0001193125-15-159933.txt : 20150430 0001193125-15-159933.hdr.sgml : 20150430 20150430111500 ACCESSION NUMBER: 0001193125-15-159933 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20150430 DATE AS OF CHANGE: 20150430 EFFECTIVENESS DATE: 20150501 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: 15816075 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: 15816076 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 d885142d485bpos.txt POST-EFFECTIVE AMENDMENT NO. 24 (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, 2015 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. [ 24 ] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. [ 176 ] 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) (800) 871-2000 (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) Manda Ghaferi, Esq. American General Life Insurance Company 1999 Avenue of the Stars Los Angeles, California 90067-6121 (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 May 1, 2015 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, 2015 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 60 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............ 18 E-DELIVERY..................................................................... 18 E-SERVICE...................................................................... 19 E-SERVICE TRANSACTIONS, TELEPHONE TRANSACTIONS AND WRITTEN TRANSACTIONS........ 19 ONE-TIME PREMIUM PAYMENTS USING E-SERVICE......................................... 19 TELEPHONE TRANSACTIONS............................................................ 20 GENERAL........................................................................... 20 VARIABLE INVESTMENT OPTIONS........................................................... 20 VOTING PRIVILEGES..................................................................... 24 FIXED ACCOUNT......................................................................... 24 OUR GENERAL ACCOUNT............................................................... 25 HOW WE DECLARE INTEREST........................................................... 25 ILLUSTRATIONS......................................................................... 25
2 POLICY FEATURES.................................................................... 25 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.................................................. 30 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......................... 32 DOLLAR COST AVERAGING....................................................... 33 AUTOMATIC REBALANCING....................................................... 33 MARKET TIMING............................................................... 33 RESTRICTIONS INITIATED BY THE FUNDS AND INFORMATION SHARING OBLIGATIONS..... 34 CHANGING THE SPECIFIED AMOUNT OF INSURANCE...................................... 35 INCREASE IN COVERAGE........................................................ 35 DECREASE IN COVERAGE........................................................ 35 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.......................................... 37 DATE OF ISSUE; POLICY MONTHS AND YEARS...................................... 37 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........................................................ 38 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...................................................... 40 WAIVER OF MONTHLY DEDUCTION RIDER........................................... 41 TAX CONSEQUENCES OF ADDITIONAL RIDER BENEFITS................................... 41 POLICY TRANSACTIONS................................................................ 41 E-DELIVERY, E-SERVICE, TELEPHONE TRANSACTIONS AND WRITTEN TRANSACTIONS.......... 41 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.......................................................................... 43 POLICY PAYMENTS.................................................................................... 44 PAYMENT OPTIONS................................................................................. 44 CHANGE OF PAYMENT OPTION.................................................................... 44 TAX IMPACT.................................................................................. 44 THE BENEFICIARY................................................................................. 44 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...................................................................... 47 CHARGES UNDER THE POLICY........................................................................... 47 STATUTORY PREMIUM TAX CHARGE................................................................ 47 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............................................................................ 49 PARTIAL SURRENDER PROCESSING FEE............................................................ 50 TRANSFER FEE................................................................................ 50 ILLUSTRATIONS............................................................................... 50 POLICY LOANS................................................................................ 51 CHARGE FOR TAXES............................................................................ 51 ALLOCATION OF CHARGES....................................................................... 51 MORE ABOUT POLICY CHARGES....................................................................... 51 PURPOSE OF OUR CHARGES...................................................................... 51 GENERAL..................................................................................... 51 ACCUMULATION VALUE................................................................................. 52 YOUR ACCUMULATION VALUE..................................................................... 52 YOUR INVESTMENT OPTIONS..................................................................... 52 POLICY LAPSE AND REINSTATEMENT..................................................................... 52 FEDERAL TAX CONSIDERATIONS......................................................................... 52 TAX EFFECTS..................................................................................... 53 GENERAL..................................................................................... 53 TESTING FOR MODIFIED ENDOWMENT CONTRACT STATUS.............................................. 53 OTHER EFFECTS OF POLICY CHANGES............................................................. 54 RIDER BENEFITS.............................................................................. 54 TAXATION OF PRE-DEATH DISTRIBUTIONS IF YOUR POLICY IS NOT A MODIFIED ENDOWMENT CONTRACT..... 54
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......................................................... 57 ERISA................................................................................... 57 OUR TAXES............................................................................... 58 WHEN WE WITHHOLD INCOME TAXES........................................................... 58 FOREIGN ACCOUNT TAX COMPLIANCE ("FATCA")................................................ 58 OTHER WITHHOLDING TAX................................................................... 59 TAX CHANGES............................................................................. 59 LEGAL PROCEEDINGS.............................................................................. 59 FINANCIAL STATEMENTS........................................................................... 59 RULE 12H-7 DISCLOSURE................................................................... 59 REGISTRATION STATEMENTS........................................................................ 59 INDEX OF SPECIAL WORDS AND PHRASES............................................................. 60
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 Insurance 2727-A Allen Parkway P. O. Box 9318 1-713-831-3443 Company Houston, Texas 77019-2191 Amarillo, Texas 1-800-340-2765 Payment Processing Center 1-713-831-3443, 1-800-340-2765 79105-9318 8430 W. Bryn Mawr Avenue (Hearing Impaired) 1-888-436-5256 3/rd/ Floor 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 15/th/ 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 52. 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 3.5%/1/ of each premium 3.5%/1/ of each premium CHARGE each premium payment payment/2/ payment/2/ PREMIUM EXPENSE CHARGE Upon receipt of 7.5% of the amount of each 5.0% of the amount of each each premium 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, which will increase the tax rate. /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
WHEN CHARGE IS MAXIMUM GUARANTEED CHARGE DEDUCTED CHARGE CURRENT CHARGE ------ ----------------- ------------------ ------------------- SURRENDER CHARGE Maximum Charge/1/ Upon a partial $48 per $1,000 of $48 per $1,000 of surrender or a base coverage base coverage full surrender of your Policy/2/ Minimum Charge/3/ Upon a partial $1 per $1,000 of $1 per $1,000 of surrender or a base coverage base coverage full surrender of your Policy/2/ Example Charge - Upon a partial $18 per $1,000 of $18 per $1,000 of for the first surrender or a base coverage base coverage Policy year - full surrender of for a 40 year your Policy/2/ old male, with a Specified Amount of $360,000, of which $252,000 is base coverage/2/ PARTIAL SURRENDER Upon a partial The lesser of $25 $10 PROCESSING FEE surrender of your or 2.0% of the Policy partial surrender TRANSFER FEE Upon a transfer $25 for each $25 for each of accumulation transfer/4/ transfer/4/ value POLICY OWNER Upon each request $25 $0 ADDITIONAL for a Policy ILLUSTRATION illustration CHARGE 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)
WHEN CHARGE IS MAXIMUM GUARANTEED CHARGE DEDUCTED CHARGE CURRENT CHARGE ------ ------------------ ------------------ ------------------ FLAT MONTHLY CHARGE Monthly, at the $6 $6 beginning of each Policy month COST OF INSURANCE CHARGE/1/ Maximum Monthly, at the $83.33 per $1,000 $27.68 per $1,000 Charge/2/ beginning of each of net amount at of net amount at Policy month risk/3/ risk attributable attributable to to base coverage; base coverage; and and $83.33 per $1,000 $27.68 per $1,000 of net amount at of net amount at risk attributable risk attributable to supplemental to supplemental coverage coverage Minimum Monthly, at the $0.06 per $1,000 $0.04 per $1,000 Charge/4/ beginning of each of net amount at of net amount at Policy month risk attributable risk attributable to base coverage; to base coverage; and and $0.06 per $1,000 $0.03 per $1,000 of net amount at of net amount at risk attributable risk attributable to supplemental to supplemental coverage coverage Example Charge Monthly, at the $0.25 per $1,000 $0.13 per $1,000 for the first beginning of each of net amount at of net amount at Policy year - Policy month risk attributable risk attributable for a 40 year to base coverage; to base coverage; old male, and and preferred non-tobacco, $0.25 per $1,000 $0.07 per $1,000 with a of net amount at of net amount at Specified risk attributable risk attributable Amount of to supplemental to supplemental $360,000, of coverage coverage which $252,000 is base coverage and $108,000 is 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 99/th/ birthday. The policy anniversary nearest the insured person's 100/th/ 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)
WHEN CHARGE IS MAXIMUM GUARANTEED CHARGE DEDUCTED CHARGE CURRENT CHARGE ------ ------------------- ------------------ ------------------ MONTHLY CHARGE PER $1,000 OF BASE COVERAGE/1/ Maximum Charge Monthly, at the $1.25 per $1,000 $1.25 per $1,000 - for a 75 beginning of each of base coverage of base coverage year old Policy month. This male, Charge is imposed standard during the first 7 tobacco, with Policy years and a Specified the first 7 Policy Amount of years following an $360,000, of increase in base which coverage/2/ $360,000 is base coverage Minimum Charge Monthly, at the $0.03 per $1,000 $0.03 per $1,000 - for a 1 beginning of each of base coverage of base coverage year old Policy month. This female, Charge is imposed juvenile, during the first 7 with a Policy years and Specified the first 7 Policy Amount of years following an $360,000, of increase in base which $36,000 coverage/2/ is base coverage and $324,000 is supplemental coverage Example Charge Monthly, at the $0.16 per $1,000 $0.16 per $1,000 - for a 40 beginning of each of base coverage of base coverage year old Policy month. This male, Charge is imposed standard during the first 7 non-tobacco, Policy years and with a the first 7 Policy Specified years following an Amount of increase in base $360,000, of coverage/2/ which $252,000 is base coverage and $108,000 is supplemental coverage DAILY CHARGE Daily annual effective annual effective (MORTALITY AND rate of 0.70% of rate of 0.70% of EXPENSE RISK FEE) accumulation value accumulation value invested in the invested in the Policy years variable variable 1-10 /3/ investment investment options /3/ options /3/ POLICY LOAN Annually (in 4.75% of the loan 4.75% of the loan INTEREST CHARGE advance on your balance/4/ 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 10/th/ 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 WHEN CHARGE IS MAXIMUM RIDER CHARGES DEDUCTED GUARANTEED CHARGE CURRENT CHARGE ---------------- ----------------- ----------------- ----------------- ACCIDENTAL DEATH BENEFIT/1/ Maximum Charge - Monthly, at the for a 65 beginning of $0.15 per $1,000 $0.15 per $1,000 year old each Policy month of rider coverage of rider coverage Minimum Charge - Monthly, at the for a 29 beginning of $0.07 per $1,000 $0.07 per $1,000 year old each Policy month of rider coverage of rider coverage Example Charge - Monthly, at the for a 40 beginning of $0.09 per $1,000 $0.09 per $1,000 year old each Policy month of rider coverage of rider coverage CHILDREN'S Monthly, at the INSURANCE beginning of $0.48 per $1,000 $0.48 per $1,000 BENEFIT each Policy month of rider coverage of rider coverage MATURITY Monthly, at the EXTENSION beginning of the ACCUMULATION Policy month VALUE VERSION which follows your original maturity date $10 $0 MATURITY EXTENSION DEATH BENEFIT VERSION Initial Charge $1 per $1,000 of $0.03 per $1,000 net amount at of net amount at Monthly risk risk beginning 9 attributable to attributable to years before the Policy the Policy your original (without any (without any maturity date riders) riders) Monthly, at the Administrative beginning of the Charge Policy month which follows your original maturity date $10 $0 SPOUSE TERM/2/ Maximum charge - for a 75 year old male, Monthly at the standard beginning of $5.54 per $1,000 $4.61 per $1,000 tobacco each Policy month of rider coverage of rider coverage Minimum charge - for a 15 year old female, Monthly at the standard beginning of $0.07 per $1,000 $0.01 per $1,000 non-tobacco each Policy month of rider coverage of rider coverage Example charge - for a 40 year old male, Monthly at the standard beginning of $0.25 per $1,000 $0.15 per $1,000 non-tobacco each Policy month of rider coverage of rider coverage
-------- /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 WHEN CHARGE IS MAXIMUM GUARANTEED RIDER CHARGES DEDUCTED CHARGE CURRENT CHARGE ---------------- ------------------- ------------------- ------------------- TERMINAL ILLNESS RIDER Interest on At time benefit is Greater of (1) 5.25% Benefit paid and each Moody's Bond Policy anniversary Average or (2) cash thereafter value interest rate plus 1%/1/ ADMINISTRATIVE FEE At time of claim $250 $150 WAIVER OF MONTHLY DEDUCTION/2/ Maximum Monthly, at the $0.40 per $1,000 of $0.40 per $1,000 of Charge - for a beginning of each net amount at risk net amount at risk 59 year old Policy month attributable to the attributable to the Policy Policy Minimum Monthly, at the $0.02 per $1,000 of $0.02 per $1,000 of Charge - for beginning of each net amount at risk net amount at risk an 18 year old Policy month attributable to the attributable to the Policy Policy Example Monthly, at the $0.03 per $1,000 of $0.03 per $1,000 of Charge - for a beginning of each net amount at risk net amount at risk 40 year old Policy month attributable to the attributable to the Policy 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, 2014. 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% 0.27%
Details concerning each Fund's specific fees and expenses are contained in the Funds' prospectuses. -------- /1/ Currently 12 of the Funds have contractual reimbursements or fee waivers. These reimbursements or waivers expire on April 29, 2016. 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. The commitments under the Policies are AGL's and AIG has no legal obligation to back those commitments. 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. 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. 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. 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 88 separate "divisions," 57 of which correspond to the 57 variable "investment options" available under the Policy. The remaining 31 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 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. 17 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, 18/th/ 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. 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. 18 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.aig.com/lifeinsurance 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.aig.com/lifeinsurance, click the E-Service login link, 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. 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 19 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 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: 20
VARIABLE INVESTMENT OPTIONS INVESTMENT ADVISER (SUB-ADVISER, IF APPLICABLE) --------------------------- ----------------------------------------------------------- Alger Capital Appreciation Portfolio - Class I-2 Shares Fred Alger Management, Inc. Alger Mid Cap Growth Portfolio - Class I-2 Shares Fred Alger Management, Inc. American Century(R) VP Value Fund American Century Investment Management, Inc. Fidelity(R) VIP Asset Manager/SM/ Portfolio - Service Class 2/1/ Fidelity Management & Research Company (FMR) (FMR Co., Inc.) (Fidelity Investments Money Management, Inc.) (Other affiliates of FMR) Fidelity(R) VIP Contrafund(R) Portfolio - Service Class 2/2/ Fidelity Management & Research Company (FMR) (FMR Co., Inc.) (Other affiliates of FMR) Fidelity(R) VIP Equity-Income Portfolio - Service Class 2 Fidelity Management & Research Company (FMR) (FMR Co., Inc.) (Other affiliates of FMR) Fidelity(R) VIP Freedom 2020 Portfolio - Service Class 2/3/ Strategic Advisers(R), Inc. Fidelity(R) VIP Freedom 2025 Portfolio - Service Class 2/4/ Strategic Advisers(R), Inc. Fidelity(R) VIP Freedom 2030 Portfolio - Service Class 2/5/ Strategic Advisers(R), Inc. Fidelity(R) VIP Growth Portfolio - Service Class 2 Fidelity Management & Research Company (FMR) (FMR Co., Inc.) (Other affiliates of FMR) Fidelity(R) VIP Mid Cap Portfolio - Service Class 2 Fidelity Management & Research Company (FMR) (FMR Co., Inc.) (Other affiliates of FMR) Franklin Templeton - Franklin Small Cap Value VIP Fund - Franklin Advisory Services, LLC Class 2/6/ Franklin Templeton - Franklin U.S. Government Securities Franklin Advisers, Inc. VIP Fund - Class 2 Franklin Templeton - Franklin Mutual Shares VIP Fund - Franklin Mutual Advisers, LLC Class 2/7/ Franklin Templeton - Templeton Foreign VIP Fund - Class 2/8/ Templeton Investment Counsel, LLC Invesco V.I. Growth and Income Fund - Series I Shares Invesco Advisers, Inc. Invesco V.I. International Growth Fund - Series I Shares Invesco Advisers, Inc. Janus Aspen Enterprise Portfolio - Service Shares/9/ Janus Capital Management LLC Janus Aspen Overseas Portfolio - Service Shares/10/ Janus Capital Management LLC JPMorgan IT Small Cap Core Portfolio - Class 1 Shares J.P. Morgan Investment Management Inc. MFS(R) VIT New Discovery Series - Initial Class/11/ Massachusetts Financial Services Company MFS(R) VIT Research Series - Initial Class/12/ Massachusetts Financial Services Company Neuberger Berman AMT Mid Cap Growth Portfolio - Class I Neuberger Berman Management LLC (Neuberger Berman LLC) Oppenheimer Conservative Balanced Fund/VA - Non-Service OFI Global Asset Management, Inc. Shares/13/ (OppenheimerFunds, Inc.) Oppenheimer Global Fund/VA - Non-Service Shares OFI Global Asset Management, Inc. (OppenheimerFunds, Inc.) PIMCO CommodityRealReturn(R) Strategy Portfolio - Pacific Investment Management Company LLC Administrative Class/14/ PIMCO Real Return Portfolio - Administrative Class/15/ Pacific Investment Management Company LLC PIMCO Short-Term Portfolio - Administrative Class Pacific Investment Management Company LLC PIMCO Total Return Portfolio - Administrative Class Pacific Investment Management Company LLC Pioneer Mid Cap Value VCT Portfolio - Class I Shares Pioneer Investment Management, Inc. Putnam VT Diversified Income Fund - Class IB/16/ Putnam Investment Management, LLC (Putnam Investments Limited) Putnam VT International Value Fund - Class IB/17/ Putnam Investment Management, LLC (The Putnam Advisory Company, LLC) (Putnam Investments Limited) SunAmerica ST Aggressive Growth Portfolio - Class 1 SunAmerica Asset Management, LLC (Wells Capital Management Shares Incorporated)
