfus IP MidCap Stock Portfolio - Initial Shares
--------------------------------------------------
2012 278,365 $11.91 to $19.07 $ 3,735,622 0.46% 0.20% to 0.75% 18.78% to 19.44%
2011 275,176 10.00 to 16.05 3,371,455 0.52% 0.20% to 0.75% -0.35% to 0.19%
2010 298,362 10.01 to 16.11 3,901,648 0.86% to 1.21% 0.20% to 0.75% 11.03% to 29.62%
2009 299,501 7.92 to 12.77 3,250,022 0.24% to 2.05% 0.40% to 0.75% 34.50% to 34.97%
2008 337,715 5.87 to 9.50 2,797,813 0.98% to 1.34% 0.40% to 0.75% -40.87% to -36.13%
Dreyfus VIF International Value Portfolio - Initial Shares /(5)/
----------------------------------------------------------------
2012 10,563 $ 7.22 to $12.78 $ 99,312 2.75% 0.20% to 0.95% 11.60% to 12.44%
2011 9,931 6.47 to 11.37 83,245 2.19% 0.20% to 0.95% -19.25% to -18.64%
2010 11,489 8.01 to 13.97 115,062 1.64% to 1.72% 0.20% to 0.95% 3.47% to 4.25%
2009 9,116 7.74 to 13.40 85,613 3.00% to 3.36% 0.20% to 0.95% 29.74% to 30.71%
2008 5,951 5.97 to 10.25 41,446 0.00% to 0.27% 0.20% to 0.95% -34.03% to 9.71%
Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares
--------------------------------------------------------------
2012 675,020 $10.06 to $13.71 $ 7,380,409 0.00% 0.20% to 0.75% 19.66% to 20.32%
2011 657,563 8.40 to 11.46 5,990,689 0.41% 0.20% to 0.75% -14.49% to -14.02%
2010 718,521 9.82 to 13.40 7,664,131 0.64% to 0.87% 0.20% to 0.75% 20.54% to 32.85%
2009 760,679 7.54 to 10.30 6,443,101 1.36% to 1.68% 0.35% to 0.75% 25.10% to 25.60%
2008 841,288 6.02 to 8.23 5,904,489 0.71% to 1.00% 0.35% to 0.75% -38.06% to -35.79%
VL-R - 72
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
--------------------------------------- ----------------------------------------------------------------------
Investment
Unit Value Income Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ----------------- ----------- ---------------------- ---------------------- ----------------------
Dreyfus VIF Quality Bond Portfolio - Initial Shares
---------------------------------------------------
2012 494,395 $13.34 to $19.64 $ 7,079,426 2.98% 0.20% to 0.75% 6.20% to 6.78%
2011 517,075 12.53 to 18.42 7,255,389 3.80% 0.20% to 0.75% 6.23% to 6.82%
2010 593,479 11.77 to 17.27 8,104,699 3.79% to 4.14% 0.20% to 0.75% 0.41% to 8.00%
2009 594,218 10.91 to 15.99 8,204,097 4.55% to 5.49% 0.35% to 0.75% 14.10% to 14.56%
2008 590,910 9.54 to 13.96 7,645,996 4.86% to 6.56% 0.35% to 0.75% -4.90% to -4.02%
Fidelity VIP Asset Manager Portfolio - Service Class 2
------------------------------------------------------
2012 349,745 $10.99 to $16.00 $ 4,353,982 1.29% 0.20% to 0.75% 11.39% to 12.24%
2011 357,178 9.84 to 14.35 4,255,781 1.72% 0.20% to 0.75% -3.54% to -3.01%
2010 369,583 10.17 to 14.87 4,767,124 1.02% to 1.98% 0.20% to 0.75% 10.77% to 13.74%
2009 456,129 8.97 to 13.14 5,235,514 1.99% to 3.64% 0.20% to 0.75% 27.80% to 31.91%
2008 475,301 6.99 to 10.28 4,302,999 2.29% to 6.66% 0.20% to 0.75% -30.84% to -25.80%
Fidelity VIP Contrafund Portfolio - Service Class 2
---------------------------------------------------
2012 2,017,400 $ 9.79 to $19.92 $25,979,429 1.15% 0.20% to 1.45% 14.46% to 16.15%
2011 2,026,207 8.45 to 17.28 24,026,115 0.75% 0.20% to 1.45% -4.18% to -2.98%
2010 2,241,206 8.71 to 17.91 29,413,759 0.86% to 1.21% 0.20% to 1.45% 12.79% to 17.90%
2009 2,349,310 7.46 to 15.43 27,925,385 0.96% to 1.66% 0.20% to 1.45% 26.27% to 35.20%
2008 2,645,928 5.52 to 11.48 23,838,430 0.07% to 2.25% 0.20% to 1.45% -43.52% to 5.04%
Fidelity VIP Equity-Income Portfolio - Service Class 2
------------------------------------------------------
2012 1,295,583 $ 9.34 to $17.73 $15,225,678 2.97% 0.20% to 1.45% 15.37% to 17.06%
2011 1,305,804 7.99 to 15.25 13,694,352 2.27% 0.20% to 1.45% -0.79% to 0.45%
2010 1,346,273 7.96 to 15.25 15,096,156 1.46% to 1.92% 0.20% to 1.45% 4.03% to 16.85%
2009 1,451,113 6.94 to 13.35 14,377,656 1.80% to 3.21% 0.20% to 1.45% 28.01% to 29.62%
2008 1,608,335 5.35 to 9.61 12,605,617 2.19% to 6.76% 0.20% to 1.45% -43.64% to 4.46%
Fidelity VIP Freedom 2020 Portfolio - Service Class 2
-----------------------------------------------------
2012 31,878 $10.57 to $16.62 $ 369,414 1.89% 0.20% to 0.70% 12.28% to 13.08%
2011 30,850 9.36 to 14.80 319,985 2.49% 0.20% to 0.70% -1.93% to -1.44%
2010 18,321 9.50 to 15.08 195,416 1.98% to 2.37% 0.20% to 0.70% 13.53% to 14.10%
2009 13,495 8.33 to 13.28 127,348 0.00% to 5.64% 0.20% to 0.70% 0.78% to 28.29%
2008 9,130 6.49 to 7.87 68,373 0.00% to 6.77% 0.20% to 0.75% -33.30% to -29.21%
Fidelity VIP Freedom 2025 Portfolio - Service Class 2
-----------------------------------------------------
2012 44,775 $10.55 to $16.09 $ 515,350 1.96% 0.20% to 1.45% 13.14% to 14.80%
2011 30,833 9.21 to 14.04 315,809 2.16% 0.20% to 1.45% -3.75% to -2.54%
2010 21,955 9.45 to 14.41 233,866 0.00% to 2.64% 0.20% to 1.45% 13.81% to 15.24%
2009 24,844 8.20 to 12.50 229,911 0.93% to 5.44% 0.20% to 1.45% 3.47% to 29.54%
2008 65,804 6.33 to 7.73 448,392 2.30% to 6.80% 0.20% to 1.45% -34.82% to -4.25%
Fidelity VIP Freedom 2030 Portfolio - Service Class 2
-----------------------------------------------------
2012 61,498 $ 9.99 to $16.14 $ 724,478 1.88% 0.20% to 1.45% 13.52% to 15.19%
2011 69,384 8.69 to 14.04 716,899 2.01% 0.20% to 1.45% -4.23% to -3.02%
2010 62,080 8.97 to 14.47 669,235 1.84% to 2.56% 0.20% to 1.45% 14.22% to 15.66%
2009 52,353 7.75 to 12.51 489,521 1.98% to 3.58% 0.20% to 1.45% 29.29% to 40.97%
2008 42,376 5.92 to 7.37 305,947 2.17% to 5.73% 0.20% to 1.45% -39.06% to -35.25%
VL-R - 73
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
--------------------------------------- -----------------------------------------------------------------------
Investment Income
Unit Value Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ----------------- ----------- ----------------------- ----------------------- -----------------------
Fidelity VIP Growth Portfolio - Service Class 2
-----------------------------------------------
2012 1,243,384 $8.66 to $15.89 $12,864,156 0.36% 0.20% to 0.75% 13.55% to 14.41%
2011 1,440,145 7.62 to 13.91 13,001,802 0.13% 0.20% to 0.75% -0.78% to -0.23%
2010 1,540,634 7.68 to 13.95 13,385,000 0.03% to 0.03% 0.20% to 0.75% 19.36% to 23.61%
2009 1,643,099 6.24 to 11.28 11,446,645 0.16% to 0.25% 0.20% to 0.75% 27.01% to 27.71%
2008 1,769,586 4.91 to 8.83 9,650,799 0.44% to 1.83% 0.20% to 1.45% -48.07% to 0.60%
Fidelity VIP Mid Cap Portfolio - Service Class 2
------------------------------------------------
2012 507,869 $10.48 to $28.61 $8,103,313 0.40% 0.20% to 1.45% 12.91% to 14.57%
2011 509,887 9.17 to 25.07 7,535,192 0.02% 0.20% to 1.45% -12.13% to -11.03%
2010 516,364 10.30 to 28.23 9,449,592 0.10% to 0.15% 0.20% to 1.45% 9.25% to 28.31%
2009 492,030 8.03 to 22.05 7,405,205 0.36% to 0.65% 0.20% to 1.45% 0.53% to 51.40%
2008 525,533 5.76 to 15.84 5,983,568 0.24% to 0.31% 0.20% to 1.45% -40.48% to 7.11%
Franklin Templeton Franklin Small Cap Value Securities Fund - Class 2
---------------------------------------------------------------------
2012 424,063 $11.66 to $24.93 $6,804,660 0.79% 0.20% to 1.45% 16.68% to 18.39%
2011 425,994 9.87 to 21.14 6,139,109 0.71% 0.20% to 1.45% -5.14% to -3.95%
2010 568,474 10.27 to 22.05 9,738,236 0.62% to 0.76% 0.20% to 1.45% 16.86% to 27.97%
2009 567,888 8.03 to 17.27 7,999,887 1.29% to 1.78% 0.20% to 1.45% 27.30% to 59.02%
2008 600,702 6.23 to 13.42 6,789,071 0.00% to 1.52% 0.20% to 1.45% -36.13% to 9.09%
Franklin Templeton Franklin Small-Mid Cap Growth Securities Fund - Class 2
--------------------------------------------------------------------------
2012 2,951 $9.30 to $11.24 $31,091 0.00% 0.50% to 0.75% 10.02% to 10.30%
2011 3,203 8.45 to 10.19 29,625 0.00% 0.50% to 0.75% -5.54% to -5.30%
2010 9,134 8.95 81,736 0.00% 0.75% 26.67%
2009 10,315 7.06 72,874 0.00% 0.75% 42.50%
2008 12,546 4.96 62,198 0.00% 0.75% -42.93%
Franklin Templeton Franklin U.S. Government Fund - Class 2
----------------------------------------------------------
2012 306,687 $12.04 to $15.40 $4,173,166 2.67% 0.20% to 0.75% 1.12% to 1.89%
2011 315,613 11.88 to 15.68 4,319,906 3.15% 0.20% to 0.75% 4.89% to 5.47%
2010 350,315 11.30 to 14.90 4,653,611 1.60% to 3.70% 0.40% to 0.75% -1.16% to 4.86%
2009 391,691 10.78 to 14.21 5,007,059 1.31% to 6.09% 0.40% to 0.75% 2.32% to 2.68%
2008 422,032 10.51 to 13.84 5,392,917 4.00% to 6.56% 0.40% to 0.75% 0.06% to 7.16%
Franklin Templeton Mutual Shares Securities Fund - Class 2
----------------------------------------------------------
2012 521,354 $9.51 to $16.07 $6,241,600 2.07% 0.20% to 1.45% 12.60% to 14.25%
2011 522,459 8.34 to 14.12 5,923,738 2.04% 0.20% to 1.45% -2.46% to -1.24%
2010 744,276 8.45 to 14.33 9,163,036 1.41% to 1.68% 0.20% to 1.45% 5.45% to 10.97%
2009 680,409 7.61 to 12.93 7,936,688 1.12% to 2.86% 0.20% to 1.45% 24.23% to 33.90%
2008 740,742 6.05 to 10.30 7,083,168 2.22% to 4.22% 0.20% to 1.45% -38.02% to -28.50%
Franklin Templeton Templeton Foreign Securities Fund - Class 2
--------------------------------------------------------------
2012 488,547 $9.65 to $17.00 $6,170,381 3.03% 0.20% to 0.75% 17.35% to 18.24%
2011 489,882 8.20 to 14.92 5,610,443 1.80% 0.20% to 0.75% -11.30% to -10.81%
2010 495,307 9.23 to 16.76 6,741,210 1.16% to 2.01% 0.20% to 0.75% 6.21% to 13.97%
2009 498,881 8.55 to 15.52 6,722,082 2.69% to 4.24% 0.40% to 0.75% 36.02% to 36.50%
2008 512,013 6.27 to 11.37 5,378,488 1.98% to 8.36% 0.40% to 1.45% -41.24% to -28.96%
VL-R - 74
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
-------------------------------------- ----------------------------------------------------------------------
Investment Income
Unit Value Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ---------------- ----------- ---------------------- ---------------------- ----------------------
Goldman Sachs VIT Strategic Growth Fund - Institutional Shares
--------------------------------------------------------------
2012 492,233 $11.09 to $14.67 $ 5,592,047 0.72% 0.20% to 0.75% 18.99% to 19.65%
2011 521,266 9.30 to 12.32 4,950,598 0.46% 0.20% to 0.75% -3.34% to -2.81%
2010 548,075 9.59 to 12.74 5,363,068 0.40% to 0.43% 0.20% to 0.75% 0.64% to 14.31%
2009 537,059 8.71 to 11.59 5,243,620 0.45% to 0.47% 0.40% to 0.75% 15.85% to 47.16%
2008 596,625 6.44 to 7.90 3,958,857 0.12% to 0.14% 0.40% to 0.75% -42.19% to -41.99%
2007 647,171 11.14 to 13.66 7,402,983 0.18% to 0.19% 0.40% to 0.75% 9.30% to 9.69%
Invesco V.I. Core Equity Fund - Series I
----------------------------------------
2012 686,192 $11.08 to $12.88 $ 7,754,263 0.97% 0.20% to 0.75% 13.03% to 13.65%
2011 751,569 9.78 to 11.35 7,627,790 0.98% 0.20% to 0.75% -0.81% to -0.26%
2010 836,741 9.83 to 11.40 8,781,854 0.85% to 1.18% 0.20% to 0.75% 6.62% to 16.54%
2009 903,902 9.02 to 10.44 8,995,954 1.69% to 3.58% 0.35% to 0.75% 27.34% to 27.85%
2008 1,009,818 7.07 to 8.17 8,105,221 0.00% to 2.53% 0.35% to 0.75% -30.66% to -29.33%
Invesco V.I. Global Real Estate Fund - Series I /(5)/
-----------------------------------------------------
2012 7,245 $ 8.99 to $16.84 $ 97,299 0.60% 0.20% to 0.70% 27.22% to 27.86%
2011 6,702 7.03 to 13.17 70,034 4.37% 0.20% to 0.70% -7.16% to -6.69%
2010 6,284 7.54 to 14.12 66,935 5.25% to 7.55% 0.20% to 0.70% 16.69% to 17.28%
2009 3,939 6.42 to 12.04 30,815 0.00% 0.20% to 0.70% 30.61% to 31.26%
2008 2,188 4.89 to 9.17 10,822 0.00% to 18.33% 0.20% to 0.70% -38.98% to 10.66%
Invesco V.I. Government Securities Fund - Series I /(11)/
---------------------------------------------------------
2012 8,468 $10.82 to $10.87 $ 91,887 3.08% 0.50% to 0.75% 1.71% to 1.96%
2011 9,242 10.64 to 10.66 98,397 0.00% 0.50% to 0.75% 6.31% to 6.49%
Invesco V.I. High Yield Fund - Series I/ (12)/
----------------------------------------------
2012 202,848 $11.17 to $11.28 $ 2,269,149 5.11% 0.20% to 0.75% 16.30% to 16.94%
2011 205,753 9.61 to 9.63 1,977,610 0.00% 0.40% to 0.75% -4.12% to -3.89%
Invesco V.I. International Growth Fund - Series I
-------------------------------------------------
2012 680,010 $ 9.12 to $21.69 $ 8,335,300 1.46% 0.20% to 1.45% 13.87% to 15.54%
2011 695,171 7.91 to 18.91 7,717,734 1.53% 0.20% to 1.45% -8.08% to -6.93%
2010 788,428 8.50 to 20.43 9,839,242 2.09% to 2.81% 0.20% to 1.45% 11.24% to 15.49%
2009 835,068 7.55 to 18.24 10,223,489 1.25% to 2.48% 0.20% to 1.45% 29.19% to 34.97%
2008 887,122 5.59 to 13.59 8,684,784 0.00% to 1.51% 0.20% to 1.45% -41.24% to 4.10%
Invesco Van Kampen V.I. American Franchise Fund - Series I
----------------------------------------------------------
2012 626 $ 6.29 to $10.91 $ 5,234 0.00% 0.50% to 0.75% 12.88% to 13.16%
2011 804 5.58 to 9.64 5,393 0.00% 0.50% to 0.75% -6.88% to -6.64%
2010 4,758 5.99 to 10.32 39,952 0.00% 0.50% to 0.75% 18.95% to 21.46%
2009 6,868 5.03 34,565 0.11% 0.75% 64.83%
2008 7,852 3.05 23,975 0.56% 0.75% -49.37%
Invesco Van Kampen V.I. Government Fund - Series I /(11)/
---------------------------------------------------------
2012 -- $ -- $ -- 0.00% 0.00% 0.00% 0.00% 0.00%
2011 -- -- -- 8.95% 0.50% to 0.75% 0.84% to 0.92%
2010 5,974 15.32 91,535 0.20% 0.75% 4.45%
2009 6,562 14.67 96,261 7.10% 0.75% 0.22%
2008 9,345 14.64 136,774 4.01% 0.75% 1.05%
VL-R - 75
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
------------------------------------ ----------------------------------------------------------------------
Investment Income
Unit Value Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
------- ---------------- ----------- ---------------------- ---------------------- ----------------------
Invesco Van Kampen V.I. Growth and Income Fund - Series I
---------------------------------------------------------
2012 617,841 $ 9.75 to $16.38 $ 7,796,561 1.53% 0.20% to 0.95% 13.55% to 14.64%
2011 644,693 8.59 to 14.35 7,472,579 1.08% 0.20% to 0.95% -2.93% to -2.20%
2010 865,685 8.85 to 14.70 10,670,022 0.09% to 0.10% 0.20% to 1.45% 7.12% to 12.41%
2009 798,396 7.94 to 13.12 9,525,424 3.64% to 4.53% 0.20% to 1.45% 22.58% to 24.12%
2008 822,906 6.44 to 10.59 8,135,935 0.00% to 2.84% 0.20% to 1.45% -33.02% to 4.79%
Invesco Van Kampen V.I. High Yield Fund - Series I /(12)/
---------------------------------------------------------
2012 -- $ -- $ -- 0.00% 0.00% 0.00% 0.00% 0.00%
2011 -- -- -- 23.28% 0.20% to 0.75% 5.02% to 5.21%
2010 129,870 12.09 to 17.35 1,967,003 8.74% to 10.72% 0.20% to 0.75% 0.91% to 11.67%
2009 129,292 10.84 to 15.59 1,744,053 1.27% to 11.83% 0.40% to 0.75% 41.02% to 41.51%
2008 142,991 7.67 to 11.05 1,414,824 8.03% to 12.04% 0.40% to 0.75% -23.43% to -22.34%
Janus Aspen Enterprise Portfolio - Service Shares
-------------------------------------------------
2012 335,792 $ 8.86 to $23.16 $ 4,068,669 0.00% 0.20% to 0.75% 16.11% to 16.99%
2011 388,019 7.63 to 19.94 3,861,188 0.00% 0.20% to 0.75% -2.39% to -1.85%
2010 457,671 7.81 to 20.42 4,284,773 0.00% 0.20% to 0.75% 20.46% to 25.27%
2009 481,729 6.27 to 16.38 3,557,635 0.00% 0.20% to 0.75% 43.36% to 44.16%
2008 595,345 4.37 to 11.42 2,982,555 0.06% to 0.19% 0.20% to 0.75% -45.09% to 5.55%
Janus Aspen Forty Portfolio - Service Shares/ (5)/
--------------------------------------------------
2012 29,377 $ 9.33 to $16.36 $ 309,675 0.62% 0.20% to 0.95% 22.68% to 23.61%
2011 28,303 7.60 to 13.23 240,224 0.26% 0.20% to 0.95% -7.82% to -7.13%
2010 26,335 8.25 to 14.25 241,882 0.13% to 0.27% 0.20% to 0.95% 5.47% to 6.27%
2009 25,001 7.82 to 13.41 212,011 0.01% to 0.02% 0.20% to 0.95% 44.63% to 45.72%
2008 18,484 5.41 to 9.20 104,233 0.00% to 0.00% 0.20% to 0.95% -47.32% to 4.83%
Janus Aspen Overseas Portfolio - Service Shares
-----------------------------------------------
2012 842,700 $ 7.70 to $24.09 $ 9,503,268 0.60% 0.20% to 1.45% 11.55% to 13.19%
2011 877,463 6.81 to 21.43 9,363,997 0.38% 0.20% to 1.45% -33.31% to -32.47%
2010 848,160 10.09 to 31.90 16,047,581 0.48% to 0.57% 0.20% to 1.45% 14.63% to 24.77%
2009 887,195 8.09 to 25.69 14,436,901 0.33% to 0.43% 0.20% to 1.45% 76.49% to 78.71%
2008 939,981 4.53 to 14.45 8,807,974 0.00% to 3.68% 0.20% to 1.45% -52.92% to -47.50%
Janus Aspen Worldwide Portfolio - Service Shares
------------------------------------------------
2012 290,208 $ 7.49 to $12.87 $ 2,642,859 0.77% 0.20% to 0.75% 18.96% to 19.62%
2011 348,837 6.29 to 10.81 2,528,689 0.49% 0.20% to 0.75% -14.63% to -14.16%
2010 458,840 7.37 to 12.64 3,587,878 0.45% to 0.50% 0.20% to 0.75% 3.46% to 21.93%
2009 499,706 6.42 to 11.02 3,373,933 0.52% to 1.26% 0.40% to 0.75% 36.38% to 36.86%
2008 553,476 4.71 to 8.07 2,747,424 0.46% to 1.47% 0.40% to 0.75% -45.22% to -40.94%
JPMorgan Insurance Trust Core Bond Portfolio - Class 1 /(6)/
------------------------------------------------------------
2012 6,314 $12.81 to $13.05 $ 81,396 4.29% 0.20% to 0.70% 4.60% to 5.12%
2011 6,254 12.25 to 12.41 76,968 5.25% 0.20% to 0.70% 6.71% to 7.24%
2010 6,045 11.48 to 11.57 69,594 3.37% to 4.07% 0.20% to 0.70% 8.47% to 9.02%
2009 5,072 10.58 to 10.62 53,733 0.00% 0.20% to 0.70% 5.79% to 6.16%
VL-R - 76
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
--------------------------------------- ----------------------------------------------------------------------
Investment Income
Unit Value Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ----------------- ----------- ---------------------- ---------------------- ----------------------
JPMorgan Insurance Trust Government Bond Portfolio - Class 1 /(5) (6)/
----------------------------------------------------------------------
2009 -- $ -- $ -- 15.11% to 119.69% 0.20% to 0.70% 0.30% to 0.45%
2008 2,582 10.79 to 10.62 28,148 0.00% 0.20% to 0.70% 1.87% to 7.25%
JPMorgan Insurance Trust International Equity Portfolio - Class 1 /(5) (7)/
---------------------------------------------------------------------------
2012 5,001 $ 8.35 to $15.37 $ 54,352 2.15% 0.20% to 0.95% 19.91% to 20.82%
2011 4,991 6.96 to 12.72 45,198 1.83% 0.20% to 0.95% -12.29% to -11.63%
2010 7,000 7.94 to 14.39 71,187 0.22% to 0.23% 0.20% to 0.95% 6.15% to 6.95%
2009 6,633 7.48 to 13.46 62,337 4.76% to 5.45% 0.20% to 0.95% 33.64% to 34.64%
2008 4,044 5.60 to 10.00 24,482 0.00% 0.20% to 0.95% -40.58% to 4.61%
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1/ (8)/
----------------------------------------------------------------
2012 36,790 $19.23 to $19.62 $ 710,812 1.08% 0.20% to 0.75% 19.48% to 20.14%
2011 40,043 16.09 to 16.33 645,733 1.49% 0.20% to 0.75% 1.40% to 1.96%
2010 143,668 15.87 to 16.02 2,282,044 1.12% to 1.16% 0.20% to 0.75% 5.70% to 22.96%
2009 154,833 12.95 to 12.98 2,005,981 0.00% 0.40% to 0.75% 29.51% to 29.83%
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 /(9)/
-----------------------------------------------------------------
2012 218,178 $11.44 to $18.72 $ 2,763,083 0.21% 0.20% to 0.75% 18.83% to 19.73%
2011 222,041 9.56 to 15.76 2,444,450 0.13% 0.20% to 0.75% -5.48% to -4.96%
2010 225,131 10.10 to 16.67 2,673,870 0.00% 0.20% to 0.75% -0.94% to 26.62%
2009 243,826 8.00 to 13.21 2,316,934 0.50% to 1.32% 0.40% to 0.75% 21.66% to 22.09%
2008 264,450 6.58 to 10.86 2,121,012 0.13% to 0.21% 0.40% to 0.75% -32.49% to -29.96%
JPMorgan Mid Cap Value Portfolio/ (8)/
--------------------------------------
2009 -- $ -- $ -- 3.89% to 4.74% 0.40% to 0.75% -2.92% to -2.81%
2008 139,030 8.37 to 12.84 1,699,338 1.14% to 1.42% 0.40% to 0.75% -33.71% to -33.47%
MFS VIT Core Equity Series - Initial Class
------------------------------------------
2012 284,309 $ 8.78 to $14.99 $ 3,169,925 0.79% 0.20% to 0.75% 15.36% to 16.00%
2011 329,447 7.61 to 12.99 3,025,430 0.97% 0.20% to 0.75% -1.76% to -1.22%
2010 404,270 7.75 to 13.21 3,463,700 0.95% to 1.09% 0.20% to 0.75% 1.93% to 20.08%
2009 437,268 6.66 to 11.35 3,187,117 1.37% to 1.93% 0.40% to 0.75% 31.44% to 31.90%
2008 489,897 5.07 to 8.63 2,705,088 0.80% to 1.80% 0.40% to 0.75% -39.61% to -35.47%
MFS VIT Growth Series - Initial Class
-------------------------------------
2012 751,222 $ 7.95 to $18.27 $ 8,544,313 0.00% 0.20% to 0.75% 16.51% to 17.15%
2011 869,874 6.80 to 15.67 8,216,438 0.20% 0.20% to 0.75% -1.07% to -0.52%
2010 1,121,296 6.85 to 15.84 10,215,781 0.07% to 0.12% 0.20% to 0.75% 7.21% to 22.06%
2009 1,173,605 5.96 to 13.83 9,964,173 0.26% to 0.36% 0.40% to 0.75% 36.65% to 37.13%
2008 1,230,391 4.35 to 10.11 8,162,971 0.02% to 0.32% 0.40% to 0.75% -37.89% to -36.79%
MFS VIT New Discovery Series - Initial Class
--------------------------------------------
2012 303,535 $13.22 to $23.29 $ 4,558,624 0.00% 0.20% to 1.45% 19.48% to 21.23%
2011 329,080 10.99 to 19.25 4,069,214 0.00% 0.20% to 1.45% -11.56% to -10.45%
2010 405,880 12.34 to 21.50 5,517,500 0.00% 0.20% to 1.45% 13.05% to 36.06%
2009 405,118 9.12 to 15.80 4,052,402 0.00% 0.20% to 1.45% 60.83% to 62.86%
2008 422,956 5.63 to 9.70 2,608,315 0.00% 0.20% to 1.45% -40.21% to 5.92%
VL-R - 77
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
----------------------------------- ----------------------------------------------------------------------
Investment Income
Unit Value Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
------- ---------------- ---------- ---------------------- ---------------------- ----------------------
MFS VIT Research Series - Initial Class
---------------------------------------
2012 168,723 $10.74 to $17.07 $2,043,000 0.80% 0.20% to 0.75% 16.39% to 17.28%
2011 183,039 9.23 to 14.58 1,878,628 0.49% 0.20% to 0.75% -1.19% to -0.65%
2010 512,364 9.33 to 14.75 4,967,719 0.47% to 1.10% 0.20% to 0.75% 5.72% to 15.66%
2009 431,935 8.10 to 12.82 3,654,802 0.95% to 3.41% 0.20% to 0.75% 24.56% to 30.28%
2008 413,070 6.21 to 9.89 2,692,480 0.00% to 1.21% 0.20% to 1.45% -37.01% to 5.04%
MFS VIT Total Return Series - Initial Class
-------------------------------------------
2012 47,066 $ 8.05 to $11.47 $ 446,828 2.86% 0.50% to 0.75% 10.42% to 10.70%
2011 60,064 7.29 to 10.36 474,549 2.60% 0.50% to 0.75% 1.01% to 1.27%
2010 72,396 7.21 522,194 2.61% 0.75% 9.11%
2009 80,158 6.61 529,914 3.62% 0.75% 17.15%
2008 88,007 5.64 496,645 3.26% 0.75% -22.71%
Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I
-------------------------------------------------------
2012 366,791 $10.21 to $19.25 $4,618,123 0.00% 0.20% to 1.45% 10.79% to 12.42%
2011 380,475 9.10 to 17.24 4,242,671 0.00% 0.20% to 1.45% -0.97% to 0.27%
2010 478,023 9.07 to 17.28 5,138,797 0.00% 0.20% to 1.45% 11.60% to 28.84%
2009 560,994 7.04 to 13.48 4,592,034 0.00% 0.20% to 1.45% 29.70% to 31.34%
2008 650,795 5.36 to 10.32 4,059,451 0.00% 0.20% to 1.45% -43.79% to 5.62%
Neuberger Berman AMT Large Cap Value Portfolio - Class I
--------------------------------------------------------
2012 3,123 $ 8.66 to $13.74 $ 28,183 0.42% 0.50% to 0.75% 15.73% to 16.02%
2011 3,480 7.46 to 11.87 26,986 0.00% 0.50% to 0.75% -12.02% to -11.80%
2010 5,652 13.49 76,272 0.67% 0.75% 14.80%
2009 5,675 11.75 66,698 2.90% 0.75% 54.91%
2008 7,647 7.59 58,023 0.64% 0.75% -52.75%
Neuberger Berman AMT Socially Responsive Portfolio - Class I /(4)/
------------------------------------------------------------------
2012 4,558 $10.21 to $16.11 $ 48,236 0.24% 0.20% to 0.70% 10.20% to 10.76%
2011 3,830 9.26 to 14.54 36,936 0.37% 0.20% to 0.70% -3.76% to -3.27%
2010 3,077 9.62 to 15.03 31,028 0.04% to 0.04% 0.20% to 0.70% 22.00% to 22.61%
2009 2,184 7.85 to 12.26 18,190 0.21% to 3.76% 0.20% to 0.70% 30.51% to 36.31%
2008 929 5.98 to 6.27 5,605 0.00% to 11.38% 0.20% to 0.70% -38.42% to 18.02%
Oppenheimer Balanced Fund/VA - Non-Service Shares
-------------------------------------------------
2012 130,271 $ 8.45 to $12.96 $1,389,796 1.30% 0.20% to 1.45% 10.72% to 12.35%
2011 127,186 7.53 to 11.61 1,240,903 2.27% 0.20% to 1.45% -0.73% to 0.52%
2010 151,485 7.49 to 11.88 1,488,557 1.16% to 1.41% 0.20% to 1.45% 0.00% to 12.69%
2009 151,706 6.65 to 10.56 1,367,234 0.00% 0.20% to 1.45% 20.14% to 33.54%
2008 151,496 5.47 to 8.70 1,135,463 0.00% to 3.09% 0.20% to 1.45% -44.29% to -42.56%
Oppenheimer Global Securities Fund/VA - Non-Service Shares
----------------------------------------------------------
2012 369,438 $10.10 to $25.26 $5,596,885 2.17% 0.20% to 1.45% 19.52% to 21.27%
2011 336,286 8.35 to 20.92 4,894,747 1.36% 0.20% to 1.45% -9.61% to -8.47%
2010 343,743 9.12 to 22.90 5,790,382 0.86% to 1.70% 0.20% to 1.45% 6.77% to 20.69%
2009 333,736 7.88 to 19.83 5,185,789 0.00% to 2.51% 0.20% to 1.45% -0.02% to 39.49%
2008 336,389 5.65 to 14.24 3,878,834 0.00% to 1.68% 0.20% to 1.45% -41.05% to 5.19%
VL-R - 78
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
-------------------------------------- ----------------------------------------------------------------------
Investment Income
Unit Value Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ---------------- ----------- ---------------------- ---------------------- ----------------------
Oppenheimer High Income Fund/VA - Non-Service Shares/(14)/
----------------------------------------------------------
2012 -- $ -- $ -- 23.56% 0.00% 0.00% 0.00% 0.00%
2011 15,334 2.93 to 3.98 59,238 5.70% 0.50% to 0.75% -3.07% to -2.82%
2010 40,017 3.01 to 4.11 137,602 1.30% 0.50% to 0.75% 1.41% to 13.96%
2009 4,509 3.60 16,248 0.00% 0.75% 24.38%
2008 5,871 2.90 17,008 9.84% 0.75% -78.83%
Oppenheimer Global Strategic Income Fund/VA (Non-Service)/(14)/
---------------------------------------------------------------
2012 4,341 $10.17 to $10.17 $ 44,134 0.00% 0.50% to 0.75% 1.66% to 1.70%
PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class
-----------------------------------------------------------------------
2012 152,437 $ 7.71 to $13.88 $ 1,542,031 2.78% 0.20% to 1.45% 3.87% to 5.40%
2011 160,205 7.35 to 13.20 1,638,541 16.05% 0.20% to 1.45% -8.89% to -7.74%
2010 312,206 7.99 to 14.30 3,537,592 1.35% to 17.19% 0.20% to 1.45% 1.96% to 24.27%
2009 285,156 6.74 to 11.51 2,622,169 4.58% to 7.59% 0.20% to 1.45% 39.49% to 41.25%
2008 182,627 4.79 to 8.15 1,196,060 4.02% to 28.18% 0.20% to 1.45% -53.92% to 5.70%
PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class /(5)/
-----------------------------------------------------------------------
2012 3,695 $13.89 to $15.79 $ 54,581 1.68% 0.20% to 0.70% 6.19% to 6.73%
2011 3,551 13.08 to 14.79 49,556 2.57% 0.20% to 0.70% 6.81% to 7.35%
2010 6,055 12.25 to 13.78 78,977 2.29% to 2.75% 0.20% to 0.70% 10.86% to 11.42%
2009 7,120 11.05 to 12.37 83,767 2.76% to 3.25% 0.20% to 0.70% 16.02% to 16.60%
2008 4,580 9.52 to 10.61 45,810 0.12% to 3.06% 0.20% to 0.70% -4.67% to 0.80%
PIMCO VIT Real Return Portfolio - Administrative Class
------------------------------------------------------
2012 892,900 $13.57 to $24.63 $14,799,219 1.09% 0.20% to 0.75% 7.94% to 8.76%
2011 849,220 12.54 to 22.74 14,253,301 2.12% 0.20% to 0.75% 10.83% to 11.44%
2010 872,324 11.29 to 20.45 14,239,385 1.31% to 1.50% 0.20% to 0.75% -3.62% to 7.89%
2009 856,973 10.50 to 18.99 13,766,246 2.01% to 3.91% 0.20% to 0.75% 9.31% to 18.12%
2008 943,684 8.91 to 16.11 13,013,491 0.76% to 4.21% 0.20% to 0.75% -10.49% to 0.80%
PIMCO VIT Short-Term Portfolio - Administrative Class
-----------------------------------------------------
2012 555,092 $10.86 to $13.83 $ 6,644,323 0.73% 0.20% to 1.45% 1.29% to 2.78%
2011 818,523 10.66 to 13.51 9,813,692 1.42% 0.20% to 1.45% -0.93% to 0.31%
2010 420,228 10.71 to 13.49 5,215,445 0.80% to 1.09% 0.20% to 1.45% 0.43% to 1.90%
2009 410,954 10.55 to 13.27 5,040,544 1.40% to 2.42% 0.20% to 1.45% 3.06% to 7.58%
2008 442,960 9.84 to 12.36 5,178,610 0.86% to 5.21% 0.20% to 1.45% -1.75% to -0.51%
PIMCO VIT Total Return Portfolio - Administrative Class
-------------------------------------------------------
2012 1,116,915 $13.88 to $21.72 $17,972,323 2.63% 0.20% to 1.45% 8.01% to 9.60%
2011 1,056,839 12.73 to 19.90 16,584,031 2.72% 0.20% to 1.45% 2.12% to 3.40%
2010 1,790,622 12.34 to 19.28 29,656,123 2.16% to 2.93% 0.20% to 1.45% -0.61% to 7.89%
2009 1,787,013 11.48 to 17.91 28,884,083 4.14% to 6.04% 0.20% to 1.45% 7.04% to 13.81%
2008 1,648,820 10.11 to 15.77 23,833,765 1.06% to 5.02% 0.20% to 1.45% 1.02% to 5.59%
Pioneer Fund VCT Portfolio - Class I
------------------------------------
2012 148,553 $10.14 to $12.65 $ 1,516,410 1.60% 0.20% to 0.75% 9.42% to 10.02%
2011 158,191 9.25 to 11.81 1,500,448 1.57% 0.20% to 0.75% -5.02% to -4.49%
2010 204,262 9.71 to 12.39 2,095,967 1.24% to 1.37% 0.20% to 0.75% 7.76% to 23.83%
2009 221,615 8.41 to 10.72 2,085,325 1.69% to 1.74% 0.40% to 0.75% 24.26% to 24.70%
2008 246,377 6.75 to 8.60 2,033,717 1.78% to 1.94% 0.40% to 0.75% -34.76% to -30.93%
VL-R - 79
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
-------------------------------------- ----------------------------------------------------------------------
Investment Income
Unit Value Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ---------------- ----------- ---------------------- ---------------------- ----------------------
Pioneer Growth Opportunities VCT Portfolio - Class I
----------------------------------------------------
2012 193,725 $12.26 to $12.70 $ 2,379,278 0.00% 0.20% to 0.75% 6.22% to 6.81%
2011 214,885 11.51 to 11.91 2,482,486 0.00% 0.20% to 0.75% -2.99% to -2.45%
2010 256,803 11.84 to 12.23 3,055,534 0.00% 0.20% to 0.75% 3.85% to 19.80%
2009 293,202 9.90 to 10.21 2,927,073 0.00% 0.35% to 0.75% 43.48% to 44.06%
2008 345,762 6.88 to 7.09 2,407,791 0.00% 0.35% to 0.75% -35.97% to -32.22%
Pioneer Mid Cap Value VCT Portfolio - Class I
---------------------------------------------
2012 79,635 $ 9.63 to $15.49 $ 873,297 1.06% 0.20% to 1.45% 9.51% to 11.12%
2011 81,710 8.68 to 13.97 820,496 0.74% 0.20% to 1.45% -6.99% to -5.82%
2010 62,230 9.22 to 14.83 668,976 0.00% to 1.22% 0.20% to 1.45% 16.52% to 17.98%
2009 55,538 7.81 to 12.57 510,873 1.33% to 2.45% 0.20% to 1.45% 21.17% to 25.33%
2008 44,205 6.23 to 10.03 325,554 0.00% to 1.47% 0.20% to 1.45% -34.53% to 4.92%
Putnam VT Diversified Income Fund - Class IB
--------------------------------------------
2012 402,710 $12.92 to $20.32 $ 6,829,890 5.59% 0.20% to 0.95% 10.47% to 11.53%
2011 391,271 11.63 to 18.28 6,267,641 10.17% 0.20% to 0.95% -4.08% to -3.36%
2010 417,012 12.03 to 18.95 7,141,922 12.99% to 14.88% 0.20% to 0.95% 0.11% to 12.45%
2009 413,215 10.70 to 16.88 6,423,888 5.56% to 7.84% 0.20% to 0.95% 49.63% to 55.04%
2008 443,963 6.90 to 10.90 4,479,144 0.00% to 15.47% 0.20% to 0.75% -31.33% to -27.80%
Putnam VT Growth and Income Fund - Class IB
-------------------------------------------
2012 829,395 $11.04 to $13.20 $ 9,733,019 1.73% 0.20% to 0.75% 18.24% to 18.90%
2011 889,651 9.31 to 11.16 8,894,899 1.26% 0.20% to 0.75% -5.35% to -4.83%
2010 964,291 9.81 to 11.79 10,330,182 1.41% to 1.60% 0.20% to 0.75% 7.89% to 15.50%
2009 1,056,043 8.62 to 10.38 10,046,450 2.50% to 5.27% 0.35% to 0.75% 28.84% to 29.36%
2008 1,173,232 6.68 to 8.05 8,781,310 1.98% to 2.93% 0.35% to 0.75% -39.16% to -31.35%
Putnam VT International Value Fund - Class IB
---------------------------------------------
2012 478,649 $ 7.73 to $16.30 $ 4,530,628 2.94% 0.20% to 1.45% 19.95% to 21.71%
2011 484,622 6.39 to 13.50 4,000,551 2.75% 0.20% to 1.45% -15.02% to -13.95%
2010 531,784 7.44 to 15.77 5,438,879 0.00% to 3.56% 0.20% to 1.45% 4.01% to 13.16%
2009 542,113 6.98 to 14.83 5,575,454 0.00% 0.40% to 1.45% 24.37% to 25.69%
2008 566,502 5.56 to 11.84 5,049,681 1.65% to 2.53% 0.40% to 1.45% -46.80% to -41.39%
Putnam VT Multi-Cap Growth Fund - Class IB /(10)/
-------------------------------------------------
2012 2,557 $12.35 to $12.42 $ 31,738 0.25% 0.50% to 0.75% 15.89% to 16.18%
2011 2,873 10.65 to 10.69 30,636 0.38% 0.50% to 0.75% -5.79% to -5.56%
2010 15,955 11.31 to 11.32 180,442 0.00% 0.50% to 0.75% 13.09% to 13.16%
Putnam VT Small Cap Value Fund - Class IB
-----------------------------------------
2012 15,566 $10.16 to $22.99 $ 186,076 0.45% 0.20% to 0.75% 16.61% to 17.25%
2011 13,404 8.66 to 19.72 166,983 0.63% 0.20% to 0.75% -5.44% to -4.92%
2010 18,306 9.11 to 20.85 308,956 0.19% to 0.29% 0.20% to 0.75% 25.04% to 25.73%
2009 16,827 7.25 to 16.68 247,341 0.43% to 1.64% 0.20% to 0.75% 30.55% to 87.01%
2008 17,876 5.52 to 12.77 200,714 0.00% to 1.56% 0.20% to 0.75% -39.81% to 5.14%
VL-R - 80
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
-------------------------------------- ----------------------------------------------------------------------
Investment
Unit Value Income Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ---------------- ----------- ---------------------- ---------------------- ----------------------
Putnam VT Vista Fund - Class IB/ (10)/
--------------------------------------
2010 -- $ -- $ -- 0.03% 0.50% to 0.75% 9.56% to 15.00%
2009 27,449 4.97 136,447 0.00% 0.75% 37.71%
2008 27,268 3.61 98,428 0.00% 0.75% -45.95%
Putnam VT Voyager Fund - Class IB
---------------------------------
2012 12,707 $ 7.46 to $12.05 $ 114,313 0.40% 0.50% to 0.75% 13.37% to 13.66%
2011 20,042 6.58 to 10.60 143,379 0.00% 0.50% to 0.75% -18.46% to -18.26%
2010 43,333 8.07 to 12.97 354,200 1.21% 0.50% to 0.75% 19.90% to 20.85%
2009 46,222 6.73 310,949 0.84% 0.75% 62.67%
2008 52,236 4.14 216,020 0.00% 0.75% -37.50%
SunAmerica Aggressive Growth Portfolio - Class 1
------------------------------------------------
2012 101,251 $ 8.25 to $17.46 $ 1,081,476 0.00% 0.20% to 0.75% 15.35% to 16.23%
2011 122,598 7.11 to 15.06 1,139,542 0.00% 0.20% to 0.75% -2.71% to -2.17%
2010 90,650 7.27 to 15.39 907,479 0.00% 0.20% to 0.75% 20.26% to 20.92%
2009 89,679 6.01 to 12.73 756,851 0.00% to 0.23% 0.20% to 0.75% 39.43% to 46.40%
2008 134,034 4.29 to 6.95 847,954 0.00% to 1.20% 0.20% to 0.75% -52.99% to 4.78%
SunAmerica Balanced Portfolio - Class 1
---------------------------------------
2012 127,008 $11.47 to $15.81 $ 1,698,860 1.39% 0.20% to 0.75% 12.28% to 13.14%
2011 125,848 10.16 to 14.01 1,584,195 1.78% 0.20% to 0.75% 1.51% to 2.07%
2010 119,980 9.95 to 13.72 1,495,385 0.00% to 2.03% 0.20% to 0.75% 11.00% to 11.61%
2009 121,451 8.92 to 12.29 1,363,563 2.10% to 5.89% 0.20% to 0.75% 9.58% to 28.69%
2008 120,190 7.20 to 9.50 1,099,120 0.06% to 8.70% 0.20% to 0.75% -26.45% to -20.26%
UIF Growth Portfolio - Class I Shares
-------------------------------------
2012 214,963 $10.74 to $17.51 $ 2,534,261 0.00% 0.20% to 0.75% 13.52% to 14.15%
2011 232,463 9.43 to 15.42 2,388,116 0.12% 0.20% to 0.75% -3.52% to -2.99%
2010 271,486 9.74 to 15.97 2,917,842 0.10% to 0.12% 0.20% to 0.75% 4.68% to 25.31%
2009 272,514 7.96 to 13.09 2,671,894 0.00% 0.40% to 0.75% 64.32% to 64.89%
2008 324,108 4.83 to 7.96 2,073,016 0.20% to 0.22% 0.40% to 0.75% -49.57% to -47.43%
VALIC Company I International Equities Fund
-------------------------------------------
2012 246,412 $ 7.54 to $14.80 $ 2,344,533 2.78% 0.20% to 0.75% 16.15% to 17.03%
2011 237,562 6.45 to 12.74 2,085,235 2.46% 0.20% to 0.75% -13.75% to -13.27%
2010 304,791 7.44 to 14.77 3,278,698 2.26% to 2.81% 0.20% to 0.75% -0.76% to 24.08%
2009 305,100 6.87 to 13.72 3,162,419 2.44% to 4.79% 0.20% to 0.75% 28.63% to 79.50%
2008 274,084 5.31 to 10.67 2,253,140 3.04% to 9.18% 0.20% to 0.75% -43.82% to -35.20%
VALIC Company I Mid Cap Index Fund
----------------------------------
2012 926,155 $12.03 to $30.28 $12,752,712 1.01% 0.20% to 1.45% 15.83% to 17.53%
2011 971,265 10.25 to 25.96 12,207,470 0.89% 0.20% to 1.45% -3.41% to -2.20%
2010 1,000,792 10.48 to 26.69 14,390,505 0.95% to 1.73% 0.20% to 1.45% 12.66% to 26.00%
2009 955,705 8.32 to 21.30 12,518,441 0.75% to 2.09% 0.20% to 1.45% 36.29% to 41.78%
2008 962,076 6.03 to 15.52 10,459,279 1.05% to 3.66% 0.20% to 1.45% -38.59% to -29.99%
VL-R - 81
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - 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 each of the five
years in the period ended December 31, 2012 are as follows:
At December 31 For the year ended December 31
-------------------------------------- ----------------------------------------------------------------------
Investment Income
Unit Value Ratio Expense Ratio Total Return
Units Lowest to Highest Net Assets Lowest to Highest /(1)/ Lowest to Highest /(2)/ Lowest to Highest /(3)/
--------- ---------------- ----------- ---------------------- ---------------------- ----------------------
VALIC Company I Money Market I Fund
-----------------------------------
2012 1,335,241 $ 9.83 to $12.60 $13,944,313 0.01% 0.20% to 1.45% -1.43% to 0.02%
2011 1,626,173 9.93 to 12.69 17,189,014 0.01% 0.20% to 1.45% -1.43% to -0.19%
2010 1,515,388 10.00 to 12.79 16,776,609 0.01% to 0.01% 0.20% to 1.45% -1.42% to -0.10%
2009 2,131,237 10.04 to 12.88 24,241,824 0.15% to 0.49% 0.20% to 1.45% -1.14% to 0.10%
2008 2,537,161 10.03 to 12.94 29,748,445 0.37% to 3.49% 0.20% to 1.45% 0.14% to 2.03%
VALIC Company I Nasdaq-100 Index Fund
-------------------------------------
2012 327,323 $ 7.51 to $21.52 $ 3,855,505 0.48% 0.20% to 0.75% 17.06% to 17.95%
2011 405,865 6.41 to 18.38 3,611,343 0.36% 0.20% to 0.75% 2.20% to 2.76%
2010 502,301 6.27 to 17.97 3,995,460 0.22% to 0.48% 0.20% to 0.75% 9.40% to 19.48%
2009 545,407 5.27 to 15.12 3,358,810 0.00% to 51.57% 0.20% to 0.75% 54.27% to 55.19%
2008 617,506 3.42 to 9.80 2,391,443 0.00% to 0.70% 0.20% to 0.75% -42.85% to 2.65%
VALIC Company I Science & Technology Fund
-----------------------------------------
2012 130,357 $ 5.49 to $18.64 $ 1,294,304 0.00% 0.20% to 0.75% 11.30% to 12.15%
2011 153,668 4.93 to 16.65 1,189,330 0.00% 0.20% to 0.75% -6.69% to -6.18%
2010 207,258 5.28 to 17.75 1,340,855 0.00% to 0.00% 0.20% to 0.75% 7.64% to 21.85%
2009 238,882 4.35 to 14.57 1,253,524 0.05% to 0.17% 0.20% to 0.75% 32.20% to 65.18%
2008 272,017 2.65 to 8.21 821,958 0.00% 0.20% to 0.75% -46.39% to -37.42%
VALIC Company I Small Cap Index Fund
------------------------------------
2012 406,952 $10.92 to $19.92 $ 5,593,379 1.21% 0.20% to 0.75% 15.19% to 16.07%
2011 478,080 9.43 to 17.29 6,058,863 0.99% 0.20% to 0.75% -5.02% to -4.50%
2010 469,845 9.87 to 18.20 6,663,196 0.73% to 1.54% 0.20% to 0.75% 14.50% to 31.36%
2009 461,849 7.82 to 14.49 5,304,975 0.80% to 2.86% 0.20% to 0.75% 27.26% to 54.47%
2008 461,504 6.11 to 11.39 4,265,057 1.37% to 4.42% 0.20% to 0.75% -34.96% to -26.64%
VALIC Company I Stock Index Fund
--------------------------------
2012 1,538,212 $10.12 to $17.06 $17,797,241 1.75% 0.20% to 0.75% 14.71% to 15.59%
2011 1,685,382 8.77 to 14.85 16,944,543 1.50% 0.20% to 0.75% 1.06% to 1.62%
2010 2,208,072 8.63 to 14.68 21,981,985 1.50% to 3.03% 0.20% to 0.75% 8.34% to 17.05%
2009 2,347,416 7.54 to 12.88 21,013,312 1.63% to 3.97% 0.20% to 0.75% 19.41% to 27.78%
2008 2,498,709 5.99 to 9.19 18,612,241 1.61% to 6.23% 0.20% to 0.75% -37.68% to -26.88%
Vanguard VIF High Yield Bond Portfolio
--------------------------------------
2012 445,329 $14.33 to $21.12 $ 7,537,292 5.50% 0.20% to 1.45% 12.65% to 14.30%
2011 431,505 12.60 to 18.55 6,717,411 7.40% 0.20% to 1.45% 5.40% to 6.72%
2010 445,504 11.84 to 17.42 6,851,684 5.70% to 7.24% 0.20% to 1.45% 4.25% to 11.88%
2009 451,621 10.61 to 15.60 6,350,984 0.00% to 8.20% 0.20% to 1.45% 20.41% to 38.57%
2008 432,123 7.67 to 11.28 4,498,847 0.00% to 8.81% 0.20% to 1.45% -23.08% to 4.41%
Vanguard VIF REIT Index Portfolio
---------------------------------
2012 743,005 $11.13 to $35.59 $12,444,603 2.02% 0.20% to 1.45% 15.77% to 17.47%
2011 674,328 9.57 to 30.42 11,391,819 1.67% 0.20% to 1.45% 6.88% to 8.22%
2010 737,406 8.91 to 28.17 13,246,969 2.22% to 3.35% 0.20% to 1.45% 4.13% to 27.99%
2009 708,984 7.01 to 22.05 11,297,243 2.97% to 5.13% 0.20% to 1.45% 27.28% to 79.82%
2008 687,277 5.48 to 17.14 9,041,687 0.00% to 4.67% 0.20% to 1.45% -43.14% to 5.66%
VL-R - 82
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 7 - FINANCIAL HIGHLIGHTS - CONTINUED
/(1)/ 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. In 2011
these amounts represent the aggregate ratio of each underlying fund,
rather than a range as presented in prior years.
/(2)/ 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.
/(3)/ 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, 2011,
2010, 2009, 2008, and 2007, 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.
/(4)/ Effective September 4, 2007, Neuberger Berman AMT Socially Responsive
Portfolio - Class I became available as an investment option.
/(5)/ Effective October 3, 2007, the following investment options became
available under the separate account: AIM V.I. Global Real Estate Fund -
Series I, Dreyfus VIF International Value Portfolio - Initial Shares,
Janus Aspen Forty Portfolio - Service Shares, JPMorgan International
Equity Portfolio, JPMorgan Insurance Trust Government Bond Portfolio -
Class I, and PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative
Class.
/(6)/ Effective April 24, 2009, JPMorgan Insurance Trust Government Bond
Portfolio - Class 1 was acquired by JPMorgan Insurance Trust Core Bond
Portfolio - Class 1.
/(7)/ Effective April 24, 2009, JPMorgan International Equity Portfolio was
acquired by JPMorgan Insurance Trust International Equity Portfolio -
Class 1.
/(8)/ Effective April 24, 2009, JPMorgan Mid Cap Value Portfolio was acquired
by JPMorgan Insurance Trust Diversified Mid Cap Value Portfolio - Class
1, which subsequently changed its name to JPMorgan Insurance Trust Mid
Cap Value Portfolio - Class 1.
/(9)/ Effective April 24, 2009, JPMorgan Small Company Portfolio was acquired
by JPMorgan Insurance Trust Small Cap Equity Portfolio - Class 1, which
subsequently changed its name to JPMorgan Insurance Trust Small Cap Core
Portfolio - Class 1.
/(10)/ Effective September 24, 2010, Putnam VT Vista Fund - Class IB merged
into Putnam VT New Opportunities Fund - Class IB, which subsequently
changed it's name to Putnam VT Multi-Cap Growth Fund - Class IB.
/(11)/ Effective April 29, 2011, Invesco Van Kampen V.I. Government Fund -
Series I was acquired by Invesco V.I. Government Securities Fund -
Series I.
/(12)/ Effective April 29, 2011, Invesco Van Kampen V.I. High Yield Fund -
Series I was acquired by Invesco V.I. High Yield Fund - Series I.
/(13)/ Effective October 21, 2011, Credit Suisse U.S. Equity Flex I Portfolio
was closed and liquidated.
/(14)/ The Oppenheimer High Income Fund/VA merged into the Oppenheimer Global
Strategic Income Fund/VA on October 26, 2012.
VL-R - 83
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 8 - OTHER MATTERS
The Company is a subsidiary of American International Group. Information on
American International Group is publicly available in its regulatory filings
with the U.S. Securities and Exchange Commission ("SEC").
VL-R - 84
AMERICAN GENERAL LIFE INSURANCE COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Numbers
-------
Report of Independent Registered Public Accounting Firm 1
Consolidated Balance Sheets - December 31, 2012 and 2011 2 to 3
Consolidated Statements of Income - Years Ended December 31, 2012, 2011 and 2010 4
Consolidated Statements of Comprehensive Income - Years Ended December 31, 2012, 2011 and 2010 5
Consolidated Statements of Equity - Years Ended December 31, 2012, 2011 and 2010 6
Consolidated Statements of Cash Flows - Years Ended December 31, 2012, 2011 and 2010 7 to 8
Notes to Consolidated Financial Statements 9 to 82
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
American General Life Insurance Company:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of comprehensive income, of equity and of
cash flows present fairly, in all material respects, the financial position of
American General Life Insurance Company and its subsidiaries (the "Company"),
an indirect, wholly owned subsidiary of American International Group, Inc.
("AIG"), at December 31, 2012 and 2011, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
2012 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 1 to the consolidated financial statements, effective
December 31, 2012, the Company merged with several AIG affiliated insurance
companies, with the Company being the surviving legal entity.
As discussed in Note 2 to the consolidated financial statements, as of
January 1, 2012, the Company retrospectively adopted a new accounting standard
that amends the accounting for costs incurred by insurance companies that can
be capitalized in connection with acquiring or renewing insurance contracts.
/s/ PricewaterhouseCoopers LLP
Houston, TX
April 27, 2013
AMERICAN GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------
2012 2011
-------- -------------
(as adjusted,
see Note 1)
(In Millions)
ASSETS
Investments:
Fixed maturity securities, available for sale, at fair value
(amortized cost: 2012 - $92,439; 2011 - $92,072) $104,320 $ 99,585
Fixed maturity securities, trading, at fair value -- 953
Hybrid securities, at fair value
(cost: 2012 - $1,326; 2011 - $210) 1,327 186
Equity securities, available for sale, at fair value
(cost: 2012 - $54; 2011 - $82) 83 155
Equity securities, trading, at fair value 562 --
Mortgage and other loans receivable
(net of allowance: 2012 - $155; 2011 - $233) 8,245 8,418
Policy loans 1,587 1,642
Investment real estate
(net of accumulated depreciation of: 2012 - $176; 2011 - $166) 519 328
Partnerships and other invested assets 6,750 6,736
Aircraft
(net of accumulated depreciation and impairment of: 2012 - $1,158; 2011 - $1,056) 984 1,095
Short-term investments
(portion measured at fair value: 2012 - $3,193; 2011 - $1,450) 4,793 3,206
Derivative assets, at fair value 756 672
-------- --------
Total investments 129,926 122,976
Cash 325 292
Restricted cash 72 95
Investment in AIG
(cost: 2012 - $10; 2011 - $10) 4 3
Accrued investment income 1,117 1,137
Amounts due from related parties 241 91
Reinsurance receivables 1,758 1,842
Deferred policy acquisition costs and value of business acquired 4,497 5,095
Deferred sales inducements 354 555
Income taxes receivable 438 --
Other assets 954 830
Separate account assets, at fair value 27,942 25,103
-------- --------
TOTAL ASSETS $167,628 $158,019
======== ========
See accompanying notes to consolidated financial statements
2
AMERICAN GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
-------------------------
2012 2011
-------- -------------
(as adjusted,
see Note 1)
(In Millions, except share
data)
LIABILITIES AND EQUITY
Liabilities:
Future policy benefits $ 29,642 $ 28,148
Policyholder contract deposits 72,925 74,445
Policy claims and benefits payable 738 821
Other policyholders' funds 2,007 2,026
Income taxes payable to parent -- 2
Deferred income taxes payable 1,706 1,184
Notes payable - to affiliates, net 142 201
Notes payable - to third parties, net 158 175
Amounts due to related parties 135 111
Securities lending payable 1,466 --
Derivative liabilities, at fair value 967 717
Other liabilities 3,639 2,424
Separate account liabilities 27,942 25,103
-------- --------
TOTAL LIABILITIES 141,467 135,357
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES (SEE NOTE 13)
AMERICAN GENERAL LIFE INSURANCE SHAREHOLDER'S EQUITY:
Preferred stock, $100 par value, 8,500 shares authorized, issued and outstanding 1 1
Common stock, $10 par value, 600,000 shares authorized, issued and outstanding 6 6
Additional paid-in capital 25,368 27,250
Accumulated deficit (5,274) (8,291)
Accumulated other comprehensive income 5,893 3,536
-------- --------
TOTAL AMERICAN GENERAL LIFE INSURANCE SHAREHOLDER'S EQUITY 25,994 22,502
-------- --------
NONCONTROLLING INTERESTS 167 160
-------- --------
TOTAL EQUITY 26,161 22,662
-------- --------
TOTAL LIABILITIES AND EQUITY $167,628 $158,019
======== ========
See accompanying notes to consolidated financial statements
3
AMERICAN GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31,
-----------------------------------
2012 2011 2010
------- ------------- -------------
(as adjusted, (as adjusted,
see Note 1) see Note 1)
(In Millions)
REVENUES:
Premiums and other considerations $ 1,616 $ 1,615 $ 1,632
Net investment income 7,001 6,440 7,213
Net realized investment gains (losses):
Total other-than-temporary impairments on available for sale securities (127) (434) (615)
Portion of other-than-temporary impairments on available for sale fixed
maturity securities recognized in accumulated other comprehensive income (170) (32) (145)
------- ------- -------
Net other-than-temporary impairments on available for sale securities
recognized in net income (297) (466) (760)
Other realized investment gains 844 248 356
------- ------- -------
Total net realized investment gains (losses) 547 (218) (404)
Insurance charges 1,334 1,365 1,416
Other income:
Variable annuity fees 629 517 471
Commissions 540 507 450
Investment advisory fees 316 297 259
Rental income from aircraft operating leases 192 197 196
Other 633 452 483
------- ------- -------
TOTAL REVENUES 12,808 11,172 11,716
------- ------- -------
BENEFITS AND EXPENSES:
Policyholder benefits 4,247 3,875 3,507
Interest credited on policyholder contract deposits 2,820 2,575 2,697
Amortization of deferred policy acquisition costs and value of business acquired 665 982 992
Amortization of deferred sales inducements 114 205 179
General and administrative expenses, net of deferrals 1,666 1,528 1,579
Commissions, net of deferrals 894 758 699
------- ------- -------
TOTAL BENEFITS AND EXPENSES 10,406 9,923 9,653
------- ------- -------
INCOME BEFORE INCOME TAX BENEFIT 2,402 1,249 2,063
INCOME TAX EXPENSE (BENEFIT):
Current 29 (170) (15)
Deferred (651) (543) (1,115)
------- ------- -------
TOTAL INCOME TAX BENEFIT (622) (713) (1,130)
------- ------- -------
NET INCOME 3,024 1,962 3,193
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 7 (35) 7
------- ------- -------
NET INCOME ATTRIBUTABLE TO AMERICAN GENERAL LIFE INSURANCE $ 3,017 $ 1,997 $ 3,186
======= ======= =======
See accompanying notes to consolidated financial statements
4
AMERICAN GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31,
-----------------------------------
2012 2011 2010
------- ------------- -------------
(as adjusted, (as adjusted,
see Note 1) see Note 1)
(In Millions)
NET INCOME $ 3,024 $ 1,962 $ 3,193
OTHER COMPREHENSIVE INCOME:
Net unrealized gains of fixed maturity investments on which
other-than-temporary credit impairments were taken - net of reclassification
adjustments 1,452 325 1,267
Deferred income tax expense on above changes (545) (111) (447)
Net unrealized gains on all other invested assets arising during the current
period - net of reclassification adjustments 3,143 3,087 3,012
Deferred income tax expense on above changes (1,015) (1,104) (1,096)
Adjustment to deferred policy acquisition costs, value of business acquired and
deferred sales inducements (716) (385) (615)
Deferred income tax benefit on above changes 257 134 216
Insurance loss recognition (336) (1,478) (234)
Deferred income tax benefit on above changes 119 519 81
Foreign currency translation adjustments (3) 3 7
Deferred income tax (expense) benefit on above changes 1 (1) (3)
------- ------- -------
OTHER COMPREHENSIVE INCOME 2,357 989 2,188
------- ------- -------
COMPREHENSIVE INCOME 5,381 2,951 5,381
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 7 (35) 7
------- ------- -------
COMPREHENSIVE INCOME ATTRIBUTABLE TO AMERICAN GENERAL LIFE INSURANCE $ 5,374 $ 2,986 $ 5,374
======= ======= =======
See accompanying notes to consolidated financial statements
5
AMERICAN GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
Years ended December 31,
-----------------------------------
2012 2011 2010
------- ------------- -------------
(as adjusted, (as adjusted,
see Note 1) see Note 1)
(In Millions)
PREFERRED STOCK:
Balance at beginning and end of year $ 1 $ 1 $ 1
COMMON STOCK:
Balance at beginning and end of year 6 6 6
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 27,250 29,026 29,170
Capital contributions from Parent (see Note 14) -- 16 6
Return of capital (1,882) (1,792) (150)
------- -------- --------
Balance at end of year 25,368 27,250 29,026
------- -------- --------
ACCUMULATED DEFICIT:
Balance at beginning of year (8,291) (10,290) (12,533)
Cumulative effect of accounting change, net of tax -- -- (943)
------- -------- --------
Adjusted balance at beginning of year (8,291) (10,290) (13,476)
Net income attributable to AGL 3,017 1,997 3,186
Other -- 2 --
------- -------- --------
Balance at end of year (5,274) (8,291) (10,290)
------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of year 3,536 2,547 338
Cumulative effect of accounting change, net of tax -- -- 21
------- -------- --------
Adjusted balance at beginning of year 3,536 2,547 359
Other comprehensive income 2,357 989 2,188
------- -------- --------
Balance at end of year 5,893 3,536 2,547
------- -------- --------
TOTAL AMERICAN GENERAL LIFE INSURANCE SHAREHOLDER'S EQUITY 25,994 22,502 21,290
------- -------- --------
NONCONTROLLING INTERESTS:
Balance at beginning of year 160 195 188
Net income (loss) attributable to noncontrolling interests 7 (35) 7
------- -------- --------
Balance at end of year 167 160 195
------- -------- --------
TOTAL EQUITY $26,161 $ 22,662 $ 21,485
======= ======== ========
See accompanying notes to consolidated financial statements
6
AMERICAN GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
------------------------------------
2012 2011 2010
-------- ------------- -------------
(as adjusted, (as adjusted,
see Note 1) see Note 1)
(In Millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,024 $ 1,962 $ 3,193
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Interest credited on policyholder contract deposits 2,820 2,575 2,697
Fees charged for policyholder contract deposits (1,137) (1,191) (1,140)
Amortization of deferred policy acquisition costs and value of business acquired 665 982 992
Amortization of deferred sales inducements 114 205 179
Net realized investment (gains) losses (547) 218 404
Foreign exchange transaction (gains) losses (1) -- --
Equity in income of partnerships and other invested assets (314) (201) (316)
Depreciation and amortization 31 39 43
Flight equipment depreciation 102 110 121
Amortization (accretion) of net premium/discount on investments (774) (638) (828)
Provision for deferred income taxes (651) (581) (1,551)
Unrealized (gains) losses in earnings - net 102 (4) (349)
Capitalized interest (36) (138) (162)
CHANGE IN:
Trading securities, at fair value -- 2 --
Accrued investment income 20 (83) (32)
Amounts due to/from related parties (126) 220 2
Reinsurance receivables 84 64 69
Deferral of deferred policy acquisition costs and value of business acquired (604) (679) (537)
Deferral of sales inducements (5) (10) (9)
Income taxes currently receivable/payable (449) (155) 855
Other assets (71) 13 (176)
Future policy benefits 922 865 346
Other policyholders' funds (19) (56) (74)
Other liabilities 266 (8) 514
Other, net 152 (82) 135
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,568 3,429 4,376
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of:
Fixed maturity securities, available for sale (18,902) (28,181) (26,248)
Equity securities (562) (17) (28)
Mortgage and other loans (961) (1,224) (831)
Flight equipment (11) (14) (9)
Acquired businesses, net (48) -- --
Other investments, excluding short-term investments (4,215) (1,469) (1,498)
Sales of:
Fixed maturity securities, available for sale 15,386 10,505 19,160
Equity securities 36 133 130
Mortgage and other loans 397 -- 200
Flight equipment 7 102 --
Divested businesses, net 35 -- --
Other investments, excluding short-term investments 2,167 2,067 1,304
Redemptions and maturities of:
Fixed maturity securities, available for sale 6,043 7,677 6,390
Mortgage and other loans 875 572 1,137
Other investments, excluding short-term investments 598 274 313
Purchases of property, equipment and software (24) (24) (23)
Sales of property, equipment and software 1 1 --
Change in restricted cash 23 4 (22)
Change in short-term investments (1,587) 8,879 (2,816)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES $ (742) $ (715) $ (2,841)
-------- -------- --------
See accompanying notes to consolidated financial statements
7
AMERICAN GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31,
-----------------------------------
2012 2011 2010
------- ------------- -------------
(as adjusted, (as adjusted,
see Note 1) see Note 1)
(In Millions)
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account deposits $ 5,011 $ 8,243 $ 5,909
Policyholder account withdrawals (4,830) (5,798) (4,694)
Net exchanges to/(from) separate accounts (756) (361) (211)
Claims and annuity payments (2,572) (2,723) (2,259)
Proceeds from repurchase agreements 857 -- --
Repayment of notes payable (202) (159) (232)
Federal Home Loan Bank borrowings 60 -- --
Security deposits on flight equipment (12) (11) 39
Change in securities lending payable 1,466 -- --
Cash overdrafts 67 28 68
Return of capital (1,882) (1,792) (150)
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (2,793) (2,573) (1,530)
------- ------- -------
INCREASE IN CASH 33 141 5
CASH AT BEGINNING OF PERIOD 292 151 146
------- ------- -------
CASH AT END OF PERIOD $ 325 $ 292 $ 151
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 132 $ 201 $ 164
Interest (received) paid $ 25 $ (11) $ (157)
Non-cash activity:
Sales inducements credited to policyholder contract deposits $ 66 $ 110 $ 108
Other various non-cash contributions $ -- $ 15 $ 3
See accompanying notes to consolidated financial statements
8
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
American General Life Insurance Company ("AGL" or the "Company"), including its
wholly-owned subsidiaries, is a wholly-owned subsidiary of AGC Life Insurance
Company ("AGC Life" or the "Parent"), which is in turn an indirect, wholly
owned subsidiary of American International Group, Inc. ("AIG").