21
VARIABLE INVESTMENT OPTIONS INVESTMENT ADVISER (SUB-ADVISER, IF APPLICABLE) --------------------------- ----------------------------------------------- SunAmerica ST Balanced Portfolio - Class 1 Shares/18/ SunAmerica Asset Management, LLC (J.P. Morgan Investment Management, Inc.) VALIC Co. I International Equities Fund/19/ VALIC* (SunAmerica Asset Management, LLC) VALIC Co. I Mid Cap Index Fund VALIC* (SunAmerica Asset Management, LLC) VALIC Co. I Money Market I Fund VALIC* (SunAmerica Asset Management, LLC) VALIC Co. I Nasdaq-100(R) Index Fund/20/ VALIC* (SunAmerica Asset Management, LLC) VALIC Co. I Science & Technology Fund/21/ VALIC* (Allianz Global Investors U.S. LLC) (T. Rowe Price Associates, Inc.) (Wellington Management Company, LLP) VALIC Co. I Small Cap Index Fund/22/ VALIC* (SunAmerica Asset Management, LLC) VALIC Co. I Stock Index Fund/23/ VALIC* (SunAmerica Asset Management, LLC) Vanguard(R)** VIF High Yield Bond Portfolio Wellington Management Company, LLP Vanguard(R)** 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 - Franklin Small Cap Value VIP Fund - Class 2 is long-term total return. /7/ The Fund type for Franklin Templeton - Franklin Mutual Shares VIP Fund - Class 2 is capital appreciation with income as a secondary goal. /8/ The Fund type for Franklin Templeton - Templeton Foreign VIP 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. * "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. 22
VARIABLE INVESTMENT OPTIONS INVESTMENT ADVISER (SUB-ADVISER, IF APPLICABLE) --------------------------- ----------------------------------------------- Dreyfus IP MidCap Stock Portfolio - Initial Shares* The Dreyfus Corporation Dreyfus VIF Opportunistic Small Cap Portfolio - Initial The Dreyfus Corporation Shares* Dreyfus VIF Quality Bond Portfolio - Initial Shares* The Dreyfus Corporation Goldman Sachs VIT Strategic Growth Fund/1, /** Goldman Sachs Asset Management, L.P. Invesco V.I. Core Equity Fund - Series I Shares* Invesco Advisers, Inc. Invesco V.I. High Yield Fund - Series I Shares* Invesco Advisers, Inc. Janus Aspen Global Research Portfolio - Service Shares/2, /* Janus Capital Management LLC JPMorgan IT Mid Cap Value Portfolio - Class 1 Shares** J.P. Morgan Investment Management Inc. MFS(R) VIT II Core Equity Portfolio - Initial Class/3, /* Massachusetts Financial Services Company MFS(R) VIT Growth Series - Initial Class* Massachusetts Financial Services Company Pioneer Fund VCT Portfolio - Class I Shares/4, /*** Pioneer Investment Management, Inc. Pioneer Select Mid Cap Growth VCT Portfolio - Class I Pioneer Investment Management, Inc. Shares*** Putnam VT Growth and Income Fund - Class IB* Putnam Investment Management, LLC (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 II Core Equity Portfolio - 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 37. ** 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. 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 CHECK THE PLATINUM INVESTOR III WEBPAGE AT WWW.AIG.COM/_3789_533840.HTML TO VIEW THE FUND PROSPECTUSES AND THEIR SUPPLEMENTS, OR CONTACT US AT OUR ADMINISTRATIVE CENTER TO REQUEST COPIES OF FUND PROSPECTUSES AND THEIR SUPPLEMENTS. 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. 23 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 47. 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. 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. 24 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. 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. 25 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 30. 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. . 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 26 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. 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. 27 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 shown on page 29 in 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. 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); 28 . 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 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 29 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 52. 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 30) 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. 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.) 30 . 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 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. 31 . 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 33, "Restrictions initiated by the Funds and information sharing obligations" on page 34 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 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 32 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 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. 33 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 (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 34 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. 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 35 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. . 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. 36 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 30. 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. 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 $1,000,000 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 37 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 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. 38 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. 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 39 . 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 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 40 . 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. 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 25. Certain transactions also include charges. For information regarding other charges, see "Charges Under the Policy" on page 47. E-DELIVERY, E-SERVICE, TELEPHONE TRANSACTIONS AND WRITTEN TRANSACTIONS See page 18 for information regarding E-Delivery, E-Service, telephone transactions and written transactions. 41 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 35. 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 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 42 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 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 52 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. 43 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. 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 44 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; . 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. 45 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; . 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 46 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. 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 47 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. 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 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. 48 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 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. 49 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. 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. 50 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). 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. 51 ACCUMULATION VALUE Your accumulation value. From each premium payment you make, we deduct the charges that we describe on page 47 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 47 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 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 52 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 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 53 . 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 adviser 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 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 54 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 . 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. 55 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. 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. For 2015, the federal estate, gift and generation-skipping tax exemptions increased to $5,430,000 ($10,860,000 for married couples). 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. 56 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. 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 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 holding the policy 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. 57 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. Foreign Account Tax Compliance ("FATCA"). An owner who is not a "United States person," which is defined under the Code to mean: . a citizen or resident of the United States . a partnership or corporation created or organized in the United States or under the law of the United States or of any state, or the District of Columbia . any estate or trust other than a foreign estate or foreign trust (see Code section 7701(a)(31) for the definition of a foreign estate and a foreign trust) . a person that meets the substantial presence test . any other person that is not a foreign person should be aware that FATCA, enacted in 2010, provides that a 30% withholding tax will be imposed on certain gross payments (which could include distributions from cash value life insurance or annuity products) made to a foreign entity if such entity fails to provide applicable certifications under a Form W-9, Form W-8-BEN-E, Form W-8-IMY, or other applicable form, each of which is effective for three years from the date of signature unless a change in circumstances makes any information on the form incorrect. Notwithstanding the preceding sentence, certain withholding certifications will remain effective until a change in circumstances makes any information on the form incorrect. The Policy owner must inform the Company within 30 days of any change in circumstances that makes any information on the form incorrect by furnishing a new IRS Form W-8 or acceptable substitute form. An entity, for this purpose, will be considered a foreign entity unless it provides an applicable certification to the contrary. 58 Other withholding tax. Any owner not exempt from United States federal withholding tax should consult a tax adviser as to the availability of an exemption from, or reduction of, such tax under an applicable income tax treaty, if any. 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 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 There are no pending legal proceedings affecting the Separate Account. Various lawsuits against AGL 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, such as through financial examinations, market conduct exams or regulatory inquiries. As of April 30, 2015 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 9318, Amarillo, Texas 79105-9318, or call us at 1-800-340-2765. Rule 12h-7 disclosure. In reliance on the exemption provided by Rule 12h-7 of the Securities Exchange Act of 1934 ("'34 Act"), AGL does not intend to file periodic reports as required under the '34 Act. 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. 59 INDEX OF SPECIAL WORDS AND PHRASES
PAGE TO SEE IN THIS DEFINED TERM PROSPECTUS ------------ ----------- accumulation value.................................................. 8 Administrative Center............................................... 18 automatic rebalancing............................................... 33 base coverage....................................................... 28 basis............................................................... 54 Beneficiary......................................................... 44 cash surrender value................................................ 7 cash value accumulation test........................................ 27 close of business................................................... 37 Code................................................................ 38 Contact Information................................................. 5 cost of insurance rates............................................. 49 daily charge........................................................ 48 date of issue....................................................... 37 death benefit....................................................... 6 dollar cost averaging............................................... 33 Fixed Account....................................................... 24 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.................................................. 20 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........................................... 30 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.................................................. 37 preferred loans..................................................... 43 premium class....................................................... 47 premium payments.................................................... 29 reinstate, reinstatement............................................ 52 required minimum death benefit...................................... 27
60 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...................................................... 53 specified amount.................................................... 6 supplemental coverage............................................... 28 surrender........................................................... 10 transfers........................................................... 7 valuation date...................................................... 37 valuation period.................................................... 37 variable investment options......................................... 20
61 THIS DOCUMENT IS NOT PART OF ANY PROSPECTUS PRIVACY NOTICE Rev. 03/2015 FACTS WHAT DO AMERICAN GENERAL LIFE INSURANCE COMPANY (AGL) AND THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK (US Life) DO WITH YOUR PERSONAL INFORMATION? Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some 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. What? 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 . 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. How? All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons AGL and US Life choose to share; and whether you can limit this sharing. Reasons we can share your personal Do AGL & US Life Can you limit this information share? 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 Yes No our products and services to you For joint marketing with other financial Yes No companies For our affiliates' everyday business Yes No purposes - information about your transactions and experiences For our affiliates' everyday business No We don't share purposes - information about your creditworthiness For nonaffiliates to market to you No We don't share Questions? For AGL and US Life variable or index annuity contracts, call 1-800-445-7862 or write to us at: P. O. Box 15570, Amarillo, TX 79105-5570. For AGL and US Life variable universal life insurance policies (except for Executive Advantage policies), call 1-800-340-2765 or write to us at: P. O. Box 9318, Amarillo, TX 79105-9318. For AGL and US Life Executive Advantage variable universal life insurance policies, call 1-888-222-4943 (AGL) or 1-877-883-6596 (US Life) or write to us at: 2929 Allen Parkway - A35-50, Houston, TX 77019. For AGL and US Life single premium immediate variable annuity contracts, call 1-877-299-1724 or write to us at: Group Annuity Admin Department, 405 King Street, 4th Floor, Wilmington, DE 19801. THIS DOCUMENT IS NOT PART OF ANY PROSPECTUS Rev. 3/2015 Page 2 Who we are Who is providing this notice? American General Life Insurance Company and The United States Life Insurance Company in the City of New York. What we do How do AGL & US Life protect To protect your personal information from my personal information? unauthorized access and use, we use security 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 do AGL & US Life collect We collect your personal information, for my personal information? example, when you . Open an account or give us your contact information . Provide account information or make a wire transfer . Deposit money or close/surrender an account 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 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 non-financial 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. . AGL & US Life do 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 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 us at the address indicated on the first page. For Vermont Residents only. We will not share information we collect about you with nonaffiliated third parties, except as permitted by Vermont law, such as to process your transactions or to maintain your account. In addition, we will not share information about your creditworthiness with our affiliates except with your authorization. For California Residents only. We will not share information we collect about you with nonaffiliated third parties, except as permitted by California law, such as to process your transactions or to maintain your account. For Nevada Residents only. We are providing this notice pursuant to state law. You may be placed on our internal Do Not Call List by calling the numbers referenced in the Questions section. 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 St., Suite 3900, Las Vegas, NV 89101; Phone number: 702-486-3132; email: aginfo@ag.nv.gov. You may contact our customer service department by calling or writing to us at the numbers and addresses referenced in the Questions section. THIS DOCUMENT IS NOT PART OF ANY PROSPECTUS [GRAPHIC] Every day the choices VUL eDelivery is an electronic service enabling you we make impact those to receive email notifications when your around us. How about account-related documents are available to view making a choice that online. impacts our environment? It's fast, simple and saves our environment! When you enroll in To enroll in VUL eDelivery, call Customer Service or VUL eDelivery, you do log in to eService at www.aig.com/lifeinsurance. Afer that. you sign on, select "My Profile" and edit your communication preference. Once you've subscribed to We have partnered with VUL eDelivery, you will get a change confirmation the National Forest email. Foundation and for every enrollment in Need further convincing? VUL eDelivery, a tree By choosing VUL eDelivery, you can: will be planted in appreciation. . Preserve the environment . Reduce paperwork clutter . Receive documents faster Sign up for VUL eDelivery and make the natural choice. [LOGO OF AIG] [LOGO OF NATIONAI FOREST FOUNDATION] Not available for all products. Policies issued by American General Life Insurance Company (AGL) except in New York, where issued by The United States Life Insurance Company in the City of New York (US Life). Issuing companies AGL and US Life are responsible for financial obligations of insurance products and are members of American International Group, Inc. (AIG). Products may not be available in all states and product features may vary by state. For more information, contact Customer Service at P.O. Box 9318, Amarillo, Texas 79105-9318. Phone number 800-340-2765 or for hearing impaired 888-436-5256. AGLC105386 REV0415 (C)2015 AIG. All rights reserved. For more information on the National Forest Foundation please visit www.nationalforests.org. [LOGO] AIG For additional information about the Platinum Investor(R) III Policies and the Separate Account, you may request a copy of the Statement of Additional Information (the "SAI"), dated May 1, 2015. 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 For E-SERVICE and write us at our Administrative Center, which is located at VUL Administration, P.O. Box 9318, E-DELIVERY, or to view and Amarillo, Texas 79105-9318 or call us at 1-800-340-2765. You may also obtain the SAI from Print Policy or Fund your AGL representative through which the Policies may be purchased. Additional information prospectuses visit us at about the Platinum Investor III Policies, including personalized illustrations of death benefits, WWW.AIG.COM/LIFEINSURANCE 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 AIG CAPITAL SERVICES, INC. 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 and is a member of American International Group, Inc. ("AIG"). The commitments under the Policies are AGL's and AIG has no legal obligation to back those commitments. AGL does not solicit business in the state of New York. The Policies are not available in all states. (C) 2015. American International Group, Inc. All Rights Reserved ICA File No. 811-08561