The Company is a leading provider of individual term and universal life
insurance solutions to middle-income and high-net-worth customers, as well as a
leading provider of fixed deferred annuities to bank customers. Primary
products include term life insurance, universal and whole life insurance,
accident and health insurance, fixed and variable annuities, indexed deferred
annuities, fixed payout annuities, private placement variable annuities,
structured settlement contracts, terminal funding annuities, immediate
annuities, corporate-owned life insurance, bank-owned life insurance,
guaranteed investment contracts ("GICs") and group benefits. The Company
distributes its products through Matrix Direct and various independent
marketing organizations, independent and career insurance agents, financial
institutions, structured settlement brokers and benefit consultants. The
Company, through its subsidiaries Integra Business Processing Solutions, Inc.
("Integra"), AIG Enterprise Services ("AIGES"), SunAmerica Asset Management
Corp. ("SAAMCo") and AGL's wholly owned broker-dealer subsidiary American
General Equity Services Corporation ("AGESC"), also provides support services
to certain affiliated insurance companies.
SAAMCo and its wholly owned distributor, SunAmerica Capital Services, Inc.
("SACS"), and its wholly owned servicing agent, SunAmerica Fund Services, Inc.
("SFS"), represent the Company's asset management operations. These companies
earn fee income by managing, distributing and administering a diversified
family of mutual funds, and variable annuity subaccounts offered within the
Company's variable annuity products, distributing their retail mutual funds and
providing professional management of individual, corporate and pension plan
portfolios.
The operations of the Company are influenced by many factors, including general
economic conditions, financial condition of AIG, monetary and fiscal policies
of the federal government and policies of state and other regulatory
authorities. The level of sales of the Company's insurance and financial
products is influenced by many factors, including general market rates of
interest, the strength, weakness and volatility of equity markets and terms and
conditions of competing products. The Company is exposed to the risks normally
associated with a portfolio of fixed income securities, namely interest rate,
option, liquidity and credit risks. The Company controls its exposure to these
risks by, among other things, closely monitoring and managing the duration and
cash flows of its assets and liabilities, monitoring and limiting prepayments
and extension risk in its portfolio, maintaining a large percentage of its
portfolio in highly liquid securities, engaging in a disciplined process of
underwriting, and reviewing and monitoring credit risk. The Company also is
exposed to market risk, policyholder behavior risk and mortality/longevity
risk. Market volatility may result in increased risks related to death and
living guaranteed benefits on the variable annuity products, as well as reduced
fee income on variable product assets held in separate accounts. These
guaranteed benefits are sensitive to equity market conditions.
On December 31, 2012, the Company merged with several other insurance companies
within AIG's Life and Retirement segment, with AGL being the surviving company,
to implement a more efficient legal entity structure, while continuing to
market products and services under currently existing brands. The merged
companies, American General Life Insurance Company of Delaware ("AGLD"),
American General Assurance Company ("AGAC"), American General Life and Accident
("AGLA"), Western National Life Insurance Company ("WNL"), SunAmerica Annuity
and Life Assurance Company ("SAAL") and SunAmerica Life Insurance Company
("SALIC") were also indirect, wholly-owned subsidiaries of AIG. Also on
December 31, 2012, the ownership of The Variable Annuity Life Insurance Company
("VALIC") was transferred from AGL to AGC Life. The merger represented a
transaction among entities under common control. Assets and liabilities
transferred between entities under common control are accounted for at
historical cost. The accompanying consolidated financial statements include the
financial position, operating results and cash flows of AGLD, AGAC, AGLA, WNL,
SAAL and SALIC and exclude VALIC for all periods presented.
9
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On November 30, 2012, AIG, as the ultimate parent, finalized a stock purchase
agreement with a third party and sold all of the common stock of American
General Property Insurance Company ("AGPIC"), a subsidiary of AGLA, and
American General Indemnity Company ("AGIC"), a subsidiary of AGAC, for
approximately $35 million cash. The operating results of AGPIC and AGIC are
included in the statements of income through the date of the sale.
On November 30, 2012, AIG Advisor Group Inc., an indirect, wholly-owned
subsidiary of SALIC, acquired Woodbury Financial Services from the Hartford
Financial Services Group Inc. Woodbury Financial Services is a leading
independent broker-dealer. The purchase price was approximately $48 million.
Effective December 31, 2011, American General Life Companies ("AGLC"), a
subsidiary of AGL, merged with AGL, the surviving entity. The merger
represented a transaction among entities under common control. Assets and
liabilities transferred between entities under common control are accounted for
at historical cost. The accompanying consolidated financial statements were not
impacted by this transaction as AGLC was previously consolidated with AGL prior
to this merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 variable interest entities ("VIE") in which the Company has
partial ownership interests. 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.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the
application of accounting policies that often involve a significant degree of
judgment. The Company considers the accounting policies that are most dependent
on the application of estimates and assumptions to be those relating to items
considered by management in the determination of:
. future policy benefits for life and accident and health contracts;
. policyholder contract deposits;
. recoverability of assets, including deferred policy acquisition costs
("DAC") and reinsurance;
. estimated gross profits ("EGPs") for investment-oriented products;
. other-than-temporary impairments;
. income tax assets and liabilities, including recoverability of deferred
tax assets and the predictability of future tax operating profitability
of the character necessary to realize deferred tax assets; and
. fair value measurement of certain financial assets and liabilities.
These accounting estimates require the use of assumptions about matters, some
of which are highly uncertain at the time of estimation. To the extent actual
experience differs from the assumptions used, the Company's consolidated
financial condition, results of operations and cash flows could be materially
affected.
Out of Period Adjustments
In 2012, the Company recorded the effect of out of period adjustments which
decreased pre-tax income by $109 million. The out of period adjustments are
primarily related to certain GIC contracts being incorrectly set up at issuance
in the Company's administration system. The Company also recorded the net
effect of an out of period adjustment which decreased equity by $30
million. The out of period adjustment was related to an update in the
methodology which the company uses to calculate the shadow DAC amortization on
a certain block of business. As a result of this correction, shadow DAC was
previously understated by $46 million. The Company has evaluated these
corrections taking into account both qualitative and quantitative factors and
considered the impact of these
10
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
corrections to 2012 as well as the materiality to the prior periods in which
they originated. Management believes these corrections are not material to the
accompanying 2012 financial statements.
Consolidation of Variable Interest Entities
The consolidated financial statements include the accounts of AGL, our
controlled subsidiaries (generally through a greater than 50 percent ownership
of voting rights of a voting interest entity), and VIEs in which we are the
primary beneficiary. Equity investments in corporate entities that we do not
consolidate, but in which we hold 20 percent to 50 percent of the voting rights
and investments in partnership and partnership-like entities for which we have
more than minor influence over operating and financial policies, are accounted
for under the equity method unless we have elected the fair value option.
On September 23, 2003, the Company purchased 75.0 percent of the non-voting
preferred equity issued by Castle 2003-1 Trust ("Castle 1 Trust"), a Delaware
statutory trust established on July 31, 2003. In 2004, the Company purchased
80.1 percent of the non-voting preferred equity issued by Castle 2003-2 Trust
("Castle 2 Trust"), a Delaware statutory trust established on November 21,
2003. See Notes 6 and 16.
The business of Castle 1 Trust, Castle 2 Trust and their wholly owned
subsidiaries is limited to acquiring, owning, leasing, maintaining, operating
and selling a portfolio of commercial jet aircraft. The accounts of Castle 1
Trust and Castle 2 Trust have been included in these consolidated financial
statements.
The Company also consolidates its investment in various limited partnerships.
INSURANCE CONTRACTS
The insurance contracts accounted for in these consolidated financial
statements include both long-duration and short-duration contracts.
Long-duration contracts include traditional whole life, term life, limited
payment, endowment, guaranteed renewable term life, participating life,
universal life, variable universal life, fixed and variable annuities,
equity-indexed annuities, single premium immediate annuities, structured
settlements, terminal funding annuities, and GICs. 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, many
contracts issued 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.
Short-duration contracts include group life, accident and health and credit
insurance policies. These contracts provide insurance protection for a fixed
period of short-duration which enables the insurer to cancel or adjust the
provisions of the contract at the end of any contract period, such as adjusting
the amount of premiums charged or coverage provided.
INVESTMENTS
Fixed Maturity and Equity Securities
Bonds held to maturity are carried at amortized cost when the Company has the
ability and positive intent to hold these securities until maturity. When the
Company does not have the ability or positive intent to hold bonds until
maturity, these securities are classified as available for sale or as trading
and are carried at fair value. None of our fixed maturity securities met the
criteria for held to maturity classification at December 31, 2012 or 2011.
Fixed maturity and equity securities classified as available-for-sale are
carried at fair value. Unrealized gains and losses from available for sale
investments in fixed maturity and equity securities are reported as a separate
component of accumulated other comprehensive income, net of deferred taxes and
an adjustment to DAC and deferred sales inducements, in shareholder's equity.
Realized gains and losses on the sale of investments are recognized in income
at the date of sale and are determined by using the specific cost
identification method.
11
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 arising from the purchase of bonds classified as available for sale
are treated as yield adjustments over their estimated holding periods, until
maturity, or call date, if applicable. Dividend income on equity securities is
generally recognized as income on the ex-dividend date. For investments in
certain residential mortgage-backed securities ("RMBS"), commercial
mortgage-backed securities ("CMBS"), collateralized debt obligations ("CDO")
and asset backed securities ("ABS"), (collectively, structured securities),
recognized yields are updated based on current information regarding the timing
and amount of expected undiscounted future cash flows. For high credit quality
structured securities, effective yields are recalculated based on actual
payments received and updated prepayment expectations, and the amortized cost
is adjusted to the amount that would have existed had the new effective yield
been applied since acquisition with a corresponding charge or credit to net
investment income. For structured securities that are not high credit quality,
effective yields are recalculated and adjusted prospectively based on changes
in expected undiscounted future cash flows. For purchased credit impaired
("PCI") securities, at acquisition, the difference between the undiscounted
expected future cash flows and the recorded investment in the securities
represents the initial accretable yield, which is to be accreted into net
investment income over the securities' remaining lives on a level-yield basis.
Subsequently, effective yields recognized on PCI securities are recalculated
and adjusted prospectively to reflect changes in the contractual benchmark
interest rates on variable rate securities and any significant increases in
undiscounted expected future cash flows arising due to reasons other than
interest rate changes.
The Company may elect to measure any hybrid financial instrument at fair value,
with changes in fair value recognized in net investment income, if the hybrid
instrument contains an embedded derivative that would otherwise be required to
be bifurcated and accounted for separately. The election to measure the hybrid
instrument at fair value is made on an instrument-by-instrument basis at the
acquisition or issuance date and is irrevocable.
Fixed maturity and equity securities classified as trading securities are
carried at fair value. Trading securities include the Company's previous
economic interest in Maiden Lane II LLC ("ML II"), which is carried at fair
value. For discussion on ML II, see Notes 3 and 4. Realized and unrealized
gains and losses on trading securities are reported in net investment income.
Impairment Policy
Fixed Maturity Securities
If the Company intends to sell a fixed maturity security or it is more likely
than not that the Company will be required to sell a fixed maturity security
before recovery of its amortized cost basis and the fair value of the security
is below amortized cost, an other-than-temporary impairment has occurred and
the amortized cost is written down to current fair value, with a corresponding
charge to earnings. When assessing the Company's intent to sell a fixed
maturity security, or whether it is more likely than not that the Company will
be required to sell a fixed maturity security before recovery of its amortized
cost basis, management evaluates relevant facts and circumstances including,
but not limited to, decisions to reposition the Company's investment portfolio,
sales of securities to meet cash flow needs and sales of securities to take
advantage of favorable pricing.
For all other fixed maturity securities for which a credit impairment has
occurred, the amortized cost is written down to the estimated recovery value
with a corresponding charge to earnings. Changes in fair value compared to
recovery value, if any, are charged to unrealized appreciation (depreciation)
of fixed maturity investments on which other-than-temporary credit impairments
are taken (a component of accumulated other comprehensive income).
When estimating future cash flows for a structured fixed maturity security
(e.g., RMBS, CMBS, CDO, ABS), management considers historical performance of
underlying assets and available market information as well as bond-specific
structural considerations, such as credit enhancement and priority of payment
structure of the security. In addition, the process of estimating future cash
flows includes, but is not limited to, the following critical inputs, which
vary by asset class:
. Current delinquency rates;
. Expected default rates and the timing of such defaults;
12
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
. Loss severity and the timing of any recovery; and
. Expected prepayment speeds.
For corporate, municipal and sovereign fixed maturity securities determined to
be credit impaired, management considers the fair value as the recovery value
when available information does not indicate that another value is more
relevant or reliable. When management identifies information that supports a
recovery value other than the fair value, the determination of a recovery value
considers scenarios specific to the issuer and the security, and may be based
upon estimates of outcomes of corporate restructurings, political and
macroeconomic factors, stability and financial strength of the issuer, the
value of any secondary sources of repayment and the disposition of assets.
The Company considers severe price declines in its assessment of potential
credit impairments. The Company may also modify its modeled outputs for certain
securities when it determines that price declines are indicative of factors not
comprehended by the cash flow models.
In periods subsequent to the recognition of an other-than-temporary impairment
charge for available for sale fixed maturity securities that are not foreign
exchange related, the Company generally prospectively accretes into earnings
the difference between the new amortized cost and the expected undiscounted
recovery value over the remaining expected holding period of the security.
Equity Securities
The Company evaluates its available for sale equity securities, equity method
and cost method investments for impairment by considering such securities as
candidates for other-than-temporary impairment if they meet any of the
following criteria:
. The security has traded at a significant (25 percent or more) discount
to cost for an extended period of time (nine consecutive months or
longer);
. A discrete credit event has occurred resulting in (i) the issuer
defaulting on a material outstanding obligation; (ii) the issuer seeking
protection from creditors under the bankruptcy laws or any similar laws
intended for 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
. The Company has concluded that it may not realize a full recovery on its
investment, regardless of the occurrence of one of the foregoing events.
The determination that an equity security is other-than-temporarily impaired
requires the judgment of management and consideration of the fundamental
condition of the issuer, its near-term prospects and all the relevant facts and
circumstances. The above criteria also consider circumstances of a rapid and
severe market valuation decline in which the Company could not reasonably
assert that the impairment period would be temporary (severity losses).
Mortgage and Other Loans Receivable
Mortgage and other loans receivable primarily include commercial mortgage loans
on real estate (net of related collateral), bank loans and guaranteed loans.
Mortgage loans are classified as loans held for investment or loans held for
sale.
Loans classified as "held for investment" are those that the Company has the
intent and ability to hold for the foreseeable future, or until maturity or
payoff. Mortgage loans held for investment are carried at unpaid principal
balances less valuation allowances and deferred fees or expenses and plus or
minus adjustments for the accretion or amortization of discount or premium.
Interest income on such loans is accrued as earned. Interest income,
amortization of premiums and discounts and prepayment fees are reported in net
investment income in the consolidated statements of income. Non-refundable loan
origination fees and certain incremental direct origination
13
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
costs are offset and the resulting net amount is deferred and amortized in net
investment income over the life of the related loan as an adjustment of the
loan's yield. Loan commitment fees are generally deferred and recognized in net
investment income as an adjustment of yield over the related life of the loan
or upon expiration of the commitment if the commitment expires unexercised.
The Company does not currently hold any loans classified as held for sale.
Impairment of mortgage and other loans receivable is based on certain risk
factors, including past due status. For commercial mortgage loans, impaired
value is based on the fair value of underlying collateral, which is determined
based on the expected net future cash flows of the collateral, less estimated
costs to sell. An allowance is typically established for the difference between
the impaired value of the loan and its current carrying amount. Additional
allowance amounts are established for incurred but not specifically identified
impairments, based on the analysis of internal risk ratings and current loan
values. Internal risk ratings are assigned based on the consideration of risk
factors including debt service coverage, loan-to-value ratio or the ratio of
the loan balance to the estimated value of the property, property occupancy,
profile of the borrower and of the major property tenants, economic trends in
the market where the property is located, and condition of the property. These
factors and the resulting risk ratings also provide a basis for determining the
level of monitoring performed at both the individual loan and the portfolio
level. When all or a portion of a commercial mortgage loan is deemed
uncollectible, the uncollectible portion of the carrying value of the loan is
charged off against the allowance. Interest income on such impaired loans is
recognized as cash is received.
Policy Loans
Policy loans are carried at unpaid principal amount. There is no allowance for
policy loans because these loans serve to reduce the death benefit paid when
the death claim is made and the balances are effectively collateralized by the
cash surrender value of the policy.
Investment 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. Properties acquired
through foreclosure and held for sale are carried at the lower of its carrying
amount or fair value less estimated costs to sell the property.
The Company's investments in real estate are periodically evaluated for
recoverability whenever changes in circumstances indicate the carrying amount
of an asset may be impaired. When impairment indicators are present, the
Company compares expected investment cash flows to carrying value. When the
expected cash flows are less than the carrying value, the investments are
written down to fair value with a corresponding charge to earnings.
Partnerships and Other Invested Assets
Partnerships in which AIG holds less than a three percent interest (five
percent in 2011) are carried at fair value and the change in fair value is
recognized as a component of accumulated other comprehensive income. With
respect to partnerships in which AIG holds in the aggregate a three percent or
greater interest or less than three percent interest but in which AIG has more
than a minor influence over the operations of the investee, the Company's
carrying value is its share of the net asset value of the partnerships. The
changes in such net asset values, accounted for under the equity method, are
recorded in earnings through net investment income. In applying the equity
method of accounting, the Company consistently uses the most recently available
financial information provided by the general partner or manager of each of
these investments, which is generally one to three months prior to the end of
the Company's reporting period. The financial statements of these investees are
generally audited annually.
The Company's partnership investments are evaluated for impairment consistent
with the evaluation of equity securities for impairments as discussed above.
Such evaluation considers market conditions, events and volatility that may
impact the recoverability of the underlying investments within these
partnerships and is based on the nature of the underlying investments and
specific inherent risks. Such risks may evolve based on the nature of the
underlying investments.
14
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other invested assets include the Company's carrying value of its ownership in
the Federal Home Loan Bank ("FHLB") of Dallas and mutual funds. Mutual funds
consist of seed money for mutual funds and investments in retail mutual funds
used as investment vehicles for the Company's variable annuity separate
accounts and are carried at market value.
Aircraft
Aircraft owned by Castle 1 Trust and Castle 2 Trust are recorded at cost
(adjusted for any impairment charges), net of accumulated depreciation.
Depreciation is generally computed on a straight-line basis to a residual value
of approximately 15 percent of the cost of the asset over its estimated useful
life of 25 years. 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).
Short-Term Investments
Short-term investments include interest-bearing money market funds, investment
pools, and other investments with original maturities within one year from the
date of purchase.
Derivative Financial Instruments
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. Financial instruments used by the
Company for such purposes include interest rate swaps, foreign currency swaps,
index options (long and short positions) and futures contracts (short positions
on U.S. treasury notes and U.S. long bonds). 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 issues equity-indexed universal life and annuity products, which
contain embedded derivatives associated with guarantees tied to certain
indices. The Company purchases call options from the S&P 500 Index, the Dow
Jones EURO STOXX 50, Nikkei 225 Index and the Hang Seng Index to offset the
increase in its liabilities resulting from the indexed features of these
products. With the exception of premiums required for the purchase of
publicly-traded or over-the-counter traded options and futures, derivatives
contracts purchased by the Company require no up-front cash payment and provide
for net settlement.
The Company issues or has issued certain variable annuity products that offer
optional guaranteed living benefits which are considered embedded derivatives
that are required to be bifurcated from the host contract and carried at fair
value. The Company hedges a portion of the risk associated with these
guarantees by utilizing both exchange traded and over-the-counter options and
exchange traded futures. Exchange traded options and futures are marked to
market using observable market quotes while over-the-counter options are marked
to market through matrix pricing that utilizes observable market inputs.
See Note 5 for further discussion of embedded derivatives.
The Company believes its hedging activities have been and remain economically
effective, but do not currently qualify for hedge accounting. The Company
carries all derivatives, with the exception of bifurcated embedded derivatives,
at fair value in the consolidated balance sheets as derivative assets or
derivative liabilities. The fair value of the bifurcated embedded derivatives
is reflected in policyholder contract deposits in the consolidated balance
sheets. Changes in the fair value of all derivatives, with the exception of
those which hedge the Company's GIC liabilities, are reported as part of net
realized investment gains and losses in the consolidated statements of income.
The change in fair value of derivatives which hedge the GIC liabilities are
reported in policyholder benefits.
See Notes 3 and 5 for additional disclosures.
15
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CASH
Cash represents cash on hand and non-interest bearing demand deposits.
RESTRICTED CASH
Castle 1 Trust and Castle 2 Trust maintain various restricted cash accounts,
primarily lessee-funded accounts, which are not available for general use.
Restricted cash primarily consists of security deposits from lessees and swap
collateral from the swap counterparty that are required to be segregated from
other funds. Restricted cash also includes cash which is segregated under
provisions of the Securities Exchange Act of 1934 and represents estimated
breakpoint refund reserves.
DEFERRED POLICY ACQUISITION COSTS, VALUE OF BUSINESS ACQUIRED ("VOBA") AND
DEFERRED SALES INDUCEMENTS
Deferred policy acquisition costs represent those costs that are incremental
and directly related to the successful acquisition of new or renewal insurance
contracts. The Company defers incremental costs that result directly from, and
are essential to, the acquisition or renewal of an insurance contract. Such
costs generally include agent or broker commissions and bonuses, premium taxes,
and medical and inspection fee that would not have been incurred if the
insurance contract had not been acquired or renewed. Each cost is analyzed to
assess whether it is fully deferrable. The Company partially defers costs,
including certain commissions, when it does not believe the entire cost is
directly related to the acquisition or renewal of insurance contracts.
The Company also defers a portion of employee total compensation and
payroll-related fringe benefits directly related to time spent performing
specific acquisition or renewal activities including costs associated with the
time spent on underwriting, policy issuance and processing, and sales force
contract selling. The amounts deferred are derived based on successful efforts
for each distribution channel and/or cost center from which the cost originates.
Policy acquisition costs for traditional life and accident and health insurance
products are generally deferred and amortized, with interest, over the premium
paying period. Policy acquisition costs and policy issuance costs related to
universal life, and investment-type products (investment-oriented products) are
deferred and amortized, with interest, in relation to the incidence of EGPs to
be realized over the estimated lives of the contracts. EGPs are composed of net
investment income, net realized investment gains and losses, fees, surrender
charges, expenses, and mortality gains and losses.
DAC for investment-oriented products is also adjusted with respect to EGPs as a
result of changes in the net unrealized gains or losses on fixed maturity and
equity securities available for sale. Because fixed maturity and equity
securities available for sale are carried at aggregate fair value, an
adjustment is made to DAC equal to the change in amortization that would have
been recorded if such securities had been sold at their stated aggregate fair
value and the proceeds reinvested at current yields. For long-duration
traditional business, if such reinvestment would not be sufficient to recover
DAC, and meet policyholder obligations, an adjustment to DAC and additional
future policy benefits for those products is recorded using best estimates that
incorporate a review of assumptions regarding mortality, morbidity,
persistency, maintenance expenses and investment returns. The change in this
adjustment, net of tax, is included with the change in net unrealized gains
(losses) on fixed maturity and equity securities available for sale that is
credited or charged directly to accumulated other comprehensive income.
VOBA is determined at the time of acquisition and is reported in the
consolidated balance sheets with DAC. This value is based on the present value
of future pre-tax profits discounted at yields applicable at the time of
purchase. For participating life, traditional life and accident and health
insurance products, VOBA is amortized over the life of the business similar to
that for DAC based on the assumptions at purchase. For universal life and
investment-oriented products, VOBA is amortized in relation to the EGPs for
each period. Similar to DAC, VOBA is adjusted for the impact of net unrealized
gains (losses) on securities in the same manner as DAC and reported with the
same financial statement line items.
With respect to the variable annuity contracts, the Company uses a "reversion
to the mean" methodology which allows the Company to maintain its long-term
assumptions, while also giving consideration to the effect of deviations from
these assumptions occurring in the current period. A DAC unlocking is performed
when
16
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
management determines that key assumptions (e.g. market return, surrender
rates, etc.) should be modified. The DAC asset is recalculated using the new
assumptions. 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 within the industry. Any resulting adjustment is included in
income as an adjustment to DAC. DAC is grouped consistent with the manner in
which the insurance contracts are acquired, serviced and measured for
profitability and is reviewed for recoverability based on the current and
projected future profitability of the underlying insurance contracts.
With respect to the Company's variable universal life policies and variable
annuity products, the assumption for the long-term growth of the separate
account assets used by the Company in the determination of DAC amortization is
8.3 percent and 7.5 percent, respectively.
The Company currently offers sales inducements, which may include enhanced
crediting rates or bonus payments to policyholders on certain of its products.
Sales inducements provided to the policyholder are recognized as part of the
liability for policyholder contract deposits on the consolidated balance
sheets. The cost of such sales inducements is 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 sales inducement 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 contracts
expected ongoing crediting rates for periods after the bonus period.
The asset management operations defer distribution costs that are directly
related to the sale of mutual funds that have a 12b-1 distribution plan and/or
contingent deferred sales charge feature (collectively, "Distribution Fee
Revenue"). The Company amortizes these deferred distribution costs on a
straight-line basis, adjusted for redemptions, over a period ranging from one
year to eight years depending on share class. Amortization of these deferred
distribution costs is increased if at any reporting period the value of the
deferred amount exceeds the projected Distribution Fee Revenue. The projected
Distribution Fee Revenue is impacted by estimated future withdrawal rates and
the rates of market return. Management uses historical activity to estimate
future withdrawal rates and average annual performance of the equity markets to
estimate the rates of market return.
SEPARATE ACCOUNT ASSETS AND LIABILITIES
The Company issues or has issued variable annuities and variable universal life
contracts, for which the investment risk lies solely with the policyholder,
except with respect to amounts invested in the fixed-rate account option and
minimum guarantees made by the Company with respect to certain policies. The
assets supporting the variable portion of variable annuities and variable
universal life contracts are carried at fair value and reported as separate
account assets with an equivalent liability in the consolidated balance sheets.
Separate account assets are primarily shares in mutual funds, which are based
on the quoted net asset value per share and are insulated from the Company's
creditors. 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. The Company receives administrative fees and other fees for
assuming mortality and certain expense risks. Such fees are included in other
revenue in the consolidated statements of income.
FUTURE POLICY BENEFITS
The liability for future policy benefits is established using assumptions
described in Note 8 herein. Future policy benefits primarily include the
reserves for traditional life and annuity payout contracts and are based on
estimates of the cost of future policy benefits. Reserves for traditional life
are determined using the net level premium method based on actuarial
assumptions as to mortality, persistency, interest and expenses established at
the policy issue date. Also included in future policy benefits is the liability
for annuities issued in structured settlement arrangements whereby a claimant
has agreed to settle a general insurance claim in exchange for fixed payments
over a fixed determinable period of time with a life contingency feature.
Structured settlement liabilities are presented on a discounted basis as the
settled claims are fixed and determinable. Additionally, the future policy
benefits include the
liability for guaranteed minimum death benefit ("the GMDB"). A majority of the
Company's variable annuity products are issued with a death benefit feature
which provides that, upon the death of a policyholder, the policyholder's
beneficiary will receive the greater of (i) the policyholder's account value,
or (ii) a guaranteed
17
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
minimum benefit that varies by product and type of benefit elected by the
policyholder. Depending on the product, the GMDB may equal the principal
invested, adjusted for withdrawals. 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
policyholder account balances, and that the fees collected under the contract
are insufficient to cover the costs of the benefit to be provided.
Earnings enhancement benefits ("EEB") is a feature the Company has offered on
certain variable annuity products. For contract holders who elect the feature,
the EEB provides an additional death benefit amount equal to a fixed percentage
of earnings in the contract, subject to certain maximums. The Company bears the
risk that account values following favorable performance of the financial
markets will result in greater EEB death claims and that the fees collected
under the contract are insufficient to cover the costs of the benefit to be
provided.
Guaranteed minimum income benefits ("GMIB") is a feature the Company offered on
certain variable annuity products from 1998 to 2006. If included in the
contract, GMIB provides a minimum fixed annuity payment guarantee after a
specified waiting period. The Company bears the risk that the performance of
the financial markets will not be sufficient for accumulated contract holder
account balances to support GMIB benefits and that the fees collected under the
contract and reinsurance recoveries, if any, are insufficient to cover the
costs of the benefit to be provided.
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. The EEB liability is determined each period end by
estimating the expected value of the EEB and recognizing it ratably over the
accumulation period based on total expected assessments. The GMIB liability is
determined each period end by estimating the expected value of the
annuitization benefits in excess of the projected account balance at the date
of annuitization and recognizing the excess ratably over the accumulation
period based on total expected assessments. The Company regularly evaluates
estimates used and adjusts the GMDB, EEB and GMIB liability balances, with a
related charge or credit to policyholder benefits in the consolidated
statements of income if actual experience or other evidence suggests that
earlier assumptions should be revised. See Note 8 for additional disclosure.
POLICYHOLDER CONTRACT DEPOSITS
Policyholder contract deposits are recorded at accumulated value (deposits
received and net transfers from separate accounts, plus accrued interest, less
withdrawals and assessed fees). Deposits collected on non-traditional life
insurance and annuity products, such as those sold by the Company, are not
reflected as revenues in the Company's consolidated statements of income, as
they are recorded directly to policyholder contract deposits upon receipt.
Policyholder contract deposits also include the Company's liabilities for
guaranteed minimum withdrawal benefit ("GMWB") and guaranteed minimum account
value ("GMAV"), accounted for as embedded derivatives at fair value. The
changes in fair value of the liability for GMWB and GMAV are reported in net
realized investment gains (losses) in the consolidated statements of income.
GMWB is a feature the Company began offering on certain variable annuity
products in May of 2004. If available and elected by the policyholder at time
of contract issuance and depending on the provisions of the feature elected,
this feature provides a guaranteed annual stream of income payments either for
a specified period of time or for life, regardless of market performance. The
amount of the guaranteed withdrawal stream is determined from a guaranteed
benefit base amount that is dependent upon the specific feature elected. The
Company bears the risk that protracted under-performance of the financial
markets and/or better than expected longevity could result in higher GMWB
benefits being higher than the underlying policyholder account balance and the
risk that the fees collected under the contract are insufficient to cover the
costs of the benefits to be provided.
GMAV is a feature that was offered on certain variable annuity products from
the third quarter of 2002 to May 2009. If available and elected by the contract
holder at the time of contract issuance, this feature guarantees that the
account value under the contract will at least equal the amount of premiums
invested during the first ninety days of the contract, adjusted for any
subsequent withdrawals, at the end of a ten-year waiting period. The Company
bears the risk that protracted under-performance of the financial markets could
result in GMAV benefits being higher than
18
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the underlying contract holder account balance and that the fees collected
under the contract are insufficient to cover the costs of the benefit to be
provided.
The fair value of the liabilities for GMWB and GMAV requires significant
management estimates and is based on the present value of expected benefits to
be paid less the present value of fee income associated with the guarantees.
The fair value estimate of the GMWB and GMAV guarantees include unobservable
inputs such as management's estimate of policyholder behavior as well as such
observable inputs as swap curves and market calibrated implied volatility. The
valuation technique used to measure the fair value of embedded policy
derivatives incorporates an additional spread to the swap curve used to value
those embedded policy derivatives.
Equity-indexed annuities and equity-indexed universal life contracts offer a
guaranteed minimum interest rate plus a contingent return based on some
internal or external equity index. This feature is accounted for in accordance
with accounting standards for derivative instruments.
POLICY CLAIMS AND BENEFITS PAYABLE
Policy claims and benefits payable include amounts representing: (i) the actual
in-force amounts for reported life claims and an estimate of incurred but not
reported ("IBNR") claims; and (ii) an estimate, based upon prior experience,
for accident and health reported and IBNR losses. The methods of making such
estimates and establishing the resulting reserves are continually reviewed and
updated and any adjustments are reflected in current period income.
The Company is now taking enhanced measures to, among other things, routinely
match policyholder records with the Social Security Administration Death Master
File ("SSDMF") to determine if its insured parties, annuitants, or retained
account holders have died and to locate beneficiaries when a claim is
payable. If the beneficiary/account owner does not make contact with the
Company within 120 days, the Company will conduct a "Thorough Search" to locate
the beneficiary/account owner. A "Thorough Search" includes at least three
attempts in writing to contact the beneficiary and if unsuccessful, at least
one contact attempt using a phone number and/or email address in Company
records.
OTHER POLICYHOLDERS' FUNDS
Included in other policyholders' funds are primarily unearned revenue reserves
("URR"), liabilities for dividends arising out of participating business,
reserves for experience-rated group products and liabilities for policyholder
premium deposit funds.
URR consists of front end loads on interest sensitive contracts, representing
those policy loads that are non-level and typically higher in initial policy
years than in later policy years. Front end loads for interest sensitive life
insurance policies are generally deferred and amortized, with interest, in
relation to the incidence of EGPs to be realized over the estimated lives of
the contracts and are subject to the same adjustments due to changes in the
assumptions underlying EGPs as DAC.
Liabilities for dividends arise from participating products issued by the
Company. Participating products are those which share in the earnings of the
Company based on provisions within the insurance contracts sold. These
dividends are declared annually by the Company's Board of Directors and may be
paid in cash, or they may be applied to reduce future premiums or purchase
additional benefits, or they may be left to accumulate with interest until a
later date. In addition, certain participating whole life insurance contracts
are subject to unique participating policyholder dividend requirements that are
imposed by state law. As such, the Company establishes an additional liability
because it is required by statute to return 90 percent of the profits from the
contracts to the policyholders in the form of policyholder dividends which will
be paid in the future but are not yet payable. The profits used in the
liability calculation consist of discrete components for operating income,
realized gains and losses and unrealized gains and losses pertaining to the
policies and the assets supporting them. The impact of the unrealized gains and
losses component is recorded through other comprehensive income.
Provisions for experience rating refunds arise from contractual obligations
between the Company and the groups being insured. Periodic assessments of the
experience of the insured groups are undertaken and the group
19
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
participates in the profits of the business, either through adjustments to
premiums or through refunds from the liability for the refund.
Premium deposit funds represent a liability for premiums received in advance of
their due dates. Such premiums are allowed to accumulate with interest until
they are due, at which time the premiums are applied to the underlying policies.
PREMIUM RECOGNITION
Premiums for traditional life insurance products are recognized as revenue 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 as a change in policyholder benefits in the consolidated statements
of income.
Premiums on accident and health policies are reported as earned over the
contract term. The portion of accident and health premiums which is not earned
at the end of a reporting period is recorded as reserves for unearned premiums
within future policy benefits in the consolidated balance sheets. The Company
estimates and accrues group premiums due but not yet collected.
NET INVESTMENT INCOME
Net investment income represents income primarily from the following sources in
the Company's operations:
. Interest income and related expenses, including amortization of premiums
and accretion of discounts on bonds with changes in the timing and the
amount of expected principal and interest cash flows reflected in the
yield, as applicable.
. Dividend income from common and preferred stock and distributions from
other investments.
. Realized and unrealized gains and losses from investments in trading
securities accounted for at fair value and investments for which the
fair value option has been elected.
. Earnings from private equity funds and hedge funds investments accounted
for under the equity method.
. Interest income on mortgage, policy and other loans.
NET REALIZED INVESTMENT GAINS AND LOSSES
Net realized investment gains and losses are determined by specific
identification. The net realized investment gains and losses are generated
primarily from the following sources:
. Sales of fixed maturity and equity securities (except trading securities
accounted for at fair value and investments which the fair value option
has been elected), real estate, investments in private equity funds and
hedge funds and other types of investments.
. Reductions to the cost basis of fixed maturity and equity securities
(except trading securities accounted for at fair value and investments
which the fair value option has been elected) and other invested assets
for other-than-temporary impairments.
. Changes in fair value of derivative assets and liabilities, except for
those instruments that are designated as economic hedges of financial
instruments for which the fair value option has been elected.
. Exchange gains and losses resulting from foreign currency transactions.
20
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
INSURANCE CHARGES AND OTHER
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts consist
of mortality, expense, and surrender charges and are included in insurance
charges in the consolidated statements of income. As discussed under "Other
Policyholders' Funds" within this note, 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 DAC. Variable
annuity and variable universal life fees and asset management fees are recorded
as income in other revenue when earned.
INCOME TAXES
Deferred taxes 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.
RECENT ACCOUNTING STANDARDS
FUTURE APPLICATION OF ACCOUNTING STANDARDS
Testing Indefinite-Lived Intangible Assets for Impairment
In July 2012, the Financial Accounting Standards Board ("FASB") issued an
accounting standard that allows a company the option to first assess
qualitatively whether it is more likely than not that an indefinite-lived
intangible asset is impaired. A company is not required to calculate the fair
value of an indefinite-lived intangible asset and perform the quantitative
impairment test unless the company determines it is more likely than not the
asset is impaired.
The standard is effective for annual and interim impairment tests performed for
fiscal years beginning after September 15, 2012. While early adoption was
permitted, the Company adopted the standard on its required effective date of
January 1, 2013. The Company does not expect adoption of the standard to have a
material effect on its consolidated financial condition, results of operations
or cash flows.
Disclosures about Offsetting Assets and Liabilities
In February 2013, the FASB issued guidance that clarifies the scope of
transactions subject to disclosures about offsetting assets and liabilities.
The guidance applies to derivatives, repurchase agreements and reverse purchase
agreements, and securities borrowing and securities lending transactions that
are offset either in accordance with specific criteria contained in FASB
Accounting Standards Codification or subject to a master netting arrangement or
similar agreement.
The standard is effective for fiscal years and interim periods beginning on or
after January 1, 2013, and will be applied retrospectively to all comparative
periods presented. The Company does not expect adoption of the standard to have
a material effect on its consolidated financial condition, results of
operations or cash flows.
Presentation of Comprehensive Income
In February 2013, the FASB issued guidance on the presentation requirements for
items reclassified out of accumulated other comprehensive income. Companies
will be required to disclose the effect of significant items reclassified out
of accumulated other comprehensive income on the respective line items of net
income or provide a cross-reference to other disclosures currently required
under GAAP for relevant items.
21
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The standard is effective for annual and interim reporting periods beginning
after December 15, 2012. The Company does not expect adoption of the standard
to have a material effect on its consolidated financial condition, results of
operations or cash flows.
THE COMPANY ADOPTED THE FOLLOWING ACCOUNTING STANDARDS DURING 2012:
Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
In October 2010, the FASB issued an accounting standard that amends the
accounting for costs incurred by insurance companies that can be capitalized in
connection with acquiring or renewing insurance contracts. The standard
clarifies how to determine whether the costs incurred in connection with the
acquisition of new or renewal insurance contracts qualify as DAC. The Company
adopted the standard retrospectively on January 1, 2012.
Deferred policy acquisition costs represent those costs that are incremental
and directly related to the successful acquisition of new or renewal insurance
contracts. The Company defers incremental costs that result directly from, and
are essential to, the acquisition or renewal of an insurance contract. Such
costs generally include agent or broker commissions and bonuses, premium taxes,
and medical and inspection fee that would not have been incurred if the
insurance contract had not been acquired or renewed. Each cost is analyzed to
assess whether it is fully deferrable. The Company partially defers costs,
including certain commissions, when it does not believe the entire cost is
directly related to the acquisition or renewal of insurance contracts.
The Company also defers a portion of employee total compensation and
payroll-related fringe benefits directly related to time spent performing
specific acquisition or renewal activities including costs associated with the
time spent on underwriting, policy issuance and processing, and sales force
contract selling. The amounts deferred are derived based on successful efforts
for each distribution channel and/or cost center from which the cost originates.
The method the Company uses to amortize DAC did not change as a result of the
adoption of the standard.
The adoption of the standard resulted in an increase to beginning of period
accumulated deficit for the earliest period presented and a decrease in the
amount of capitalized costs in connection with the acquisition or renewal of
insurance contracts. Accordingly, the Company revised its historical financial
statements and accompanying notes in the financial statements for the changes
in DAC and associated changes in acquisitions expenses and income taxes.
The following table presents amounts as of December 31, 2011 as if the Company
had previously reported merged financial statements, to reflect the effect of
the change due to the retrospective adoption of the standard, and the adjusted
amounts that are reflected in the consolidated balance sheet.
As Previously Effect of As Currently
Reported Change Reported
DECEMBER 31, 2011 ------------- --------- ------------
(in Millions)
Balance Sheet:
Deferred policy acquisition cost and value of business acquired $ 6,298 $(1,203) $ 5,095
Deferred sales inducements 516 39 555
Income tax receivable (280) 280 --
Total assets 158,903 (884) 158,019
Deferred income tax payable 1,311 (127) 1,184
Total liabilites 135,484 (127) 135,357
Accumulated deficit (7,345) (946) (8,291)
Accumulated other comprehensive income 3,347 189 3,536
Total AGL shareholder's equity 23,259 (757) 22,502
Total equity 23,419 (757) 22,662
Total laibilities and equity 158,903 (884) 158,019
22
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present amounts for the years ended December 31, 2011 and
2010 as if the Company had previously reported merged financial statements to
reflect the effect of the change due to the retrospective adoption of the
standard, and the adjusted amounts that are reflected in the consolidated
statements of income and consolidated statements of cash flows.
As Previously Effect of As Currently
Reported Change Reported
YEAR ENDED DECEMBER 31, 2011 ------------- --------- ------------
(in Millions)
Statement of Income:
Amortization of deferred policy acquisition costs and value of
busniess acquired $1,234 $(252) $ 982
Amortization of deferred sales inducements 183 22 205
General and administrative expenses, net of deferrals 1,310 218 1,528
Commissions, net of deferrals 731 27 758
Total benefits and expenses 9,908 15 9,923
Income before income tax benefit 1,264 (15) 1,249
Income tax benefit (709) (4) (713)
Net income 1,973 (11) 1,962
Net income attributable to AGL 2,008 (11) 1,997
As Previously Effect of As Currently
Reported Change Reported
YEAR ENDED DECEMBER 31, 2010 ------------- --------- ------------
(in Millions)
Statement of Income:
Amortization of deferred policy acquisition costs and value of
busniess acquired $ 1,231 $(239) $ 992
Amortization of deferred sales inducements 177 2 179
General and administrative expenses, net of deferrals 1,393 186 1,579
Commissions, net of deferrals 670 29 699
Total benefits and expenses 9,675 (22) 9,653
Income before income tax benefit 2,041 22 2,063
Income tax benefit (1,136) 6 (1,130)
Net income 3,177 16 3,193
Net income attributable to AGL 3,170 16 3,186
Adoption of the standard did not affect the previously reported totals for net
cash flows provided by (used in) operating, investing, or financing activities,
but did affect the following components of net cash flows provided by operating
activities.
As Previously Effect of As Currently
Reported Change Reported
YEAR ENDED DECEMBER 31, 2011 ------------- --------- ------------
(in Millions)
Cash flows from operating activities:
Net income $1,973 $ (11) $1,962
Amortization of deferred policy acquisition costs and value of
busniess acquired 1,234 (252) 982
Amortization of deferred sales inducements 183 22 205
Provision for deferred income taxes (577) (4) (581)
Deferral of deferred policy acquisition costs and value of busniess
acquired (924) 245 (679)
Income taxes currently receivable/payable (161) 6 (155)
23
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As Previously Effect of As Currently
Reported Change Reported
YEAR ENDED DECEMBER 31, 2010 ------------- --------- ------------
(in Millions)
Cash flows from operating activities:
Net income $ 3,177 $ 16 $ 3,193
Amortization of deferred policy acquisition costs and value of
busniess acquired 1,231 (239) 992
Amortization of deferred sales inducements 177 2 179
Provision for deferred income taxes (1,557) 6 (1,551)
Deferral of deferred policy acquisition costs and value of busniess
acquired (752) 215 (537)
Income taxes currently receivable/payable 848 7 855
Reconsideration of Effective Control for Secured Borrowings
In April 2011, the FASB issued an accounting standard that amends the criteria
used to determine effective control for repurchase agreements and other similar
agreements such as securities lending transactions. The standard modifies the
criteria for determining when these transactions would be accounted for as
secured borrowings (i.e., financings) instead of sales of the securities.
The standard removes from the assessment of effective control the requirement
that the transferor have the ability to repurchase or redeem the financial
assets on substantially agreed terms, even in the event of default by the
transferee. The removal of this requirement makes the level of collateral
received by the transferor in a repurchase agreement or similar agreement
irrelevant in determining whether the transaction should be accounted for as a
sale. Consequently, more repurchase agreements, securities lending transactions
and similar arrangements will be accounted for as secured borrowings.
The guidance in the standard was required to be applied prospectively to
transactions or modifications that occur on or after January 1, 2012. There are
no repurchase agreements that continue to be accounted for as sales as of
December 31, 2012.
Common Fair Value Measurement and Disclosure Requirements in GAAP and
International Financial Reporting Standards ("IFRS")
In May 2011, the FASB issued an accounting standard that amends certain aspects
of the fair value measurement guidance in GAAP, primarily to achieve the FASB's
objective of a converged definition of fair value and substantially converged
measurement and disclosure guidance with IFRS. The measurement and disclosure
requirements under GAAP and IFRS are now generally consistent, with certain
exceptions including the accounting for day one gains and losses, measuring the
fair value of alternative investments using net asset value and certain
disclosure requirements.
The standard's fair value measurement and disclosure guidance applies to all
companies that measure assets, liabilities, or instruments classified in
shareholder's equity at fair value or provide fair value disclosures for items
not recorded at fair value. The guidance clarifies existing guidance on the
application of fair value measurements, changes certain principles or
requirements for measuring fair value, and requires significant additional
disclosures for Level 3 valuation inputs. The new disclosure requirements were
applied prospectively. The standard became effective for the Company beginning
January 1, 2012. The standard did not have any effect on the Company's
consolidated financial condition, results of operations or cash flows. See Note
3 herein.
Presentation of Comprehensive Income
In June 2011, the FASB issued an accounting standard that requires the
presentation of comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. In the
two-statement approach, the first statement should present total net income and
its components, followed consecutively by a second statement that presents
total other comprehensive income and its components. The standard became
24
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
effective beginning January 1, 2012 with retrospective application required.
The standard did not have any effect on the Company's consolidated financial
condition, results of operations or cash flows.
THE COMPANY ADOPTED THE FOLLOWING ACCOUNTING STANDARDS DURING 2011:
Fair Value Measurements and Disclosures
In January 2010, the FASB issued an accounting standard that requires fair
value disclosures about significant transfers between Level 1 and 2 measurement
categories and separate presentation of purchases, sales, issuances, and
settlements within the rollforward of Level 3 activity. Also, this fair value
guidance clarifies the disclosure requirements about the level of
disaggregation and valuation techniques and inputs. This guidance became
effective for the Company beginning on January 1, 2010, except for the
disclosures about purchases, sales, issuances, and settlements within the
rollforward of Level 3 activity, which were effective for the Company beginning
on January 1, 2011. See Note 3.
Consolidation of Investments in Separate Accounts
In April 2010, the FASB issued an accounting standard that clarifies that an
insurance company should not combine any investments held in separate account
interests with its interest in the same investment held in its general account
when assessing the investment for consolidation. Separate accounts represent
funds for which investment income and investment gains and losses accrue
directly to the policyholders who bear the investment risk. The standard also
provides guidance on how an insurer should consolidate an investment fund when
the insurer concludes that consolidation of an investment is required and the
insurer's interest is through its general account in addition to any separate
accounts. The new standard became effective for the Company on January 1, 2011.
The adoption of this standard did not have a material effect on the Company's
consolidated financial condition, results of operations or cash flows.
A Creditor's Determination of Whether a Restructuring is a Troubled Debt
Restructuring
In April 2011, the FASB issued an accounting standard that amends the guidance
for a creditor's evaluation of whether a restructuring is a troubled debt
restructuring ("TDR") and requires additional disclosures about a creditor's
troubled debt restructuring activities. The standard clarifies the existing
guidance on the two criteria used by creditors to determine whether a
modification or restructuring is a troubled debt restructuring: (i) whether the
creditor has granted a concession and (ii) whether the debtor is experiencing
financial difficulties. The standard became effective for the Company for
interim and annual periods beginning on July 1, 2011. The Company applied the
guidance in the accounting standard retrospectively for all modifications and
restructuring activities that had occurred since January 1, 2011. For
receivables that were considered impaired under the guidance, the Company was
required to measure the impairment of those receivables prospectively in the
first period of adoption. In addition, the Company must provide the disclosures
about troubled debt restructuring activities in the period of adoption. The
adoption of this standard did not have a material effect on the Company's
consolidated financial condition, results of operations or cash flows.
See Note 4.
THE COMPANY ADOPTED THE FOLLOWING ACCOUNTING STANDARDS DURING 2010:
Consolidation of VIEs
In June 2009, the FASB issued an accounting standard that amends the guidance
addressing consolidation of certain variable interest entities with an approach
focused on identifying which enterprise has the power to direct the activities
of a variable interest entity that most significantly affect the entity's
economic performance and has (i) the obligation to absorb losses of the entity
or (ii) the right to receive benefits from the entity. The standard also
requires enhanced financial reporting by enterprises involved with variable
interest entities. The adoption of the standard did not have a material effect
on the Company's consolidated financial condition, results of operations or
cash flows.
In February 2010, the FASB also issued an update to the aforementioned
accounting standard that defers the revised consolidation rules for variable
interest entities with attributes of, or similar to, an investment company or
money
25
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
market fund. The primary effect of this deferral is that the Company will
continue to apply the consolidation rules in effect before the amended guidance
discussed above for its interests in eligible entities.
Accounting for Embedded Credit Derivatives
In March 2010, the FASB issued an accounting standard that amends the
accounting for embedded credit derivative features in structured securities
that redistribute credit risk in the form of subordination of one financial
instrument to another. The standard clarifies how to determine whether embedded
credit derivative features, including those in CDOs, credit-linked notes
("CLNs"), synthetic CDOs and CLNs and other synthetic securities (e.g.,
commercial and residential mortgage-backed securities issued by securitization
entities that wrote credit derivatives), are considered to be embedded
derivatives that should be analyzed for potential bifurcation and separate
accounting or, alternatively, for fair value accounting in connection with the
application of the fair value option to the entire hybrid instrument. The
Company adopted the standard on July 1, 2010. Upon adoption, the Company
accounts for its investments in synthetic securities otherwise requiring
bifurcation at fair value, with changes in fair value recognized in earnings.
The adoption of this standard did not have a material effect on the Company's
consolidated financial condition, results of operations or cash flows.
Disclosures about the Credit Quality of Financing Receivables and the Allowance
for Credit Losses
In July 2010, the FASB issued an accounting standard that requires enhanced
disclosures about the credit quality of financing receivables that are not
measured at fair value. This guidance requires a greater level of disaggregated
information about the credit quality of financing receivables and the related
allowance for credit losses. In addition, this guidance requires disclosure of
credit quality indicators, past due information, and modifications of financing
receivables. For nonpublic entities, the disclosures as of the end of a
reporting period became effective for annual reporting periods ended on or
after December 15, 2011. The disclosures about activity that occurs during a
reporting period became effective for interim and annual reporting periods
beginning on or after December 15, 2010. In January 2011, the FASB issued an
accounting standard that temporarily deferred the effective date for
disclosures on modifications of financing receivables by creditors. In April
2011, the FASB issued an accounting standard that amended the guidance for a
creditor's evaluation of whether a restructuring is a troubled debt
restructuring. In addition, this guidance requires additional disclosures about
a creditor's troubled debt restructuring activities in interim and annual
periods beginning on July 1, 2011.
3. FAIR VALUE MEASUREMENTS
Fair Value Measurements on a Recurring Basis
The Company carries certain financial instruments at fair value. The fair value
of a financial instrument is the amount that would be received from the sale of
an asset or paid to transfer a liability in an orderly transaction between
willing, able and knowledgeable market participants at the measurement date.
The Company is responsible for the determination of the value of the
investments carried at fair value and the supporting methodologies and
assumptions.
The degree of judgment used in measuring the fair value of financial
instruments generally inversely correlates with the level of observable
valuation inputs. The Company maximizes the use of observable inputs and
minimizes the use of unobservable inputs when measuring fair value. Financial
instruments with quoted prices in active markets generally have more pricing
observability and less judgment is used in measuring fair value. Conversely,
financial instruments for which no quoted prices are available have less
observability and are measured at fair value using valuation models or other
pricing techniques that require more judgment. Pricing observability is
affected by a number of factors, including the type of financial instrument,
whether the financial instrument is new to the market and not yet established,
the characteristics specific to the transaction, liquidity and general market
conditions.
26
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Hierarchy
Assets and liabilities recorded at fair value in the consolidated balance
sheets are measured and classified in a hierarchy for disclosure purposes,
consisting of three "levels" based on the observability of inputs available in
the marketplace used to measure the fair values, as discussed below:
. Level 1 - Fair value measurements that are quoted prices (unadjusted) in
active markets that the Company has the ability to access for identical
assets or liabilities. Market price data generally is obtained from
exchange or dealer markets. The Company does not adjust the quoted price
for such instruments.
. Level 2 - Fair value measurements based on inputs other than quoted
prices included in Level 1, that are observable for the asset or
liability, either directly or indirectly. Level 2 inputs include quoted
prices for similar assets and liabilities in active markets, and inputs
other than quoted prices that are observable for the asset or liability,
such as interest rates and yield curves that are observable at commonly
quoted intervals.
. Level 3 - Fair value measurements based on valuation techniques that use
significant inputs that are unobservable. Both observable and
unobservable inputs may be used to determine the fair values of
positions classified in Level 3. These measurements include
circumstances in which there is little, if any, market activity for the
asset or liability. Therefore, the Company must make certain assumptions
as to the inputs a hypothetical market participant would use to value
that asset or liability.
In certain cases, the inputs used to measure the fair value may fall into
different levels of the fair value hierarchy. In such cases, the level in the
fair value hierarchy within which the fair value measurement in its entirety
falls is determined based on the lowest level input that is significant to the
fair value measurement in its entirety. The Company's assessment of the
significance of a particular input to the fair value measurement in its
entirety requires judgment. In making the assessment, the Company considers
factors specific to the asset or liability.
Valuation Methodologies
The following is a description of the valuation methodologies used for
instruments carried at fair value. These methodologies are applied to assets
and liabilities across the levels noted above, and it is the observability of
the inputs used that determines the appropriate level in the fair value
hierarchy for the respective asset or liability.
Incorporation of Credit Risk in Fair Value Measurements
. The Company's Own Credit Risk. Fair value measurements for certain
freestanding derivatives incorporate the Company's own credit risk by
determining the explicit cost for each counterparty to protect against
its net credit exposure to the Company at the balance sheet date by
reference to observable credit default swap ("CDS") or cash bond
spreads. A derivative counterparty's net credit exposure to the Company
is determined based on master netting agreements, when applicable, which
take into consideration all derivative positions with the Company, as
well as collateral posted by the Company with the counterparty at the
balance sheet date.
. Counterparty Credit Risk. Fair value measurements for freestanding
derivatives incorporate counterparty credit risk by determining the
explicit cost for the Company to protect against its net credit exposure
to each counterparty at the balance sheet date by reference to
observable counterparty CDS spreads, when available. When not available,
other directly or indirectly observable credit spreads will be used to
derive the best estimates of the counterparty spreads. The Company's net
credit exposure to a counterparty is determined based on master netting
agreements, which take into consideration all derivative positions with
the counterparty, as well as collateral posted by the counterparty at
the balance sheet date.
Fair values for fixed maturity securities based on observable market prices for
identical or similar instruments implicitly incorporate counterparty credit
risk. Fair values for fixed maturity securities based on internal models
incorporate counterparty credit risk by using discount rates that take into
consideration cash issuance spreads for similar instruments or other observable
information.
27
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The cost of credit protection is determined under a discounted present value
approach considering the market levels for single name CDS spreads for each
specific counterparty, the mid market value of the net exposure (reflecting the
amount of protection required) and the weighted average life of the net
exposure. CDS spreads are provided to the Company by an independent third
party. The Company utilizes an interest rate based on the benchmark London
Interbank Offered Rate ("LIBOR") curve to derive its discount rates.
While this approach does not explicitly consider all potential future behavior
of the derivative transactions or potential future changes in valuation inputs,
management believes this approach provides a reasonable estimate of the fair
value of the assets and liabilities, including consideration of the impact of
non-performance risk.
Fixed Maturity Securities - Trading and Available for Sale
Whenever available, the Company obtains quoted prices in active markets for
identical assets at the balance sheet date to measure fixed maturity securities
at fair value in its available for sale and trading portfolios. Market price
data is generally obtained from third party pricing vendors.
Management is responsible for the determination of the value of the investments
carried at fair value and the supporting methodologies and assumptions. The
Company employs independent third-party valuation service providers to gather,
analyze, and interpret market information in order to derive fair value
estimates for individual investments based upon market-accepted methodologies
and assumptions. The methodologies used by these independent third-party
valuation services are reviewed and understood by the Company's management, via
periodic discussion with and information provided by the valuation services. In
addition, as discussed further below, control processes are applied to the fair
values received from third-party valuation services to ensure the accuracy of
these values.
Valuation service providers typically obtain data about market transactions and
other key valuation model inputs from multiple sources and, through the use of
widely accepted valuation methodologies, which may utilize matrix pricing,
financial models, accompanying model inputs and various assumptions, provide a
single fair value measurement for individual securities. The inputs used by the
valuation service providers include, but are not limited to, market prices from
completed transactions for identical securities and transactions of comparable
securities, benchmark yields, interest rate yield curves, credit spreads,
currency rates, quoted prices for similar securities and other
market--observable information, as applicable. If fair value is determined
using financial models, these models generally take into account, among other
things, market observable information as of the measurement date as well as the
specific attributes of the security being valued, including its term, interest
rate, credit rating, industry sector, and when applicable, collateral quality
and other security or issuer-specific information. When market transactions or
other market observable data is limited, the extent to which judgment is
applied in determining fair value is greatly increased.
The Company has control processes designed to ensure that the fair values
received from third party valuation services are accurately recorded, that
their data inputs and valuation techniques are appropriate and consistently
applied and that the assumptions used appear reasonable and consistent with the
objective of determining fair value. The Company assesses the reasonableness of
individual security values received from valuation service providers through
various analytical techniques, and has procedures to escalate related questions
internally and to the third party valuation services for resolution. To assess
the degree of pricing consensus among various valuation services for specific
asset types, the Company has conducted comparisons of prices received from
available sources. Management has used these comparisons to establish a
hierarchy for the fair values received from third party valuations services to
be used for particular security classes. The Company also validates prices for
selected securities through reviews by members of management who have relevant
expertise and who are independent of those charged with executing investing
transactions.
When the Company's third-party valuation service providers are unable to obtain
sufficient market observable information upon which to estimate the fair value
for a particular security, fair value is determined either by requesting
brokers who are knowledgeable about these securities to provide a price quote,
which is generally non-binding, or by employing widely accepted valuation
models. Broker prices may be based on an income approach, which converts
expected future cash flows to a single present value amount, with specific
consideration of inputs relevant to particular security types. For structured
securities, such inputs may include ratings, collateral types,
28
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
geographic concentrations, underlying loan vintages, loan delinquencies, and
weighted average coupons and maturities. When the volume or level of market
activity for a security is limited, certain inputs used to determine fair value
may not be observable in the market. Broker prices may also be based on a
market approach that considers recent transactions involving identical or
similar securities. Fair values provided by brokers are subject to similar
control processes to those noted above for fair values from third party
valuation services, including management reviews. For those corporate debt
instruments (for example, private placements) that are not traded in active
markets or that are subject to transfer restrictions, valuations are adjusted
to reflect illiquidity and non-transferability, and such adjustments generally
are based on available market evidence. When observable price quotations are
not available, fair value is determined based on discounted cash flow models
using discount rates based on credit spreads, yields or price levels of
comparable securities, adjusted for illiquidity and structure. Fair values
determined internally are also subject to management review in order to ensure
that valuation models and related inputs are reasonable.
The methodology above is relevant for all fixed maturity securities including
RMBS, CMBS, CDOs, other ABS and fixed maturity securities issued by government
sponsored entities and corporate entities.
Equity Securities - Available for Sale and Trading
Whenever available, the Company obtains quoted prices in active markets for
identical assets at the balance sheet date to measure at fair value marketable
equity securities in its available for sale and trading portfolios. Market
price data is generally obtained from exchange or dealer markets.
Partnerships and Other Invested Assets
The Company initially estimates the fair value of investments in certain hedge
funds, private equity funds and other investment partnerships by reference to
the transaction price. Subsequently, the Company generally obtains the fair
value of these investments from net asset value information provided by the
general partner or manager of the investments, the financial statements of
which are generally audited annually. The Company considers observable market
data and performs certain control procedures to validate the appropriateness of
using the net asset value as a fair value measurement.
Short-Term Investments
For short-term investments that are measured at fair value, the carrying values
of these assets approximate fair values because of the relatively short period
of time between origination and expected realization, and their limited
exposure to credit risk.
Separate Account Assets
Separate account assets are composed primarily of registered and unregistered
open-end mutual funds that generally trade daily and are measured at fair value
in the manner discussed above for equity securities traded in active markets.
Changes in the fair value of separate account assets are completely offset in
the consolidated statements of income and comprehensive income by changes in
separate account liabilities, which are not carried at fair value.
Derivative Assets and Liabilities
Derivative assets and liabilities can be exchange-traded or traded
over-the-counter ("OTC"). The Company generally values exchange-traded
derivatives using quoted prices in active markets for identical derivatives at
the balance sheet date.
OTC derivatives are valued using market transactions and other observable
market evidence whenever possible, including market-based inputs to models,
model calibration to market clearing transactions, broker or dealer quotations
or alternative pricing sources with reasonable levels of price transparency.
When models are used, the selection of a particular model to value an OTC
derivative depends on the contractual terms of, and specific risks
29
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
inherent in the instrument, as well as the availability of pricing information
in the market. The Company generally uses similar models to value similar
instruments. Valuation models require a variety of inputs, including
contractual terms, market prices and rates, yield curves, credit curves,
measures of volatility, prepayment rates and correlations of such inputs. For
OTC derivatives that trade in liquid markets, such as swaps and options, model
inputs can generally be corroborated by observable market data by correlation
or other means, and model selection does not involve significant management
judgment.
For certain OTC derivatives that trade in less liquid markets, where we
generally do not have corroborating market evidence to support significant
model inputs and cannot verify the model to market transactions, the
transaction price may provide the best estimate of fair value. Accordingly,
when a pricing model is used to value such an instrument, the model is adjusted
so the model value at inception equals the transaction price. The Company will
update valuation inputs in these models only when corroborated by evidence such
as similar market transactions, third party pricing services and/or broker or
dealer quotations, or other empirical market data. When appropriate, valuations
are adjusted for various factors such as liquidity, bid/offer spreads and
credit considerations. Such adjustments are generally based on available market
evidence. In the absence of such evidence, management's best estimate is used.
Embedded Policy Derivatives Included in Policyholder Contract Deposits
The fair value of embedded policy derivatives contained in certain variable
annuity and equity-indexed annuity and life contracts is measured based on
actuarial and capital market assumptions related to projected cash flows over
the expected lives of the contracts. These cash flow estimates primarily
include benefits and related fees assessed, when applicable, and incorporate
expectations about policyholder behavior. Estimates of future policyholder
behavior are subjective and based primarily on the Company's historical
experience.
With respect to embedded policy derivatives in the Company's variable annuity
contracts, because of the dynamic and complex nature of the expected cash
flows, risk neutral valuations are used. Estimating the underlying cash flows
for these products involves many estimates and judgments, including those
regarding expected market rates of return, market volatility, correlations of
market index returns to funds, fund performance, discount rates and
policyholder behavior.
With respect to embedded derivatives in the Company's equity-indexed life and
annuity contracts, option pricing models are used to estimate fair value,
taking into account assumptions for future equity index growth rates,
volatility of the equity index, future interest rates, and determinations on
adjusting the participation rate and the cap on equity-indexed credited rates
in light of market conditions and policyholder behavior assumptions. This
methodology incorporates an explicit risk margin to take into consideration
market participant estimates of projected cash flows and policyholder behavior.
The Company also incorporates its own risk of non-performance in the valuation
of the embedded policy derivatives associated with variable annuity and
equity-indexed annuity and life contracts. Historically, the expected cash
flows were discounted using the interest rate swap curve ("swap curve"), which
is commonly viewed as being consistent with the credit spreads for highly-rated
financial institutions (S&P AA-rated or above). A swap curve shows the
fixed-rate leg of a plain vanilla swap against the floating rate (e.g. LIBOR)
leg of a related tenor. The swap curve was adjusted, as necessary, for
anomalies between the swap curve and the U.S. Treasury yield curve. The
non-performance risk adjustment also reflects a market participant's view of
the Company's claims-paying ability and incorporates an additional spread to
the swap curve used to value embedded policy derivatives.