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 9318, AMARILLO, TEXAS 79105-9655 TELEPHONE: 1-800-340-2765; 1-713-831-3443; HEARING IMPAIRED: 1-888-436-5256 STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 2015 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, 2015, 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.......................................... 5 ADDITIONAL INFORMATION ABOUT THE POLICIES........................ 6 Gender neutral policies................................... 6 Cost of insurance rates................................... 6 Special purchase plans.................................... 6 Underwriting procedures and cost of insurance charges..... 6 Certain arrangements...................................... 7 More About the Fixed Account.................................. 7 Our general account....................................... 7 How we declare interest................................... 7 Adjustments to Death Benefit.................................. 8 Suicide................................................... 8 Wrong age or gender....................................... 8 Death during grace period................................. 8 ACTUARIAL EXPERT................................................. 8 MATERIAL CONFLICTS............................................... 8 FINANCIAL STATEMENTS............................................. 9
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. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange. 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 88 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 31 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. 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, 18/th/ 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. 3 American Home, an affiliate of AGL, is an indirect wholly-owned subsidiary of American International Group, Inc. 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. AGLC was merged into AGL at the end of 2011. AGL now provides all of the services that were previously provided by AGLC. During 2014, 2013 and 2012, AGL paid AIG for these services $89,509,007, $89,508,560 and $30,173,049, respectively. We have not designed the Policies for professional market timing organizations or other entities or individuals using programmed and frequent transfers involving large amounts. We currently have no contractual agreements or any other formal or informal arrangements with any entity or individual permitting such transfers and receive no compensation for any such contract or arrangement. DISTRIBUTION OF THE POLICIES The Policies are offered on a continuous basis through AIG Capital Services, Inc. ("ACS"), located at Harborside Financial Center, 3200 Plaza 5, Jersey City, NJ 07311. ACS is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended, and a member of the Financial Industry Regulatory Authority ("FINRA"). The Company and ACS are each an indirect, wholly owned subsidiary of AIG. No underwriting fees are paid in connection with the distribution of the policies. We and ACS 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; 4 . 0.25% annually 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% annually 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. 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 5 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 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. However, we offer Platinum Investor III Policies on both a gender-neutral and sex-distinct basis. 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. 6 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. 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 annual effective rate shown on your Policy Schedule. 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. 7 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 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 Chief Life Pricing Actuary and Portfolio Manager of AGL. An opinion on actuarial matters is filed as an exhibit to the registration statement we have filed with the SEC in connection with the Policies. MATERIAL CONFLICTS We are required to track events to identify any material conflicts from using investment portfolios for both variable 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 8 action to protect Policy owners. This could mean delays or interruptions of the variable operations. When state insurance regulatory authorities require us, we may ignore instructions relating to changes in an investment portfolio's adviser or its investment policies. If we do ignore voting instructions, we give you a summary of our actions in the next semi-annual report to owners. FINANCIAL STATEMENTS PricewaterhouseCoopers LLP, located at 1000 Louisiana Street, Suite 5800, Houston, Texas 77002, serves as 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 American Home. You may obtain a free copy of these financial statements if you write us at our VUL Administration Department or call us at 1-800-340-2765. The financial statements have also been filed with the SEC and can be obtained through its website at http://www.sec.gov. The following financial statements are included 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: . Audited Financial Statements of Separate Account VL-R of American General Life Insurance Company for the year ended December 31, 2014 and the results of its operations and the changes in its net assets for each of the periods indicated . Audited Consolidated Financial Statements of American General Life Insurance Company at December 31, 2014, 2013 and 2012 . Audited Statutory Financial Statements of American Home Assurance Company for the years ended December 31, 2014, 2013 and 2012. The financial statements of AGL should be considered only as bearing on the ability of AGL to meet its obligation under the contracts. You should only consider the statutory financial statements of American Home Assurance Company ("American Home") that we include in the Statement of Additional Information 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. 9 AMERICAN GENERAL Life Companies Variable Universal Life Insurance Separate Account VL-R 2014 Annual Report December 31, 2014 American General Life Insurance Company REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of American General Life Insurance Company and the Contractholders of its separate account, 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 constituting Separate Account VL-R (the "Separate Account"), a separate account of American General Life Insurance Company, at December 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2014 by correspondence with the mutual fund companies and transfer agents, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Houston, Texas April 27, 2015 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2014
Investment Due from (to) American securities - at General Life Insurance Divisions fair value Company NET ASSETS --------- --------------- ---------------------- ----------- Alger Capital Appreciation Portfolio - Class I-2 Shares $ 5,759,903 $-- $ 5,759,903 Alger Mid Cap Growth Portfolio - Class I-2 Shares 2,958,031 -- 2,958,031 American Century VP Value Fund - Class I 16,723,661 -- 16,723,661 American Funds IS Asset Allocation Fund Class 2 77,912 -- 77,912 American Funds IS Global Growth Fund Class 2 67,216 -- 67,216 American Funds IS Growth Fund Class 2 11,137 -- 11,137 American Funds IS Growth-Income Fund Class 2 72,411 -- 72,411 American Funds IS High-Income Bond Fund Class2 26,459 -- 26,459 American Funds IS International Fund Class 2 4,308 -- 4,308 Anchor Series Trust Capital Appreciation Portfolio - Class 3 13,792 -- 13,792 Anchor Series Trust Government and Quality Bond Portfolio - Class 3 3,454 -- 3,454 Dreyfus IP MidCap Stock Portfolio - Initial Shares 5,588,214 -- 5,588,214 Dreyfus VIF International Value Portfolio - Initial Shares 139,628 -- 139,628 Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares 7,676,329 -- 7,676,329 Dreyfus VIF Quality Bond Portfolio - Initial Shares 5,594,333 -- 5,594,333 Fidelity VIP Asset Manager Portfolio - Service Class 2 4,533,991 -- 4,533,991 Fidelity VIP Contrafund Portfolio - Service Class 2 34,117,348 -- 34,117,348 Fidelity VIP Equity-Income Portfolio - Service Class 2 17,933,840 -- 17,933,840 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 362,588 -- 362,588 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 637,712 -- 637,712 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 1,009,535 -- 1,009,535 Fidelity VIP Growth Portfolio - Service Class 2 16,916,744 -- 16,916,744 Fidelity VIP Mid Cap Portfolio - Service Class 2 10,828,585 -- 10,828,585 Fidelity VIP Money Market Portfolio - Service Class 2 23,368 -- 23,368 Franklin Templeton Franklin Small Cap Value VIP Fund - Class 2 8,238,202 -- 8,238,202 Franklin Templeton Franklin Small-Mid Cap Growth VIP Fund - Class 2 44,664 -- 44,664 Franklin Templeton Franklin U.S. Government Securities VIP Fund - Class 2 3,005,162 -- 3,005,162 Franklin Templeton Franklin Mutual Shares VIP Fund - Class 2 7,010,955 -- 7,010,955 Franklin Templeton Templeton Foreign VIP Fund - Class 2 5,837,832 -- 5,837,832 Goldman Sachs VIT Strategic Growth Fund - Institutional Shares 3,320,170 -- 3,320,170 Invesco V.I. Core Equity Fund - Series I 8,957,278 -- 8,957,278 Invesco V.I. Global Real Estate Fund - Series I 210,658 -- 210,658 Invesco V.I. Government Securities Fund - Series I 38,030 -- 38,030 Invesco V.I. High Yield Fund - Series I 2,592,381 -- 2,592,381 Invesco V.I. International Growth Fund - Series I 8,210,933 -- 8,210,933 Invesco V.I. American Franchise Fund - Series I 5,172 -- 5,172 Invesco V.I. Growth and Income Fund - Series I 10,490,134 -- 10,490,134 Janus Aspen Enterprise Portfolio - Service Shares 5,329,079 -- 5,329,079 Janus Aspen Forty Portfolio - Service Shares 492,985 -- 492,985 Janus Aspen Overseas Portfolio - Service Shares 8,434,733 -- 8,434,733 Janus Aspen Global Research Portfolio - Service Shares 3,195,683 -- 3,195,683 JPMorgan Insurance Trust Core Bond Portfolio - Class 1 166,280 -- 166,280 JPMorgan Insurance Trust International Equity Portfolio - Class 1 -- -- -- JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 834,494 -- 834,494 JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 3,980,905 -- 3,980,905 MFS VIT Core Equity Series - Initial Class 4,227,249 -- 4,227,249 MFS VIT Growth Series - Initial Class 10,962,846 -- 10,962,846 MFS VIT New Discovery Series - Initial Class 5,102,989 -- 5,102,989 MFS VIT Research Series - Initial Class 2,760,517 -- 2,760,517 MFS VIT Total Return Series - Initial Class 413,403 -- 413,403
VL-R - 2 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENTS OF ASSETS AND LIABILITIES - CONTINUED DECEMBER 31, 2014
Investment Due from (to) American securities - at General Life Insurance Divisions fair value Company NET ASSETS --------- --------------- ---------------------- ----------- Neberger Berman AMT Mid-Cap Growth Portfolio - Class I $ 5,935,633 $-- $ 5,935,633 Neubeger Berman AMT Large Cap Value Portfolio -Class 1 35,318 -- 35,318 Neuberger Berman AMT Socially Responsive Portfolio - Class I 84,617 -- 84,617 Oppenheimer Capital Income Fund A 1,313,231 -- 1,313,231 Oppenheimer Global Fund/VA - Non-Service Shares 7,020,158 -- 7,020,158 Oppenheimer Global Strategic Income Fund/VA (Non-Service) 4,497 -- 4,497 PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 939,699 -- 939,699 PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class 109,767 -- 109,767 PIMCO VIT Real Return Portfolio - Administrative Class 11,432,689 -- 11,432,689 PIMCO VIT Short-Term Portfolio - Administrative Class 4,444,798 -- 4,444,798 PIMCO VIT Total Return Portfolio - Administrative Class 15,298,326 -- 15,298,326 Pioneer Fund VCT Portfolio - Class I 1,675,091 -- 1,675,091 Pioneer Select Mid Cap Growth VCT Portfolio - Class I 3,016,671 -- 3,016,671 Pioneer Mid Cap Value VCT Portfolio - Class I 1,295,160 -- 1,295,160 Putnam VT Diversified Income Fund - Class IB 6,577,843 -- 6,577,843 Putnam VT Growth and Income Fund - Class IB 12,972,211 -- 12,972,211 Putnam VT International Value Fund - Class IB 4,609,199 -- 4,609,199 Putnam VT Multi-Cap Growth Fund - Class IB 43,591 -- 43,591 Putnam VT Small Cap Value Fund - Class IB 227,886 -- 227,886 Putnam VT Voyager Fund - Class IB 201,633 -- 201,633 SunAmerica Aggressive Growth Portfolio - Class 1 1,296,355 -- 1,296,355 SunAmerica Balanced Portfolio - Class 1 2,073,068 -- 2,073,068 UIF Capital Growth Portfolio - Class I Shares 3,024,443 -- 3,024,443 VALIC Company I Dynamic Allocation Fund 18,755 -- 18,755 VALIC Company I Emerging Economies Fund 6,209 -- 6,209 VALIC Company I Foreign Value Fund 1,369 -- 1,369 VALIC Company II Mid Cap Value 2,227 -- 2,227 VALIC Company II Strategic Bond Fund 50,223 -- 50,223 VALIC Company II Socially Responsible Fund 14,158 -- 14,158 VALIC Company I International Equities Index Fund 2,483,499 -- 2,483,499 VALIC Company I Mid Cap Index Fund 15,463,977 -- 15,463,977 VALIC Company I Money Market I Fund 11,413,517 -- 11,413,517 VALIC Company I Nasdaq-100 Index Fund 5,678,276 -- 5,678,276 VALIC Company I Science & Technology Fund 2,117,057 -- 2,117,057 VALIC Company I Small Cap Index Fund 8,200,643 -- 8,200,643 VALIC Company I Stock Index Fund 21,735,503 -- 21,735,503 Vanguard VIF High Yield Bond Portfolio 7,720,929 -- 7,720,929 Vanguard VIF REIT Index Portfolio 14,892,265 -- 14,892,265
VL-R - 3 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2014
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 $ 5,248 $ (31,298) $(26,050) $ 413,357 $ 839,005 $ (561,824) $ 664,488 Alger Mid Cap Growth Portfolio - Class I-2 Shares -- (17,093) (17,093) 383,233 -- (155,478) 210,662 American Century VP Value Fund - Class I 249,473 (88,320) 161,153 1,061,619 -- 680,918 1,903,690 American Funds IS Asset Allocation Fund Class 2 936 (150) 786 12 -- (201) 597 American Funds IS Global Growth Fund Class 2 228 (16) 212 (19) -- 1,442 1,635 American Funds IS Growth Fund Class 2 84 (14) 70 18 -- 124 212 American Funds IS Growth-Income Fund Class 2 556 (61) 495 14 -- 1,510 2,019 American Funds IS High-Income Bond Fund Class2 1,293 (18) 1,275 (31) -- (1,770) (526) American Funds IS International Fund Class 2 56 (5) 51 (27) -- (143) (119) Anchor Series Trust Capital Appreciation Portfolio - Class 3 -- (7) (7) (62) 569 (430) 70 Anchor Series Trust Government and Quality Bond Portfolio - Class 3 59 (2) 57 (2) -- (7) 48 Dreyfus IP MidCap Stock Portfolio - Initial Shares 49,195 (25,076) 24,119 487,831 26,700 (1,035) 537,615 Dreyfus VIF International Value Portfolio - Initial Shares 2,356 (556) 1,800 2,541 -- (18,907) (14,566) Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares -- (41,963) (41,963) 1,028,391 -- (934,258) 52,170 Dreyfus VIF Quality Bond Portfolio - Initial Shares 125,830 (29,335) 96,495 44,395 -- 111,787 252,677 Fidelity VIP Asset Manager Portfolio - Service Class 2 58,058 (24,403) 33,655 193,410 221,909 (220,728) 228,246 Fidelity VIP Contrafund Portfolio - Service Class 2 243,948 (175,839) 68,109 2,326,663 679,246 293,249 3,367,267 Fidelity VIP Equity-Income Portfolio - Service Class 2 469,704 (97,708) 371,996 967,843 252,791 (200,691) 1,391,939 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 5,157 (1,868) 3,289 11,261 6,427 (7,117) 13,860 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 8,971 (3,641) 5,330 28,051 13,839 (16,520) 30,700 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 13,517 (5,647) 7,870 28,510 19,532 (19,114) 36,798 Fidelity VIP Growth Portfolio - Service Class 2 -- (89,328) (89,328) 1,245,457 -- 496,218 1,652,347 Fidelity VIP Mid Cap Portfolio - Service Class 2 2,036 (65,154) (63,118) 320,495 252,734 43,235 553,346 Fidelity VIP Money Market Portfolio - Service Class 2 4 (174) (170) -- -- -- (170) Franklin Templeton Franklin Small Cap Value VIP Fund - Class 2 51,701 (51,172) 529 492,039 623,424 (1,129,367) (13,375) Franklin Templeton Franklin Small-Mid Cap Growth VIP Fund - Class 2 -- (232) (232) 1,162 9,043 (6,837) 3,136 Franklin Templeton Franklin U.S. Government Securities VIP Fund - Class 2 86,110 (21,064) 65,046 (54,497) -- 82,404 92,953 Franklin Templeton Franklin Mutual Shares VIP Fund - Class 2 144,131 (40,228) 103,903 488,402 37,475 (178,979) 450,801 Franklin Templeton Templeton Foreign VIP Fund - Class 2 130,148 (40,045) 90,103 393,663 -- (1,245,454) (761,688) Goldman Sachs VIT Strategic Growth Fund - Institutional Shares 11,880 (17,128) (5,248) 1,836,761 616,441 (1,628,929) 819,025 Invesco V.I. Core Equity Fund - Series I 76,603 (43,724) 32,879 563,360 42,769 42,458 681,466 Invesco V.I. Global Real Estate Fund - Series I 2,490 (349) 2,141 2,321 -- 13,041 17,503 Invesco V.I. Government Securities Fund - Series I 1,308 (245) 1,063 (2,392) -- 3,127 1,798 Invesco V.I. High Yield Fund - Series I 122,147 (17,651) 104,496 27,262 -- (101,838) 29,920 Invesco V.I. International Growth Fund - Series I 136,327 (49,301) 87,026 541,182 -- (621,513) 6,695 Invesco V.I. American Franchise Fund - Series I 3 (32) (29) 842 -- (324) 489 Invesco V.I. Growth and Income Fund - Series I 182,760 (56,797) 125,963 612,454 1,188,507 (978,738) 948,186 Janus Aspen Enterprise Portfolio - Service Shares 1,684 (26,812) (25,128) 306,204 351,547 (74,500) 558,123 Janus Aspen Forty Portfolio - Service Shares 137 (1,708) (1,571) 17,922 135,031 (113,653) 37,729 Janus Aspen Overseas Portfolio - Service Shares 293,022 (55,504) 237,518 (369,274) 989,932 (2,078,918) (1,220,742) Janus Aspen Global Research Portfolio - Service Shares 30,849 (15,360) 15,489 159,568 -- 29,509 204,566 JPMorgan Insurance Trust Core Bond Portfolio - Class 1 3,585 (550) 3,035 (325) -- 1,761 4,471 JPMorgan Insurance Trust International Equity Portfolio - Class 1 1,126 (270) 856 7,606 -- (10,664) (2,202) JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 6,229 (4,663) 1,566 77,808 42,500 (13,519) 108,355 JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 5,034 (21,546) (16,512) 276,246 288,354 (230,012) 318,076 MFS VIT Core Equity Series - Initial Class 30,729 (18,597) 12,132 275,778 -- 119,825 407,735 MFS VIT Growth Series - Initial Class 11,079 (51,502) (40,423) 774,477 707,005 (570,243) 870,816 MFS VIT New Discovery Series - Initial Class -- (29,070) (29,070) 218,906 1,122,397 (1,785,436) (473,203) MFS VIT Research Series - Initial Class 22,132 (13,808) 8,324 180,859 200,832 (144,112) 245,903 MFS VIT Total Return Series - Initial Class 8,051 (2,359) 5,692 44,968 11,206 (27,947) 33,919 Neberger Berman AMT Mid-Cap Growth Portfolio - Class I -- (29,374) (29,374) 313,323 2,368,141 (2,258,516) 393,574 Neubeger Berman AMT Large Cap Value Portfolio - Class 1 260 (178) 82 1,645 -- 1,399 3,126 Neuberger Berman AMT Socially Responsive Portfolio - Class I 295 (464) (169) 1,203 -- 6,057 7,091 Oppenheimer Capital Income Fund A 32,012 (8,842) 23,170 138,859 -- (54,537) 107,492 Oppenheimer Global Fund/VA - Non-Service Shares 78,605 (41,354) 37,251 539,643 320,688 (786,198) 111,384 Oppenheimer Global Strategic Income Fund/VA (Non- Service) 135 (19) 116 (91) -- 47 72 PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 4,339 (7,291) (2,952) (88,193) -- (129,646) (220,791) PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class 1,703 (308) 1,395 (861) 2,475 (2,759) 250 PIMCO VIT Real Return Portfolio - Administrative Class 171,842 (64,374) 107,468 (158,616) -- 379,234 328,086 PIMCO VIT Short-Term Portfolio - Administrative Class 32,427 (25,936) 6,491 10,826 4,510 (14,185) 7,642 PIMCO VIT Total Return Portfolio - Administrative Class 347,497 (89,910) 257,587 (33,363) -- 357,145 581,369 Pioneer Fund VCT Portfolio - Class I 19,928 (7,799) 12,129 47,324 118,892 (9,034) 169,311 Pioneer Select Mid Cap Growth VCT Portfolio - Class I -- (14,057) (14,057) 115,276 602,747 (446,329) 257,637 Pioneer Mid Cap Value VCT Portfolio - Class I 10,450 (7,678) 2,772 56,715 158,698 (66,354) 151,831