30
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present information about assets and liabilities measured
at fair value on a recurring basis and indicate the level of the fair value
measurement based on the levels of the inputs used:
Counterparty Cash
At December 31, 2012 Level 1 Level 2 Level 3 Netting (a) Collateral (b) Total Fair Value
-------------------- -------- ------- ------- ------------ -------------- ----------------
(In Millions)
ASSETS:
Fixed maturity securities, available for sale:
U.S. government obligations $ -- $ 515 $ -- $ -- $ -- $ 515
Foreign government 7 2,545 -- -- -- 2,552
States, territories & political subdivisions -- 1,621 633 -- -- 2,254
Corporate debt -- 74,506 1,240 -- -- 75,746
RMBS -- 9,972 4,957 -- -- 14,929
CMBS -- 1,720 2,205 -- -- 3,925
CDO/ABS -- 1,745 2,654 -- -- 4,399
-------- ------- ------- ----- ----- --------
Total fixed maturity securities, available for sale 7 92,624 11,689 -- -- 104,320
-------- ------- ------- ----- ----- --------
Hybrid securities:
U.S. government obligations 48 858 -- -- -- 906
RMBS -- 117 127 -- -- 244
CMBS -- 15 41 -- -- 56
CDO/ABS -- 8 113 -- -- 121
-------- ------- ------- ----- ----- --------
Total hybrid securities 48 998 281 -- -- 1,327
-------- ------- ------- ----- ----- --------
Equity securities, available for sale:
Common stocks 17 -- 9 -- -- 26
Preferred stocks -- 31 26 -- -- 57
-------- ------- ------- ----- ----- --------
Total equity securities, available for sale 17 31 35 -- -- 83
-------- ------- ------- ----- ----- --------
Equity securities, trading:
Common stocks 562 -- -- -- -- 562
-------- ------- ------- ----- ----- --------
Total equity securities, trading 562 -- -- -- -- 562
-------- ------- ------- ----- ----- --------
Partnerships and other invested assets (c) 1 404 1,905 -- -- 2,310
Short-term investments (d) 90 3,103 -- -- -- 3,193
Derivative assets:
Interest rate contracts 1 1,283 -- -- -- 1,284
Foreign exchange contracts -- 16 -- -- -- 16
Equity contracts 64 32 21 -- -- 117
Other contracts -- -- 2 -- -- 2
Counterparty netting and cash collateral -- -- -- (230) (433) (663)
-------- ------- ------- ----- ----- --------
Total derivative assets 65 1,331 23 (230) (433) 756
-------- ------- ------- ----- ----- --------
Separate account assets 26,642 1,300 -- -- -- 27,942
-------- ------- ------- ----- ----- --------
Total $ 27,432 $99,791 $13,933 $(230) $(433) $140,493
======== ======= ======= ===== ===== ========
LIABILITIES:
Policyholder contract deposits (e) $ -- $ 76 $ 1,040 $ -- $ -- $ 1,116
Derivative liabilities:
Interest rate contracts -- 1,144 2 -- -- 1,146
Foreign exchange contracts -- 43 -- -- -- 43
Counterparty netting and cash collateral -- -- -- (230) 8 (222)
-------- ------- ------- ----- ----- --------
Total derivative liabilities -- 1,187 2 (230) 8 967
-------- ------- ------- ----- ----- --------
Total $ -- $ 1,263 $ 1,042 $(230) $ 8 $ 2,083
======== ======= ======= ===== ===== ========
31
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Counterparty Cash Total Fair
At December 31, 2011 Level 1 Level 2 Level 3 Netting (a) Collateral (b) Value
-------------------- -------- ------- ------- ------------ -------------- ----------
(In Millions)
ASSETS:
Fixed maturity securities, available for sale:
U.S. government obligations $ -- $ 547 $ -- $ -- $ -- $ 547
Foreign government -- 1,900 -- -- -- 1,900
States, territories & political subdivisions -- 1,201 482 -- -- 1,683
Corporate debt -- 72,596 978 -- -- 73,574
RMBS -- 8,940 5,939 -- -- 14,879
CMBS -- 1,699 1,900 -- -- 3,599
CDO/ABS -- 1,452 1,951 -- -- 3,403
-------- ------- ------- ----- ----- --------
Total fixed maturity securities, available for sale -- 88,335 11,250 -- -- 99,585
-------- ------- ------- ----- ----- --------
Fixed maturity securities, trading:
CDO/ABS -- -- 953 -- -- 953
-------- ------- ------- ----- ----- --------
Total fixed maturity securities, trading -- -- 953 -- -- 953
-------- ------- ------- ----- ----- --------
Hybrid securities:
RMBS -- 20 138 -- -- 158
CMBS -- 8 -- -- -- 8
CDO/ABS -- 7 13 -- -- 20
-------- ------- ------- ----- ----- --------
Total hybrid securities -- 35 151 -- -- 186
-------- ------- ------- ----- ----- --------
Equity securities, available for sale:
Common stocks 18 4 36 -- -- 58
Preferred stocks -- 37 60 -- -- 97
-------- ------- ------- ----- ----- --------
Total equity securities, available for sale 18 41 96 -- -- 155
-------- ------- ------- ----- ----- --------
Partnerships and other invested assets (c) 1 364 2,398 -- -- 2,763
Short-term investments (d) 146 1,304 -- -- -- 1,450
Derivative assets:
Interest rate contracts -- 159 -- -- -- 159
Foreign exchange contracts -- 1,068 -- -- -- 1,068
Equity contracts 85 76 9 -- -- 170
Counterparty netting and cash collateral -- -- -- (284) (441) (725)
-------- ------- ------- ----- ----- --------
Total derivative assets 85 1,303 9 (284) (441) 672
-------- ------- ------- ----- ----- --------
Separate account assets 23,732 1,371 -- -- -- 25,103
-------- ------- ------- ----- ----- --------
Total $ 23,982 $92,753 $14,857 $(284) $(441) $130,867
======== ======= ======= ===== ===== ========
LIABILITIES:
Policyholder contract deposits (e) $ -- $ -- $ 800 $ -- $ -- $ 800
Derivative liabilities:
Interest rate contracts -- 433 10 -- -- 443
Foreign exchange contracts -- 698 -- -- -- 698
Counterparty netting and cash collateral -- -- -- (284) (140) (424)
-------- ------- ------- ----- ----- --------
Total derivative liabilities -- 1,131 10 (284) (140) 717
-------- ------- ------- ----- ----- --------
Total $ -- $ 1,131 $ 810 $(284) $(140) $ 1,517
======== ======= ======= ===== ===== ========
(a)Represents netting of derivative exposures covered by a qualifying master
netting agreement.
(b)Represents cash collateral posted and received.
(c)Amounts presented for partnerships and other invested assets in the tables
above differ from the amounts presented in the consolidated balance sheets
as these tables only include partnerships carried at estimated fair value on
a recurring basis.
(d)Amounts exclude short-term investments that are carried at cost, which
approximate fair value of $1.6 billion and $1.8 billion at December 31, 2012
and 2011, respectively.
(e)Amount presented for policyholder contract deposits in the tables above
differ from the amounts presented in the consolidated balance sheets as
these tables only include the GMWB embedded derivatives which are measured
at estimated fair value on a recurring basis.
32
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 2012 and 2011, Level 3 assets were 8.3 percent and 9.4 percent
of total assets, respectively, and Level 3 liabilities were 0.7 percent and 0.6
percent of total liabilities, respectively.
Transfers of Level 1 and Level 2 Assets and Liabilities
The Company's policy is to record transfers of assets and liabilities between
Level 1 and Level 2 at their fair values as of the end of each reporting
period, consistent with the date of the determination of fair value. Assets are
transferred out of Level 1 when they are no longer transacted with sufficient
frequency and volume in an active market. Conversely, assets are transferred
from Level 2 to Level 1 when transaction volume and frequency are indicative of
an active market. The Company had no significant transfers between Level 1 and
Level 2 during the year ended December 31, 2012.
33
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Changes in Level 3 Recurring Fair Value Measurements
The following tables present changes during 2012 and 2011 in Level 3 assets and
liabilities measured at fair value on a recurring basis, and the realized and
unrealized gains (losses) recorded in the consolidated statements of income
during 2012 and 2011 related to the Level 3 assets and liabilities that
remained in the consolidated balance sheets at December 31, 2012 and 2011:
Net Realized and Accumulated
Fair Value Unrealized Gains Other Purchases, Sales,
Beginning (Losses) included Comprehensive Issuances and Gross Transfers Gross Transfers
December 31, 2012 of Year in Income Income (Loss) Settlements, Net In Out
----------------- ---------- ----------------- ------------- ----------------- --------------- ---------------
(In Millions)
ASSETS:
Fixed maturity securities,
available for sale:
States, territories &
political
subdivisions $ 482 $ 40 $ (4) $ 153 $ 41 $ (79)
Corporate debt 978 (10) 63 (42) 796 (545)
RMBS 5,939 174 944 (514) 297 (1,883)
CMBS 1,900 36 275 45 34 (85)
CDO/ABS 1,951 120 89 679 367 (552)
------- ----- ------ ------- ------ -------
Total fixed maturity
securities, available for
sale 11,250 360 1,367 321 1,535 (3,144)
------- ----- ------ ------- ------ -------
Fixed maturity securities,
trading:
CDO/ABS 953 175 -- (1,128) -- --
------- ----- ------ ------- ------ -------
Total fixed maturity
securities, trading 953 175 -- (1,128) -- --
------- ----- ------ ------- ------ -------
Hybrid securities:
RMBS 138 35 -- (44) -- (2)
CMBS -- 3 -- 38 -- --
CDO/ABS 13 62 -- 38 -- --
------- ----- ------ ------- ------ -------
Total hybrid securities 151 100 -- 32 -- (2)
------- ----- ------ ------- ------ -------
Equity securities,
available for sale:
Common stocks 36 15 (24) (23) 5 --
Preferred stocks 60 9 (25) (17) 1 (2)
------- ----- ------ ------- ------ -------
Total equity securities,
available for sale 96 24 (49) (40) 6 (2)
------- ----- ------ ------- ------ -------
Partnerships and other
invested assets 2,398 (26) 113 (125) 416 (871)
Derivative assets
Equity contracts 9 2 -- 5 5 --
Other contracts -- -- -- 2 -- --
------- ----- ------ ------- ------ -------
Total derivative assets 9 2 -- 7 5 --
------- ----- ------ ------- ------ -------
Total $14,857 $ 635 $1,431 $ (933) $1,962 $(4,019)
------- ----- ------ ------- ------ -------
LIABILITIES:
Policyholder contract
deposits $ (800) $(181) $ (72) $ 13 $ -- $ --
Derivative liabilities, net
Interest rate
contracts (10) 8 -- -- -- --
------- ----- ------ ------- ------ -------
Total derivative
liabilities, net (10) 8 -- -- -- --
------- ----- ------ ------- ------ -------
Total $ (810) $(173) $ (72) $ 13 $ -- $ --
------- ----- ------ ------- ------ -------
Changes in
Unrealized
Gains (Losses)
Included in
Income on
Instruments
Fair Value End of Held at End of
December 31, 2012 Year Year
----------------- ----------------- --------------
ASSETS:
Fixed maturity securities,
available for sale:
States, territories &
political
subdivisions $ 633 $ --
Corporate debt 1,240 --
RMBS 4,957 --
CMBS 2,205 --
CDO/ABS 2,654 --
------- ----
Total fixed maturity
securities, available for
sale 11,689 --
------- ----
Fixed maturity securities,
trading:
CDO/ABS -- --
------- ----
Total fixed maturity
securities, trading -- --
------- ----
Hybrid securities:
RMBS 127 31
CMBS 41 4
CDO/ABS 113 1
------- ----
Total hybrid securities 281 36
------- ----
Equity securities,
available for sale:
Common stocks 9 --
Preferred stocks 26 --
------- ----
Total equity securities,
available for sale 35 --
------- ----
Partnerships and other
invested assets 1,905 --
Derivative assets
Equity contracts 21 --
Other contracts 2 --
------- ----
Total derivative assets 23 --
------- ----
Total $13,933 $ 36
------- ----
LIABILITIES:
Policyholder contract
deposits $(1,040) $196
Derivative liabilities, net
Interest rate
contracts (2) --
------- ----
Total derivative
liabilities, net (2) --
------- ----
Total $(1,042) $196
------- ----
34
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net Realized and Accumulated
Fair Value Unrealized Gains Other Purchases, Sales,
Beginning (Losses) included Comprehensive Issuances and Gross Transfers Gross Transfers
December 31, 2011 of Year in Income Income (Loss) Settlements, Net In Out
----------------- ---------- ----------------- ------------- ----------------- --------------- ---------------
(In Millions)
ASSETS:
Fixed maturity securities,
available for sale:
Foreign government $ -- $ -- $ -- $ 1 $ -- $ (1)
States, territories &
political
subdivisions 289 -- 75 179 -- (61)
Corporate debt 1,411 7 (52) 79 1,360 (1,827)
RMBS 3,831 (45) 269 1,402 498 (16)
CMBS 1,722 1 92 71 51 (37)
CDO/ABS 2,007 22 90 (256) 508 (420)
------- ----- ----- ------ ------- -------
Total fixed maturity
securities, available for
sale 9,260 (15) 474 1,476 2,417 (2,362)
------- ----- ----- ------ ------- -------
Fixed maturity securities,
trading:
Corporate debt -- -- -- (2) 2 --
CDO/ABS 922 31 -- -- -- --
------- ----- ----- ------ ------- -------
Total fixed maturity
securities, trading 922 31 -- (2) 2 --
------- ----- ----- ------ ------- -------
Hybrid securities:
RMBS -- (15) -- 153 -- --
CDO/ABS -- -- -- 20 -- (7)
------- ----- ----- ------ ------- -------
Total hybrid securities -- (15) -- 173 -- (7)
------- ----- ----- ------ ------- -------
Equity securities,
available for sale:
Common stocks 49 23 (6) (33) 8 (5)
Preferred stocks 31 (1) 27 -- 3 --
------- ----- ----- ------ ------- -------
Total equity securities,
available for sale 80 22 21 (33) 11 (5)
------- ----- ----- ------ ------- -------
Partnerships and other
invested assets 2,576 (13) 78 (154) 3 (92)
Derivative assets
Interest rate
contracts 1 (11) -- 10 -- --
Equity contracts 22 (3) -- 5 -- (15)
------- ----- ----- ------ ------- -------
Total derivative assets 23 (14) -- 15 -- (15)
------- ----- ----- ------ ------- -------
Total $12,861 $ (4) $ 573 $1,475 $ 2,433 $(2,481)
------- ----- ----- ------ ------- -------
LIABILITIES:
Policyholder contract
deposits $ (361) $(426) $ -- $ (13) $ -- $ --
Derivative liabilities, net
Interest rate
contracts -- -- -- (10) -- --
------- ----- ----- ------ ------- -------
Total derivative
liabilities, net -- -- -- (10) -- --
------- ----- ----- ------ ------- -------
Total $ (361) $(426) $ -- $ (23) $ -- $ --
------- ----- ----- ------ ------- -------
Changes in
Unrealized
Gains (Losses)
Included in
Income on
Instruments
Fair Value End of Held at End of
December 31, 2011 Year Year
----------------- ----------------- --------------
ASSETS:
Fixed maturity securities,
available for sale:
Foreign government $ -- $ --
States, territories &
political
subdivisions 482 --
Corporate debt 978 --
RMBS 5,939 --
CMBS 1,900 --
CDO/ABS 1,951 --
------- ----
Total fixed maturity
securities, available for
sale 11,250 --
------- ----
Fixed maturity securities,
trading:
Corporate debt -- --
CDO/ABS 953 5
------- ----
Total fixed maturity
securities, trading 953 5
------- ----
Hybrid securities:
RMBS 138 (22)
CDO/ABS 13 (1)
------- ----
Total hybrid securities 151 (23)
------- ----
Equity securities,
available for sale:
Common stocks 36 --
Preferred stocks 60 --
------- ----
Total equity securities,
available for sale 96 --
------- ----
Partnerships and other
invested assets 2,398 --
Derivative assets
Interest rate
contracts -- --
Equity contracts 9 --
------- ----
Total derivative assets 9 --
------- ----
Total $14,857 $(18)
------- ----
LIABILITIES:
Policyholder contract
deposits $ (800) $ --
Derivative liabilities, net
Interest rate
contracts (10) --
------- ----
Total derivative
liabilities, net (10) --
------- ----
Total $ (810) $ --
------- ----
35
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net realized and unrealized gains and losses related to Level 3 items shown
above are reported in the consolidated statements of income as follows:
Net Realized
Net Investment Investment
Income Gains (Losses) Total
At December 31, 2012 -------------- -------------- -----
(In Millions)
Fixed maturity securities, available for sale $ 447 $ (87) $ 360
Fixed maturity securities, trading 175 -- 175
Hybrid securities 100 -- 100
Equity securities, available for sale -- 24 24
Partnerships and other invested assets 28 (54) (26)
Derivative assets -- 2 2
Policyholder contract deposits -- (181) (181)
Derivative liabilities -- (8) (8)
Net Realized
Net Investment Investment
Income Gains (Losses) Total
At December 31, 2011 -------------- -------------- -----
(In Millions)
Fixed maturity securities, available for sale $335 $(350) $ (15)
Fixed maturity securities, trading 31 -- 31
Hybrid securities (15) -- (15)
Equity securities, available for sale -- 22 22
Partnerships and other invested assets 26 (39) (13)
Derivative assets (11) (3) (14)
Policyholder contract deposits -- (426) (426)
36
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the gross components of purchases, sales,
issuances and settlements, net, shown above for Level 3 assets and liabilities:
Purchases,
Sales,
Issuances
and
Settlements,
December 31, 2012 Purchases Sales Settlements Net (a)
----------------- --------- ------- ----------- ------------
(In Millions)
ASSETS:
Fixed maturity securities, available for sale:
States, territories & political subdivisions $ 372 $ (201) $ (18) $ 153
Corporate debt 225 (169) (98) (42)
RMBS 628 (193) (949) (514)
CMBS 277 (131) (101) 45
CDO/ABS 1,379 -- (700) 679
------ ------- ------- -------
Total fixed maturity securities, available for sale 2,881 (694) (1,866) 321
------ ------- ------- -------
Fixed maturity securities, trading:
CDO/ABS -- -- (1,128) (1,128)
------ ------- ------- -------
Total fixed maturity securities, trading -- -- (1,128) (1,128)
------ ------- ------- -------
Hybrid securities:
RMBS -- (16) (28) (44)
CMBS 57 (19) -- 38
CDO/ABS 1,133 (981) (114) 38
------ ------- ------- -------
Total hybrid securities 1,190 (1,016) (142) 32
------ ------- ------- -------
Equity securities, available for sale:
Common stocks -- (23) -- (23)
Preferred stocks 60 (75) (2) (17)
------ ------- ------- -------
Total equity securities, available for sale 60 (98) (2) (40)
------ ------- ------- -------
Partnerships and other invested assets 296 -- (421) (125)
Derivative assets
Equity contracts 5 -- -- 5
Other contracts 2 -- -- 2
------ ------- ------- -------
Total derivative assets 7 -- -- 7
------ ------- ------- -------
Total $4,434 $(1,808) $(3,559) $ (933)
------ ------- ------- -------
LIABILITIES:
Policyholder contract deposits $ -- $ (22) $ 35 $ 13
------ ------- ------- -------
37
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Purchases,
Sales,
Issuances
and
Settlements,
December 31, 2011 Purchases Sales Settlements Net (a)
----------------- --------- ----- ----------- ------------
(In Millions)
ASSETS:
Fixed maturity securities, available for sale:
Foreign government $ 1 $ -- $ -- $ 1
States, territories & political subdivisions 179 -- -- 179
Corporate debt 350 (119) (152) 79
RMBS 2,476 (317) (757) 1,402
CMBS 244 (21) (152) 71
CDO/ABS 397 (7) (646) (256)
------ ----- ------- ------
Total fixed maturity securities, available for sale 3,647 (464) (1,707) 1,476
------ ----- ------- ------
Fixed maturity securities, trading:
Corporate debt -- -- (2) (2)
------ ----- ------- ------
Total fixed maturity securities, trading -- -- (2) (2)
------ ----- ------- ------
Hybrid securities:
RMBS 178 -- (25) 153
CDO/ABS 20 -- -- 20
------ ----- ------- ------
Total hybrid securities 198 -- (25) 173
------ ----- ------- ------
Equity securities, available for sale:
Common stocks -- (31) (2) (33)
Preferred stocks 19 (19) -- --
------ ----- ------- ------
Total equity securities, available for sale 19 (50) (2) (33)
------ ----- ------- ------
Partnerships and other invested assets 238 (126) (266) (154)
Derivative assets
Interest rate contracts 10 -- -- 10
Equity contracts 5 -- -- 5
------ ----- ------- ------
Total derivative assets 15 -- -- 15
------ ----- ------- ------
Total $4,117 $(640) $(2,002) $1,475
------ ----- ------- ------
LIABILITIES:
Policyholder contract deposits $ -- $ (18) $ 5 $ (13)
Derivative liabilities, net
Interest rate contracts (10) -- -- (10)
------ ----- ------- ------
Total derivative liabilities, net (10) -- -- (10)
------ ----- ------- ------
Total $ (10) $ (18) $ 5 $ (23)
------ ----- ------- ------
(a)There were no issuances during the years ended December 31, 2012 and 2011.
Both observable and unobservable inputs may be used to determine the fair
values of positions classified in Level 3 in the tables above. As a result, the
unrealized gains (losses) on instruments held at December 31, 2012 and 2011 may
include changes in fair value that were attributable to both observable (e.g.,
changes in market interest rates) and unobservable inputs (e.g., changes in
unobservable long-dated volatilities).
Transfers of Level 3 Assets and Liabilities
The Company's policy is to record transfers of assets and liabilities into or
out of Level 3 at their fair values as of the end of each reporting period,
consistent with the date of the determination of fair value.
38
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the year ended December 31, 2012, transfers into Level 3 included
certain RMBS, CMBS, CDO/ABS, private placement corporate debt and certain
private equity funds and hedge funds. Transfers of certain RMBS and certain
CDO/ABS into Level 3 were related to decreased observations of market
transactions and price information for those securities. The transfers of
investments in certain other RMBS and CMBS into Level 3 were due to a decrease
in market transparency, downward credit migration and an overall increase in
price disparity for certain individual security types. Transfers of private
placement corporate debt and certain other ABS into Level 3 were primarily the
result of limited market pricing information that required the Company to
determine fair value for these securities based on inputs that are adjusted to
better reflect the Company's own assumptions regarding the characteristics of a
specific security or associated market liquidity. Certain private equity fund
and hedge fund investments were transferred into Level 3 due to these
investments being carried at fair value and no longer being accounted for using
the equity method of accounting, consistent with the changes to the Company's
influence over the respective investments. Other hedge fund investments were
transferred into Level 3 as a result of limited market activity due to
fund-imposed redemption restrictions.
Assets are transferred out of Level 3 when circumstances change such that
significant inputs can be corroborated with market observable data. This may be
due to a significant increase in market activity for the asset, a specific
event, one or more significant input(s) becoming observable or a long-term
interest rate significant to a valuation becoming short-term and thus
observable. In addition, transfers out of Level 3 assets also occur when
investments are no longer carried at fair value as the result of a change in
the applicable accounting methodology, given changes in the nature and extent
of the Company's ownership interest. During the year ended December 31, 2012,
transfers out of Level 3 assets primarily related to certain RMBS, ABS,
investments in private placement corporate debt and private equity funds and
hedge funds. Transfers of certain RMBS out of Level 3 assets were based on
consideration of the market liquidity as well as related transparency of
pricing and associated observable inputs for these investments. Transfers of
ABS and private placement corporate debt out of Level 3 assets were primarily
the result of the Company using observable pricing information that reflects
the fair value of those securities without the need for adjustment based on the
Company's own assumptions regarding the characteristics of a specific security
or the current liquidity in the market. The removal of fund-imposed redemption
restrictions, as well as certain fund investments becoming subject to the
equity method of accounting based on our level of influence over the respective
investments, resulted in the transfer of certain hedge fund and private equity
fund investments out of Level 3.
The Company had no transfers of liabilities into or out of Level 3 during the
year ended December 31, 2012.
39
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Quantitative Information About Level 3 Fair Value Measurements
The table below presents information about the significant unobservable inputs
used for recurring fair value measurements for certain Level 3 instruments, and
includes only those instruments for which information about the inputs is
reasonably available to the Company, such as data from pricing vendors and from
internal valuation models. Because input information with respect to certain
Level 3 instruments may not be reasonably available to the Company, balances
shown below may not equal total amounts reported for such Level 3 assets and
liabilities:
Fair Value at Range
December 31, 2012 Valuation Technique Unobservable Input (a) (Weighted Average)(a)
----------------- -------------------- ------------------------------ -------------------------
(In Millions)
ASSETS:
RMBS $4,500 Discounted cash flow Constant prepayment rate (c) 0.00% - 11.22% (5.46%)
Loss severity (c) 39.40% - 78.75% (59.08%)
Constant default rate (c) 3.45% - 12.63% (8.04%)
Yield (c) 2.99% - 10.08% (6.53%)
Certain CDO/ABS 568 Discounted cash flow Constant prepayment rate (c) 0.00% - 50.61% (18.40%)
Constant default rate (c) 0.00% - 0.31% (0.02%)
Yield (c) 0.30% - 5.51% (2.91%)
CMBS 1,454 Discounted cash flow Yield (b) 0.00% - 17.57% (8.33%)
LIABILITIES:
Policyholder contract deposits 1,040 Discounted cash flow Equity implied volatility (b) 6.00% - 39.00%
Base lapse rates (b) 1.00% - 40.00%
Dynamic lapse rates (b) 0.20% - 60.00%
Mortality rates (b) 0.50% - 40.00%
Utilization rates (b) 0.50% - 25.00%
(a)The unobservable inputs and ranges for the constant prepayment rate, loss
severity and constant default rate relate to each of the individual
underlying mortgage loans that comprise the entire portfolio of securities
in the RMBS and CDO securitization vehicles and not necessarily to the
securitization vehicle bonds (tranches) purchased by the Company. The ranges
of these inputs do not directly correlate to changes in the fair values of
the tranches purchased by the Company because there are other factors
relevant to the specific tranches owned by the Company including, but not
limited to, purchase price, position in the waterfall, senior versus
subordinated position and attachment points.
(b)Represents discount rates, estimates and assumptions that the Company
believes would be used by market participants when valuing these assets and
liabilities.
(c)Information received from independent third-party valuation service
providers.
The ranges of reported inputs for Corporate debt, RMBS, CDO/ABS, and CMBS
valued using a discounted cash flow technique consist of +/--one standard
deviation in either direction from the value-weighted average. The preceding
table does not give effect to the Company's risk management practices that
might offset risks inherent in these investments.
Sensitivity to Changes in Unobservable Inputs
The Company considers unobservable inputs to be those for which market data is
not available and that are developed using the best information available to
the Company about the assumptions that market participants would use when
pricing the asset or liability. Relevant inputs vary depending on the nature of
the instrument being measured at fair value. The following is a general
description of sensitivities of significant unobservable inputs along with
interrelationships between and among the significant unobservable inputs and
their impact on the fair value measurements. The effect of a change in a
particular assumption in the sensitivity analysis below is considered
independently of changes in any other assumptions. In practice, simultaneous
changes in assumptions may not always have a linear effect on the inputs
discussed below. Interrelationships may also exist between observable and
unobservable inputs. Such relationships have not been included in the
discussion below. For each of the individual relationships described below, the
inverse relationship would also generally apply.
40
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
RMBS and Certain CDO/ABS
The significant unobservable inputs used in fair value measurements of RMBS and
certain CDO/ABS valued by third-party valuation service providers are constant
prepayment rates ("CPR"), constant default rates ("CDR"), loss severity, and
yield. A change in the assumptions used for the probability of default will
generally be accompanied by a corresponding change in the assumption used for
the loss severity and an inverse change in the assumption used for prepayment
rates. In general, increases in yield, CPR, CDR, and loss severity, in
isolation, would result in a decrease in the fair value measurement. Changes in
fair value based on variations in assumptions generally cannot be extrapolated
because the relationship between the directional change of each input is not
usually linear.
CMBS
The significant unobservable input used in fair value measurements for CMBS is
the yield. Prepayment assumptions for each mortgage pool are factored into the
yield. CMBS generally feature a lower degree of prepayment risk than RMBS
because commercial mortgages generally contain a penalty for prepayment. In
general, increases in the yield would decrease the fair value of CMBS.
Policyholder contract deposits
The significant unobservable inputs used for embedded derivatives in
policyholder contract deposits measured at fair value, mainly GMWB for variable
annuity products, are equity volatility, mortality rates, lapse rates and
utilization rates. Mortality, lapse and utilization rates may vary
significantly depending upon age groups and duration. In general, increases in
volatility and utilization rates will increase the fair value, while increases
in lapse rates and mortality rates will decrease the fair value of the
liability associated with the GMWB.
41
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Investments in Certain Entities Carried at Fair Value Using Net Asset Value Per
Share
The following table includes information related to the Company's investments
in certain other invested assets, including private equity funds, hedge funds
and other alternative investments that calculate net asset value per share (or
its equivalent). For these investments, which are measured at fair value on a
recurring or non-recurring basis, the Company uses the net asset value per
share as a practical expedient for fair value.
Investment Category Includes
---------------------------------------------
INVESTMENT CATEGORY
Private equity funds:
Leveraged buyout Debt and/or equity investments made as
part of a transaction in which assets of
mature companies are acquired from the
current shareholders, typically with the use
of financial leverage.
Non-U.S. Investments that focus primarily on Asian
and European based buyouts, expansion
capital, special situations, turnarounds,
venture capital, mezzanine and distressed
opportunities strategies.
Venture capital Early-stage, high-potential, growth
companies expected to generate a return
through an eventual realization event, such
as an initial public offering or sale of the
company.
Distressed Securities of companies that are already in
default, under bankruptcy protection, or
troubled.
Other Real estate, energy, multi-strategy,
mezzanine, and industry-focused strategies.
Total private equity funds
Hedge funds:
Event-driven Securities of companies undergoing
material structural changes, including
mergers, acquisitions and other
reorganizations.
Long-short Securities that the manager believes are
undervalued, with corresponding short
positions to hedge market risk.
Distressed Securities of companies that are already in
default, under bankruptcy protection or
troubled.
Other Non-U.S. companies, futures and
commodities, macro and multi-strategy and
industry-focused strategies.
Total hedge funds
Total
December 31, 2012 December 31, 2011
---------------------------- ----------------------------
Fair Value Using Unfunded Fair Value Using Unfunded
Net Asset Value Commitments Net Asset Value Commitments
---------------- ----------- ---------------- -----------
(In Millions)
INVESTMENT CATEGORY
Private equity funds:
Leveraged buyout $1,020 $224 $1,042 $263
Non-U.S. 7 1 12 8
Venture capital 55 9 141 11
Distressed 63 12 117 35
Other 116 32 468 126
------ ---- ------ ----
Total private equity funds 1,261 278 1,780 443
------ ---- ------ ----
Hedge funds:
Event-driven 319 2 338 2
Long-short 395 -- 242 --
Distressed 261 -- 192 5
Other 52 -- 173 --
------ ---- ------ ----
Total hedge funds 1,027 2 945 7
------ ---- ------ ----
Total $2,288 $280 $2,725 $450
====== ==== ====== ====
Private equity fund investments included above are not redeemable, as
distributions from the funds will be received when underlying investments of
the funds are liquidated. Private equity funds are generally expected to have
10-year lives at their inception, but these lives may be extended at the fund
manager's discretion, typically in one or two-year increments. At December 31,
2012, assuming average original expected lives of 10 years for the funds,
49 percent of the total fair value using net asset value or its equivalent
above would have expected remaining lives of less than three years, 49 percent
between three and seven years and 2 percent between seven and 10 years.
At December 31, 2012, hedge fund investments included above are redeemable
quarterly (34 percent), semi-annually (17 percent) and annually (49 percent),
with redemption notices ranging from 30 days to 180 days. More than 73 percent
require redemption notices of less than 90 days. Investments representing
approximately 100 percent of the value of the hedge fund investments cannot be
redeemed, either in whole or in part, because the investments
42
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
include various restrictions. The majority of these restrictions were put in
place prior to 2009 and do not have stated end dates. The restrictions that
have pre-defined end dates are generally expected to be lifted by the end of
2013. The partial restrictions relate to certain hedge funds that hold at least
one investment that the fund manager deems to be illiquid.
Fair Value Option - Fixed Maturity Securities, Trading, Hybrid Securities and
Policyholder Contract Deposits
The Company may elect to measure financial instruments at fair value and
certain other assets and liabilities that are not otherwise required to be
measured at fair value. Subsequent changes in fair value for designated items
are reported in earnings.
The Company has elected fair value accounting for its economic interest in ML
II. The Company recorded gains of $177 million, $30 million and $375 million in
the years ended December 31, 2012, 2011 and 2010, respectively, to reflect the
change in the fair value of ML II, which were reported as a component of net
investment income in the consolidated statements of income.
The Company has elected fair value accounting for its hybrid securities. Net
unrealized gains (losses) included in net investment income on the consolidated
statements of income were $206 million and $(24) million for the years ended
December 31, 2012 and 2011, respectively. The Company did not invest in any
hybrid securities in 2010.
In 2011, the Company assumed GIC liabilities, which are reported in
policyholder contract deposits on the balance sheets, from AIG Matched Funding
Corp. ("AIGMFC"). AIGMFC had elected fair value accounting for its GIC
liabilities and the Company will maintain this election. The change in the fair
value of the GIC liabilities were $(3) million and $78 million in the years
ended December 31, 2012 and 2011, respectively, and were reported in
policyholder benefits in the statements of income. The change in the value of
the GIC liabilities was partially offset with swaps used to hedge the Company's
interest rate risk. See Note 16 for additional information.
Fair Value Measurements on a Non-Recurring Basis
The Company measures the fair value of certain assets on a non-recurring basis,
generally quarterly, annually, or when events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. These
assets include cost and equity-method investments and mortgage and other loans.
See Note 2 herein for additional information about how the Company tests
various asset classes for impairment.
Fair Value Information about Financial Instruments Not Measured at Fair Value
Information regarding the estimation of fair value for financial instruments
not carried at fair value (excluding insurance contracts) is discussed below.
Mortgage and Other Loans Receivable
Fair values of mortgage loans were estimated for disclosure purposes using
discounted cash flow calculations based upon discount rates the Company
believes market participants would use in determining the price that they would
pay for such assets. For certain loans, the Company's current incremental
lending rates for similar type loans is used as the discount rate, as it is
believed that this rate approximates the rate that market participants would
use. Fair values of collateral, commercial and guaranteed loans were estimated
principally by using independent pricing services, broker quotes and other
independent information.
Policy Loans
The fair values of the policy loans are generally estimated based on unpaid
principal amount as of each reporting date, or in some cases, based on the
present value of the loans using a discounted cash flow model.
43
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Partnerships and Other Invested Assets
The majority of partnerships and other invested assets that are not measured at
fair value represent investments in hedge funds, private equity funds and other
investment partnerships for which the Company uses the equity method of
accounting. The fair value of the Company's investment in these funds is
measured based on the Company's share of the funds' reported net asset value.
Short-Term Investments
The carrying value of these assets approximates fair value because of the
relatively short period of time between origination and expected realization,
and their limited exposure to credit risk.
Policyholder Contract Deposits Associated with Investment-type Contracts
Fair value for policyholder contract deposits associated with investment-type
contracts (those without significant mortality risk) not accounted for at fair
value were estimated for disclosure purposes using discounted cash flow
calculations based upon interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued. Where no similar contracts are being offered, the discount rate
is the appropriate tenor swap rates (if available) or current risk-free
interest rates consistent with the currency in which cash flows are denominated.
The following table presents the estimated fair value and carrying value of the
Company's financial instruments not measured at fair value and indicates the
level of the estimated fair value measurement based on the levels of the inputs
used:
Estimated Fair Value
-------------------------------
Carrying
Level 1 Level 2 Level 3 Total Value
------- ------- ------- ------- --------
(In Millions)
December 31, 2012
ASSETS
Mortgage and other loans receivable $ -- $ 189 $ 8,906 $ 9,095 $ 8,245
Policy loans -- -- 1,587 1,587 1,587
Partnerships and other invested assets -- 54 -- 54 54
Short-term investments -- 1,600 -- 1,600 1,600
Cash 325 -- -- 325 325
LIABILITIES
Policyholder contract deposits (a) -- 245 64,115 64,360 57,452
Notes payable -- -- 224 224 240
December 31, 2011 (b)
ASSETS
Mortgage and other loans receivable $ 9,137 $ 8,418
Policy loans 1,920 1,642
Partnerships and other invested assets 59 59
Short-term investments 1,756 1,756
Cash 292 292
LIABILITIES
Policyholder contract deposits (a) 58,139 52,352
Notes payable 349 376
(a)Net embedded derivatives within liability host contracts are presented
within policyholder contract deposits.
(b)Estimated fair value measurement based on the levels of the inputs used is
not required for 2011.
44
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
Available for Sale Securities
The amortized cost or cost, gross unrealized gains and losses, and fair value
of fixed maturity and equity securities available for sale by major category
were as follows:
Other-Than-
Gross Gross Temporary
Amortized Unrealized Unrealized Fair Impairments
Cost or Cost Gains Losses Value in AOCI (a)
------------ ---------- ---------- -------- -----------
(In Millions)
December 31, 2012
Fixed maturity securities, available for sale:
U.S. government obligations $ 413 $ 102 $ -- $ 515 $ --
Foreign government 2,243 317 (8) 2,552 --
States, territories & political subdivisions 2,015 245 (6) 2,254 --
Corporate debt 66,448 9,607 (309) 75,746 79
RMBS 13,641 1,506 (218) 14,929 469
CMBS 3,462 546 (83) 3,925 185
CDO/ABS 4,217 256 (74) 4,399 43
------- ------- ----- -------- -----
Total fixed maturity securities, available for sale 92,439 12,579 (698) 104,320 776
Equity securities, available for sale:
Common stocks 12 14 -- 26 --
Preferred stocks 42 15 -- 57 --
------- ------- ----- -------- -----
Total equity securities, available for sale 54 29 -- 83 --
Investment in AIG 10 -- (6) 4 --
------- ------- ----- -------- -----
Total $92,503 $12,608 $(704) $104,407 $ 776
======= ======= ===== ======== =====
45
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other-Than-
Gross Gross Temporary
Amortized Unrealized Unrealized Fair Impairments
Cost or Cost Gains Losses Value in AOCI (a)
------------ ---------- ---------- ------- -----------
(In Millions)
December 31, 2011
Fixed maturity securities, available for sale:
U.S. government obligations $ 422 $ 125 $ -- $ 547 $ --
Foreign government 1,704 204 (8) 1,900 --
States, territories & political subdivisions 1,491 198 (6) 1,683 --
Corporate debt 66,654 7,780 (860) 73,574 66
RMBS 14,929 774 (824) 14,879 (228)
CMBS 3,475 352 (228) 3,599 120
CDO/ABS 3,397 213 (207) 3,403 14
------- ------ ------- ------- -----
Total fixed maturity securities, available for sale 92,072 9,646 (2,133) 99,585 (28)
Equity securities, available for sale:
Common stocks 28 33 (3) 58 --
Preferred stocks 54 43 -- 97 --
------- ------ ------- ------- -----
Total equity securities, available for sale 82 76 (3) 155 --
Investment in AIG 10 -- (7) 3 --
------- ------ ------- ------- -----
Total $92,164 $9,722 $(2,143) $99,743 $ (28)
------- ------ ------- ------- -----
(a)Represents the amount of other-than-temporary impairment losses recognized
in accumulated other comprehensive income. This amount includes unrealized
gains and losses on impaired securities relating to changes in the value of
such securities subsequent to the impairment measurement date.
The following table summarizes the Company's fair values and gross unrealized
losses on fixed maturity and equity securities available for sale, aggregated
by major investment category and length of time that individual securities have
been in a continuous unrealized loss position as of December 31, 2012 and 2011:
Less than 12 Months 12 Months or More Total
------------------ ---------------- ----------------
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
------ ---------- ------ ---------- ------ ----------
(In Millions)
December 31, 2012
Fixed maturity securities, available for sale:
Foreign government $ 378 $ (8) $ 3 $ -- $ 381 $ (8)
States, territories & political subdivisions 326 (6) 1 -- 327 (6)
Corporate debt 4,111 (131) 2,048 (178) 6,159 (309)
RMBS 142 (2) 959 (216) 1,101 (218)
CMBS 86 (2) 278 (81) 364 (83)
CDO/ABS 882 (22) 716 (52) 1,598 (74)
------ ----- ------ ----- ------ -----
Total fixed maturity securities, available for sale 5,925 (171) 4,005 (527) 9,930 (698)
Investment in AIG -- -- 4 (6) 4 (6)
------ ----- ------ ----- ------ -----
Total $5,925 $(171) $4,009 $(533) $9,934 $(704)
------ ----- ------ ----- ------ -----
46
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Less than 12 Months 12 Months or More Total
----------------- ---------------- -----------------
Gross Gross Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value Losses Value Losses Value Losses
------- ---------- ------ ---------- ------- ----------
(In Millions)
December 31, 2011
Fixed maturity securities, available for sale:
Foreign government $ 233 $ (8) $ -- $ -- $ 233 $ (8)
States, territories & political subdivisions 12 (1) 40 (5) 52 (6)
Corporate debt 7,152 (433) 3,069 (427) 10,221 (860)
RMBS 3,562 (281) 1,975 (543) 5,537 (824)
CMBS 809 (81) 425 (147) 1,234 (228)
CDO/ABS 676 (21) 884 (186) 1,560 (207)
------- ----- ------ ------- ------- -------
Total fixed maturity securities, available for sale 12,444 (825) 6,393 (1,308) 18,837 (2,133)
Equity securities, available for sale:
Common stocks 8 (3) -- -- 8 (3)
------- ----- ------ ------- ------- -------
Total equity securities, available for sale 8 (3) -- -- 8 (3)
Investment in AIG 2 (7) -- -- 2 (7)
------- ----- ------ ------- ------- -------
Total $12,454 $(835) $6,393 $(1,308) $18,847 $(2,143)
======= ===== ====== ======= ======= =======
As of December 31, 2012, the Company held 1,337 individual fixed maturity and
equity securities that were in an unrealized loss position, of which 678
individual securities were in a continuous unrealized loss position for twelve
months or more.
The Company did not recognize in earnings the unrealized losses on these fixed
maturity securities at December 31, 2012, because management neither intends to
sell the securities nor does it believe that it is more likely than not that it
will be required to sell these securities before recovery of their amortized
cost basis. Furthermore, management expects to recover the entire amortized
cost basis of these securities. In performing this evaluation, management
considered the recovery periods for securities in previous periods of broad
market declines. For fixed maturity securities with significant declines,
management performed fundamental credit analysis on a security-by-security
basis, which included consideration of credit enhancements, expected defaults
on underlying collateral, review of relevant industry analyst reports and
forecasts and other market available data.
The following table presents the amortized cost and fair value of fixed
maturity securities available for sale by contractual maturity as of
December 31, 2012:
Total Fixed Maturity Available
for Sale Securities
------------------------------
Amortized
Cost Fair Value
--------- ----------
(In Millions)
Due in one year or less $ 2,827 $ 2,898
Due after one year through five years 10,806 11,742
Due after five years through ten years 27,555 30,897
Due after ten years 29,931 35,530
Mortgage-backed, asset-backed and collateralized securities 21,320 23,253
------- --------
Total fixed maturity securities available for sale $92,439 $104,320
======= ========
Actual maturities may differ from contractual maturities because certain
borrowers have the right to call or prepay certain obligations with or without
call or prepayment penalties. In addition, corporate requirements and
investment strategies may result in the sale of investments before maturity.
The Company's investments at December 31, 2012 and 2011 did not include any
investments in a single issuer that exceeded 10 percent of the Company's
consolidated shareholder's equity.
47
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Trading Securities
ML II
On December 12, 2008, the Company and certain other wholly owned U.S. life
insurance subsidiaries of AIG sold to ML II all of their undivided interests in
a pool of $39.3 billion face amount of RMBS. In exchange for the RMBS, the life
insurance companies received an initial purchase price of $19.8 billion plus
the right to receive deferred contingent portions of the total purchase price
of $1.0 billion plus participation in the residual cash flows, each of which is
subordinated to the repayment of a loan from the Federal Reserve Bank of New
York ("New York Fed") to ML II.
Neither AIG nor the Company had any control rights over ML II. The Company
determined that ML II was a VIE and the Company was not the primary
beneficiary. The transfer of RMBS to ML II was accounted for as a sale. The
Company elected to account for its economic interest in ML II (including the
rights to the deferred contingent purchase price) at fair value. This interest
is reported in fixed maturity securities, trading, with changes in fair value
reported as a component of net investment income. See Note 3 herein for further
discussion of the Company's fair value methodology and the valuation of ML II.
As the controlling member of ML II, the New York Fed directed ML II to sell its
RMBS assets through a series of auctions held since 2011. Proceeds from the
sale of the RMBS assets were used to repay in full the New York Fed's loan to
ML II and the Company's deferred purchase price, including any accrued interest
due, in accordance with the terms of the definitive agreements governing the
sale of the RMBS assets, with any residual interests shared between the New
York Fed and the domestic securities lending program participants.
Through a series of transactions that occurred during 2012, the New York Fed
initiated the sales of the remaining securities held by ML II. These sales
resulted in the Company receiving principal payments of $157 million on
March 1, 2012 and additional cash receipts of $972 million on March 15, 2012
from ML II that consisted of $563 million, $82 million, and $327 million in
principal, contractual interest and residual cash flows, respectively,
effectively monetizing the Company's ML II interests.
The total amount received of $1.13 billion by the Company from ML II was
remitted as a return of capital to the Company's intermediate parent company
and ultimately remitted to AIG.
Net unrealized gains (losses) included in the consolidated statements of income
from fixed maturity securities classified as trading securities in 2012, 2011
and 2010 were $(155) million, $5 million, and $350 million, respectively.
Invested Assets on Deposit and Pledged as Collateral
The invested assets on deposit, and invested assets pledged as collateral are
presented in the table below. The amounts presented in the table below are at
estimated fair value for cash and cash equivalents, short-term investments,
fixed maturity and other securities.
December 31, December 31,
2012 2011
------------ ------------
(In Millions)
Invested assets on deposit:
Regulatory agencies $ 87 $95
Invested assets pledged as collateral:
Advance agreements - Federal Home Loan Bank of Dallas 15 20
Advance agreements - Federal Home Loan Bank of Cincinnati 15 14
Advance agreements - Federal Home Loan Bank of San Francisco 25 25
FHLB collateral 283 --
48
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SECURITIES LENDING
During 2012, the Company began utilizing a securities lending program to
supplement liquidity or for other uses as deemed appropriate by management.
Under these programs, the Company lends securities to financial institutions
and receives collateral equal to 102 percent of the fair value of the loaned
securities. Reinvestment of cash collateral received is restricted to highly
liquid short-term investments. The Company is obligated to return the cash
collateral received to its counterparties. Elements of the securities lending
program are presented below as of December 31:
2012
-------------
(In Millions)
Securities on loan: (a)
Amortized cost.................................. $1,234
Estimated fair value............................ 1,420
Cash collateral on deposit from counterparties (b) 1,466
Reinvestment portfolio - estimated fair value 1,466
(a)Included within Fixed maturity securities, available for sale on the
consolidated balance sheets.
(b)Included within Short-term investments on the consolidated balance sheets.
Liability is reported in securities lending payable.
MORTGAGE LOANS ON REAL ESTATE
At December 31, 2012, the Company had direct U.S. commercial mortgage loan
exposure of $7.9 billion. At that date, substantially all of the U.S. loans
were current.
The U.S. commercial loan exposure by state and type of loan, at December 31,
2012, were as follows:
State # of Loans Amount * Apartments Offices Retails Industrials Hotels Others % of Total
----- ---------- -------- ---------- ------- ------- ----------- ------ ------ ----------
($ In Millions)
California 138 $1,736 $ 58 $ 481 $ 193 $431 $221 $352 22.0%
New York 64 1,075 157 658 74 29 44 113 13.6%
New Jersey 51 729 373 150 164 3 -- 39 9.2%
Texas 37 464 27 196 51 115 53 22 5.9%
Pennsylvania 51 425 54 95 145 107 17 7 5.4%
Other states 321 3,475 281 1,375 813 192 356 458 43.9%
--- ------ ---- ------ ------ ---- ---- ---- -----
Total 662 $7,904 $950 $2,955 $1,440 $877 $691 $991 100.0%
=== ====== ==== ====== ====== ==== ==== ==== =====
* Excludes portfolio valuation allowance
The following table presents the credit quality indicators for commercial
mortgage loans:
Class
----------------------------------------------------
# of Loans Apartments Offices Retails Industrials Hotels Others Total % of Total
December 31, 2012 ---------- ---------- ------- ------- ----------- ------ ------ ------ ----------
($ In Millions)
Credit Quality Indicator:
In good standing 646 $941 $2,835 $1,414 $875 $691 $912 $7,668 97.0%
Restructured (a) 12 9 107 -- 2 -- 27 145 1.8%
90 days or less delinquent -- -- -- -- -- -- -- -- 0.0%
>90 days delinquent or in process of
foreclosure 4 -- 13 26 -- -- 52 91 1.2%
--- ---- ------ ------ ---- ---- ---- ------ -----
Total (b) 662 $950 $2,955 $1,440 $877 $691 $991 $7,904 100.0%
=== ==== ====== ====== ==== ==== ==== ====== =====
Valuation allowance $ 2 $ 39 $ 13 $ 1 $ 1 $ 23 $ 79 1.0%
--- ---- ------ ------ ---- ---- ---- ------ -----
(a)Loans that have been modified in troubled debt restructurings and are
performing according to their restructured terms. See discussion of troubled
debt restructurings below.
(b)Does not reflect valuation allowances.
49
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company owns mortgages with a carrying value of $82 million and $84 million
on certain properties that are owned by an affiliate, AIG Global Real Estate
Investment Corporation at December 31, 2012 and 2011, respectively.
As discussed in Note 2 - Summary of Significant Accounting Policies, the
Company establishes a specific reserve when it is probable that the Company
will be unable to collect all amounts due under the contractual terms of the
loan agreement, and a general reserve for probable incurred but not
specifically identified losses.
A significant majority of commercial mortgage loans in the portfolio are
non-recourse loans and, accordingly, the only guarantees are for specific items
that are exceptions to the non-recourse provisions. It is therefore extremely
rare for the Company to have cause to enforce the provisions of a guarantee on
a commercial real estate or mortgage loan.
The Company's mortgage and other loan valuation allowance activity are as
follows:
2012 2011 2010
---- ---- -----
(In Millions)
Allowance, beginning of year $233 $319 $ 330
Additions (reductions) to allowance for losses (62) (32) 179
Charge-offs, net of recoveries (16) (54) (190)
---- ---- -----
Allowance, end of year $155 $233 $ 319
---- ---- -----
The Company's impaired mortgage loans are as follows:
2012 2011 2010
---- ---- ----
(In Millions)
Impaired loans with valuation allowances $ 75 $108 $288
Impaired loans without valuation allowances 7 69 179
---- ---- ----
Total impaired loans 82 177 467
Valuation allowances on impaired loans (27) (18) (58)
---- ---- ----
Impaired loans, net $ 55 $159 $409
==== ==== ====
The Company recognized $4 million, $10 million and $15 million in interest
income on the above impaired mortgage loans for the years ended December 31,
2012, 2011 and 2010, respectively.
Troubled Debt Restructurings
The Company modifies loans to optimize their returns and improve their
collectability, among other things. When such a modification is undertaken with
a borrower that is experiencing financial difficulty and the modification
involves the Company granting a concession to the troubled debtor, the
modification is deemed to be a TDR. The Company assesses whether a borrower is
experiencing financial difficulty based on a variety of factors, including the
borrower's current default on any of its outstanding debt, the probability of a
default on any of its debt in the foreseeable future without the modification,
the insufficiency of the borrower's forecasted cash flows to service any of its
outstanding debt (including both principal and interest), and the borrower's
inability to access alternative third-party financing at an interest rate that
would be reflective of current market conditions for a non-troubled debtor.
Concessions granted may include extended maturity dates, interest rate changes,
principal forgiveness, payment deferrals and easing of loan covenants.
The Company held $11 million and $153 million of commercial mortgage loans that
had been modified in a TDR at December 31, 2012 and 2011, respectively. The
Company had no other loans that had been modified in a TDR. At December 31,
2012 these commercial mortgage loans had no related total allowances for credit
losses. At December 31, 2011, these commercial mortgage loans had related total
allowances for credit losses of $23 million.
50
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The commercial mortgage loans modified in a TDR are included among the
restructured loans in the credit quality indicators table above, as they are
all performing according to the restructured terms.
As the result of each loan's TDR, the Company assessed the adequacy of any
additional allowance for credit losses with respect to such loans, and in all
cases no additional allowance for credit losses, aside from the one that had
already been provided for each loan prior to their 2012 and 2011
restructurings, was deemed necessary. In certain cases, based on an assessment
of amounts deemed uncollectible, a portion of a loan restructured in a TDR may
be charged off against the allowance for credit losses.
PARTNERSHIPS
Investments in partnerships totaled $6.6 billion and $6.5 billion at
December 31, 2012 and 2011, respectively, and were comprised of 492
partnerships and 518 partnerships, respectively. These partnerships consist
primarily of hedge funds and are managed by independent money managers who
invest in equity securities, fixed maturity securities and real estate. The
risks generally associated with these partnerships include those related to
their underlying investments (i.e. equity securities, debt securities and real
estate), plus a level of illiquidity, which is mitigated, to some extent, by
the existence of contractual termination/withdrawal provisions.
INVESTMENT INCOME
Investment income by type of investment was as follows for the years ended
December 31:
2012 2011 2010
------ ------ ------
(In Millions)
Investment income:
Fixed maturities $5,792 $5,404 $5,970
Equity securities 67 2 6
Mortgage and other loans 526 540 535
Policy loans 102 106 111
Investment real estate 73 59 39
Partnerships and other invested assets 650 508 648
Securities Lending 2 -- 3
Other investment income 12 12 35
------ ------ ------
Gross investment income 7,224 6,631 7,347
Investment expenses (223) (191) (134)
------ ------ ------
Net investment income $7,001 $6,440 $7,213
====== ====== ======
The carrying value of investments that produced no investment income during
2012 was $178 million, which is 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.
51
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NET REALIZED INVESTMENT GAINS (LOSSES)
Net realized investment gains (losses) by type of investment were as follows
for the years ended December 31:
2012 2011 2010
------ ----- -----
(In Millions)
Sales of fixed maturity securities, available for sale $1,506 $ 760 $ 747
Sales of equity securities, available for sale 25 30 58
Mortgage and other loans 73 55 (139)
Investment real estate 12 15 1
Partnerships and other invested assets (21) (144) 5
Derivatives (669) (336) (226)
Securities lending collateral, including other-than-
temporary impairments -- -- 112
Other-than-temporary impairments (379) (598) (962)
------ ----- -----
Net realized investment gains (losses) before taxes $ 547 $(218) $(404)
====== ===== =====
The following table presents the gross realized gains and gross realized losses
from sales or redemptions of the Company's available for sale securities as
follows for the years ended December 31:
2012 2011 2010
---------------- ---------------- ----------------
Gross Gross Gross Gross Gross Gross
Realized Realized Realized Realized Realized Realized
Gains Losses Gains Losses Gains Losses
-------- -------- -------- -------- -------- --------
(In Millions)
Fixed maturity securities $1,598 $(92) $821 $(61) $833 $(86)
Equity securities 31 (6) 37 (7) 61 (3)
------ ---- ---- ---- ---- ----
Total $1,629 $(98) $858 $(68) $894 $(89)
====== ==== ==== ==== ==== ====
52
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CREDIT IMPAIRMENTS
The following table presents a rollforward of the cumulative credit loss
component of other-than-temporary impairments recognized in earnings for
available for sale fixed maturity securities held by the Company, and includes
structured, corporate, municipal and sovereign fixed maturity securities for
the years ended December 31:
2012 2011 2010
------ ------ ------
(In Millions)
Balance, beginning of year $2,775 $2,762 $2,371
Increases due to:
Credit impairments on new securities subject to impairment losses 96 177 364
Additional credit impairments on previously impaired securities 194 278 509
Reductions due to:
Credit impaired securities fully disposed for which there
was no prior intent or requirement to sell (520) (160) (343)
Credit impaired securities for which there is a current intent
or anticipated requirement to sell -- -- (6)
Accretion on securities previously impaired due to credit (422) (272) (133)
Other 3 (10) --
------ ------ ------
Balance, end of year $2,126 $2,775 $2,762
====== ====== ======
PURCHASED CREDIT IMPAIRED SECURITIES
In 2011, the Company began purchasing certain RMBS securities that had
experienced deterioration in credit quality since their issuance. Management
determined, based on its expectations as to the timing and amount of cash flows
expected to be received, that it was probable at acquisition that the Company
would not collect all contractually required payments for these PCI securities,
including both principal and interest and considering the effects of
prepayments,. At acquisition, the timing and amount of the undiscounted future
cash flows expected to be received on each PCI security was determined based on
management's best estimate using key assumptions, such as interest rates,
default rates and prepayment speeds. At acquisition, the difference between the
undiscounted expected future cash flows of the PCI securities and the recorded
investment in the securities represents the initial accretable yield, which is
to be accreted into net investment income over their remaining lives on a
level-yield basis. Additionally, the difference between the contractually
required payments on the PCI securities and the undiscounted expected future
cash flows represents the non-accretable difference at acquisition. Over time,
based on actual payments received and changes in estimates of undiscounted
expected future cash flows, the accretable yield and the non-accretable
difference can change, as discussed further below.
On a quarterly basis, the undiscounted expected future cash flows associated
with PCI securities are re-evaluated based on updates to key assumptions.
Declines in undiscounted expected future cash flows due to further credit
deterioration as well as changes in the expected timing of the cash flows can
result in the recognition of an other-than-temporary impairment charge, as PCI
securities are subject to the Company's policy for evaluating investments for
other-than-temporary impairment. Changes to undiscounted expected future cash
flows due solely to the changes in the contractual benchmark interest rates on
variable rate PCI securities will change the accretable yield prospectively.
Significant increases in undiscounted expected future cash flows for reasons
other than interest rate changes are recognized prospectively as an adjustment
to the accretable yield.
53
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present information on the Company's PCI securities, which
are included in fixed maturity securities, available for sale:
At Date of
Acquisition
-------------
(In Millions)
Contractually required payments (principal and interest) $6,789
Cash flows expected to be collected (a) 5,338
Recorded investment in acquired securities 3,427
(a)Represents undiscounted expected cash flows, including both principal and
interest.
December 31, 2012 December 31, 2011
----------------- -----------------
(In Millions)
Outstanding principal balance $4,262 $3,941
Amortized cost 2,794 2,693
Fair value 3,189 2,523
The following table presents activity for the accretable yield on PCI
securities for the years ended December 31:
2012 2011
------ ------
(In Millions)
Balance, beginning of year $1,695 $ --
Newly purchased PCI securities 486 1,574
Accretion (244) (141)
Decreases due to disposal (175) --
Effect of changes in interest rate indices (84) (23)
Net reclassification from (to) non-accretable difference,
including effects of prepayments 56 285
------ ------
Balance, end of year $1,734 $1,695
====== ======
5. DERIVATIVE FINANCIAL INSTRUMENTS
The Company maintains an overall risk management strategy that incorporates the
use of derivative instruments to minimize significant unplanned fluctuations in
earnings that are caused by interest rate risk, foreign currency exchange risk,
equity market risk and credit risk. See Notes 2 and 3 for further discussion on
derivative financial instruments.
54
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the notional amount and fair value of derivative
financial instruments, by their underlying risk exposure, held at:
Derivative Assets Derivative Liabilities
------------------- ---------------------
Notional Fair Notional Fair
Amount (a) Value (b) Amount (a) Value (b)
---------- --------- ---------- ---------
(In Millions)
December 31, 2012
Derivatives not designated as hedging instruments:
Interest rate contracts $ 5,159 $1,284 $ 5,687 $1,146
Foreign exchange contracts 108 16 165 43
Equity contracts 3,550 117 -- --
Other contracts (c) 10,323 2 18,235 1,040
------- ------ ------- ------
Total derivatives, gross $19,140 1,419 $24,087 2,229
======= ------ ======= ------
Counterparty netting (d) (230) (230)
Cash collateral (e) (433) 8
------ ------
Total derivatives, net 756 2,007
------ ------
Less: Bifurcated embedded derivatives -- 1,040
------ ------
Total derivatives on balance sheets $ 756 $ 967
====== ======
Derivative Assets Derivative Liabilities
------------------- ---------------------
Notional Fair Notional Fair
Amount (a) Value (b) Amount (a) Value (b)
---------- --------- ---------- ---------
(In Millions)
December 31, 2011
Derivatives not designated as hedging instruments:
Interest rate contracts $1,523 $ 159 $ 2,734 $ 443
Foreign exchange contracts 4,069 1,068 4,474 698
Equity contracts 3,580 170 -- --
Other contracts (c) -- -- 14,636 800
------ ------ ------- ------
Total derivatives, gross $9,172 1,397 $21,844 1,941
====== ------ ======= ------
Counterparty netting (d) (284) (284)
Cash collateral (e) (441) (140)
------ ------
Total derivatives, net 672 1,517
------ ------
Less: Bifurcated embedded derivatives -- 800
------ ------
Total derivatives on balance sheets $ 672 $ 717
====== ======
(a)Notional amount represents a standard of measurement of the volume of
derivatives. Notional amount is generally not a quantification of market
risk or credit risk and is not recorded on the consolidated balance sheets.
Notional amounts generally represent those amounts used to calculate
contractual cash flows to be exchanged and are not paid or received, except
for certain contracts such as currency swaps.
(b)See Note 3 for additional information regarding the Company's fair value
measurement of derivative instruments.
(c)Included in Other contracts are bifurcated embedded derivatives, which are
recorded in policyholder contract deposits.
(d)Represents netting of derivative exposures covered by a qualifying master
netting agreement.
(e)Represents cash collateral posted and received.
The Company's interest rate contracts include interest rate swaps and short
futures options. The interest rate swap agreements convert specific investment
securities from a floating to a fixed-rate basis and are used to mitigate the
impact of changes in interest rates on certain investment securities. The
Company buys and sells exchange traded short futures contracts on U.S. Treasury
notes to hedge interest rate exposures on certain bonds purchased for the
Company's trading portfolio. The short futures contracts have terms no longer
than three months at the time of purchase and all such positions are closed out
each quarter end.
55
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign exchange contracts used by the Company include cross-currency interest
rate swaps, which are used to reduce risks from changes in currency exchange
rates with respect to investments denominated in foreign currencies that the
Company holds.
The Company purchases equity contracts, such as futures, call and put options,
to hedge certain guarantees of specific equity-indexed universal life and
variable annuity products. The Company's exchange traded index and long bond
futures contracts have no recorded value as they are net cash settled daily.
Call options are contracts that grant the purchaser, for a premium payment, the
right, but not the obligation to purchase a financial instrument at a specified
price within a specified period of time. Put options are contracts that provide
the purchaser, for a premium payment, the right, but not the obligation to sell
a financial instrument at a specified price within a specified period of time.
The Company issues or has issued certain equity-indexed universal life and
variable annuity products which contain guaranteed provisions that are
considered embedded derivatives. The fair value of these embedded derivatives
is reflected in policyholder contract deposits in the consolidated balance
sheets. The changes in fair value of the embedded derivatives are reported in
net realized investment gains (losses) in the accompanying consolidated
statements of income.
The Company recorded the following change in value of its derivative financial
instruments, including periodic net coupon settlements, change in value of its
embedded derivatives and gains and losses on sales of derivatives in net
realized investment gains (losses) in the consolidated statements of income:
2012 2011 2010
----- ----- -----
(In Millions)
Derivatives not designated as hedging instruments
Interest rate contracts $ (8) $(173) $(128)
Foreign exchange contracts (46) 156 (257)
Equity contracts (101) 118 (146)
Other contracts (514) (437) 305
----- ----- -----
Total $(669) $(336) $(226)
===== ===== =====
The Company is exposed to potential credit-related losses in the event of
nonperformance by counterparties to financial instruments. The Company had $231
million and $155 million of net derivative assets at December 31, 2012 and
2011, respectively, outstanding with AIG Financial Products Corp., an
affiliated company. The credit exposure of the Company's derivative financial
instruments is limited to the fair value of contracts that are favorable to the
Company at the reporting date.
6. VARIABLE INTEREST ENTITIES
A VIE is a legal entity that does not have sufficient equity at risk to finance
its activities without additional subordinated financial support or is
structured such that equity investors lack the ability to make significant
decisions relating to the entity's operations through voting rights and do not
substantively participate in the gains and losses of the entity. Consolidation
of a VIE by its primary beneficiary is not based on majority voting interest,
but is based on other criteria discussed below.
While the Company enters into various arrangements with VIEs in the normal
course of business, the Company's involvement with VIEs is primarily as a
passive investor in debt securities (rated and unrated) and equity interests
issued by VIEs. In all instances, the Company consolidates the VIE when it
determines that the Company is the primary beneficiary. This analysis includes
a review of the VIE's capital structure, contractual relationships and terms,
nature of the VIE's operations and purpose, nature of the VIE's interests
issued, and the Company's involvement with the entity. In evaluating
consolidation, the Company also evaluates the design of the VIE, and the
related risks to which the entity was designed to expose the variable interest
holders to.
56
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For VIEs with attributes consistent with that of an investment company or a
money market fund, the primary beneficiary is the party or group of related
parties that absorbs a majority of the expected losses of the VIE, receives the
majority of the expected residual returns of the VIE, or both.
For all other VIEs, the primary beneficiary is the entity that has both (i) the
power to direct the activities of the VIE that most significantly affect the
entity's economic performance and (ii) the obligation to absorb losses or the
right to receive benefits that could be potentially significant to the VIE.
While also considering these factors, the consolidation conclusion depends on
the breadth of the Company's decision-making ability and its ability to
influence activities that significantly affect the economic performance of the
VIE.
Exposure to Loss
The Company's total off balance sheet exposure associated with VIEs, primarily
consisting of commitments to real estate and investment funds, was $55 million
and $80 million at December 31, 2012 and 2011, respectively.
The Company calculates its maximum exposure to loss to be (i) the amount
invested in the debt or equity of the VIE, (ii) the notional amount of VIE
assets or liabilities where the Company has also provided credit protection to
the VIE with the VIE as the referenced obligation, and (iii) other commitments
and guarantees to the VIE.
The following table presents the Company's total assets, total liabilities and
off-balance sheet exposure associated with its variable interests in
consolidated VIEs:
At December 31,
--------------------------------------------------------
VIE Assets VIE Liabilities Off-Balance Sheet Exposure
------------- --------------- --------------------------
2012 2011 2012 2011 2012 2011
------ ------ ---- ---- ---- ----
(In Millions)
Castle 1 Trust $ 632 $ 720 $324 $419 $-- $--
Castle 2 Trust 634 730 274 389 -- --
Investment in limited partnerships 665 710 23 50 -- --
------ ------ ---- ---- --- ---
Total $1,931 $2,160 $621 $858 $-- $--
====== ====== ==== ==== === ===
The following table presents total assets of unconsolidated VIEs in which the
Company holds a variable interest, as well as the Company's maximum exposure to
loss associated with these VIEs:
Maximum Exposure to Loss
-----------------------------
Total VIE On-Balance Off-Balance
December 31, 2012 Assets Sheet Sheet Total
----------------- --------- ---------- ----------- ------
(In Millions)
Real estate and investment funds $ 5,448 $ 779 $55 $ 834
------- ------ --- ------
Total $ 5,448 $ 779 $55 $ 834
======= ====== === ======
December 31, 2011
-----------------
Real estate and investment funds $ 5,725 $ 830 $80 $ 910
Maiden Lane II 9,254 953 -- 953
------- ------ --- ------
Total $14,979 $1,783 $80 $1,863
======= ====== === ======
57
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Balance Sheet Classification
The Company's interest in the assets and liabilities of consolidated and
unconsolidated VIEs was classified on the Company's consolidated balance sheets
as follows:
At December 31,
----------------------------
Consolidated Unconsolidated
VIEs VIEs
------------- --------------
2012 2011 2012 2011
------ ------ ---- ------
(In Millions)
Assets:
Cash and short-term investments $ 182 $ 208 $ -- $ --
Restricted cash 70 93 -- --
Fixed maturity securities, trading -- -- -- 953
Aircraft 984 1,095 -- --
Other invested assets 513 716 779 830
Other asset accounts 182 48 -- --
------ ------ ---- ------
Total assets $1,931 $2,160 $779 $1,783
====== ====== ==== ======
Liabilities:
Amounts due to related parties $ 281 $ 432 $ -- $ --
Other liability accounts 340 426 -- --
------ ------ ---- ------
Total liabilities $ 621 $ 858 $ -- $ --
====== ====== ==== ======
Real Estate and Investment Funds
The Company participates as a passive investor in the equity issued primarily
by third-party-managed hedge and private equity funds, real estate funds and
some funds managed by AIG Investments (an affiliate). The Company is typically
not involved in the design or establishment of VIEs, nor does it actively
participate in the management of VIEs. The Company's exposure to funds that are
unconsolidated VIEs was not material to the Company's financial condition as of
December 31, 2012 or 2011.