VL-R - 4 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENTS OF OPERATIONS - CONTINUED FOR THE YEAR ENDED DECEMBER 31, 2014
A B A+B=C D E F C+D+E+F Net change in INCREASE Mortality and unrealized (DECREASE) IN Dividends expense risk NET Capital gain appreciation NET ASSETS from and INVESTMENT Net realized distributions (depreciation) RESULTING mutual administrative INCOME gain (loss) on from mutual of FROM Divisions funds charges (LOSS) investments funds investments OPERATIONS --------- --------- -------------- ---------- -------------- ------------- -------------- ------------- Putnam VT Diversified Income Fund - Class IB $546,638 $ (31,162) $515,476 $ (3,540) $ -- $ (510,765) $ 1,171 Putnam VT Growth and Income Fund - Class IB 168,079 (58,678) 109,401 650,771 -- 476,968 1,237,140 Putnam VT International Value Fund - Class IB 67,620 (28,944) 38,676 156,417 -- (707,182) (512,089) Putnam VT Multi-Cap Growth Fund - Class IB 158 (243) (85) 4,604 -- 1,211 5,730 Putnam VT Small Cap Value Fund - Class IB 1,206 (1,131) 75 10,760 59,694 (64,923) 5,606 Putnam VT Voyager Fund - Class IB 1,544 (1,050) 494 11,559 3,961 2,060 18,074 SunAmerica Aggressive Growth Portfolio - Class 1 -- (7,734) (7,734) 165,523 -- (161,769) (3,980) SunAmerica Balanced Portfolio - Class 1 29,320 (11,234) 18,086 234,549 -- (28,182) 224,453 UIF Capital Growth Portfolio - Class I Shares -- (15,287) (15,287) 219,663 221,673 (247,226) 178,823 VALIC Company I Dynamic Allocation Fund 249 (32) 217 (16) 299 (299) 201 VALIC Company I Emerging Economies Fund -- -- -- (5) -- 58 53 VALIC Company I Foreign Value Fund -- (3) (3) (4) -- (153) (160) VALIC Company II Mid Cap Value -- (3) (3) (6) -- 18 9 VALIC Company II Strategic Bond Fund -- (23) (23) (11) -- (265) (299) VALIC Company II Socially Responsible Fund -- -- -- 5 -- 33 38 VALIC Company I International Equities Index Fund 64,034 (14,539) 49,495 68,313 -- (272,899) (155,091) VALIC Company I Mid Cap Index Fund 172,070 (79,902) 92,168 814,656 643,322 (229,106) 1,321,040 VALIC Company I Money Market I Fund 1,215 (65,630) (64,415) -- -- -- (64,415) VALIC Company I Nasdaq-100 Index Fund 41,956 (26,958) 14,998 408,105 26,918 423,719 873,740 VALIC Company I Science & Technology Fund 2,373 (10,154) (7,781) 155,536 -- 102,962 250,717 VALIC Company I Small Cap Index Fund 88,646 (41,559) 47,087 542,470 163,728 (436,237) 317,048 VALIC Company I Stock Index Fund 342,982 (105,426) 237,556 1,305,412 480,801 530,628 2,554,397 Vanguard VIF High Yield Bond Portfolio 413,379 (45,442) 367,937 97,003 -- (179,971) 284,969 Vanguard VIF REIT Index Portfolio 452,585 (76,590) 375,995 661,872 614,436 1,802,110 3,454,413
VL-R - 5 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R SCHEDULES OF PORTFOLIO INVESTMENTS DECEMBER 31, 2014
Net Asset Value Per Value of Shares Cost of Shares Divisions Shares Share at Fair Value Held Level /(1)/ --------- --------- --------- --------------- -------------- ---------- Alger Capital Appreciation Portfolio - Class I-2 Shares 80,727 $71.35 $ 5,759,903 $ 5,455,320 1 Alger Mid Cap Growth Portfolio - Class I-2 Shares 149,245 19.82 2,958,031 2,278,216 1 American Century VP Value Fund - Class I 1,777,222 9.41 16,723,661 11,863,965 1 American Funds IS Asset Allocation Fund Class 2 3,532 22.06 77,912 78,113 1 American Funds IS Global Growth Fund Class 2 2,462 27.30 67,216 65,774 1 American Funds IS Growth Fund Class 2 139 79.84 11,137 11,012 1 American Funds IS Growth-Income Fund Class 2 1,382 52.41 72,411 70,901 1 American Funds IS High-Income Bond Fund Class 2 2,542 10.41 26,459 28,229 1 American Funds IS International Fund Class 2 212 20.29 4,308 4,450 1 Anchor Series Trust Capital Appreciation Portfolio - Class 3 303 45.52 13,792 14,222 1 Anchor Series Trust Government and Quality Bond Portfolio - Class 3 228 15.13 3,454 3,461 1 Dreyfus IP MidCap Stock Portfolio - Initial Shares 242,649 23.03 5,588,214 4,148,006 1 Dreyfus VIF International Value Portfolio - Initial Shares 13,235 10.55 139,628 140,632 1 Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares 160,660 47.78 7,676,329 5,432,328 1 Dreyfus VIF Quality Bond Portfolio - Initial Shares 460,060 12.16 5,594,333 5,504,987 1 Fidelity VIP Asset Manager Portfolio - Service Class 2 269,399 16.83 4,533,991 4,155,440 1 Fidelity VIP Contrafund Portfolio - Service Class 2 929,628 36.70 34,117,348 25,145,325 1 Fidelity VIP Equity-Income Portfolio - Service Class 2 752,574 23.83 17,933,840 15,574,061 1 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 28,550 12.70 362,588 331,994 1 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 48,717 13.09 637,712 560,885 1 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 77,956 12.95 1,009,535 854,998 1 Fidelity VIP Growth Portfolio - Service Class 2 269,375 62.80 16,916,744 11,759,736 1 Fidelity VIP Mid Cap Portfolio - Service Class 2 293,936 36.84 10,828,585 9,705,228 1 Fidelity VIP Money Market Portfolio - Service Class 2 23,368 1.00 23,368 23,368 1 Franklin Templeton Franklin Small Cap Value VIP Fund - Class 2 369,095 22.32 8,238,202 7,118,535 1 Franklin Templeton Franklin Small-Mid Cap Growth VIP Fund - Class 2 1,896 23.56 44,664 44,353 1 Franklin Templeton Franklin U.S. Government Securities VIP Fund - Class 2 236,069 12.73 3,005,162 3,083,567 1 Franklin Templeton Franklin Mutual Shares VIP Fund - Class 2 310,219 22.60 7,010,955 5,586,815 1 Franklin Templeton Templeton Foreign VIP Fund - Class 2 387,896 15.05 5,837,832 5,752,367 1 Goldman Sachs VIT Strategic Growth Fund - Institutional Shares 205,456 16.16 3,320,170 2,697,928 1 Invesco V.I. Core Equity Fund - Series I 218,417 41.01 8,957,278 6,357,824 1 Invesco V.I. Global Real Estate Fund - Series I 12,219 17.24 210,658 187,484 1 Invesco V.I. Government Securities Fund - Series I 3,239 11.74 38,030 38,999 1 Invesco V.I. High Yield Fund - Series I 468,785 5.53 2,592,381 2,537,488 1 Invesco V.I. International Growth Fund - Series I 235,473 34.87 8,210,933 7,101,488 1 Invesco V.I. American Franchise Fund - Series I 94 54.88 5,172 3,884 1 Invesco V.I. Growth and Income Fund - Series I 417,103 25.15 10,490,134 8,866,110 1 Janus Aspen Enterprise Portfolio - Service Shares 89,927 59.26 5,329,079 3,910,303 1 Janus Aspen Forty Portfolio - Service Shares 12,573 39.21 492,985 473,256 1 Janus Aspen Overseas Portfolio - Service Shares 267,345 31.55 8,434,733 10,661,212 1 Janus Aspen Global Research Portfolio - Service Shares 78,383 40.77 3,195,683 2,421,457 1 JPMorgan Insurance Trust Core Bond Portfolio - Class 1 14,860 11.19 166,280 167,748 1 JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 73,137 11.41 834,494 593,832 1 JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 165,457 24.06 3,980,905 3,016,826 1 MFS VIT Core Equity Series - Initial Class 162,524 26.01 4,227,249 3,045,949 1 MFS VIT Growth Series - Initial Class 275,795 39.75 10,962,846 7,908,801 1 MFS VIT New Discovery Series - Initial Class 312,683 16.32 5,102,989 5,407,449 1 MFS VIT Research Series - Initial Class 94,831 29.11 2,760,517 2,155,823 1 MFS VIT Total Return Series - Initial Class 17,005 24.31 413,403 361,198 1 Neberger Berman AMT Mid-Cap Growth Portfolio - Class I 242,271 24.50 5,935,633 6,635,507 1 Neubeger Berman AMT Large Cap Value Portfolio -Class 1 2,155 16.39 35,318 25,952 1 Neuberger Berman AMT Socially Responsive Portfolio - Class I 3,543 23.88 84,617 55,560 1 Oppenheimer Capital Income Fund A 89,518 14.67 1,313,231 1,146,049 1 Oppenheimer Global Strategic Income Fund/VA (Non-Service) 849 5.30 4,497 4,578 1 Oppenheimer Global Fund/VA - Non-Service Shares 177,726 39.50 7,020,158 6,105,857 1
VL-R - 6 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R SCHEDULES OF PORTFOLIO INVESTMENTS - CONTINUED DECEMBER 31, 2014
Net Asset Value Per Value of Shares Cost of Shares Divisions Shares Share at Fair Value Held Level /(1)/ --------- ---------- --------- --------------- -------------- ---------- PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 193,354 $ 4.86 $ 939,699 $ 1,347,077 1 PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class 9,186 11.95 109,767 118,678 1 PIMCO VIT Real Return Portfolio - Administrative Class 892,482 12.81 11,432,689 12,311,354 1 PIMCO VIT Short-Term Portfolio - Administrative Class 433,216 10.26 4,444,798 4,443,718 1 PIMCO VIT Total Return Portfolio - Administrative Class 1,365,922 11.20 15,298,326 15,464,821 1 Pioneer Fund VCT Portfolio - Class I 62,410 26.84 1,675,091 1,381,842 1 Pioneer Select Mid Cap Growth VCT Portfolio - Class I 105,001 28.73 3,016,671 2,589,479 1 Pioneer Mid Cap Value VCT Portfolio - Class I 56,830 22.79 1,295,160 1,097,394 1 Putnam VT Diversified Income Fund - Class IB 938,351 7.01 6,577,843 7,040,576 1 Putnam VT Growth and Income Fund - Class IB 496,639 26.12 12,972,211 8,632,406 1 Putnam VT International Value Fund - Class IB 466,518 9.88 4,609,199 4,328,374 1 Putnam VT Multi-Cap Growth Fund - Class IB 1,265 34.47 43,591 30,505 1 Putnam VT Small Cap Value Fund - Class IB 13,786 16.53 227,886 206,931 1 Putnam VT Voyager Fund - Class IB 3,663 55.04 201,633 165,649 1 SunAmerica Aggressive Growth Portfolio - Class 1 79,994 16.21 1,296,355 1,024,391 1 SunAmerica Balanced Portfolio - Class 1 99,582 20.82 2,073,068 1,766,932 1 UIF Capital Growth Portfolio - Class I Shares 98,420 30.73 3,024,443 2,292,686 1 VALIC Company I Foreign Value Fund 140 9.81 1,369 1,522 1 VALIC Company I Emerging Economies Fund 826 7.52 6,209 6,317 1 VALIC Company I Dynamic Allocation Fund 1,587 11.82 18,755 19,054 1 VALIC Company II Socially Responsible Fund 731 19.38 14,158 13,993 1 VALIC Company II Strategic Bond Fund 4,367 11.50 50,223 50,489 1 VALIC Company II Mid Cap Value 89 24.96 2,227 2,209 1 VALIC Company I International Equities Index Fund 367,382 6.76 2,483,499 2,324,214 1 VALIC Company I Mid Cap Index Fund 534,901 28.91 15,463,977 11,672,065 1 VALIC Company I Money Market I Fund 11,413,517 1.00 11,413,517 11,413,517 1 VALIC Company I Nasdaq-100 Index Fund 572,984 9.91 5,678,276 4,012,860 1 VALIC Company I Science & Technology Fund 76,928 27.52 2,117,057 1,497,168 1 VALIC Company I Small Cap Index Fund 375,659 21.83 8,200,643 6,382,608 1 VALIC Company I Stock Index Fund 580,387 37.45 21,735,503 15,720,639 1 Vanguard VIF High Yield Bond Portfolio 948,517 8.14 7,720,929 7,535,476 1 Vanguard VIF REIT Index Portfolio 1,050,971 14.17 14,892,265 12,327,571 1
/(1)/Represents the level within the fair value hierarchy under which the portfolio is classified as defined in ASC 820 and described in Note 3 to the financial statements. VL-R - 7 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Divisions ------------------------------------------------ American Alger Capital Alger Mid Funds IS Appreciation Cap Growth American Asset Portfolio - Portfolio - Century VP Allocation Class I-2 Class I-2 Value Fund - Fund Shares Shares Class I Class 2 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ (26,050) $ (17,093) $ 161,153 $ 786 Net realized gain (loss) on investments 413,357 383,233 1,061,619 12 Capital gain distributions from mutual funds 839,005 -- -- -- Net change in unrealized appreciation (depreciation) of investments (561,824) (155,478) 680,918 (201) ---------- ---------- ----------- ------- Increase (decrease) in net assets resulting from operations 664,488 210,662 1,903,690 597 ---------- ---------- ----------- ------- PRINCIPAL TRANSACTIONS: Net premiums 294,014 220,890 938,107 7,882 Net transfers from (to) other Divisions or fixed rate option 157,367 53,774 (30,140) 76,683 Internal rollovers -- -- -- -- Cost of insurance and other charges (163,772) (123,218) (714,117) (6,855) Administrative charges (14,877) (10,723) (45,187) (395) Policy loans (7,268) (38,638) (39,074) -- Death benefits (1,778) (7,929) (109,161) -- Withdrawals (339,331) (315,772) (905,328) -- ---------- ---------- ----------- ------- Increase (decrease) in net assets resulting from principal transactions (75,645) (221,616) (904,900) 77,315 ---------- ---------- ----------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS 588,843 (10,954) 998,790 77,912 NET ASSETS: Beginning of year 5,171,060 2,968,985 15,724,871 -- ---------- ---------- ----------- ------- End of year $5,759,903 $2,958,031 $16,723,661 $77,912 ========== ========== =========== ======= FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ (11,556) $ (7,452) $ 156,575 $ -- Net realized gain (loss) on investments 446,303 179,123 900,998 -- Capital gain distributions from mutual funds 513,675 -- -- -- Net change in unrealized appreciation (depreciation) of investments 354,727 617,804 2,766,990 -- ---------- ---------- ----------- ------- Increase (decrease) in net assets resulting from operations 1,303,149 789,475 3,824,563 -- ---------- ---------- ----------- ------- PRINCIPAL TRANSACTIONS: Net premiums 293,107 227,934 1,034,331 -- Net transfers from (to) other Divisions or fixed rate option 185,581 2,577 (34,559) -- Internal rollovers 252 -- -- -- Cost of insurance and other charges (148,601) (124,026) (700,440) -- Administrative charges (14,926) (11,771) (50,038) -- Policy loans (55,799) (15,350) (133,431) -- Death benefits (5,266) (192) (31,889) -- Withdrawals (267,515) (200,862) (771,486) -- ---------- ---------- ----------- ------- Increase (decrease) in net assets resulting from principal transactions (13,167) (121,690) (687,512) -- ---------- ---------- ----------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,289,982 667,785 3,137,051 -- NET ASSETS: Beginning of year 3,881,078 2,301,200 12,587,820 -- ---------- ---------- ----------- ------- End of year $5,171,060 $2,968,985 $15,724,871 $ -- ========== ========== =========== =======
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, 2014 AND 2013
Divisions ---------------------------------- American American American Funds IS Funds IS American Funds IS High- Global Funds IS Growth- Income Growth Growth Income Bond Fund Fund Fund Fund Class 2 Class 2 Class 2 Class 2 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 212 $ 70 $ 495 $ 1,275 Net realized gain (loss) on investments (19) 18 14 (31) Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 1,442 124 1,510 (1,770) ------- ------- ------- ------- Increase (decrease) in net assets resulting from operations 1,635 212 2,019 (526) ------- ------- ------- ------- PRINCIPAL TRANSACTIONS: Net premiums 5,125 6,737 2,068 993 Net transfers from (to) other Divisions or fixed rate option 64,674 11,569 75,432 27,269 Internal rollovers -- -- -- -- Cost of insurance and other charges (3,962) (7,006) (6,765) (1,221) Administrative charges (257) (375) (343) (56) Policy loans 1 -- -- -- Death benefits -- -- -- -- Withdrawals -- -- -- -- ------- ------- ------- ------- Increase (decrease) in net assets resulting from principal transactions 65,581 10,925 70,392 26,985 ------- ------- ------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS 67,216 11,137 72,411 26,459 NET ASSETS: Beginning of year -- -- -- -- ------- ------- ------- ------- End of year $67,216 $11,137 $72,411 $26,459 ======= ======= ======= ======= FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ -- $ -- $ -- $ -- Net realized gain (loss) on investments -- -- -- -- Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments -- -- -- -- ------- ------- ------- ------- Increase (decrease) in net assets resulting from operations -- -- -- -- ------- ------- ------- ------- PRINCIPAL TRANSACTIONS: Net premiums -- -- -- -- Net transfers from (to) other Divisions or fixed rate option -- -- -- -- Internal rollovers -- -- -- -- Cost of insurance and other charges -- -- -- -- Administrative charges -- -- -- -- Policy loans -- -- -- -- Death benefits -- -- -- -- Withdrawals -- -- -- -- ------- ------- ------- ------- Increase (decrease) in net assets resulting from principal transactions -- -- -- -- ------- ------- ------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- -- -- -- NET ASSETS: Beginning of year -- -- -- -- ------- ------- ------- ------- End of year $ -- $ -- $ -- $ -- ======= ======= ======= =======
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, 2014 AND 2013
Divisions ----------------------------------------------------- Anchor Anchor Series Trust American Series Trust Government Dreyfus IP Funds IS Capital and Quality MidCap International Appreciation Bond Stock Fund Portfolio - Portfolio - Portfolio - Class 2 Class 3 Class 3 Initial Shares FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 51 $ (7) $ 57 $ 24,119 Net realized gain (loss) on investments (27) (62) (2) 487,831 Capital gain distributions from mutual funds -- 569 -- 26,700 Net change in unrealized appreciation (depreciation) of investments (143) (430) (7) (1,035) ------- ------- ------ ---------- Increase (decrease) in net assets resulting from operations (119) 70 48 537,615 ------- ------- ------ ---------- PRINCIPAL TRANSACTIONS: Net premiums 2,931 2,693 7 259,538 Net transfers from (to) other Divisions or fixed rate option 3,491 12,950 3,676 519,928 Internal rollovers -- -- -- -- Cost of insurance and other charges (1,842) (1,772) (277) (226,560) Administrative charges (153) (149) -- (12,181) Policy loans -- -- -- (42,037) Death benefits -- -- -- (4,449) Withdrawals -- -- -- (379,870) ------- ------- ------ ---------- Increase (decrease) in net assets resulting from principal transactions 4,427 13,722 3,406 114,369 ------- ------- ------ ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 4,308 13,792 3,454 651,984 NET ASSETS: Beginning of year -- -- -- 4,936,230 ------- ------- ------ ---------- End of year $ 4,308 $13,792 $3,454 $5,588,214 ======= ======= ====== ========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ -- $ -- $ -- $ 35,303 Net realized gain (loss) on investments -- -- -- 331,780 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments -- -- -- 905,524 ------- ------- ------ ---------- Increase (decrease) in net assets resulting from operations -- -- -- 1,272,607 ------- ------- ------ ---------- PRINCIPAL TRANSACTIONS: Net premiums -- -- -- 288,292 Net transfers from (to) other Divisions or fixed rate option -- -- -- 140,931 Internal rollovers -- -- -- -- Cost of insurance and other charges -- -- -- (204,247) Administrative charges -- -- -- (13,500) Policy loans -- -- -- (57,680) Death benefits -- -- -- (13,475) Withdrawals -- -- -- (212,320) ------- ------- ------ ---------- Increase (decrease) in net assets resulting from principal transactions -- -- -- (71,999) ------- ------- ------ ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- -- -- 1,200,608 NET ASSETS: Beginning of year -- -- -- 3,735,622 ------- ------- ------ ---------- End of year $ -- $ -- $ -- $4,936,230 ======= ======= ====== ==========