Aircraft Trusts
AIG has created two VIEs, Castle 1 Trust and Castle 2 Trust, for the purpose of
acquiring, owning, leasing, maintaining, operating and selling aircraft. Under
a servicing agreement, International Lease Finance Corporation, an affiliate,
acts as servicer for the aircraft owned by these entities. The Company and
other AIG subsidiaries hold beneficial interests in these entities. These
beneficial interests include passive investments in non-voting preferred equity
and in debt issued by these entities. The debt of these entities is not an
obligation of, or guaranteed by, the Company or by AIG or any of AIG's
subsidiaries. The Company bears the obligation to absorb economic losses or
receive economic benefits that could possibly be significant to Castle 1 Trust
and Castle 2 Trust. As a result, the Company has determined that it is the
primary beneficiary of Castle 1 Trust and Castle 2 Trust and fully consolidates
these entities. See Note 16 herein for additional information on these entities.
ML II
On December 12, 2008, the Company and certain other domestic insurance
subsidiaries of AIG sold all of their undivided interests in a pool of
$39.3 billion face amount of RMBS to ML II, whose sole member is the New York
Fed. Prior to the March 2012 liquidation of ML II by the New York Fed, the
Company had a significant variable economic interest in ML II, which was a VIE.
See Note 4 for further discussion.
RMBS, CMBS, Other ABS and CDOs
The Company is a passive investor in RMBS, CMBS, other ABS and CDOs primarily
issued by domestic special-purpose entities. The Company generally does not
sponsor or transfer assets to, or act as the servicer to these asset-backed
structures, and was not involved in the design of these entities.
58
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company's maximum exposure in these types of structures is limited to its
investment in securities issued by these entities. Based on the nature of the
Company's investments and its passive involvement in these types of structures,
the Company has determined that it is not the primary beneficiary of these
entities. The fair values of the Company's investments in these structures are
reported in Note 3 and Note 4 herein.
7. DEFERRED POLICY ACQUISITION COSTS, VALUE OF BUSINESS ACQUIRED AND DEFERRED
SALES INDUCEMENTS
The following table summarizes the activity in DAC:
2012 2011 2010
------ ------ ------
(In Millions)
Balance at January 1 $4,704 $5,315 $6,202
Deferrals 584 663 528
Accretion of interest/amortization (592) (722) (709)
Effect of unlocking assumptions used in
estimating future gross profits 45 28 (68)
Effect of realized gains on securities (85) (245) (160)
Effect of unrealized gains on securities (498) (335) (478)
------ ------ ------
Balance at December 31 $4,158 $4,704 $5,315
====== ====== ======
The following table summarizes the activity in value of business acquired:
2012 2011 2010
---- ---- ----
(In Millions)
Balance at January 1 $391 $443 $521
Accretion of interest/amortization (15) (39) (33)
Effect of unlocking assumptions used in
estimating future gross profits 5 1 --
Effect of realized gains on securities (23) (5) (22)
Effect of unrealized gains on securities (19) (9) (23)
---- ---- ----
Balance at December 31 $339 $391 $443
==== ==== ====
VOBA amortization, net of accretion of interest, expected to be recorded in
each of the next five years is $28 million, $24 million, $23 million, $20
million and $21 million, respectively.
The following table summarizes the activity in deferred sales inducements:
2012 2011 2010
----- ----- -----
(In Millions)
Balance at January 1 $ 555 $ 667 $ 831
Deferrals 112 134 129
Accretion of interest/amortization (140) (167) (164)
Effect of unlocking assumptions used in
estimating future gross profits 27 8 --
Effect of realized gains on securities (1) (46) (15)
Effect of unrealized gains on securities (199) (41) (114)
----- ----- -----
Balance at December 31 $ 354 $ 555 $ 667
----- ----- -----
59
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company performs a loss recognition review to determine whether future
profitability of insurance-oriented products may be substantially lower than
estimated, which can result in an impairment charge to DAC or the establishment
of additional reserves. This review considers if additional DAC adjustments are
required if unrealized gains included in other comprehensive income were
assumed to be actually realized and the proceeds are reinvested at lower
yields. As a result of this review, the Company reduced DAC by $147 million and
$152 million in 2012 and 2011, respectively.
The Company periodically unlocks assumptions as necessary. Depending on the
product, DAC, URR and other required reserves may be affected. In 2012,
unlocking decreased amortization primarily due to decreased surrenders,
partially offset by decreased interest spreads. In 2011, the Company recorded
lower amortization primarily due to three unlocking events. First, a refinement
was made to the estimated crediting rate. Second, base lapse and withdrawal
rates were lowered to reflect recent experience. Third, the future interest
spread was modified to incorporate additional spread compression. In 2010,
unlocking increased amortization primarily due to unfavorable anticipated
mortality for life insurance products, offset by improved surrender rates and
higher than anticipated interest crediting spreads on deferred annuity
products. Unlocking also reduced reserves on certain interest sensitive
products.
8. FUTURE POLICY BENEFITS AND POLICYHOLDER CONTRACT DEPOSITS
Future policy benefits and policyholder contract deposit liabilities were as
follows at December 31:
2012 2011
------- -------
(In Millions)
Future policy benefits:
Ordinary life $11,359 $11,105
Group life 74 78
Life contingent group annuities 330 340
Life contingent annuities 15,882 14,710
Terminal funding 1,324 1,294
Accident and health 673 621
------- -------
Total $29,642 $28,148
======= =======
Policyholder contract deposits:
Annuities $52,435 $53,608
Guaranteed investment contracts 6,252 6,925
Corporate-owned life insurance 2,181 2,174
Universal life 11,263 10,901
Other contract deposits 794 837
------- -------
Total $72,925 $74,445
======= =======
For interest-sensitive life insurance and investment contracts, reserves equal
the sum of the policy account balance and deferred revenue charges, and as
applicable, other required reserves. Fixed-indexed business is reserved
according to the guidance in derivative accounting standards. 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 1.0 percent to
11.0 percent.
The Company performs a loss recognition review to determine whether future
profitability of insurance-oriented products, which includes among other things
the impact of investment returns and mortality, may be substantially lower than
estimated, which can result in an impairment charge to DAC or the establishment
of additional reserves. This review considers if additional future policy
benefit reserves are required if unrealized gains included in other
comprehensive income were assumed to be actually realized and the proceeds are
reinvested at lower yields.
60
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As a result of this review, the Company recognized a $336 million and $1.5
billion pre-tax decrease to accumulated other comprehensive income as a
consequence of the recognition of additional policyholder benefit reserves in
2012 and 2011, respectively. A $119 million and $519 million deferred tax
benefit was recorded related to this adjustment in 2012 and 2011, respectively,
resulting in a $217 million and $959 million decrease to comprehensive income
and total equity in 2012 and 2011, respectively.
For the year ended December 31, 2012, the Company recognized a pretax
adjustment to policyholder benefit expense and an increase in reserves of $807
million as a consequence of actual loss recognition and a $61 million
strengthening of long-term care reserves for updated morbidity assumptions.
There was no actual loss recognition recorded in 2011 or 2010.
The liability for future policy benefits has been established on the basis of
the following assumptions for 2012:
. Interest rates (exclusive of immediate/terminal funding annuities),
which vary by year of issuance and products, range from 1.0 percent to
11.0 percent. Interest rates on immediate/terminal funding annuities are
at a maximum of 13.5 percent and grade to no less than zero.
. Mortality and surrender rates are based upon actual experience modified
to allow for variations in policy form. The weighted average lapse rate,
including surrenders, for individual and group life was approximately
6.5 percent.
The liability for policyholder contract deposits has been established on the
basis of the following assumptions for 2012:
. Interest credited on deferred annuities, which vary by year of issuance,
range from a rate of 1.0 percent to 9.0 percent, including bonuses. This
range is applicable to deferred annuity contracts where the crediting
rates are not directly based on equity market returns. 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 zero percent to 20.0 percent grading to
zero over a period of zero to 15 years.
. GICs have market value withdrawal provisions for any funds withdrawn
other than benefit responsive payments. Interest rates credited
generally range from 0.5 percent to 8.5 percent and the maturity ranges
from 4 years to 21 years.
. Interest rates on corporate-owned life insurance are guaranteed at 3.0
or 4.0 percent, depending on policy form, and the weighted average rate
credited in 2012 was 4.6 percent.
. The universal life policies have credited interest rates of 1.0 percent
to 6.0 percent and guarantees ranging from 1.0 percent to 5.5 percent
depending on the year of issue. Additionally, universal life policies
are subject to surrender charges that amount to 8.3 percent of the
aggregate fund balance grading to zero over a period no longer than 20
years.
Participating life insurance accounted for approximately 0.8 percent of life
insurance in force at December 31, 2012.
Dividends to be paid on participating life insurance contracts are determined
annually based on estimates of the contracts' earnings. Policyholder dividends
were $35 million, $41 million and $43 million in 2012, 2011 and 2010,
respectively, and were included as part of policyholders' benefits in the
consolidated statements of income.
61
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Guaranteed Benefits
Details concerning the Company's exposure to guaranteed benefits as of
December 31 were as follows:
2012 2011
---------------------------------- ----------------------------------
Highest Highest
Net Deposits Plus a Contract Value Net Deposits Plus a Contract Value
Minimum Return Attained Minimum Return Attained
------------------- -------------- ------------------- --------------
($ In Millions)
In the event of death (GMDB)
Account value $ 13,943 $13,688 $ 10,928 $13,128
Net amount at risk (a) 955 1,093 1,348 2,132
Average attained age of contract holders 66 66 66 67
Range of guaranteed minimum return rates 0.00%-10.00% 0.00%-10.00%
At annuitization (GMIB)
Account value $ 2,981 $ 3,130
Net amount at risk (b) 233 271
Weighted average period remaining until
earliest annuitization 0.1 years 0.3 years
Range of guaranteed minimum return rates 0.00%-6.50% 0.00%-6.50%
Annual withdrawals at specified date (GMWB)
Account value $ 14,587 $ 10,592
Net amount at risk (c) 899 1,358
Weighted average period remaining until
guaranteed payment 16.7 years 16.6 years
Accumulation at specified date (GMAV)
Account value $ 826 $ 961
Net amount at risk (d) 9 23
Weighted average period remaining until
guaranteed payment 2.1 years 3.0 years
(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.
(b)Net amount at risk represents the present value of the projected guaranteed
benefit exposure in excess of the projected account value if all contract
holders annuitized at their respective eligibility date.
(c)Net amount at risk represents the guaranteed benefit exposure in excess of
the current account value if all contract holders exercise the maximum
withdrawal benefits at the same balance sheet date.
(d)Net amount at risk represents the guaranteed benefit exposure in excess of
the current account value if all contract holders reached the specified date
at the same balance sheet date.
62
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following summarizes the reserve for guaranteed benefits on variable
contracts, which is reflected in the general account and reported in future
policy benefits (GMDB/GMIB) and policyholder contract deposits (GMWB/GMAV) on
the consolidated balance sheets:
GMDB GMIB GMWB GMAV
---- ---- ---- ----
(In Millions)
2012
----
Balance at January 1 $378 $61 $543 $ 63
Guaranteed benefits incurred 36 (6) 226 (32)
Guaranteed benefits paid (63) (5) -- --
---- --- ---- ----
Balance at December 31 $351 $50 $769 $ 31
==== === ==== ====
2011
----
Balance at January 1 $350 $52 $125 $ 49
Guaranteed benefits incurred 107 13 418 14
Guaranteed benefits paid (79) (4) -- --
---- --- ---- ----
Balance at December 31 $378 $61 $543 $ 63
==== === ==== ====
The following assumptions and methodology were used to determine the reserve
for guaranteed benefits on variable contracts at December 31, 2012:
. Data used was 50 stochastically generated investment performance
scenarios.
. Mean investment performance assumption was 7.5 percent.
. Volatility assumption was 16 percent.
. Mortality was assumed to be 50.0 percent to 80.0 percent of the 1975-80
SOA Ultimate, 1983a and Ult. M tables.
. Lapse rates vary by contract type and duration and range from zero to 37
percent.
. The discount rate used ranged from 5.5 percent to 10.0 percent.
There is a guaranteed minimum withdrawal benefit rider that is available on
certain equity-indexed annuities. The rider has a waiting period of one year
before charges are assessed and before the withdrawal option can be elected. To
date, sales of this rider have been immaterial and no reserves are being held.
63
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. ACCIDENT AND HEALTH RESERVES
Activity in the liability for unpaid claims and claim adjustment expenses
relating to the Company's accident and health business, which is reported in
policy claims and benefits payable, is summarized as follows:
2012 2011 2010
---- ---- ----
(In Millions)
Balance as of January 1, net of reinsurance recoverable $ 48 $ 43 $ 48
Add: Incurred losses related to:
Current year 82 90 78
Prior years 60 71 62
---- ---- ----
Total incurred losses 142 161 140
---- ---- ----
Deduct: Paid losses related to:
Current year 85 91 82
Prior years 59 65 63
---- ---- ----
Total paid losses 144 156 145
---- ---- ----
Balance as of December 31, net of reinsurance recoverable 46 48 43
Reinsurance recoverable 8 14 15
---- ---- ----
Balance as of December 31, gross of reinsurance recoverable $ 54 $ 62 $ 58
==== ==== ====
The liability for unpaid claims and claim adjustment expenses relating to the
Company's accident and health business is based on the estimated amount payable
on claims reported prior to the date of the balance sheets which have not yet
been settled, claims reported subsequent to the date of the balance sheets
which have been incurred during the period then ended, and an estimate (based
on past experience) of incurred but unreported claims relating to such periods.
10. REINSURANCE
The Company generally limits its exposure to loss on any single insured to $10
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 $15 million.
A receivable is recorded for reinsured benefits, both paid and pending, which
are recoverable from the reinsurer. Reinsurance premiums are recognized over
the life of the reinsured policies using assumptions consistent with those used
to account for the underlying policies.
64
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reinsurance transactions for the years ended December 31, 2012, 2011 and 2010
were as follows:
Percentage
Ceded to Assumed of Amount
Gross Other From Other Net Assumed
Amount Companies Companies Amount to Net
-------- --------- ---------- -------- ----------
(In Millions)
December 31, 2012
Life insurance in force $793,874 $108,760 $2,728 $687,842 0.40%
======== ======== ====== ========
Premiums:
Life insurance and annuities $ 2,228 $ 847 $ 21 $ 1,402 1.50%
Accident and health insurance 228 13 (1) 214 -0.47%
-------- -------- ------ --------
Total premiums $ 2,456 $ 860 $ 20 $ 1,616 1.24%
======== ======== ====== ========
December 31, 2011
Life insurance in force $785,904 $117,210 $3,080 $671,774 0.46%
======== ======== ====== ========
Premiums:
Life insurance and annuities $ 2,210 $ 846 $ 22 $ 1,386 1.59%
Accident and health insurance 246 17 -- 229 0.00%
-------- -------- ------ --------
Total premiums $ 2,456 $ 863 $ 22 $ 1,615 1.36%
======== ======== ====== ========
December 31, 2010
Life insurance in force $788,672 $130,808 $3,252 $661,116 0.49%
======== ======== ====== ========
Premiums:
Life insurance and annuities $ 2,202 $ 815 $ 23 $ 1,410 1.63%
Accident and health insurance 252 27 (3) 222 -1.35%
-------- -------- ------ --------
Total premiums $ 2,454 $ 842 $ 20 $ 1,632 1.23%
======== ======== ====== ========
The Company's reinsurance agreements do not relieve it from its direct
obligations to its insureds. Thus, a credit exposure exists with respect to
life reinsurance ceded to the extent that any reinsurer fails to meet the
obligations assumed under any reinsurance agreement. To minimize its exposure
to significant losses from reinsurance insolvencies, the Company evaluates the
financial strength of its reinsurers and monitors concentration of credit risk
arising from similar characteristics among the reinsurers.
Total reinsurance recoverables are included in reinsurance receivables on the
consolidated balance sheets. Reinsurance recoverable on paid losses was
approximately $111 million and $54 million at December 31, 2012 and 2011,
respectively. Reinsurance recoverable on unpaid losses was approximately $108
million and $155 million at December 31, 2012 and 2011, respectively. Ceded
claim and surrender recoveries under reinsurance agreements were $694 million,
$579 million and $625 million for the years ended 2012, 2011 and 2010,
respectively.
The Company identified an alternative internal funding solution for its
XXX/AXXX reserves. This alternative solution involves fully recapturing the
coinsurance/modified coinsurance agreement with AIG Life of Bermuda, Ltd.
("AIGB"), an affiliate, and simultaneously reinsuring this in-force, together
with new business (term and universal life), to another affiliate, AGC Life,
under a new coinsurance/modified coinsurance agreement. This new agreement does
not meet the criteria for reinsurance accounting under GAAP; therefore, deposit
accounting is applied. Management received approvals of the recapture and
reinsurance transactions on behalf of legacy AGL and AGC Life from the Texas
and Missouri Departments of Insurance, respectively, in March 2011, with
January 1, 2011 effective dates.
In December 2002, the Company entered into a coinsurance/modified coinsurance
agreement with AIGB. The agreement had an effective date of March 1, 2002.
Under the agreement, AIGB reinsured 100 percent quota share of the Company's
liability on virtually all level term and universal life products issued by the
Company with issue
65
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
dates on or after March 1, 2002. The agreement was unlimited in duration but
either party may terminate the agreement as to new business with thirty days
written notice to the other party. This agreement did not meet the criteria for
reinsurance accounting under GAAP; therefore, deposit accounting was applied.
This agreement was amended to terminate for new business issued on and after
August 1, 2009. This agreement was recaptured for legacy AGL effective
January 1, 2011, as discussed above.
The agreements, between the Company and AIGB and AGC Life, also provide for an
experience refund of all profits, less a reinsurance risk charge. The main
impact of the agreement on the Company's results of operations for the years
ended December 31, 2012, 2011 and 2010 was a pre-tax expense of approximately
$66 million, $59 million and $59 million, respectively, representing the risk
charge associated with the reinsurance agreements.
On October 1, 2003, the Company entered into a coinsured/modified coinsurance
agreement with AIGB. The agreement has an effective date of January 1, 2003.
Under the agreement, AIGB reinsures 100 percent quota share of the Company's
liability on virtually all general account deferred annuity contracts issued by
the Company with issue dates on or after January 1, 2003. The agreement was
amended on September 25, 2007 to terminate the agreement for new business as of
July 1, 2007. Under the agreement, the Company will retain the assets
supporting the reserves ceded to AIGB. The agreement also provides for an
experience refund of all profits, less a reinsurance risk charge. This
agreement does not meet the criteria for reinsurance accounting under GAAP,
therefore, deposit accounting is applied. The main impact of the agreement on
the Company's results of operations for the years ended December 31, 2012, 2011
and 2010 was a pre-tax expense of approximately $3 million in each year and
represented the risk charge associated with the reinsurance agreement.
In 2003, the Company entered into a coinsurance/modified coinsurance agreement
with AIGB. The agreement has an effective date of January 1, 2003. Under the
agreement, AIGB reinsures a 100 percent quota share of the Company's liability
on selective level term products and universal life products issued by the
Company. 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. This agreement does not meet the criteria for reinsurance accounting
under GAAP; therefore, deposit accounting is applied. This agreement was
amended to terminate for new business issued on and after August 1, 2009. The
agreement also provides for an experience refund of all profits, less a
reinsurance risk charge. The main impact of the agreement on the Company's
results of operations for the years ended December 31, 2012, 2011 and 2010 was
a pre-tax expense of approximately $4 million, $3 million and $5 million,
respectively, representing the risk charge associated with the coinsurance
agreement.
11. NOTES PAYABLE
On September 23, 2003 and January 14, 2004, Castle 1 Trust and Castle 2 Trust,
respectively, issued five classes of notes payable.
The repayment terms of each class of notes are such that certain principal
amounts are expected to be repaid on dates which are based on certain operating
assumptions or refinanced through the issuance of new notes, but in any event
are ultimately due for repayment on May 15, 2027 and November 15, 2026 for
Castle 1 Trust and Castle 2 Trust, respectively. Each Trust has the right to
make an optional redemption of any class of the notes. Should either Trust
choose to exercise an early redemption of any of the notes, it may be required
to pay a redemption premium.
The dates on which principal repayments on the notes will actually occur will
depend on the cash flows generated from the portfolio of aircraft, each Trust's
ability to refinance any or all of the notes and the amount of operating costs
incurred in the ordinary course of business.
The notes are obligations solely of Castle 1 Trust and Castle 2 Trust and are
not secured by the aircraft. The notes are not guaranteed by any lessee,
sellers of aircraft, trustees of Castle 1 Trust, trustees of Castle 2 Trust,
the Company or other beneficial interest holders of Castle 1 Trust, Castle 2
Trust, or any other person.
66
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The outstanding principal balances and the unamortized hedge accounting fair
value adjustments were as follows:
December 31, 2012 December 31, 2011
---------------- ----------------
Castle Castle Castle Castle
1 Trust 2 Trust 1 Trust 2 Trust
------- ------- ------- -------
(In Millions)
Outstanding principal $86 $162 $130 $257
Unamortized hedge accounting fair value adjustments (3) (5) (4) (7)
--- ---- ---- ----
Notes payable, net $83 $157 $126 $250
=== ==== ==== ====
The weighted average interest rate on the notes during the twelve months ended
December 31, 2012 and 2011 was 6.6 percent and 6.3 percent, respectively for
Castle 1 Trust and 6.4 percent and 6.0 percent, respectively for Castle 2 Trust.
The Notes of Castle 1 Trust and Castle 2 Trust are payable to affiliates and
third parties as follows:
December 31, 2012 December 31, 2011
----------------- -----------------
Castle Castle Castle Castle
1 Trust 2 Trust 1 Trust 2 Trust
------- ------- ------- -------
(In Millions)
Notes payable - to affiliates, net $54 $ 88 $ 79 $122
Notes payable - to third parties, net 29 69 47 128
--- ---- ---- ----
Notes payable, net $83 $157 $126 $250
=== ==== ==== ====
Included within Notes payable - to third parties, net on the consolidated
balance sheets are outstanding borrowings taken by the Company from the FHLB as
described in Note 12.
12. DEBT
In 2011, the Company became a member of the FHLB of Dallas. Membership with the
FHLB provides the Company with collateralized borrowing opportunities,
primarily as an additional source of contingent liquidity. When a cash advance
is obtained, the Company is required to pledge certain mortgage-backed
securities, government and agency securities, other qualifying assets and its
ownership interest in the FHLB of Dallas to secure advances obtained from the
FHLB. Upon any event of default by the Company, the FHLB of Dallas's recovery
would generally be limited to the amount of the Company's liability under
advances borrowed.
On December 31, 2012, several life insurance companies were merged into the
Company. Refer to Note 1 for further discussion. Each of the companies listed
below were members in their respective FHLBs. In conjunction with the merger
described in Note 1, WNL, AGLA and SALIC withdrew their membership from their
respective FHLBs, and their interest in shares of the FHLB stock will be
redeemed by the respective FHLBs over time.
Company Domiciliary State FHLB Bank
------- ----------------- ---------
AGL Texas FHLB - Dallas
WNL Texas FHLB - Dallas
AGLA Tennessee FHLB - Cincinnati
SALIC Arizona FHLB - San Francisco
67
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 2012 and 2011, the carrying value of the Company's ownership in
the FHLB of Dallas was $54 million and $59 million, respectively, which was
reported in partnership and other invested assets. At December 31, 2012, the
fair value of collateral pledged to secure advances was $372 million. As of
December 31, 2012, the Company had outstanding borrowings of $60 million. There
were no advances taken during 2011.
Advances taken by the Company which were outstanding at December 31, 2012
mature at various dates through 2015 and have stated interest rates which range
from 0.24 percent to 0.54 percent.
13. COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS
Leases
The Company has various long-term, noncancelable operating leases, primarily
for office space and equipment, which expire at various dates through 2018. At
December 31, 2012, the future minimum lease payments under the operating leases
are as follows:
(In Millions)
2013 $ 6
2014 4
2015 3
2016 2
2017 2
Thereafter 1
---
Total $18
===
Rent expense was $7 million, $34 million and $39 million for the years ended
December 31, 2012, 2011 and 2010, respectively.
The leasing operations of Castle 1 Trust and Castle 2 Trust consist of leasing
aircraft under operating leases which expire on various dates through 2018. At
December 31, 2012, future minimum lease payments, including an estimated U.S.
dollar equivalent for lease payments denominated in Euros using an exchange
rate in effect at December 31, 2012, to be received by Castle 1 Trust and
Castle 2 Trust under operating leases for the years ended December 31 are as
follows:
(In Millions)
2013 $119
2014 81
2015 50
2016 23
2017 9
Thereafter 1
----
Total $283
====
Commitments to Fund Partnership Investments
The Company had commitments to provide funding to various limited partnerships
totaling $595 million and $841 million for the periods ended December 31, 2012
and 2011, respectively. The commitments to invest in limited partnerships and
other funds are called at the discretion of each fund, as needed and subject to
the provisions of such
68
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
fund's governing documents, for funding new investments, follow-on investments
and/or fees and other expenses of the fund. $444 million of the total
commitments at December 31, 2012 are currently expected to expire by 2013, and
the remaining by 2017 based on the expected life cycle of the related fund and
the Company's historical funding trends for such commitments.
Mortgage Loan Commitments
The Company had $142 million in commitments relating to mortgage loans at
December 31, 2012.
Other Commitments
In the ordinary course of business, the Company is obligated to purchase
approximately $23 million of asset-backed securities in future periods at
December 31, 2012. The expiration date of this commitment is in 2016.
The Company has entered into credit and short-term financing agreements under
which the Company agreed to make loans to various affiliates (See Note 16).
The Company's wholly owned subsidiary, SA Affordable Housing, LLC ("SAAH LLC"),
has invested and indirectly acquired low-income housing tax credits pursuant to
Section 42 of the Internal Revenue Code, as amended (the "federal tax
credits"). In July 2010, SAAH LLC sold approximately $745 million in federal
tax credits to unaffiliated investors through transactions that involved
formation of investment limited partnerships in which SAAH LLC is the general
partner. At the time of these transactions, SAAH LLC was a wholly owned
subsidiary of SALIC, which merged with and into the Company on December 31,
2012 (see Note 1 for description of the merger). In connection with the sales
of these federal tax credits, SALIC guaranteed, in favor of the unaffiliated
investors, all payment obligations of SAAH LLC in its capacity as the general
partner of the investment limited partnerships. Upon SALIC's merger with and
into the Company, the Company assumed all of SALIC's obligations under these
guarantees. SAAH LLC has retained proceeds from sales of the tax credits in an
amount reasonably expected to meet its payment obligations as the general
partner. Accordingly, the Company currently believes that any calls on its
guarantees would be immaterial.
SAAMCo is the investment advisor of SunAmerica Money Market Fund (the "Fund"),
a series of the SunAmerica Money Market Funds, Inc., which seeks to maintain a
stable $1.00 net asset value ("NAV") per share. The Fund's market value NAV was
negatively impacted by a loss in 2008 on an asset-backed security ("Cheyne").
SAAMCo has provided certain commitments to the Board of Directors of the Fund
to contribute capital to maintain a minimum market value per share up to the
amount of the security loss. Management has also committed that should the
realized loss carry forward from Cheyne eventually expire, SAAMCo will
reimburse the Fund to the extent of the expiration. SAAMCo has recorded a
contingent liability of $1 million for expected future capital contributions as
of December 31, 2012.
CONTINGENT LIABILITIES
Legal Matters
The Company is party to various 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, cash
flows 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 invested a total of $491 million in WG Trading Company, L.P. ("WG
Trading") in two separate transactions (October 2000 and June 2004). The
Company received back a total amount of $567 million from these
69
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
investments. In August 2010, a court-appointed receiver filed a lawsuit against
the Company and other defendants seeking to recover any funds distributed in
excess of the entities' investments. Robb, Evans & Associates LLC ("The
Receiver") asserts that WG Trading and WG Trading Investors, L.P. were operated
as a "ponzi" scheme. As of December 31, 2012, the Company believes it is not
likely that contingent liabilities arising from this lawsuit will have a
material adverse effect on the on the Company's consolidated financial
condition, results of operations or cash flows.
Regulatory Matters
All fifty states and the District of Columbia have laws requiring solvent life
insurance companies, through participation in guaranty associations, to pay
assessments to protect the interests of policyholders of insolvent life
insurance companies. These state insurance guaranty associations generally levy
assessments, up to prescribed limits, on member insurers in a particular state
based on the proportionate share of the premiums written by member insurers in
the lines of business in which the impaired, insolvent or failed insurer is
engaged. Such assessments are used to pay certain contractual insurance
benefits owed pursuant to insurance policies issued by impaired, insolvent or
failed insurers. Some states permit member insurers to recover assessments paid
through full or partial premium tax offsets. The Company accrues liabilities
for guaranty fund assessments when an assessment is probable and can be
reasonably estimated. The Company estimates the liability using the latest
information available from the National Organization of Life and Health
Insurance Guaranty Associations. While the Company cannot predict the amount
and timing of any future guaranty fund assessments, the Company has established
reserves it believes are adequate for assessments relating to insurance
companies that are currently subject to insolvency proceedings. The Company
accrued $17 million and $26 million for these guaranty fund assessments at
December 31, 2012, and 2011, respectively, which is reported within other
liabilities in the accompanying consolidated balance sheets.
Various federal, state and other regulatory agencies may from time to time
review, examine or inquire into the operations, practices and procedures of the
Company, such as through financial examinations, market conduct exams or
regulatory inquiries. Based on the current status of pending regulatory
examinations and inquiries involving the Company, the Company believes it is
not likely that these regulatory examinations or inquiries will have a material
adverse effect on the consolidated financial position, results of operations or
cash flows of the Company.
The Company recorded an increase of approximately $58 million and $179 million
in the estimated reserves for IBNR death claims in 2012 and 2011, respectively,
in conjunction with the use of the SSDMF to identify potential claims not yet
filed. In 2012, the Company worked to resolve multi-state examinations relating
to the handling of unclaimed property and the use of the SSDMF to identify
death claims that have not been submitted to the Company in the normal course
of business. The final settlement of these examinations was announced on
October 22, 2012, pursuant to which AIG paid an $11 million regulatory
assessment to the various state insurance departments that are parties to the
regulatory settlement to defray costs of their examinations and monitoring. The
Company paid $7 million of this amount. Although the Company has enhanced its
claims practices to include use of the SSDMF, it is possible that the
settlement remediation requirements, remaining inquiries, other regulatory
activity or litigation could result in the payment of additional amounts. AIG
has also received a demand letter from a purported AIG shareholder requesting
that the Board of Directors investigate these matters, and bring appropriate
legal proceedings against any person identified by the investigation as
engaging in misconduct. The Company believes it has adequately reserved for
such claims, but there can be no assurance that the ultimate cost will not
vary, perhaps materially, from its estimate.
In addition, the state of West Virginia has two lawsuits pending against the
Company relating to alleged violations of the West Virginia Uniform Unclaimed
Property Act, in connection with policies issued by the Company and by AGLA
(which merged into the Company on December 31, 2012). The State of West
Virginia has also filed similar lawsuits against other insurers.
14. TOTAL EQUITY
Capital contributions received by the Company were $265 thousand, $16 million
and $6 million in 2012, 2011 and 2010, respectively.
70
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of accumulated other comprehensive income are as follows:
2012 2011 2010
------- ------- -------
(In Millions)
Fixed maturity and equity securities, available for sale:
Gross unrealized gains $12,608 $ 9,722 $ 6,541
Gross unrealized losses (704) (2,143) (2,289)
Net unrealized gains on other invested assets 925 655 570
Adjustments to DAC, VOBA and deferred sales inducements (1,804) (1,088) (703)
Insurance loss recognition (2,048) (1,712) (234)
Foreign currency translation adjustments 12 15 12
Deferred federal and state income tax expense (3,096) (1,913) (1,350)
------- ------- -------
Accumulated other comprehensive income $ 5,893 $ 3,536 $ 2,547
======= ======= =======
The following table presents the other comprehensive income (loss)
reclassification adjustments for the years ended December 31:
Unrealized gains
(losses) of fixed Adjustment to
maturity deferred policy
investments on acquisition costs,
which other-than Unrealized gains value of business
temporary credit (losses) on all acquired and
impairments were other invested deferred sales Insurance loss
taken assets inducements recognition
----------------- ---------------- ------------------ --------------
(In Millions)
DECEMBER 31, 2012
Unrealized change arising during period $1,682 $ 1,787 $(817) $(1,143)
Less: Reclassification adjustments included
in net income 230 (1,356) (101) (807)
------ ------- ----- -------
Total other comprehensive income, before
income tax (expense) benefit 1,452 3,143 (716) (336)
Less: Income tax (expense) benefit (545) (1,015) 257 119
------ ------- ----- -------
Total other comprehensive income, net of
income tax (expense) benefit $ 907 $ 2,128 $(459) $ (217)
====== ======= ===== =======
DECEMBER 31, 2011
Unrealized change arising during period $ 616 $ 3,082 $(465) $(1,478)
Less: Reclassification adjustments included
in net income 291 (5) (80) --
------ ------- ----- -------
Total other comprehensive income, before
income tax (expense) benefit 325 3,087 (385) (1,478)
Less: Income tax (expense) benefit (111) (1,104) 134 519
------ ------- ----- -------
Total other comprehensive income, net of
income tax (expense) benefit $ 214 $ 1,983 $(251) $ (959)
====== ======= ===== =======
DECEMBER 31, 2010
Unrealized change arising during period $1,793 $ 2,737 $(722) $ (234)
Less: Reclassification adjustments included
in net income 526 (275) (107) --
------ ------- ----- -------
Total other comprehensive income, before
income tax (expense) benefit 1,267 3,012 (615) (234)
Less: Income tax (expense) benefit (447) (1,096) 216 81
------ ------- ----- -------
Total other comprehensive income, net of
income tax (expense) benefit $ 820 $ 1,916 $(399) $ (153)
====== ======= ===== =======
Foreign currency
translation
adjustment Total
---------------- -------
DECEMBER 31, 2012
Unrealized change arising during period $(3) $ 1,506
Less: Reclassification adjustments included
in net income -- (2,034)
--- -------
Total other comprehensive income, before
income tax (expense) benefit (3) 3,540
Less: Income tax (expense) benefit 1 (1,183)
--- -------
Total other comprehensive income, net of
income tax (expense) benefit $(2) $ 2,357
=== =======
DECEMBER 31, 2011
Unrealized change arising during period $ 3 $ 1,758
Less: Reclassification adjustments included
in net income -- 206
--- -------
Total other comprehensive income, before
income tax (expense) benefit 3 1,552
Less: Income tax (expense) benefit (1) (563)
--- -------
Total other comprehensive income, net of
income tax (expense) benefit $ 2 $ 989
=== =======
DECEMBER 31, 2010
Unrealized change arising during period $ 7 $ 3,581
Less: Reclassification adjustments included
in net income -- 144
--- -------
Total other comprehensive income, before
income tax (expense) benefit 7 3,437
Less: Income tax (expense) benefit (3) (1,249)
--- -------
Total other comprehensive income, net of
income tax (expense) benefit $ 4 $ 2,188
=== =======
71
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dividends that the Company may pay to the Parent in any year without prior
approval of the Texas Department of Insurance ("TDI") are limited by statute.
The maximum amount of dividends which can be paid over a rolling twelve-month
period to shareholders of insurance companies domiciled in the state of Texas
without obtaining the prior approval of the TDI is limited to the greater of
either 10 percent of the preceding year's statutory surplus or the preceding
year's statutory net gain from operations. Additionally, unless prior approval
of the TDI is obtained, dividends can only be paid out of the Company's
unassigned surplus. Subject to the foregoing requirements, the maximum dividend
payout that may be made in 2013 without prior approval of the TDI is $2.4
billion.
In 2012 and 2011, the Company paid dividends totaling $1.9 billion and $1.8
billion, respectively, to its Parent. Dividend payments in excess of positive
retained earnings were classified and reported as a return of capital.
The Company is required to file financial statements prepared in accordance
with statutory accounting practices prescribed or permitted by state insurance
regulatory authorities. Statutory accounting principles differ from GAAP
primarily by charging policy acquisition costs to expense as incurred,
establishing future policy benefit liabilities using different actuarial
assumptions, excluding certain assets from statutory admitted assets and
valuing investments and establishing deferred taxes on a different basis.
The TDI has the right to permit specific practices that deviate from prescribed
practices. In 2010, the Company received permission from the TDI to restate the
statutory gross paid-in and contributed statutory surplus and the unassigned
funds components of its statutory surplus, similar to the restatement of
statutory surplus balances that occurs pursuant to the prescribed accounting
guidance for a quasi-reorganization. The effective date was September 30, 2010.
The permitted practice had no impact on either the Company's statutory basis
net income or total statutory surplus or impact on these financial statements.
In addition, there was no impact on the Company's risk-based capital results.
Statutory net income and capital and surplus of AGL at December 31 were as
follows:
2012 2011 2010
------- ------- -------
(In Millions)
Statutory net income $ 3,641 $ 924 $ 778
Statutory capital and surplus $11,514 $15,626 $15,717
15. FEDERAL INCOME TAXES
The components of the provision for income taxes on pretax income for the years
ended December 31 were as follows:
2012 2011 2010
----- ----- -------
(In Millions)
Current $ 29 $(170) $ (15)
Deferred (651) (543) (1,115)
----- ----- -------
Total income tax benefit $(622) $(713) $(1,130)
===== ===== =======
72
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The U.S. statutory income tax rate is 35 percent for 2012, 2011 and 2010.
Actual tax expense on income differs from the statutory amount computed by
applying the federal income tax rate for the years ended December 31 due to the
following:
2012 2011 2010
------- ------- -------
(In Millions)
U.S. federal income tax (benefit) at statutory rate $ 845 $ 464 $ 721
Adjustments:
Valuation allowance (1,457) (1,225) (1,679)
State income tax (2) 91 (84)
Dividends received deduction (24) (27) (14)
Audit corrections 12 1 4
Prior year corrections (3) (8) (21)
Other credits, taxes and settlements 7 (9) (57)
------- ------- -------
Total income tax benefit $ (622) $ (713) $(1,130)
======= ======= =======
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. The
significant components of deferred tax assets and liabilities at December 31
are as follows:
2012 2011
------- -------
(In Millions)
Deferred tax assets:
Excess capital losses and other tax carryovers $ 3,829 $ 5,213
Basis differential of investments 1,085 1,075
Policy reserves 1,758 1,767
Other 271 185
------- -------
Total deferred tax assets before valuation allowance 6,943 8,240
Valuation allowance (3,467) (5,018)
------- -------
Total deferred tax assets 3,476 3,222
Deferred tax liabilities:
Deferred policy acquisition costs (2,074) (1,969)
Net unrealized gains on debt and equity securities available for sale (3,081) (2,429)
State deferred tax liabilities (21) (5)
Capitalized EDP (6) (3)
------- -------
Total deferred tax liabilities (5,182) (4,406)
------- -------
Net deferred tax liability $(1,706) $(1,184)
======= =======
73
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 2012, the Company had the following net operating losses
carryforwards:
Amount Year expired
------------- ------------
(In Millions)
2008 $ 2 2023
2009 -- 2024
2010 24 2025
2011 10 2026
2012 17 2027
---
Total $53
===
At December 31, 2012, the Company had the following foreign tax credit
carryovers:
Amount Year expired
------------- ------------
(In Millions)
2005 $ 1 2015
2006 6 2016
2007 1 2017
2008 2 2018
2009 3 2019
2010 9 2020
2011 7 2021
2012 7 2022
---
Total $36
===
At December 31, 2012, the Company had the following capital loss carryforwards:
Amount Year expired
------------- ------------
(In Millions)
2008 $ 9,947 2013
2009 579 2014
-------
Total $10,526
=======
At December 31, 2012, the Company had the following general business credit
carryforwards:
Amount Year expired
------------- ------------
(In Millions)
2005 $ 18 2025
2006 7 2026
2007 90 2027
2008 15 2028
2009 27 2029
2010 38 2030
2011 7 2031
2012 7 2032
----
Total $209
====
74
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company is included in the consolidated federal income tax return of its
ultimate parent, AIG. Under the tax sharing agreement with AIG, taxes are
recognized and computed on a separate company basis. To the extent that
benefits for net operating losses, foreign tax credits or net capital losses
are utilized on a consolidated basis, the Company will recognize tax benefits
based upon the amount of the deduction and credits utilized in the consolidated
federal income tax return.
The evaluation of the recoverability of the deferred tax asset and the need for
a valuation allowance requires the Company to weigh all positive and negative
evidence to reach a conclusion that is more likely than not that all or some of
the deferred tax asset will not be realized. The weight given to the evidence
is commensurate with the extent to which it can be objectively verified. The
more negative evidence that exists, the more positive evidence is necessary and
the more difficult it is to support a conclusion that a valuation allowance is
not needed.
The Company's framework for assessing the recoverability of deferred tax assets
weighs the sustainability of recent operating profitability, the predictability
of future operating profitability of the character necessary to realize the
deferred tax assets, and the Company's emergence from cumulative losses in
recent years. The framework requires the Company to consider all available
evidence, including:
. the nature, frequency and severity of cumulative financial reporting
losses in recent years;
. the predictability of future operating profitability of the character
necessary to realize the net deferred tax asset;
. the carryforward periods for the net operating loss, capital loss and
foreign tax credit carryforwards, including the effect of reversing
taxable temporary differences;
. prudent and feasible tax planning strategies that would be implemented,
if necessary, to protect against the loss of deferred tax assets.
As a result of sales in the ordinary course of business to manage the
investment portfolio and the application of prudent and feasible tax planning
strategies during the year ended December 31, 2012, the Company determined that
an additional portion of the capital loss carryforwards will
more-likely-than-not be realized prior to their expiration.
For the year ended December 31, 2012, the Company released $1.6 billion of its
deferred tax asset valuation allowance associated with capital loss
carryforwards, of which $1.5 billion was allocated to net income. Additional
capital loss carryforwards may be realized in the future if and when other
prudent and feasible tax planning strategies are identified. Changes in market
conditions, including rising interest rates above the Company's projections,
may results in a reduction in projected taxable gains and reestablishment of a
valuation allowance.
A reconciliation of the beginning and ending balances of the total amounts of
gross unrecognized tax benefits is as follows:
December 31,
------------
2012 2011
---- -----
(In Millions)
Gross unrecognized tax benefits at beginning of period $65 $ 345
Increases in tax positions for prior years 20 1
Decreases in tax positions for prior years -- (281)
--- -----
Gross unrecognized tax benefits at end of period $85 $ 65
=== =====
The Company continually evaluates proposed adjustments by taxing authorities.
At December 31, 2012, such proposed adjustments would not result in a material
change to the Company's financial condition. Although it is reasonably possible
that a significant change in the balance of unrecognized tax benefits may occur
within the next twelve months, at this time it is not possible to estimate the
range of the change due to the uncertainty of the potential outcomes.
75
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At December 31, 2012 and 2011, the Company's unrecognized tax benefits,
excluding interest and penalties, were $67 million and $58 million,
respectively. As of December 31, 2012 and 2011, the amounts of unrecognized tax
benefits that, if recognized, would favorably affect the effective tax rate
were $11 million and $18 million, respectively.
Interest and penalties related to unrecognized tax benefits are recognized in
income tax expense. At December 31, 2012 and 2011, the Company had accrued $18
million and $3 million, respectively, for the payment of interest (net of
federal benefit) and penalties. For the years ended December 31, 2012, 2011 and
2010, the Company recognized an expense of $11 million, $1 million and $1
million, respectively, of interest (net of federal benefit) and penalties in
the consolidated statements of income.
The Company is currently under IRS examination for the taxable years 2003 to
2006. Although the final outcome of possible issues raised in any future
examination is uncertain, the Company believes that the ultimate liability,
including interest, will not materially exceed amounts recorded in the
consolidated financial statements. The Company's taxable years 2001 to 2012
remain subject to examination by major tax jurisdictions.
16. RELATED-PARTY TRANSACTIONS
Events Related to AIG
Through a series of transactions that closed on January 14, 2011, AIG exchanged
various forms of government support for AIG common stock, and the U.S.
Department of the Treasury (the "Department of the Treasury") became AIG's
majority shareholder, with approximately 92 percent of outstanding AIG common
stock at that time.
The Department of the Treasury, as selling shareholder, sold all of its shares
of AIG common stock through six registered public offerings completed in May
2011 and in March, May, August, September and December 2012 (the 2012 offerings
collectively referred to as "the 2012 Offerings"). In the 2012 Offerings, the
Department of the Treasury sold approximately 1.5 billion shares of AIG common
stock for aggregate proceeds of approximately $45.8 billion. AIG purchased
approximately 421 million shares of AIG common stock at an average price of
$30.86 per share, for an aggregate purchase amount of approximately $13.0
billion, in the first four of the 2012 Offerings. AIG did not purchase any
shares in the December 2012 offering. The Department of the Treasury still owns
warrants to purchase 2.7 million shares of AIG common stock which expire in
2018.
AIG is currently regulated by the Board of Governors of the Federal Reserve
System ("FRB") and subject to its examination, supervision and enforcement
authority and reporting requirements as a savings and loan holding company
("SLHC"). In addition, under the Dodd-Frank Wall Street Reform and Consumer
Protection Act ("Dodd-Frank"), AIG may separately become subject to the
examination, enforcement and supervisory authority of the FRB. In October 2012,
AIG received a notice that it is under consideration by the Financial Stability
Oversight Council created by Dodd-Frank for a proposed determination that it is
a systemically important financial institution ("SIFI"). Changes mandated by
Dodd-Frank include directing the FRB to promulgate minimum capital requirements
for both SLHCs and SIFIs.
Additional information on AIG is publicly available in AIG's regulatory filings
with the U.S. Securities and Exchange Commission ("SEC"), which can be found at
www.sec.gov. Information regarding AIG as described herein is qualified by
regulatory filings AIG files from time to time with the SEC.
Operating Agreements
Pursuant to a cost allocation agreement, the Company purchases administrative,
investment management, accounting, marketing and data processing services from
AIG or its subsidiaries. The allocation of costs for investment management
services is based on the level of assets under management. The allocation of
costs for other services is based on estimated level of usage, transactions or
time incurred in providing the respective services. The Company paid
approximately $198 million, $278 million and $190 million for such services in
2012, 2011 and 2010, respectively. Accounts payable for such services were $172
million and $71 million at December 31, 2012 and 2011, respectively. The
Company rents facilities and provides services on an allocated cost basis to
various
76
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
affiliates. The Company also provides shared services, including technology, to
a number of AIG's life insurance subsidiaries. The Company received
approximately $282 million, $151 million and $144 million for such services and
rent in 2012, 2011 and 2010, respectively. Accounts receivable for rent and
services were $226 million and $47 million at December 31, 2012 and 2011,
respectively.
The Company pays commissions and fees, including support fees to defray
marketing and training costs, to affiliated broker-dealers for distributing its
annuity products and mutual funds. Amounts paid to these broker-dealers totaled
$39 million, $36 million and $32 million for the years ended December 31, 2012,
2011 and 2010, respectively. These broker-dealers distribute a significant
portion of the Company's variable annuity products, amounting to approximately
8 percent, 10 percent and 15 percent of premiums received in 2012, 2011 and
2010, respectively. These broker-dealers also distribute a significant portion
of the Company's mutual funds, amounting to approximately 16 percent, 14
percent and 16 percent of sales in 2012, 2011 and 2010, respectively.
On February 1, 2004, SAAMCo. entered into an administrative services agreement
with The United States Life Insurance Company in the City of New York ("USL")
(as successor by merger of First SunAmerica Life Insurance Company ("FSA") with
and into USL) whereby SAAMCo will pay to USL a fee based on a percentage of all
assets invested through USL's variable annuity products in exchange for
services performed. SAAMCo is the investment advisor for certain trusts that
serve as investment options for USL's variable annuity products. Amounts
incurred by the Company under this agreement totaled $3 million, $2 million and
$2 million in 2012, 2011 and 2010, respectively, and are included in the
Company's consolidated statements of income.
On October 1, 2001, SAAMCo entered into two administrative services agreements
with business trusts established by its affiliate, VALIC, whereby the trust
pays to SAAMCo a fee based on a percentage of average daily net assets invested
through VALIC's annuity products in exchange for services performed. Amounts
earned by SAAMCo under this agreement were $15 million, $14 million and $13
million in 2012, 2011 and 2010, respectively, and are net of certain
administrative costs incurred by VALIC of $4 million, $4 million and $4
million, respectively. The net amounts earned by SAAMCo are included in other
revenue in the Company's consolidated statements of income.
Notes of Affiliates
On September 23, 2003, the Company purchased 75.0 percent of the non-voting
preferred equity issued by Castle 1 Trust for $201 million. The remaining
non-voting preferred equity and 100 percent of the voting equity of Castle 1
Trust are held by affiliates of the Company. On September 23, 2003, the Company
purchased $513 million of fixed-rate asset-backed notes and subordinated
deferred interest notes issued by Castle 1 Trust, which mature on May 15, 2027.
Castle 1 Trust is a Delaware statutory trust established on July 31, 2003. The
business of Castle 1 Trust and its wholly-owned subsidiaries is limited to
acquiring, owning, leasing, maintaining, operating and selling a portfolio of
commercial jet aircraft. Castle 1 Trust is consolidated in the Company's
financial statements.
In 2004, the Company purchased 80.1 percent of the non-voting preferred equity
issued by Castle 2 Trust for $242 million. The remaining non-voting preferred
equity and 100 percent of the voting equity of Castle 2 Trust are held by
affiliates of the Company. In 2004, the Company purchased $60 million of
fixed-rate asset-backed notes issued by Castle 2 Trust, which mature on
November 15, 2026. Castle 2 Trust is a Delaware statutory trust established on
November 21, 2003. The business of Castle 2 Trust and its wholly-owned
subsidiaries is limited to acquiring, owning, leasing, maintaining, operating
and selling a portfolio of commercial jet aircraft. Castle 2 Trust is
consolidated in the Company's financial statements.
Castle 1 Trust, which is fully consolidated, recognized impairment losses of $4
million, $86 million and $5 million for the years ended December 31, 2012, 2011
and 2010, respectively.
Castle 2 Trust, which is fully consolidated, recognized impairment losses of $9
million and $87 million for the years ended December 31, 2012 and 2011,
respectively. There were no impairments recognized in 2010.
On December 15, 2005, the Company invested $116 million in a Senior Promissory
Note issued by AGC Life, which matured on December 15, 2010. The Company
recognized interest income on the Note of $6 million during 2010. Upon
maturity, the Company reinvested the $116 million in a 6.10 percent Senior
Promissory Note due
77
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 15, 2020, issued by AGC Life. The Note was redeemed by AGC Life on
December 28, 2011. The Company recognized interest income of $7 million and
$314 thousand on the Note during 2011 and 2010, respectively.
On September 15, 2006, the Company invested $560 million in a 5.57 percent
fixed rate Senior Promissory Note issued by SunAmerica Financial Group, Inc.
("SAFG, Inc."), which matured on September 15, 2011. The Company recognized
interest income of $22 million and $31 million on the Note during 2011 and
2010, respectively. Upon maturity, the Company reinvested $300 million in a
5.57 percent Senior Promissory Note due September 30, 2014, issued by SAFG,
Inc. The Company recognized interest income of $16 million and $5 million on
the Note during 2012 and 2011, respectively.
American Home and National Union Guarantees
American Home Assurance Company ("American Home") and National Union Fire
Insurance Company of Pittsburgh, Pa. ("National Union"), indirect wholly owned
subsidiaries of AIG, have terminated the General Guarantee Agreements ("the
Guarantees") with respect to prospectively issued policies and contracts issued
by the Company. The Guarantees terminated on December 29, 2006 ("Point of
Termination"). Pursuant to its terms, the Guarantees do not apply to any group
or individual policy, contract or certificate issued after the Point of
Termination. The Guarantees will continue to cover the policies, contracts and
certificates with a date of issue earlier than the Point of Termination until
all insurance obligations under such policies, contracts and certificates are
satisfied in full. American Home's and National Union's audited statutory
financial statements are filed with the SEC in the Company's registration
statements for its variable products that were issued prior to the Point of
Termination.
Capital Maintenance Agreement
On March 30, 2011, AIG and the Company entered into an Unconditional Capital
Maintenance Agreement ("CMA"). Among other things, the CMA provides that AIG
will maintain the Company's total adjusted capital (as defined under applicable
insurance laws) at or above a certain specified minimum percentage of the
Company's projected company action level risk-based capital ("RBC") (as defined
under applicable insurance laws). The CMA also provides that if the Company's
total adjusted capital is in excess of a certain specified minimum percentage
of the Company's company action level RBC (as reflected in the Company's
quarterly or annual statutory financial statement), subject to Board of
Directors and regulatory approval(s), the Company would declare and pay
ordinary dividends to its equity holders in an amount in excess of that
required to maintain the specified minimum percentage.
Financing Agreements
On July 1, 2011, the Company entered into a short-term financial arrangement
with SAFG Retirement Services, Inc. ("SAFGRS"), whereby SAFGRS has the right to
borrow up to $100 million from the Company. Principal amounts borrowed under
the arrangement may be repaid and re-borrowed, in whole or in part, at any time
and from time to time, without penalty. All advances made shall be repaid by
SAFGRS in full no later than the stated maturity date of December 31, 2012.
There was no outstanding balance under this arrangement at December 31, 2012 or
2011. This short-term financing arrangement expired by its terms on
December 31, 2012.
On June 1, 2009, the Company amended and restated a short-term financing
arrangement with SAFGRS, dated September 26, 2001, whereby the Company has the
right to borrow up to $500 million from SAFGRS. All terms and conditions set
forth in the arrangement remain in effect, including that any advances made
under this arrangement must be repaid within 30 days. There was no outstanding
balance under this arrangement at December 31, 2012 or 2011.
On June 1, 2009, the Company amended and restated a short-term financing
arrangement with SAFGRS, dated December 19, 2001, whereby SAFGRS has the right
to borrow up to $500 million from the Company. All terms and conditions set
forth in the original arrangement remain in effect, including that any advances
made under this arrangement must be repaid within 30 days. There was no
outstanding balance under this arrangement at December 31, 2012 and 2011.
78
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On January 20, 2004 and February 15, 2004, the Company entered into separate
short-term financing arrangements with USL, whereby the Company has the right
to borrow up to $15 million under each agreement from USL. Any advances made
under this arrangement must be repaid within 30 days. There were no balances
outstanding under this arrangement at December 31, 2012 and 2011.
On June 1, 2009, the Company amended and restated a short-term financing
arrangement with USL, dated February 15, 2004, whereby USL has the right to
borrow up to $15 million from the Company. All terms and conditions set forth
in the original arrangement remain in effect. There were no outstanding
balances under this arrangement at December 31, 2012 and 2011.
On September 15, 2006, the Company amended and restated a short-term financial
arrangement with SAAH LLC, whereby SAAH LLC has the right to borrow up to $200
million from the Company. Outstanding borrowings bear interest at a fluctuating
rate per annum (computed on the basis of a 360-day year and the actual days
elapsed) equal to the daily Federal Commercial Paper rate, formally known as
the Fed H.15 Financial CP 1 day (yield) (the "Fed H.15") (ticker H15F001Y), as
calculated every business day by the Federal Reserve Bank and published by
Bloomberg. The interest rate for each Advance shall equal the average daily
rate of the Fed H.15 for the period in which the relevant Advance is
outstanding. There was no outstanding balance under this agreement at
December 31, 2012 or 2011.
On April 10, 2010, the Company amended and restated a short-term financing
arrangement with SAFGRS, whereby SAFGRS has the right to borrow up to $520
million from the Company. The principal amount of the note was originally for
$950 million. Interest under the note is payable on the outstanding daily
unpaid principal amount of each advance from the date the advance is made until
payment in full, and accrues on a fluctuating rate per annum (computed on the
basis of a 360-day year and the actual days elapsed) equal to three-month
USD-LIBOR plus 300 basis points (3.0 percent) for each interest period under
the note; provided however, that at any given time, the three-month USD-LIBOR
rate shall not be less than 3.5 percent. Interest accrued is payable on
January 10, April 10, July 10, and October 10 of each year, commencing on
July 10, 2010 and ending on and including April 10, 2011 (unless the short-term
financing arrangement is extended in accordance with its terms). On January 10,
2009, as required under AIG's credit facility agreement with the New York Fed,
the Company and SAFGRS executed an affiliate subordination agreement in respect
to the amended and restated short-term financing arrangement (the
"Subordination Agreement"), pursuant to which the Company agreed to subordinate
its rights under the short-term financing arrangement in favor of the New York
Fed in limited circumstances. As a result of the complete repayment by AIG of
all amounts owing under AIG's revolving credit facility with the New York Fed
on January 14, 2011, the Subordination Agreement was terminated by the Company
and SAFGRS on February 22, 2011. On April 11, 2011, SAFGRS repaid the amount
borrowed under the note of $218 million, and by its terms the note expired.
There was no outstanding balance at December 31, 2011.
GIC Assumption
On June 3, 2011, the Company entered into an assignment and assumption
agreement with AIGMFC, U.S. Bank National Association, as trustee ("US Bank"),
and the Salt Verde Financial Corporation ("Salt Verde"), pursuant to which the
Company assumed all of AIGMFC's obligations under a certain investment
agreement previously entered into between AIGMFC and US Bank relating to
certain bonds issued by Salt Verde. As part of this assignment and assumption,
the Company received from AIGMFC approximately $312 thousand, representing the
then outstanding principal amount of investments under the investment agreement
plus accrued but unpaid interest thereon. The Company also entered into a swap
with AIG Markets, Inc. ("AIG Markets") in connection with the foregoing
transaction, which, among other things, provides a fee to the Company for
assuming the obligations under the investment agreement and hedges the
Company's interest rate risk associated with the investment agreement.
Obligations of AIG Markets under the swap are guaranteed by AIG.
On June 30, 2011, the Company entered into an assignment and assumption
agreement with AIGMFC, US Bank, as trustee, and the Southern California Public
Power Authority ("SCPPS"), pursuant to which the Company assumed all of
AIGMFC's obligations under a certain investment agreement previously entered
into between AIGMFC and US Bank relating to certain bonds issued by SCPPA. As
part of this assignment and assumption, the Company received from AIGMFC
approximately $14 million, representing the then outstanding principal amount of
79
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
investments under the investment agreement plus accrued by unpaid interest
thereon. The Company also entered into a swap with AIG Markets in connection
with the foregoing transaction, which, among other things, provides a fee to
the Company for assuming the obligations under the investment agreement and
hedges the Company's interest rate risk associated with the investment
agreement. Obligations of AIG Markets under the swap are guaranteed by AIG.
On September 22, 2011, the Company entered into an assignment and assumption
agreement with AIGMFC, The Bank of New York Mellon Trust Company, N.A., as the
trustee ("BONY"), and the Long Beach Bond Finance Authority ("Long Beach"),
pursuant to which the Company assumed all of the AIGMFC's obligations under a
certain investment agreement previously entered into between AIGMFC and BONY
relating to certain bonds issued by Long Beach. As part of this assignment and
assumption, the Company received from AIGMFC approximately $20 million,
representing the then outstanding principal amount of investments under the
investment agreement plus accrued but unpaid interest thereon. The Company also
entered into a swap with AIG Markets in connection with the foregoing
transaction, which, among other things, provides a fee to the Company for
assuming the obligations under the investment agreement and hedges the
Company's interest rate risk associated with the investment agreement.
Obligations of AIG Markets under the swap are guaranteed by AIG.
Other
Effective August 1, 2003, the Company and AIGB entered into a Cut-through
Agreement pursuant to which insurers, 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 $405 thousand at
December 31, 2012 and $445 thousand at December 31, 2011. The Company believes
the probability of loss under this agreement is remote.
The Company engages in structured settlement transactions, certain of which
transactions involve affiliated property and casualty insurance company members
of the AIG Property and Casualty group. In a structured settlement arrangement,
a property and casualty insurance policy claimant has agreed to settle a
casualty insurance claim in exchange for fixed payments over either a fixed
determinable period of time or a life contingent period. In such claim
settlement arrangements, a casualty insurance claim payment provides the
funding for the purchase of a single premium immediate annuity ("SPIA") issued
by the Company for the ultimate benefit of the claimant. The portion of the
Company's liabilities related to structured settlements involving life
contingencies are reported in future policy benefits, while the portion not
involving life contingencies are reported in policyholder contract deposits. In
certain structured settlement arrangements the property and casualty insurance
company remains contingently liable for the payments to the claimant. The
Company carried liabilities of $1.2 billion and $1.1 billion at December 31,
2012 and 2011, respectively, related to SPIAs issued by the Company in
conjunction with structured settlement transactions involving AIG Property and
Casualty group members where those members remained contingently liable for the
payments to the claimant. In addition, the Company carried liabilities for the
structured settlement transactions where the AIG Property and Casualty group
members were no longer contingently liable for the payments to the claimant.
17. 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 (the
"U.S. Plans"). AIG's U.S. Plans do not separately identify projected benefit
obligations and plan assets attributable to employees of participating
affiliates.
The Company is jointly and severally responsible with AIG and other
participating companies for funding obligations for the U.S. Plans, Employee
Retirement Income Security Act ("ERISA") qualified defined contribution plans
and ERISA plans issued by other AIG subsidiaries (the "ERISA Plans"). If the
ERISA Plans do not have adequate funds to pay obligations due participants, the
Pension Benefit Guaranty Corporation or Department of Labor could seek payment
of such amounts from the members of the AIG ERISA control group, including the
Company. Accordingly, the Company is contingently liable for such obligations.
The Company believes that the
80
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
likelihood of payment under any of these plans is remote. Accordingly, the
Company has not established any liability for such contingencies.
18. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date the financial
statements were issued.
Ambrose Transactions
On February 6, 2013, the Company acquired certain financial assets from AIG and
subsequently entered into a related securitization transaction involving
certain affiliates and a third party for the purpose of enhancing its
risk-based capital ratio, liquidity and net investment income. The financial
assets acquired from AIG consisted of a portfolio of structured securities
("Secondary Portfolio 2") with a fair market value of $159 million in exchange
for an intraday Demand Note that was subsequently extinguished. The
securitization transaction involved the Company's transfer of a portfolio of
its high grade corporate securities along with the Secondary Portfolio 2 with a
combined carrying value of approximately $2.0 billion to a newly formed special
purpose entity, Ambrose 2013-2 ("Ambrose 2"). The Company received 100 percent
of its consideration for the transferred securities in the form of beneficial
interests in structured securities issued by Ambrose 2 in three tranches,
(Class A1, B and X), with a fair value of approximately $2.0 billion. The Class
X notes ($67 million) were subsequently transferred on the same day to AIG in
exchange for cancellation of the $159 million Demand Note resulting in a $92
million capital contribution to the Company. Ambrose 2 also issued a tranche of
Class A2 notes to third party investors and received cash consideration of $25
million. Ambrose 2 also received a capital commitment of up to $300 million
from a non-U.S. subsidiary of AIG, guaranteed by AIG, pursuant to which such
entity will contribute funds to Ambrose 2 upon demand. AIG indirectly bears the
first loss position in the transaction through its ownership of the Class X
notes and the capital commitment.
Ambrose 2 is a VIE and the Company maintains the power to direct the activities
of Ambrose 2 that most significantly impact its economic performance and bears
the obligation to absorb losses or receive benefits from Ambrose 2 that could
potentially be significant to the VIE. Accordingly, the Company will
consolidate this entity. The Class A1 and Class B structured securities issued
by Ambrose 2 and held by the Company are eliminated in consolidation. The Class
X Notes and the Class A2 Notes issued by Ambrose 2 and held by AIG and a third
party, respectively, are classified as notes payable. On a consolidated basis,
the Ambrose 2 transaction resulted in an increase in the Company's assets
(Secondary Portfolio 2 and cash), liabilities (notes payable) and shareholder's
equity (capital contribution from AIG).
On April 10, 2013, the Company executed a similar transaction to Ambrose 2 in
which it acquired certain financial assets from AIG and subsequently entered
into a related securitization transaction involving certain affiliates and a
third party for the purpose of enhancing its risk-based capital ratio,
liquidity and net investment income. The financial assets acquired from AIG
consisted of a portfolio of structured securities ("Secondary Portfolio 3")
with a fair market value of $179 million in exchange for an intraday Demand
Note. that was subsequently extinguished The securitization transaction
involved the Company's transfer of a portfolio of its high grade corporate
securities along with the Secondary Portfolio 3 with a combined carrying value
of approximately $2.1 billion to a newly formed special purpose entity, Ambrose
2013-3 ("Ambrose 3"). The Company received 100 percent of its consideration for
the transferred securities in the form of beneficial interests in structured
securities issued by Ambrose 3 in three tranches, (Class A1, B and X), with a
fair value of approximately $2.1 billion. The Class X notes ($58 million) were
subsequently transferred on the same day to AIG in exchange for cancellation of
the $179 million Demand Note resulting in a $121 million capital contribution
to the Company. Ambrose 3 also issued a tranche of Class A2 notes to third
party investors and received cash consideration of $25 million. Ambrose 3 also
received a capital commitment of up to $300 million from a non-U.S. subsidiary
of AIG, guaranteed by AIG, pursuant to which such entity will contribute funds
to Ambrose 3 upon demand. AIG indirectly bears the first loss position in the
transaction through its ownership of the Class X notes and the capital
commitment.
Ambrose 3 is a VIE and the Company maintains the power to direct the activities
of Ambrose 3 that most significantly impact its economic performance and bears
the obligation to absorb losses or receive benefits from Ambrose 3 that could
potentially be significant to the VIE. Accordingly, the Company will
consolidate this entity.
81
AMERICAN GENERAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Class A1 and Class B structured securities issued by Ambrose 3 and held by
the Company are eliminated in consolidation. The Class X Notes and the Class A2
Notes issued by Ambrose 3 and held by AIG and a third party, respectively, are
classified as notes payable. On a consolidated basis, the Ambrose 3 transaction
resulted in an increase in the Company's assets (Secondary Portfolio 3 and
cash), liabilities (notes payable) and shareholder's equity (capital
contribution from AIG).
Dividend to AGC Life
The Company paid a $571 million dividend to AGC Life on March 28, 2013.
82
AMERICAN HOME ASSURANCE COMPANY
NAIC CODE: 19380
STATUTORY BASIS FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2012 AND 2011
AND FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
AMERICAN HOME ASSURANCE COMPANY
STATUTORY BASIS FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2012 AND 2011 AND FOR THE YEARS ENDED DECEMBER 31, 2012,
2011 AND 2010
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