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, 2014 AND 2013
Divisions ------------------------------------------------------- Dreyfus VIF Fidelity VIP International Dreyfus VIF Asset Value Opportunistic Dreyfus VIF Manager Portfolio - Small Cap Quality Bond Portfolio - Initial Portfolio - Portfolio - Service Shares Initial Shares Initial Shares Class 2 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 1,800 $ (41,963) $ 96,495 $ 33,655 Net realized gain (loss) on investments 2,541 1,028,391 44,395 193,410 Capital gain distributions from mutual funds -- -- -- 221,909 Net change in unrealized appreciation (depreciation) of investments (18,907) (934,258) 111,787 (220,728) -------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations (14,566) 52,170 252,677 228,246 -------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 21,721 545,998 394,481 366,756 Net transfers from (to) other Divisions or fixed rate option 7,382 (783,599) (35,878) (182) Internal rollovers -- -- -- -- Cost of insurance and other charges (8,503) (507,659) (619,248) (301,968) Administrative charges (1,086) (23,485) (18,178) (16,840) Policy loans (772) (46,080) (11,621) (10,633) Death benefits -- (36,771) (14,220) (30,775) Withdrawals (10,263) (1,120,634) (511,650) (372,802) -------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions 8,479 (1,972,230) (816,314) (366,444) -------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (6,087) (1,920,060) (563,637) (138,198) NET ASSETS: Beginning of year 145,715 9,596,389 6,157,970 4,672,189 -------- ----------- ---------- ---------- End of year $139,628 $ 7,676,329 $5,594,333 $4,533,991 ======== =========== ========== ========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 1,773 $ (41,655) $ 151,187 $ 35,195 Net realized gain (loss) on investments 364 649,552 65,253 148,799 Capital gain distributions from mutual funds -- -- -- 11,168 Net change in unrealized appreciation (depreciation) of investments 21,654 2,520,385 (360,366) 421,722 -------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations 23,791 3,128,282 (143,926) 616,884 -------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 22,465 583,422 410,034 358,508 Net transfers from (to) other Divisions or fixed rate option 14,835 (337,305) 37,908 (1,299) Internal rollovers -- -- -- -- Cost of insurance and other charges (10,956) (513,640) (638,291) (307,139) Administrative charges (1,123) (25,169) (18,854) (16,647) Policy loans (352) (66,974) (41,164) (32,096) Death benefits -- (3,144) (17,822) (34,824) Withdrawals (2,257) (549,492) (509,341) (265,180) -------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions 22,612 (912,302) (777,530) (298,677) -------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 46,403 2,215,980 (921,456) 318,207 NET ASSETS: Beginning of year 99,312 7,380,409 7,079,426 4,353,982 -------- ----------- ---------- ---------- End of year $145,715 $ 9,596,389 $6,157,970 $4,672,189 ======== =========== ========== ==========
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, 2014 AND 2013
Divisions -------------------------------------------------------- Fidelity VIP Fidelity VIP Freedom Freedom Fidelity VIP Fidelity VIP 2020 2025 Contrafund Equity-Income Portfolio - Portfolio - Portfolio - Portfolio - Service Service Service Class 2 Service Class 2 Class 2 Class 2 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 68,109 $ 371,996 $ 3,289 $ 5,330 Net realized gain (loss) on investments 2,326,663 967,843 11,261 28,051 Capital gain distributions from mutual funds 679,246 252,791 6,427 13,839 Net change in unrealized appreciation (depreciation) of investments 293,249 (200,691) (7,117) (16,520) ----------- ----------- --------- --------- Increase (decrease) in net assets resulting from operations 3,367,267 1,391,939 13,860 30,700 ----------- ----------- --------- --------- PRINCIPAL TRANSACTIONS: Net premiums 1,678,794 1,136,890 45,912 64,118 Net transfers from (to) other Divisions or fixed rate option 1,326,373 50,168 44,866 (864) Internal rollovers 2,116 2,116 -- -- Cost of insurance and other charges (1,314,591) (809,943) (23,032) (50,777) Administrative charges (80,471) (55,030) (2,320) (3,206) Policy loans (243,852) (118,581) (12,605) 7,631 Death benefits (111,672) (78,809) (251) -- Withdrawals (2,321,589) (1,570,867) (52,477) (132,790) ----------- ----------- --------- --------- Increase (decrease) in net assets resulting from principal transactions (1,064,892) (1,444,056) 93 (115,888) ----------- ----------- --------- --------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,302,375 (52,117) 13,953 (85,188) NET ASSETS: Beginning of year 31,814,973 17,985,957 348,635 722,900 ----------- ----------- --------- --------- End of year $34,117,348 $17,933,840 $ 362,588 $ 637,712 =========== =========== ========= ========= FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 75,702 $ 290,000 $ 2,894 $ 7,494 Net realized gain (loss) on investments 1,689,965 875,332 16,027 32,627 Capital gain distributions from mutual funds 8,433 1,136,609 4,319 9,951 Net change in unrealized appreciation (depreciation) of investments 5,833,916 1,690,343 19,597 62,213 ----------- ----------- --------- --------- Increase (decrease) in net assets resulting from operations 7,608,016 3,992,284 42,837 112,285 ----------- ----------- --------- --------- PRINCIPAL TRANSACTIONS: Net premiums 1,852,589 1,279,502 52,731 64,873 Net transfers from (to) other Divisions or fixed rate option (166,451) (258,221) 54,644 111,904 Internal rollovers -- -- -- -- Cost of insurance and other charges (1,312,262) (827,005) (27,444) (44,629) Administrative charges (89,872) (62,143) (2,636) (3,244) Policy loans (126,663) (201,286) 700 25,778 Death benefits (53,740) (64,946) (45) (23) Withdrawals (1,876,073) (1,097,906) (141,566) (59,394) ----------- ----------- --------- --------- Increase (decrease) in net assets resulting from principal transactions (1,772,472) (1,232,005) (63,616) 95,265 ----------- ----------- --------- --------- TOTAL INCREASE (DECREASE) IN NET ASSETS 5,835,544 2,760,279 (20,779) 207,550 NET ASSETS: Beginning of year 25,979,429 15,225,678 369,414 515,350 ----------- ----------- --------- --------- End of year $31,814,973 $17,985,957 $ 348,635 $ 722,900 =========== =========== ========= =========
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, 2014 AND 2013
Divisions -------------------------------------------------------- Fidelity VIP Fidelity VIP Freedom Money 2030 Fidelity VIP Fidelity VIP Market Portfolio - Growth Mid Cap Portfolio - Service Portfolio - Portfolio - Service Class 2 Service Class 2 Service Class 2 Class 2 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 7,870 $ (89,328) $ (63,118) $ (170) Net realized gain (loss) on investments 28,510 1,245,457 320,495 -- Capital gain distributions from mutual funds 19,532 -- 252,734 -- Net change in unrealized appreciation (depreciation) of investments (19,114) 496,218 43,235 -- ---------- ----------- ----------- --------- Increase (decrease) in net assets resulting from operations 36,798 1,652,347 553,346 (170) ---------- ----------- ----------- --------- PRINCIPAL TRANSACTIONS: Net premiums 133,787 971,979 661,500 631,753 Net transfers from (to) other Divisions or fixed rate option (78,810) (29,572) 83,788 (920,264) Internal rollovers -- -- -- 476,873 Cost of insurance and other charges (38,542) (717,938) (400,891) (65,931) Administrative charges (6,712) (46,490) (33,008) (46,364) Policy loans 5,122 (66,913) (51,207) (52,529) Death benefits -- (10,026) (3,017) -- Withdrawals (21,211) (1,006,704) (665,440) -- ---------- ----------- ----------- --------- Increase (decrease) in net assets resulting from principal transactions (6,366) (905,664) (408,275) 23,538 ---------- ----------- ----------- --------- TOTAL INCREASE (DECREASE) IN NET ASSETS 30,432 746,683 145,071 23,368 NET ASSETS: Beginning of year 979,103 16,170,061 10,683,514 -- ---------- ----------- ----------- --------- End of year $1,009,535 $16,916,744 $10,828,585 $ 23,368 ========== =========== =========== ========= FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 8,788 $ (75,106) $ (32,721) $ -- Net realized gain (loss) on investments 16,926 1,133,221 206,259 -- Capital gain distributions from mutual funds 12,135 9,997 1,255,653 -- Net change in unrealized appreciation (depreciation) of investments 122,262 3,266,992 1,372,196 -- ---------- ----------- ----------- --------- Increase (decrease) in net assets resulting from operations 160,111 4,335,104 2,801,387 -- ---------- ----------- ----------- --------- PRINCIPAL TRANSACTIONS: Net premiums 139,913 1,036,224 722,960 -- Net transfers from (to) other Divisions or fixed rate option 3,960 (202,901) (16,830) -- Internal rollovers -- -- 252 -- Cost of insurance and other charges (36,565) (699,310) (398,221) -- Administrative charges (6,993) (50,252) (36,195) -- Policy loans 45,979 (105,887) (42,463) -- Death benefits (24) (32,849) (5,883) -- Withdrawals (51,756) (974,224) (444,806) -- ---------- ----------- ----------- --------- Increase (decrease) in net assets resulting from principal transactions 94,514 (1,029,199) (221,186) -- ---------- ----------- ----------- --------- TOTAL INCREASE (DECREASE) IN NET ASSETS 254,625 3,305,905 2,580,201 -- NET ASSETS: Beginning of year 724,478 12,864,156 8,103,313 -- ---------- ----------- ----------- --------- End of year $ 979,103 $16,170,061 $10,683,514 $ -- ========== =========== =========== =========
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, 2014 AND 2013
Divisions ------------------------------------------------- Franklin Templeton Franklin Franklin Franklin Franklin Small-Mid Templeton Templeton Templeton Cap Franklin U.S. Franklin Franklin Small Growth Government Mutual Cap Value VIP Securities Shares VIP VIP Fund - Fund - VIP Fund - Fund - Class 2 Class 2 Class 2 Class 2 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 529 $ (232) $ 65,046 $ 103,903 Net realized gain (loss) on investments 492,039 1,162 (54,497) 488,402 Capital gain distributions from mutual funds 623,424 9,043 -- 37,475 Net change in unrealized appreciation (depreciation) of investments (1,129,367) (6,837) 82,404 (178,979) ----------- ------- ---------- ---------- Increase (decrease) in net assets resulting from operations (13,375) 3,136 92,953 450,801 ----------- ------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 406,642 671 237,494 433,281 Net transfers from (to) other Divisions or fixed rate option 185,715 (80) (178,113) (33,054) Internal rollovers -- -- -- -- Cost of insurance and other charges (269,280) (1,629) (186,190) (263,953) Administrative charges (20,980) -- (11,733) (21,592) Policy loans (46,627) (32) (22,460) (135,464) Death benefits -- (2,077) (14,427) (38,635) Withdrawals (573,582) (1,257) (790,668) (446,399) ----------- ------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (318,112) (4,404) (966,097) (505,816) ----------- ------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (331,487) (1,268) (873,144) (55,015) NET ASSETS: Beginning of year 8,569,689 45,932 3,878,306 7,065,970 ----------- ------- ---------- ---------- End of year $ 8,238,202 $44,664 $3,005,162 $7,010,955 =========== ======= ========== ========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 50,091 $ (206) $ 85,919 $ 100,149 Net realized gain (loss) on investments 332,863 3,132 (20,686) 455,261 Capital gain distributions from mutual funds 127,116 2,156 -- -- Net change in unrealized appreciation (depreciation) of investments 1,800,719 6,632 (182,913) 1,066,399 ----------- ------- ---------- ---------- Increase (decrease) in net assets resulting from operations 2,310,789 11,714 (117,680) 1,621,809 ----------- ------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 469,911 307 344,230 473,985 Net transfers from (to) other Divisions or fixed rate option (205,690) 6,831 (42,310) (173,560) Internal rollovers 252 -- -- -- Cost of insurance and other charges (277,331) (1,637) (225,533) (311,966) Administrative charges (23,359) -- (16,897) (23,439) Policy loans (19,750) (129) (26,300) (23,749) Death benefits (20,906) -- (799) (6,746) Withdrawals (468,887) (2,245) (209,571) (731,964) ----------- ------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (545,760) 3,127 (177,180) (797,439) ----------- ------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,765,029 14,841 (294,860) 824,370 NET ASSETS: Beginning of year 6,804,660 31,091 4,173,166 6,241,600 ----------- ------- ---------- ---------- End of year $ 8,569,689 $45,932 $3,878,306 $7,065,970 =========== ======= ========== ==========
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, 2014 AND 2013
Divisions ---------------------------------------------------- Goldman Franklin Sachs VIT Invesco Templeton Strategic Invesco V.I. V.I. Global Templeton Growth Fund - Core Equity Real Estate Foreign VIP Institutional Fund - Fund - Fund - Class 2 Shares Series I Series I FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 90,103 $ (5,248) $ 32,879 $ 2,141 Net realized gain (loss) on investments 393,663 1,836,761 563,360 2,321 Capital gain distributions from mutual funds -- 616,441 42,769 -- Net change in unrealized appreciation (depreciation) of investments (1,245,454) (1,628,929) 42,458 13,041 ----------- ----------- ---------- -------- Increase (decrease) in net assets resulting from operations (761,688) 819,025 681,466 17,503 ----------- ----------- ---------- -------- PRINCIPAL TRANSACTIONS: Net premiums 455,350 -- 633,769 17,561 Net transfers from (to) other Divisions or fixed rate option 129,243 (4,025,344) (35,295) 71,766 Internal rollovers -- -- -- -- Cost of insurance and other charges (339,286) (406,473) (583,012) (4,747) Administrative charges (19,789) (124) (23,618) (1,309) Policy loans (120,229) (238) (76,822) 133 Death benefits (7,016) -- (41,415) -- Withdrawals (637,372) (2,887) (752,155) (7,243) ----------- ----------- ---------- -------- Increase (decrease) in net assets resulting from principal transactions (539,099) (4,435,066) (878,548) 76,161 ----------- ----------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS (1,300,787) (3,616,041) (197,082) 93,664 NET ASSETS: Beginning of year 7,138,619 6,936,211 9,154,360 116,994 ----------- ----------- ---------- -------- End of year $ 5,837,832 $ 3,320,170 $8,957,278 $210,658 =========== =========== ========== ======== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 114,622 $ 9,482 $ 75,471 $ 4,219 Net realized gain (loss) on investments 266,095 181,681 407,271 1,403 Capital gain distributions from mutual funds -- 238,625 -- -- Net change in unrealized appreciation (depreciation) of investments 963,757 1,307,698 1,647,365 (3,501) ----------- ----------- ---------- -------- Increase (decrease) in net assets resulting from operations 1,344,474 1,737,486 2,130,107 2,121 ----------- ----------- ---------- -------- PRINCIPAL TRANSACTIONS: Net premiums 462,474 -- 653,555 25,513 Net transfers from (to) other Divisions or fixed rate option (19,356) (3,855) (91,763) 698 Internal rollovers -- -- -- 252 Cost of insurance and other charges (346,657) (388,429) (602,344) (5,922) Administrative charges (20,884) (133) (24,768) (1,289) Policy loans (144,915) (7) (31,337) (190) Death benefits (4,550) -- (57,016) -- Withdrawals (302,348) (898) (576,337) (1,488) ----------- ----------- ---------- -------- Increase (decrease) in net assets resulting from principal transactions (376,236) (393,322) (730,010) 17,574 ----------- ----------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 968,238 1,344,164 1,400,097 19,695 NET ASSETS: Beginning of year 6,170,381 5,592,047 7,754,263 97,299 ----------- ----------- ---------- -------- End of year $ 7,138,619 $ 6,936,211 $9,154,360 $116,994 =========== =========== ========== ========
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, 2014 AND 2013
Divisions --------------------------------------------------- Invesco V.I. Invesco V.I. Government Invesco V.I. Invesco V.I. American Securities High Yield International Franchise Fund - Fund - Growth Fund - Fund - Series I Series I Series I Series I FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 1,063 $ 104,496 $ 87,026 $ (29) Net realized gain (loss) on investments (2,392) 27,262 541,182 842 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 3,127 (101,838) (621,513) (324) -------- ---------- ----------- ------- Increase (decrease) in net assets resulting from operations 1,798 29,920 6,695 489 -------- ---------- ----------- ------- PRINCIPAL TRANSACTIONS: Net premiums 1,807 141,318 600,772 -- Net transfers from (to) other Divisions or fixed rate option 1,564 5,258 (353,681) (19) Internal rollovers -- -- -- -- Cost of insurance and other charges (12,591) (47,674) (431,868) (422) Administrative charges -- (6,785) (28,159) -- Policy loans 5,674 (6,931) (51,499) -- Death benefits (26,170) (1,739) (30,210) (1,540) Withdrawals (5,697) (90,222) (923,263) -- -------- ---------- ----------- ------- Increase (decrease) in net assets resulting from principal transactions (35,413) (6,775) (1,217,908) (1,981) -------- ---------- ----------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS (33,615) 23,145 (1,211,213) (1,492) NET ASSETS: Beginning of year 71,645 2,569,236 9,422,146 6,664 -------- ---------- ----------- ------- End of year $ 38,030 $2,592,381 $ 8,210,933 $ 5,172 ======== ========== =========== ======= FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 2,171 $ 104,084 $ 56,761 $ (7) Net realized gain (loss) on investments 664 36,147 331,661 775 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments (5,614) 7,739 1,089,515 1,176 -------- ---------- ----------- ------- Increase (decrease) in net assets resulting from operations (2,779) 147,970 1,477,937 1,944 -------- ---------- ----------- ------- PRINCIPAL TRANSACTIONS: Net premiums 640 191,556 666,759 -- Net transfers from (to) other Divisions or fixed rate option (9,426) 166,189 346,207 -- Internal rollovers -- -- 252 -- Cost of insurance and other charges (1,793) (46,935) (443,394) (514) Administrative charges -- (9,266) (30,915) -- Policy loans (6,884) (3,660) (139,386) -- Death benefits -- (321) (25,334) -- Withdrawals -- (145,446) (765,280) -- -------- ---------- ----------- ------- Increase (decrease) in net assets resulting from principal transactions (17,463) 152,117 (391,091) (514) -------- ---------- ----------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS (20,242) 300,087 1,086,846 1,430 NET ASSETS: Beginning of year 91,887 2,269,149 8,335,300 5,234 -------- ---------- ----------- ------- End of year $ 71,645 $2,569,236 $ 9,422,146 $ 6,664 ======== ========== =========== =======
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, 2014 AND 2013
Divisions --------------------------------------------------- Janus Aspen Janus Aspen Invesco V.I. Enterprise Forty Janus Aspen Growth and Portfolio - Portfolio - Overseas Income Fund - Service Service Portfolio - Series I Shares Shares Service Shares FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 125,963 $ (25,128) $ (1,571) $ 237,518 Net realized gain (loss) on investments 612,454 306,204 17,922 (369,274) Capital gain distributions from mutual funds 1,188,507 351,547 135,031 989,932 Net change in unrealized appreciation (depreciation) of investments (978,738) (74,500) (113,653) (2,078,918) ----------- ---------- --------- ----------- Increase (decrease) in net assets resulting from operations 948,186 558,123 37,729 (1,220,742) ----------- ---------- --------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 516,918 268,591 33,949 775,329 Net transfers from (to) other Divisions or fixed rate option 151,270 21,006 24,323 (63,786) Internal rollovers -- 1,587 -- -- Cost of insurance and other charges (428,255) (176,970) (10,324) (502,271) Administrative charges (27,405) (13,073) (1,808) (34,962) Policy loans (64,823) (3,362) -- (33,307) Death benefits (63,142) (8,294) -- (18,876) Withdrawals (494,765) (399,712) (7,590) (505,708) ----------- ---------- --------- ----------- Increase (decrease) in net assets resulting from principal transactions (410,202) (310,227) 38,550 (383,581) ----------- ---------- --------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 537,984 247,896 76,279 (1,604,323) NET ASSETS: Beginning of year 9,952,150 5,081,183 416,706 10,039,056 ----------- ---------- --------- ----------- End of year $10,490,134 $5,329,079 $ 492,985 $ 8,434,733 =========== ========== ========= =========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 82,619 $ (8,948) $ 622 $ 237,090 Net realized gain (loss) on investments 631,965 288,867 5,044 (1,153,127) Capital gain distributions from mutual funds 79,568 -- -- -- Net change in unrealized appreciation (depreciation) of investments 1,749,547 965,996 90,010 2,136,413 ----------- ---------- --------- ----------- Increase (decrease) in net assets resulting from operations 2,543,699 1,245,915 95,676 1,220,376 ----------- ---------- --------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 555,481 295,866 36,366 882,764 Net transfers from (to) other Divisions or fixed rate option 16,397 6,702 (4,715) (313,256) Internal rollovers -- -- 252 -- Cost of insurance and other charges (436,433) (185,960) (12,542) (529,263) Administrative charges (25,929) (14,410) (1,831) (41,371) Policy loans (73,699) (22,336) -- (53,689) Death benefits (2,646) (252) -- (13,813) Withdrawals (421,281) (313,011) (6,175) (615,960) ----------- ---------- --------- ----------- Increase (decrease) in net assets resulting from principal transactions (388,110) (233,401) 11,355 (684,588) ----------- ---------- --------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,155,589 1,012,514 107,031 535,788 NET ASSETS: Beginning of year 7,796,561 4,068,669 309,675 9,503,268 ----------- ---------- --------- ----------- End of year $ 9,952,150 $5,081,183 $ 416,706 $10,039,056 =========== ========== ========= ===========
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, 2014 AND 2013
Divisions ------------------------------------------------ JPMorgan Janus Aspen JPMorgan Insurance JPMorgan Global Insurance Trust Insurance Research Trust Core International Trust Mid Portfolio - Bond Equity Cap Value Service Portfolio - Portfolio - Portfolio - Shares Class 1 Class 1 Class 1 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 15,489 $ 3,035 $ 856 $ 1,566 Net realized gain (loss) on investments 159,568 (325) 7,606 77,808 Capital gain distributions from mutual funds -- -- -- 42,500 Net change in unrealized appreciation (depreciation) of investments 29,509 1,761 (10,664) (13,519) ---------- -------- -------- --------- Increase (decrease) in net assets resulting from operations 204,566 4,471 (2,202) 108,355 ---------- -------- -------- --------- PRINCIPAL TRANSACTIONS: Net premiums 273,010 22,615 9,058 -- Net transfers from (to) other Divisions or fixed rate option (84,268) 62,049 (62,600) (6,261) Internal rollovers -- -- -- -- Cost of insurance and other charges (199,739) (9,927) (5,723) (10,723) Administrative charges (12,170) (1,164) (445) (16) Policy loans (25,663) (491) 890 (3,341) Death benefits (213) -- -- (13,614) Withdrawals (134,417) (982) (2,766) (10,596) ---------- -------- -------- --------- Increase (decrease) in net assets resulting from principal transactions (183,460) 72,100 (61,586) (44,551) ---------- -------- -------- --------- TOTAL INCREASE (DECREASE) IN NET ASSETS 21,106 76,571 (63,788) 63,804 NET ASSETS: Beginning of year 3,174,577 89,709 63,788 770,690 ---------- -------- -------- --------- End of year $3,195,683 $166,280 $ -- $ 834,494 ========== ======== ======== ========= FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 16,261 $ 3,252 $ 830 $ 3,549 Net realized gain (loss) on investments 129,468 (245) 1,326 61,074 Capital gain distributions from mutual funds -- -- -- 8,864 Net change in unrealized appreciation (depreciation) of investments 556,534 (4,695) 6,141 134,161 ---------- -------- -------- --------- Increase (decrease) in net assets resulting from operations 702,263 (1,688) 8,297 207,648 ---------- -------- -------- --------- PRINCIPAL TRANSACTIONS: Net premiums 288,642 18,189 11,494 -- Net transfers from (to) other Divisions or fixed rate option (15,228) 2,408 (82) (76,785) Internal rollovers -- -- -- -- Cost of insurance and other charges (182,637) (8,106) (6,807) (17,874) Administrative charges (13,022) (909) (575) (16) Policy loans (18,566) 108 (1,775) (38,156) Death benefits (16,330) -- -- -- Withdrawals (213,404) (1,689) (1,116) (14,939) ---------- -------- -------- --------- Increase (decrease) in net assets resulting from principal transactions (170,545) 10,001 1,139 (147,770) ---------- -------- -------- --------- TOTAL INCREASE (DECREASE) IN NET ASSETS 531,718 8,313 9,436 59,878 NET ASSETS: Beginning of year 2,642,859 81,396 54,352 710,812 ---------- -------- -------- --------- End of year $3,174,577 $ 89,709 $ 63,788 $ 770,690 ========== ======== ======== =========
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, 2014 AND 2013
Divisions ---------------------------------------------------------- JPMorgan Insurance MFS VIT Trust Small MFS VIT MFS VIT New Cap Core Core Equity Growth Discovery Portfolio - Series - Series - Initial Series - Initial Class 1 Initial Class Class Class FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ (16,512) $ 12,132 $ (40,423) $ (29,070) Net realized gain (loss) on investments 276,246 275,778 774,477 218,906 Capital gain distributions from mutual funds 288,354 -- 707,005 1,122,397 Net change in unrealized appreciation (depreciation) of investments (230,012) 119,825 (570,243) (1,785,436) ---------- ---------- ----------- ----------- Increase (decrease) in net assets resulting from operations 318,076 407,735 870,816 (473,203) ---------- ---------- ----------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 239,117 265,701 610,358 298,531 Net transfers from (to) other Divisions or fixed rate option 275,983 82,472 1,262 (111,155) Internal rollovers -- 1,058 1,058 -- Cost of insurance and other charges (133,466) (212,801) (647,010) (233,536) Administrative charges (11,723) (11,951) (22,829) (15,131) Policy loans (17,229) (13,676) (88,460) (11,419) Death benefits (1,481) (3,327) (50,846) (6,425) Withdrawals (251,589) (182,818) (778,335) (416,443) ---------- ---------- ----------- ----------- Increase (decrease) in net assets resulting from principal transactions 99,612 (75,342) (974,802) (495,578) ---------- ---------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 417,688 332,393 (103,986) (968,781) NET ASSETS: Beginning of year 3,563,217 3,894,856 11,066,832 6,071,770 ---------- ---------- ----------- ----------- End of year $3,980,905 $4,227,249 $10,962,846 $ 5,102,989 ========== ========== =========== =========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ (2,344) $ 17,051 $ (26,632) $ (30,317) Net realized gain (loss) on investments 307,742 314,863 648,388 123,189 Capital gain distributions from mutual funds -- -- 72,726 43,887 Net change in unrealized appreciation (depreciation) of investments 791,633 697,859 2,341,618 1,674,925 ---------- ---------- ----------- ----------- Increase (decrease) in net assets resulting from operations 1,097,031 1,029,773 3,036,100 1,811,684 ---------- ---------- ----------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 258,218 320,961 718,704 340,470 Net transfers from (to) other Divisions or fixed rate option (77,996) (23,687) 175,777 94,258 Internal rollovers -- -- -- -- Cost of insurance and other charges (135,840) (211,992) (630,793) (225,230) Administrative charges (12,511) (14,762) (27,694) (16,391) Policy loans (43,433) (18,954) (27,399) (40,021) Death benefits (6,702) (33,469) (11,154) (18,467) Withdrawals (278,633) (322,939) (711,022) (433,157) ---------- ---------- ----------- ----------- Increase (decrease) in net assets resulting from principal transactions (296,897) (304,842) (513,581) (298,538) ---------- ---------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 800,134 724,931 2,522,519 1,513,146 NET ASSETS: Beginning of year 2,763,083 3,169,925 8,544,313 4,558,624 ---------- ---------- ----------- ----------- End of year $3,563,217 $3,894,856 $11,066,832 $ 6,071,770 ========== ========== =========== ===========
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, 2014 AND 2013
Divisions --------------------------------------------------- Neubeger Berman Neberger AMT Berman AMT Large MFS VIT MFS VIT Mid-Cap Cap Research Total Return Growth Value Series - Series - Portfolio - Portfolio - Initial Class Initial Class Class I Class 1 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 8,324 $ 5,692 $ (29,374) $ 82 Net realized gain (loss) on investments 180,859 44,968 313,323 1,645 Capital gain distributions from mutual funds 200,832 11,206 2,368,141 -- Net change in unrealized appreciation (depreciation) of investments (144,112) (27,947) (2,258,516) 1,399 ---------- --------- ----------- ------- Increase (decrease) in net assets resulting from operations 245,903 33,919 393,574 3,126 ---------- --------- ----------- ------- PRINCIPAL TRANSACTIONS: Net premiums 186,308 62 333,629 600 Net transfers from (to) other Divisions or fixed rate option (4,385) 557 (79,815) (104) Internal rollovers -- -- -- -- Cost of insurance and other charges (156,707) (35,123) (224,415) (3,417) Administrative charges (9,569) -- (16,146) -- Policy loans (12,804) 157 (37,349) (141) Death benefits (1,949) -- -- -- Withdrawals (178,422) (70,257) (229,817) -- ---------- --------- ----------- ------- Increase (decrease) in net assets resulting from principal transactions (177,528) (104,604) (253,913) (3,062) ---------- --------- ----------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS 68,375 (70,685) 139,661 64 NET ASSETS: Beginning of year 2,692,142 484,088 5,795,972 35,254 ---------- --------- ----------- ------- End of year $2,760,517 $ 413,403 $ 5,935,633 $35,318 ========== ========= =========== ======= FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ (4,996) $ 5,495 $ (28,567) $ 218 Net realized gain (loss) on investments 143,753 28,174 388,214 3,810 Capital gain distributions from mutual funds 5,738 -- -- -- Net change in unrealized appreciation (depreciation) of investments 497,403 44,729 1,079,848 4,323 ---------- --------- ----------- ------- Increase (decrease) in net assets resulting from operations 641,898 78,398 1,439,495 8,351 ---------- --------- ----------- ------- PRINCIPAL TRANSACTIONS: Net premiums 209,880 933 363,436 200 Net transfers from (to) other Divisions or fixed rate option 76,048 449 (35,173) 6,057 Internal rollovers -- -- -- -- Cost of insurance and other charges (150,559) (35,660) (241,117) (3,085) Administrative charges (9,996) -- (17,606) -- Policy loans (5,233) (36) (26,992) (212) Death benefits (3,133) -- (54,067) (2,324) Withdrawals (109,763) (6,824) (250,127) (1,916) ---------- --------- ----------- ------- Increase (decrease) in net assets resulting from principal transactions 7,244 (41,138) (261,646) (1,280) ---------- --------- ----------- ------- TOTAL INCREASE (DECREASE) IN NET ASSETS 649,142 37,260 1,177,849 7,071 NET ASSETS: Beginning of year 2,043,000 446,828 4,618,123 28,183 ---------- --------- ----------- ------- End of year $2,692,142 $ 484,088 $ 5,795,972 $35,254 ========== ========= =========== =======
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, 2014 AND 2013
Divisions ----------------------------------------------- Neuberger Oppenheimer Berman Global AMT Strategic Oppenheimer Socially Oppenheimer Income Global Fund/ Responsive Capital Fund/VA VA - Non- Portfolio - Income (Non- Service Class I Fund A Service) Shares FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ (169) $ 23,170 $ 116 $ 37,251 Net realized gain (loss) on investments 1,203 138,859 (91) 539,643 Capital gain distributions from mutual funds -- -- -- 320,688 Net change in unrealized appreciation (depreciation) of investments 6,057 (54,537) 47 (786,198) ------- ---------- -------- ---------- Increase (decrease) in net assets resulting from operations 7,091 107,492 72 111,384 ------- ---------- -------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 8,084 135,193 3,987 536,253 Net transfers from (to) other Divisions or fixed rate option 156 (8,154) (28) 200,970 Internal rollovers -- -- -- -- Cost of insurance and other charges (510) (73,022) (1,597) (263,795) Administrative charges (662) (6,941) -- (27,009) Policy loans -- (10,241) 193 (64,283) Death benefits -- (11,283) (2,983) (659) Withdrawals (3,875) (360,644) (218) (451,944) ------- ---------- -------- ---------- Increase (decrease) in net assets resulting from principal transactions 3,193 (335,092) (646) (70,467) ------- ---------- -------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 10,284 (227,600) (574) 40,917 NET ASSETS: Beginning of year 74,333 1,540,831 5,071 6,979,241 ------- ---------- -------- ---------- End of year $84,617 $1,313,231 $ 4,497 $7,020,158 ======= ========== ======== ========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 84 $ 24,763 $ 1,937 $ 48,359 Net realized gain (loss) on investments 194 54,275 (1,613) 307,485 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 18,499 92,383 (903) 1,138,564 ------- ---------- -------- ---------- Increase (decrease) in net assets resulting from operations 18,777 171,421 (579) 1,494,408 ------- ---------- -------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 8,639 154,263 4,000 522,863 Net transfers from (to) other Divisions or fixed rate option (4) (7,045) (40,134) 120,556 Internal rollovers -- -- -- 252 Cost of insurance and other charges (601) (80,954) (2,536) (260,198) Administrative charges (714) (7,870) -- (26,516) Policy loans -- (5,734) 186 (135,145) Death benefits -- -- -- (12,012) Withdrawals -- (73,046) -- (321,852) ------- ---------- -------- ---------- Increase (decrease) in net assets resulting from principal transactions 7,320 (20,386) (38,484) (112,052) ------- ---------- -------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 26,097 151,035 (39,063) 1,382,356 NET ASSETS: Beginning of year 48,236 1,389,796 44,134 5,596,885 ------- ---------- -------- ---------- End of year $74,333 $1,540,831 $ 5,071 $6,979,241 ======= ========== ======== ==========
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, 2014 AND 2013
Divisions ---------------------------------------------------------------- PIMCO VIT Global Bond PIMCO VIT PIMCO VIT PIMCO VIT Portfolio Real Return Short-Term CommodityRealReturn (Unhedged) - Portfolio - Portfolio - Strategy Portfolio - Administrative Administrative Administrative Administrative Class Class Class Class FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ (2,952) $ 1,395 $ 107,468 $ 6,491 Net realized gain (loss) on investments (88,193) (861) (158,616) 10,826 Capital gain distributions from mutual funds -- 2,475 -- 4,510 Net change in unrealized appreciation (depreciation) of investments (129,646) (2,759) 379,234 (14,185) ---------- -------- ----------- ----------- Increase (decrease) in net assets resulting from operations (220,791) 250 328,086 7,642 ---------- -------- ----------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 124,082 9,499 767,047 338,963 Net transfers from (to) other Divisions or fixed rate option (72,978) 55,179 (82,627) (60,038) Internal rollovers -- -- -- -- Cost of insurance and other charges (69,225) (8,117) (785,436) (273,351) Administrative charges (6,237) (903) (34,825) (16,768) Policy loans (5,582) (4,553) (23,446) (26,699) Death benefits -- -- (79,589) (47,839) Withdrawals (71,365) (120) (789,373) (281,952) ---------- -------- ----------- ----------- Increase (decrease) in net assets resulting from principal transactions (101,305) 50,985 (1,028,249) (367,684) ---------- -------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (322,096) 51,235 (700,163) (360,042) NET ASSETS: Beginning of year 1,261,795 58,532 12,132,852 4,804,840 ---------- -------- ----------- ----------- End of year $ 939,699 $109,767 $11,432,689 $ 4,444,798 ========== ======== =========== =========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 15,908 $ 348 $ 145,339 $ 9,353 Net realized gain (loss) on investments (172,256) (434) (129,992) 28,934 Capital gain distributions from mutual funds -- 410 98,891 -- Net change in unrealized appreciation (depreciation) of investments (78,792) (5,602) (1,582,541) (37,214) ---------- -------- ----------- ----------- Increase (decrease) in net assets resulting from operations (235,140) (5,278) (1,468,303) 1,073 ---------- -------- ----------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 161,864 15,978 928,974 384,243 Net transfers from (to) other Divisions or fixed rate option (27,327) 939 (239,991) (54,470) Internal rollovers 252 -- -- -- Cost of insurance and other charges (94,350) (6,619) (831,069) (239,196) Administrative charges (8,304) (799) (43,399) (19,258) Policy loans (2,191) -- (58,823) (7,045) Death benefits (1,529) -- (20,374) (9,408) Withdrawals (73,511) (270) (933,382) (1,895,422) ---------- -------- ----------- ----------- Increase (decrease) in net assets resulting from principal transactions (45,096) 9,229 (1,198,064) (1,840,556) ---------- -------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (280,236) 3,951 (2,666,367) (1,839,483) NET ASSETS: Beginning of year 1,542,031 54,581 14,799,219 6,644,323 ---------- -------- ----------- ----------- End of year $1,261,795 $ 58,532 $12,132,852 $ 4,804,840 ========== ======== =========== ===========
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, 2014 AND 2013
Divisions -------------------------------------------------- Pioneer PIMCO VIT Select Mid Pioneer Mid Total Return Pioneer Fund Cap Growth Cap Value Portfolio - VCT VCT VCT Administrative Portfolio - Portfolio - Portfolio - Class Class I Class I Class I FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 257,587 $ 12,129 $ (14,057) $ 2,772 Net realized gain (loss) on investments (33,363) 47,324 115,276 56,715 Capital gain distributions from mutual funds -- 118,892 602,747 158,698 Net change in unrealized appreciation (depreciation) of investments 357,145 (9,034) (446,329) (66,354) ----------- ---------- ---------- ---------- Increase (decrease) in net assets resulting from operations 581,369 169,311 257,637 151,831 ----------- ---------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 1,011,757 79,252 155,392 74,321 Net transfers from (to) other Divisions or fixed rate option 118,166 (10,397) (45,254) 85,791 Internal rollovers -- -- -- -- Cost of insurance and other charges (956,192) (81,766) (158,135) (31,477) Administrative charges (50,728) (2,635) (5,747) (3,755) Policy loans (58,639) (9,778) (10,806) (8,547) Death benefits (107,572) (10,465) (32,022) -- Withdrawals (1,359,300) (129,883) (182,225) (118,661) ----------- ---------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (1,402,508) (165,672) (278,797) (2,328) ----------- ---------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (821,139) 3,639 (21,160) 149,503 NET ASSETS: Beginning of year 16,119,465 1,671,452 3,037,831 1,145,657 ----------- ---------- ---------- ---------- End of year $15,298,326 $1,675,091 $3,016,671 $1,295,160 =========== ========== ========== ========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 271,428 $ 12,608 $ (13,085) $ 3,124 Net realized gain (loss) on investments (26,863) 65,255 120,225 53,819 Capital gain distributions from mutual funds 140,442 76,613 116,151 -- Net change in unrealized appreciation (depreciation) of investments (835,931) 309,488 723,956 213,898 ----------- ---------- ---------- ---------- Increase (decrease) in net assets resulting from operations (450,924) 463,964 947,247 270,841 ----------- ---------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 1,274,065 90,321 158,204 95,962 Net transfers from (to) other Divisions or fixed rate option (346,916) (14,086) (15,059) (30,781) Internal rollovers -- -- -- -- Cost of insurance and other charges (1,013,886) (88,594) (164,139) (32,786) Administrative charges (62,598) (3,084) (5,982) (4,844) Policy loans (38,133) 1,115 (7,806) (8,476) Death benefits (46,495) (20,410) -- -- Withdrawals (1,167,971) (274,184) (253,912) (17,556) ----------- ---------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (1,401,934) (308,922) (288,694) 1,519 ----------- ---------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (1,852,858) 155,042 658,553 272,360 NET ASSETS: Beginning of year 17,972,323 1,516,410 2,379,278 873,297 ----------- ---------- ---------- ---------- End of year $16,119,465 $1,671,452 $3,037,831 $1,145,657 =========== ========== ========== ==========
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, 2014 AND 2013
Divisions ------------------------------------------------ Putnam Putnam VT VT Multi- Diversified Putnam VT Putnam VT Cap Income Growth and International Growth Fund - Income Fund - Value Fund - Fund - Class IB Class IB Class IB Class IB FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 515,476 $ 109,401 $ 38,676 $ (85) Net realized gain (loss) on investments (3,540) 650,771 156,417 4,604 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments (510,765) 476,968 (707,182) 1,211 ---------- ----------- ---------- -------- Increase (decrease) in net assets resulting from operations 1,171 1,237,140 (512,089) 5,730 ---------- ----------- ---------- -------- PRINCIPAL TRANSACTIONS: Net premiums 203,992 691,605 489,587 600 Net transfers from (to) other Divisions or fixed rate option 222,233 (64,250) 11,934 (461) Internal rollovers -- 2,646 -- -- Cost of insurance and other charges (305,567) (682,775) (293,886) (1,553) Administrative charges (10,893) (31,763) (23,120) -- Policy loans (28,623) (42,905) (33,803) (106) Death benefits (6,516) (23,628) (10,941) (1,976) Withdrawals (385,600) (546,074) (225,284) (7,952) ---------- ----------- ---------- -------- Increase (decrease) in net assets resulting from principal transactions (310,974) (697,144) (85,513) (11,448) ---------- ----------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS (309,803) 539,996 (597,602) (5,718) NET ASSETS: Beginning of year 6,887,646 12,432,215 5,206,801 49,309 ---------- ----------- ---------- -------- End of year $6,577,843 $12,972,211 $4,609,199 $ 43,591 ========== =========== ========== ======== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 185,883 $ 129,381 $ 94,156 $ (23) Net realized gain (loss) on investments (15,051) 587,313 157,763 2,092 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 310,544 2,603,908 696,571 10,012 ---------- ----------- ---------- -------- Increase (decrease) in net assets resulting from operations 481,376 3,320,602 948,490 12,081 ---------- ----------- ---------- -------- PRINCIPAL TRANSACTIONS: Net premiums 201,815 729,779 503,811 200 Net transfers from (to) other Divisions or fixed rate option (53,659) (38,363) 43,190 6,920 Internal rollovers -- -- -- -- Cost of insurance and other charges (287,799) (667,117) (295,983) (1,416) Administrative charges (10,620) (33,675) (23,576) -- Policy loans (30,241) (32,775) (102,142) (214) Death benefits (185) (33,400) (5,533) -- Withdrawals (242,931) (545,855) (392,084) -- ---------- ----------- ---------- -------- Increase (decrease) in net assets resulting from principal transactions (423,620) (621,406) (272,317) 5,490 ---------- ----------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 57,756 2,699,196 676,173 17,571 NET ASSETS: Beginning of year 6,829,890 9,733,019 4,530,628 31,738 ---------- ----------- ---------- -------- End of year $6,887,646 $12,432,215 $5,206,801 $ 49,309 ========== =========== ========== ========
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, 2014 AND 2013
Divisions ------------------------------------------ Putnam VT SunAmerica Small Cap Putnam VT Aggressive SunAmerica Value Voyager Growth Balanced Fund - Fund - Portfolio - Portfolio - Class IB Class IB Class 1 Class 1 FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 75 $ 494 $ (7,734) $ 18,086 Net realized gain (loss) on investments 10,760 11,559 165,523 234,549 Capital gain distributions from mutual funds 59,694 3,961 -- -- Net change in unrealized appreciation (depreciation) of investments (64,923) 2,060 (161,769) (28,182) -------- -------- ---------- ---------- Increase (decrease) in net assets resulting from operations 5,606 18,074 (3,980) 224,453 -------- -------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 7,550 787 137,687 137,576 Net transfers from (to) other Divisions or fixed rate option (17,965) (940) (2,576) 45,407 Internal rollovers -- -- -- -- Cost of insurance and other charges (10,165) (7,642) (57,992) (99,417) Administrative charges (338) -- (6,858) (6,675) Policy loans (2,602) (1,771) (2,121) (14,114) Death benefits (2,240) (1,719) (1,513) (35,534) Withdrawals (28,015) (12,951) (304,639) (484,817) -------- -------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (53,775) (24,236) (238,012) (457,574) -------- -------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (48,169) (6,162) (241,992) (233,121) NET ASSETS: Beginning of year 276,055 207,795 1,538,347 2,306,189 -------- -------- ---------- ---------- End of year $227,886 $201,633 $1,296,355 $2,073,068 ======== ======== ========== ========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ 752 $ 180 $ (8,361) $ 20,961 Net realized gain (loss) on investments 7,608 16,815 169,239 123,026 Capital gain distributions from mutual funds 3,102 -- -- -- Net change in unrealized appreciation (depreciation) of investments 62,298 33,082 292,382 189,786 -------- -------- ---------- ---------- Increase (decrease) in net assets resulting from operations 73,760 50,077 453,260 333,773 -------- -------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 7,754 1,027 142,567 136,498 Net transfers from (to) other Divisions or fixed rate option 19,632 52,851 22,816 366,377 Internal rollovers 252 -- -- -- Cost of insurance and other charges (10,017) (8,407) (58,609) (96,367) Administrative charges (351) -- (7,091) (6,758) Policy loans (231) 7 (18,127) (5,062) Death benefits -- -- (1,666) (6,774) Withdrawals (820) (2,073) (76,279) (114,358) -------- -------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions 16,219 43,405 3,611 273,556 -------- -------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 89,979 93,482 456,871 607,329 NET ASSETS: Beginning of year 186,076 114,313 1,081,476 1,698,860 -------- -------- ---------- ---------- End of year $276,055 $207,795 $1,538,347 $2,306,189 ======== ======== ========== ==========
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, 2014 AND 2013
Divisions ----------------------------------------- UIF Capital VALIC VALIC VALIC Growth Company I Company I Company I Portfolio - Dynamic Emerging Foreign Class I Allocation Economies Value Shares Fund Fund Fund FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ (15,287) $ 217 $ -- $ (3) Net realized gain (loss) on investments 219,663 (16) (5) (4) Capital gain distributions from mutual funds 221,673 299 -- -- Net change in unrealized appreciation (depreciation) of investments (247,226) (299) 58 (153) ---------- ------- ------ ------ Increase (decrease) in net assets resulting from operations 178,823 201 53 (160) ---------- ------- ------ ------ PRINCIPAL TRANSACTIONS: Net premiums 192,315 3,024 682 1,179 Net transfers from (to) other Divisions or fixed rate option (71,281) 19,599 6,152 920 Internal rollovers -- -- -- -- Cost of insurance and other charges (182,162) (3,914) (643) (504) Administrative charges (6,093) (155) (35) (66) Policy loans (28,652) -- -- -- Death benefits (34,315) -- -- -- Withdrawals (213,493) -- -- -- ---------- ------- ------ ------ Increase (decrease) in net assets resulting from principal transactions (343,681) 18,554 6,156 1,529 ---------- ------- ------ ------ TOTAL INCREASE (DECREASE) IN NET ASSETS (164,858) 18,755 6,209 1,369 NET ASSETS: Beginning of year 3,189,301 -- -- -- ---------- ------- ------ ------ End of year $3,024,443 $18,755 $6,209 $1,369 ========== ======= ====== ====== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ (1,228) $ -- $ -- $ -- Net realized gain (loss) on investments 110,100 -- -- -- Capital gain distributions from mutual funds 103,191 -- -- -- Net change in unrealized appreciation (depreciation) of investments 859,600 -- -- -- ---------- ------- ------ ------ Increase (decrease) in net assets resulting from operations 1,071,663 -- -- -- ---------- ------- ------ ------ PRINCIPAL TRANSACTIONS: Net premiums 185,735 -- -- -- Net transfers from (to) other Divisions or fixed rate option (210,896) -- -- -- Internal rollovers -- -- -- -- Cost of insurance and other charges (189,907) -- -- -- Administrative charges (5,971) -- -- -- Policy loans (33,750) -- -- -- Death benefits (2,018) -- -- -- Withdrawals (159,816) -- -- -- ---------- ------- ------ ------ Increase (decrease) in net assets resulting from principal transactions (416,623) -- -- -- ---------- ------- ------ ------ TOTAL INCREASE (DECREASE) IN NET ASSETS 655,040 -- -- -- NET ASSETS: Beginning of year 2,534,261 -- -- -- ---------- ------- ------ ------ End of year $3,189,301 $ -- $ -- $ -- ========== ======= ====== ======
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, 2014 AND 2013
Divisions ---------------------------------------------- VALIC VALIC VALIC VALIC Company II Company I Company II Company II Socially International Mid Cap Strategic Responsible Equities Value Bond Fund Fund Index Fund FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ (3) $ (23) $ -- $ 49,495 Net realized gain (loss) on investments (6) (11) 5 68,313 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 18 (265) 33 (272,899) ------- ------- ------- ---------- Increase (decrease) in net assets resulting from operations 9 (299) 38 (155,091) ------- ------- ------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 1,359 (716) 1,299 182,022 Net transfers from (to) other Divisions or fixed rate option 2,282 52,796 13,898 122,635 Internal rollovers -- -- -- -- Cost of insurance and other charges (1,352) (1,491) (1,007) (113,271) Administrative charges (71) (68) (70) (8,657) Policy loans -- 1 -- 5,872 Death benefits -- -- -- (36,862) Withdrawals -- -- -- (134,661) ------- ------- ------- ---------- Increase (decrease) in net assets resulting from principal transactions 2,218 50,522 14,120 17,078 ------- ------- ------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,227 50,223 14,158 (138,013) NET ASSETS: Beginning of year -- -- -- 2,621,512 ------- ------- ------- ---------- End of year $ 2,227 $50,223 $14,158 $2,483,499 ======= ======= ======= ========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ -- $ -- $ -- $ (14,002) Net realized gain (loss) on investments -- -- -- 35,401 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments -- -- -- 391,811 ------- ------- ------- ---------- Increase (decrease) in net assets resulting from operations -- -- -- 413,210 ------- ------- ------- ---------- PRINCIPAL TRANSACTIONS: Net premiums -- -- -- 206,872 Net transfers from (to) other Divisions or fixed rate option -- -- -- (71,596) Internal rollovers -- -- -- -- Cost of insurance and other charges -- -- -- (114,375) Administrative charges -- -- -- (9,998) Policy loans -- -- -- (6,425) Death benefits -- -- -- -- Withdrawals -- -- -- (140,709) ------- ------- ------- ---------- Increase (decrease) in net assets resulting from principal transactions -- -- -- (136,231) ------- ------- ------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- -- -- 276,979 NET ASSETS: Beginning of year -- -- -- 2,344,533 ------- ------- ------- ---------- End of year $ -- $ -- $ -- $2,621,512 ======= ======= ======= ==========
VL-R - 27 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Divisions --------------------------------------------------- VALIC VALIC VALIC VALIC Company I Company I Company I Company I Science & Mid Cap Index Money Market I Nasdaq-100 Technology Fund Fund Index Fund Fund FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 92,168 $ (64,415) $ 14,998 $ (7,781) Net realized gain (loss) on investments 814,656 -- 408,105 155,536 Capital gain distributions from mutual funds 643,322 -- 26,918 -- Net change in unrealized appreciation (depreciation) of investments (229,106) -- 423,719 102,962 ----------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations 1,321,040 (64,415) 873,740 250,717 ----------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 754,966 2,230,360 274,333 108,076 Net transfers from (to) other Divisions or fixed rate option (81,987) (131,077) (21,313) 119,988 Internal rollovers -- -- -- -- Cost of insurance and other charges (668,773) (1,528,895) (195,007) (62,484) Administrative charges (33,448) (85,505) (12,593) (5,238) Policy loans (89,085) (73,257) (49,695) (23,555) Death benefits (71,314) (51,213) (19,824) (292) Withdrawals (1,257,194) (1,981,680) (304,264) (100,100) ----------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (1,446,835) (1,621,267) (328,363) 36,395 ----------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (125,795) (1,685,682) 545,377 287,112 NET ASSETS: Beginning of year 15,589,772 13,099,199 5,132,899 1,829,945 ----------- ----------- ---------- ---------- End of year $15,463,977 $11,413,517 $5,678,276 $2,117,057 =========== =========== ========== ========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ (76,525) $ (79,296) $ (24,247) $ (8,181) Net realized gain (loss) on investments 541,227 -- 240,083 78,939 Capital gain distributions from mutual funds -- -- -- -- Net change in unrealized appreciation (depreciation) of investments 3,505,917 2 1,126,999 465,804 ----------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from operations 3,970,619 (79,294) 1,342,835 536,562 ----------- ----------- ---------- ---------- PRINCIPAL TRANSACTIONS: Net premiums 796,316 1,845,743 323,051 108,666 Net transfers from (to) other Divisions or fixed rate option 19,749 105,528 19,339 96,605 Internal rollovers -- -- -- -- Cost of insurance and other charges (660,408) (1,580,455) (190,828) (64,069) Administrative charges (35,279) (75,372) (15,267) (5,205) Policy loans (59,224) (21,697) (19,688) (6,646) Death benefits (29,329) (39,947) (1,698) (9,712) Withdrawals (1,165,384) (999,620) (180,350) (120,560) ----------- ----------- ---------- ---------- Increase (decrease) in net assets resulting from principal transactions (1,133,559) (765,820) (65,441) (921) ----------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,837,060 (845,114) 1,277,394 535,641 NET ASSETS: Beginning of year 12,752,712 13,944,313 3,855,505 1,294,304 ----------- ----------- ---------- ---------- End of year $15,589,772 $13,099,199 $5,132,899 $1,829,945 =========== =========== ========== ==========
VL-R - 28 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Divisions ------------------------------------------------ VALIC VALIC Vanguard Company I Company I VIF High Vanguard VIF Small Cap Stock Index Yield Bond REIT Index Index Fund Fund Portfolio Portfolio FOR THE YEAR ENDED DECEMBER 31, 2014 OPERATIONS: Net investment income (loss) $ 47,087 $ 237,556 $ 367,937 $ 375,995 Net realized gain (loss) on investments 542,470 1,305,412 97,003 661,872 Capital gain distributions from mutual funds 163,728 480,801 -- 614,436 Net change in unrealized appreciation (depreciation) of investments (436,237) 530,628 (179,971) 1,802,110 ---------- ----------- ---------- ----------- Increase (decrease) in net assets resulting from operations 317,048 2,554,397 284,969 3,454,413 ---------- ----------- ---------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 434,293 1,167,748 627,589 940,402 Net transfers from (to) other Divisions or fixed rate option 1,027,935 (22,716) 121,513 104,963 Internal rollovers -- -- -- -- Cost of insurance and other charges (251,210) (1,185,146) (382,502) (573,154) Administrative charges (21,246) (49,985) (29,049) (45,902) Policy loans (84,904) (149,744) (56,384) (104,510) Death benefits (46,542) (81,888) (6,247) (54,794) Withdrawals (522,696) (1,696,672) (296,641) (729,557) ---------- ----------- ---------- ----------- Increase (decrease) in net assets resulting from principal transactions 535,630 (2,018,403) (21,721) (462,552) ---------- ----------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 852,678 535,994 263,248 2,991,861 NET ASSETS: Beginning of year 7,347,965 21,199,509 7,457,681 11,900,404 ---------- ----------- ---------- ----------- End of year $8,200,643 $21,735,503 $7,720,929 $14,892,265 ========== =========== ========== =========== FOR THE YEAR ENDED DECEMBER 31, 2013 OPERATIONS: Net investment income (loss) $ (37,892) $ (100,538) $ 350,560 $ 184,926 Net realized gain (loss) on investments 391,051 877,742 104,896 598,793 Capital gain distributions from mutual funds -- -- -- 313,305 Net change in unrealized appreciation (depreciation) of investments 1,715,912 4,515,581 (183,277) (841,628) ---------- ----------- ---------- ----------- Increase (decrease) in net assets resulting from operations 2,069,071 5,292,785 272,179 255,396 ---------- ----------- ---------- ----------- PRINCIPAL TRANSACTIONS: Net premiums 448,526 1,204,953 679,606 1,032,355 Net transfers from (to) other Divisions or fixed rate option 36,191 (390,162) (60,352) (92,788) Internal rollovers -- -- -- 252 Cost of insurance and other charges (253,334) (1,217,349) (364,351) (611,706) Administrative charges (22,123) (51,210) (32,143) (50,381) Policy loans (27,615) (8,066) (24,587) (202,366) Death benefits (349) (43,667) (50,613) (18,298) Withdrawals (495,781) (1,385,016) (499,350) (856,663) ---------- ----------- ---------- ----------- Increase (decrease) in net assets resulting from principal transactions (314,485) (1,890,517) (351,790) (799,595) ---------- ----------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,754,586 3,402,268 (79,611) (544,199) NET ASSETS: Beginning of year 5,593,379 17,797,241 7,537,292 12,444,603 ---------- ----------- ---------- ----------- End of year $7,347,965 $21,199,509 $7,457,681 $11,900,404 ========== =========== ========== ===========
VL-R - 29 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 (except for Income Advantage Select and Protection Advantage Select, which are available in California). On November 6, 2014, a new product, AG Platinum Choice VUL was introduced. 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): Invesco V.I. Core Equity Fund - Series I Invesco V.I. Global Real Estate Fund - Series I Invesco V.I. Government Securities Fund - Series I Invesco V.I. High Yield Fund - Series I Invesco V.I. International Growth Fund - Series I Invesco V.I. American Franchise Fund - Series I (2) Invesco V.I. Growth and Income Fund - Series I 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 AMERICAN FUNDS American Funds IS Asset Allocation Fund Class 2 (5) American Funds IS Growth Fund Class 2 (5) American Funds IS Global Growth Fund Class 2 (5) American Funds IS Growth-Income Fund Class 2 (5) American Funds IS High-Income Bond Fund Class 2 (5) American Funds IS International Fund Class 2 (5) ANCHOR SERIES TRUST Anchor Series Trust Government and Quality Bond Portfolio - Class 3 (5) Anchor Series Trust Capital Appreciation Portfolio - Class 3 (5) DREYFUS INVESTMENT PORTFOLIOS ("DREYFUS IP"): Dreyfus IP MidCap Stock Portfolio - Initial Shares DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS VIF"): Dreyfus VIF International Value Portfolio - Initial Shares Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares Dreyfus VIF Quality Bond Portfolio - Initial Shares 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 Fidelity(R) VIP Money Market Portfolio - Service Class 2 (5) VL-R - 30 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"): Franklin Templeton Franklin Small Cap Value VIP Fund - Class 2 Franklin Templeton Franklin Small-Mid Cap Growth VIP Fund - Class 2 Franklin Templeton Templeton Foreign VIP Fund - Class 2 Franklin Templeton Franklin U.S. Government Securities VIP Fund - Class 2 Franklin Templeton Franklin Mutual Shares VIP Fund - Class 2 GOLDMAN SACHS VARIABLE INSURANCE TRUST ("GOLDMAN SACHS VIT"): Goldman Sachs VIT Strategic Growth Fund - Institutional Shares 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 Global Research Portfolio - Service Shares 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 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 MFS(R) VIT Growth Series - Initial Class 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 Neubeger Berman AMT Large Cap Value Portfolio -Class I (3) Neuberger Berman AMT Socially Responsive Portfolio - Class I OPPENHEIMER VARIABLE ACCOUNT FUNDS ("OPPENHEIMER"): Oppenheimer Capital Income Fund A Oppenheimer Global Fund/VA - Non-Service Shares Oppenheimer Global Strategic Income Fund/VA (Non-Service) (4) 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 Select Mid Cap Growth 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 Putnam VT Multi-Cap Growth Fund - Class IB Putnam VT Small Cap Value Fund - Class IB VL-R - 31 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 SEASONS SERIES TRUST Seasons Series Trust Mid Cap Value Portfolio - Class 3 (1) (5) THE UNIVERSAL INSTITUTIONAL FUNDS, INC. ("UIF"): UIF Capital Growth Portfolio - Class I Shares VALIC COMPANY I: VALIC Company I Dynamic Allocation Fund (5) VALIC Company I Emerging Economies Fund (5) VALIC Company I Foreign Value Fund (5) VALIC Company I International Equities Index 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 VALIC COMPANY II: VALIC Co. II Mid Cap Value Fund (5) VALIC Co. II Socially Responsible Fund (5) VALIC Co. II Strategic Bond Fund (5) VANGUARD(R) VARIABLE INSURANCE FUND ("VANGUARD(R) VIF"): Vanguard(R) VIF High Yield Bond Portfolio Vanguard(R) VIF REIT Index Portfolio (1)Fund had no activity for current year. (2)Effective April, 30 2012, Invesco Van Kampen V.I. Capital Growth Fund- Series I changed its name to Invesco V.I. American Franchise Fund (3)Effective May 1, 2012, Neuberger AMT Partners Portfolio - Class I changed its name to Neuberger Berman AMT Large Cap Value Portfolio - Class I (4)The Oppenheimer High Income Fund/VA merged into the Oppenheimer Global Strategic Income Fund/VA on October 26, 2012. (5)Fund commenced operations on May 1, 2013. 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. VL-R - 32 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 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. 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. VL-R - 33 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE 3 - FAIR VALUE MEASUREMENTS - CONTINUED 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, 2014 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, 2014, 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, 2014, is presented. 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, and AG 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 EXPENSE POLICIES 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% AG Platinum Choice VUL 9.00%
VL-R - 34 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE 4 - POLICY CHARGES - CONTINUED MORTALITY AND EXPENSE RISK AND ADMINISTRATIVE CHARGES - The expense risk charge is compensation for assuming the risk that the current contract administration charges will be insufficient in the future to cover the cost of administering the contract. 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 RISK FIRST REDUCTION IN MORTALITY SECOND REDUCTION IN MORTALITY AND ADMINISTRATIVE CHARGES AND EXPENSE RISK AND AND EXPENSE RISK AND POLICIES MAXIMUM ANNUAL RATE ADMINISTRATIVE CHARGES RATE ADMINISTRATIVE 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 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 AG Platinum Choice VUL 0.70% 0.35% after 10th policy year 0.15% after 20th policy year
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 coverage (if the policy offers both base and supplement coverage, then only each $1000 of base coverage). This charge varies according to the ages, gender and the premium class of the insured, 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 and other charges 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 and other charges in the Statements of Changes in Net Assets under principal transactions. VL-R - 35 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE 4 - POLICY CHARGES - CONTINUED TRANSFER CHARGES - The Company reserves the right to charge a $25 transfer fee for each transfer between divisions 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 surrenders, the Company may charge a maximum transaction fee per partial surrender 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 - 36 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, 2014, 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 $2,330,472 $1,593,160 Alger Mid Cap Growth Portfolio - Class I-2 Shares 871,332 1,110,043 American Century VP Value Fund - Class I 2,279,440 3,023,188 American Funds IS Asset Allocation Fund Class 2 79,520 1,419 American Funds IS Global Growth Fund Class 2 67,258 1,465 American Funds IS Growth Fund Class 2 13,360 2,364 American Funds IS Growth-Income Fund Class 2 72,908 2,021 American Funds IS High-Income Bond Fund Class2 29,433 1,173 American Funds IS International Fund Class 2 5,877 1,399 Anchor Series Trust Government and Quality Bond Portfolio - Class 3 3,684 221 Anchor Series Trust Capital Appreciation Portfolio - Class 3 14,627 343 Dreyfus IP MidCap Stock Portfolio - Initial Shares 1,477,607 1,312,418 Dreyfus VIF International Value Portfolio - Initial Shares 31,668 21,390 Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares 900,779 2,914,970 Dreyfus VIF Quality Bond Portfolio - Initial Shares 628,149 1,347,967 Fidelity VIP Asset Manager Portfolio - Service Class 2 1,134,643 1,245,523 Fidelity VIP Contrafund Portfolio - Service Class 2 6,221,952 6,539,491 Fidelity VIP Equity-Income Portfolio - Service Class 2 3,475,464 4,294,732 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 102,257 92,447 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 86,495 183,213 Fidelity VIP Freedom 2030 Portfolio - Service Class 2 161,908 140,871 Fidelity VIP Growth Portfolio - Service Class 2 2,299,774 3,294,766 Fidelity VIP Mid Cap Portfolio - Service Class 2 2,338,916 2,557,576 Fidelity VIP Money Market Portfolio - Service Class 2 1,099,266 1,075,897 Franklin Templeton Franklin Small Cap Value VIP Fund - Class 2 2,281,352 1,975,512 Franklin Templeton Franklin Small-Mid Cap Growth VIP Fund - Class 2 12,093 7,686 Franklin Templeton Franklin U.S. Government Securities VIP Fund - Class 2 550,482 1,451,533 Franklin Templeton Franklin Mutual Shares VIP Fund - Class 2 1,334,114 1,698,552 Franklin Templeton Templeton Foreign VIP Fund - Class 2 1,671,303 2,120,299 Goldman Sachs VIT Strategic Growth Fund - Institutional Shares 628,419 4,452,292 Invesco V.I. Core Equity Fund - Series I 783,065 1,585,965 Invesco V.I. Global Real Estate Fund - Series I 88,716 10,413 Invesco V.I. Government Securities Fund - Series I 10,377 44,727 Invesco V.I. High Yield Fund - Series I 417,258 319,537 Invesco V.I. International Growth Fund - Series I 1,201,386 2,332,270 Invesco V.I. American Franchise Fund - Series I 3 2,013 Invesco V.I. Growth and Income Fund - Series I 2,789,243 1,884,976 Janus Aspen Enterprise Portfolio - Service Shares 928,301 912,108 Janus Aspen Forty Portfolio - Service Shares 231,070 59,059 Janus Aspen Overseas Portfolio - Service Shares 2,723,693 1,879,824 Janus Aspen Global Research Portfolio - Service Shares 456,942 624,914 JPMorgan Insurance Trust Core Bond Portfolio - Class 1 82,669 7,534 JPMorgan Insurance Trust International Equity Portfolio - Class 1 22,891 83,621 JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 204,838 205,324 JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 1,201,918 830,465 MFS VIT Core Equity Series - Initial Class 713,029 776,238 Oppenheimer Global Fund/VA - Non-Service Shares 2,261,522 1,974,050 PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class 322,555 426,812 PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class 65,691 10,836 MFS VIT Growth Series - Initial Class 1,843,648 2,151,870 MFS VIT New Discovery Series - Initial Class 2,021,224 1,423,476 MFS VIT Research Series - Initial Class 645,334 613,707 MFS VIT Total Return Series - Initial Class 101,826 189,532
VL-R - 37 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, 2014, the aggregate cost of purchases and proceeds from the sales of investments were:
Cost of Proceeds Divisions Purchases from Sales --------- ---------- ---------- Neberger Berman AMT Mid-Cap Growth Portfolio - Class I $3,302,268 $1,217,415 Neubeger Berman AMT Large Cap Value Portfolio - Class 1 2,639 5,618 Neuberger Berman AMT Socially Responsive Portfolio - Class I 7,434 4,410 Oppenheimer Global Strategic Income Fund/VA (Non-Service) 3,288 3,817 Oppenheimer Capital Income Fund A 345,995 657,917 PIMCO VIT Real Return Portfolio - Administrative Class 1,660,713 2,581,494 PIMCO VIT Short-Term Portfolio - Administrative Class 1,264,715 1,621,398 PIMCO VIT Total Return Portfolio - Administrative Class 2,889,140 4,034,061 Pioneer Fund VCT Portfolio - Class I 198,743 233,393 Pioneer Select Mid Cap Growth VCT Portfolio - Class I 694,173 384,281 Pioneer Mid Cap Value VCT Portfolio - Class I 538,264 379,122 Putnam VT Diversified Income Fund - Class IB 1,174,053 969,550 Putnam VT Growth and Income Fund - Class IB 1,260,538 1,848,279 Putnam VT International Value Fund - Class IB 748,656 795,493 Putnam VT Multi-Cap Growth Fund - Class IB 738 12,271 Putnam VT Small Cap Value Fund - Class IB 67,298 61,304 Putnam VT Voyager Fund - Class IB 32,226 52,007 SunAmerica Aggressive Growth Portfolio - Class 1 284,019 529,765 SunAmerica Balanced Portfolio - Class 1 582,537 1,022,024 UIF Capital Growth Portfolio - Class I Shares 578,286 715,579 VALIC Company I Foreign Value Fund 1,569 43 VALIC Company I Emerging Economies Fund 6,688 366 VALIC Company I Dynamic Allocation Fund 20,324 1,254 VALIC Company II Socially Responsible Fund 14,376 391 VALIC Company II Strategic Bond Fund 51,191 691 VALIC Company II Mid Cap Value 2,472 255 VALIC Company I International Equities Index Fund 507,241 440,668 VALIC Company I Mid Cap Index Fund 2,332,966 3,044,311 VALIC Company I Money Market I Fund 4,895,696 6,581,378 VALIC Company I Nasdaq-100 Index Fund 1,024,317 1,310,764 VALIC Company I Science & Technology Fund 485,708 457,092 VALIC Company I Small Cap Index Fund 2,431,783 1,685,338 VALIC Company I Stock Index Fund 3,100,757 4,400,803 Vanguard VIF High Yield Bond Portfolio 1,757,465 1,411,249 Vanguard VIF REIT Index Portfolio 3,963,679 3,435,800
VL-R - 38 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, 2014.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------- ------------ -------------- ------------ Alger Capital Appreciation Portfolio - Class I-2 Shares AG Income Advantage VUL 2,017 (753) 1,264 Corporate America 174 (124) 50 Income Advantage Select VUL 3,965 (999) 2,966 Platinum Investor FlexDirector VUL 7,397 (55) 7,342 Platinum Investor FlexDirector VUL 12 (4,544) (4,532) Platinum Investor III VUL 46,740 (14,394) 32,346 Platinum Investor III VUL 1,408 (21,663) (20,255) Platinum Investor IV VUL 3,174 (1,779) 1,395 Platinum Investor Plus 9,947 (436) 9,511 Platinum Investor Plus 871 (5,538) (4,667) Platinum Investor Survivor 140 (129) 11 Platinum Investor Survivor II 872 (745) 127 Platinum Investor VIP VUL 2,949 (2,729) 220 Platinum Investor VIP VUL 1,078 (200) 878 Platinum Investor VUL 19 (2,981) (2,962) Protection Advantage Select VUL 2,168 (696) 1,472 Alger Mid Cap Growth Portfolio - Class I-2 Shares AG Income Advantage VUL 5,493 (2,940) 2,553 AG Income Advantage VUL -- (17) (17) Corporate America 35 (997) (962) Income Advantage Select VUL 78 (204) (126) Platinum Investor FlexDirector VUL 16 (6) 10 Platinum Investor III VUL 39,795 (11,142) 28,653 Platinum Investor III VUL 615 (19,663) (19,048) Platinum Investor IV VUL 1,887 (1,919) (32) Platinum Investor Plus 13,398 (1,083) 12,315 Platinum Investor Plus 163 (6,526) (6,363) Platinum Investor Survivor 1,378 (1,035) 343 Platinum Investor Survivor II 263 (94) 169 Platinum Investor VIP VUL 4,131 (2,746) 1,385 Platinum Investor VUL 545 (9,517) (8,972) Platinum Investor VUL 9 (274) (265) Protection Advantage Select VUL 394 (301) 93 American Century VP Value Fund - Class I AG Income Advantage VUL 586 (241) 345 AG Legacy Plus 1,145 (3,682) (2,537) AG Legacy Plus 1 (633) (632) Corporate America 352 (535) (183) Income Advantage Select VUL 1,347 (50) 1,297 Platinum Investor FlexDirector VUL 135 (53) 82 Platinum Investor FlexDirector VUL 16 (120) (104) Platinum Investor III VUL 76,515 (33,629) 42,886 Platinum Investor III VUL 1,704 (49,246) (47,542) Platinum Investor IV VUL 3,294 (5,900) (2,606) Platinum Investor Plus 17,495 (3,447) 14,048 Platinum Investor Plus 339 (14,224) (13,885) Platinum Investor Survivor 693 (1,820) (1,127) Income Advantage Select VUL 5,622 (108) 5,514 Protection Advantage Select VUL 188 (17) 171 American Funds IS Growth Fund Class 2 Platinum Investor Survivor II 1,021 (1,368) (347) Platinum Investor VIP VUL 6,227 (6,748) (521) Platinum Investor VUL 14,271 (12,171) 2,100 Platinum Investor VUL 1 (5,212) (5,211) Protection Advantage Select VUL 482 (571) (89)
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, 2014.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------- ------------ -------------- ------------ American Funds IS Asset Allocation Fund Class 2 Income Advantage Select VUL 132 (9) 123 Protection Advantage Select VUL 6,784 (105) 6,679 American Funds IS Global Growth Fund Class 2 Income Advantage Select VUL 512 (68) 444 Protection Advantage Select VUL 580 (125) 455 American Funds IS Growth-Income Fund Class 2 Income Advantage Select VUL 3,820 (35) 3,785 Protection Advantage Select VUL 2,011 (122) 1,889 American Funds IS High-Income Bond Fund Class2 Income Advantage Select VUL 2,408 (22) 2,386 Protection Advantage Select VUL 234 (3) 231 American Funds IS International Fund Class 2 Income Advantage Select VUL 167 (19) 148 Protection Advantage Select VUL 357 (105) 252 Anchor Series Trust Capital Appreciation Portfolio - Class 3 Income Advantage Select VUL 833 (18) 815 Protection Advantage Select VUL 216 (8) 208 Anchor Series Trust Government and Quality Bond Portfolio - Class 3 Income Advantage Select VUL 358 (21) 337 Dreyfus IP MidCap Stock Portfolio - Initial Shares Platinum Investor FlexDirector VUL 8,136 (5) 8,131 Platinum Investor FlexDirector VUL -- (6,490) (6,490) Platinum Investor III VUL 28,581 (19,780) 8,801 Platinum Investor III VUL 431 (24,096) (23,665) Platinum Investor IV VUL 1,623 (2,121) (498) Platinum Investor Plus 6,500 (1,820) 4,680 Platinum Investor Plus 190 (4,265) (4,075) Platinum Investor Survivor 33,728 (1,288) 32,440 Platinum Investor Survivor II 22 (195) (173) Platinum Investor VUL 1,731 (3,819) (2,088) Dreyfus VIF International Value Portfolio - Initial Shares AG Income Advantage VUL 1,544 (244) 1,300 AG Income Advantage VUL -- (18) (18) Income Advantage Select VUL 466 (578) (112) Protection Advantage Select VUL 770 (891) (121) Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares Corporate America - Andesa 29 (137) (108) Platinum Investor III VUL 39,883 (20,186) 19,697 Platinum Investor III VUL 1,110 (42,930) (41,820) Platinum Investor IV VUL 2,734 (2,410) 324 Platinum Investor Plus 9,765 (2,286) 7,479 Platinum Investor Plus 209 (8,920) (8,711) Platinum Investor Survivor 555 (2,276) (1,721) Platinum Investor Survivor II 108 (511) (403) Platinum Investor VUL 3,753 (103,642) (99,889) Dreyfus VIF Quality Bond Portfolio - Initial Shares Corporate America 270 (630) (360) Corporate America - Andesa 16 (77) (61) Platinum Investor III VUL 26,860 (20,551) 6,309 Platinum Investor III VUL 746 (20,624) (19,878) Platinum Investor IV VUL 1,296 (10,463) (9,167) Platinum Investor Plus 4,030 (495) 3,535 Platinum Investor Plus 129 (2,993) (2,864) Platinum Investor Survivor 960 (1,628) (668) Platinum Investor Survivor II 820 (379) 441 Platinum Investor VUL 2,450 (32,418) (29,968) Platinum Investor VUL 1 (5) (4)
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, 2014.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------- ------------ -------------- ------------ Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Income Advantage VUL 385 (1,774) (1,389) AG Legacy Plus 4,420 (1,289) 3,131 AG Legacy Plus -- (3,353) (3,353) Corporate America -- (329) (329) Income Advantage Select VUL 64 (18) 46 Platinum Investor FlexDirector VUL 8 (58) (50) Platinum Investor III VUL 35,910 (24,775) 11,135 Platinum Investor III VUL 3,666 (32,923) (29,257) Platinum Investor IV VUL 360 (835) (475) Platinum Investor Plus 6,819 (2,965) 3,854 Platinum Investor Plus 247 (4,619) (4,372) Platinum Investor Survivor 549 (322) 227 Platinum Investor Survivor II 551 (77) 474 Platinum Investor VIP VUL 1,738 (732) 1,006 Platinum Investor VUL 7,305 (5,630) 1,675 Protection Advantage Select VUL 2,183 (1,878) 305 Fidelity VIP Contrafund Portfolio - Service Class 2 AG Income Advantage VUL 1,529 (7,252) (5,723) AG Legacy Plus 1,680 (2,681) (1,001) AG Legacy Plus 1 (1,046) (1,045) Corporate America 986 (2,457) (1,471) Income Advantage Select VUL 5,988 (1,065) 4,923 Platinum Investor FlexDirector VUL 781 (58) 723 Platinum Investor FlexDirector VUL 525 (741) (216) Platinum Investor III VUL 151,071 (54,099) 96,972 Platinum Investor III VUL 1,618 (121,512) (119,894) Platinum Investor IV VUL 4,624 (18,115) (13,491) Platinum Investor Plus 53,326 (4,685) 48,641 Platinum Investor Plus 516 (33,658) (33,142) Platinum Investor Survivor 106,069 (7,777) 98,292 Platinum Investor Survivor II 912 (3,281) (2,369) Platinum Investor VIP VUL 11,643 (14,532) (2,889) Platinum Investor VIP VUL 15 (45) (30) Platinum Investor VUL 10,806 (66,718) (55,912) Platinum Investor VUL 128 (1,254) (1,126) Protection Advantage Select VUL 3,931 (2,145) 1,786 Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Income Advantage VUL 737 (1,457) (720) AG Legacy Plus 2,117 (2,767) (650) AG Legacy Plus 1 (1,727) (1,726) Corporate America 835 (1,601) (766) Corporate Investor Select -- (9) (9) Income Advantage Select VUL 3,723 (705) 3,018 Platinum Investor FlexDirector VUL 12,066 (49) 12,017 Platinum Investor FlexDirector VUL 30 (9,661) (9,631) Platinum Investor III VUL 116,925 (32,898) 84,027 Platinum Investor III VUL 960 (98,973) (98,013) Platinum Investor IV VUL 5,018 (6,292) (1,274) Platinum Investor Plus 28,348 (3,905) 24,443 Platinum Investor Plus 1,777 (23,941) (22,164) Platinum Investor Survivor 2,526 (2,607) (81) Platinum Investor Survivor II 2,236 (3,499) (1,263) Platinum Investor VIP VUL 8,786 (6,570) 2,216 Platinum Investor VIP VUL 144 (263) (119) Platinum Investor VUL 9,025 (59,676) (50,651) Platinum Investor VUL 137 (135) 2 Protection Advantage Select VUL 2,482 (1,200) 1,282
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, 2014.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------- ------------ -------------- ------------ Fidelity VIP Freedom 2020 Portfolio - Service Class 2 AG Income Advantage VUL 1,007 (552) 455 Corporate America 1,167 (9) 1,158 Corporate Investor Select 1 (11) (10) Income Advantage Select VUL 58 (14) 44 Platinum Investor FlexDirector VUL 47 (33) 14 Platinum Investor III VUL 3,253 (4,719) (1,466) Platinum Investor III VUL 141 (435) (294) Platinum Investor IV VUL 42 (219) (177) Platinum Investor VIP VUL 761 (348) 413 Protection Advantage Select VUL 423 (535) (112) Fidelity VIP Freedom 2025 Portfolio - Service Class 2 AG Income Advantage VUL -- (1,421) (1,421) Corporate America 900 (7,967) (7,067) Income Advantage Select VUL 1 (3) (2) Platinum Investor III VUL 314 (1,226) (912) Platinum Investor III VUL 32 (33) (1) Platinum Investor IV VUL 19 (6) 13 Platinum Investor Survivor II 1,871 (684) 1,187 Platinum Investor VIP VUL 1,173 (123) 1,050 Platinum Investor VUL -- (1,698) (1,698) Protection Advantage Select VUL 78 (131) (53) Fidelity VIP Freedom 2030 Portfolio - Service Class 2 AG Income Advantage VUL 1,545 (145) 1,400 Income Advantage Select VUL 615 (37) 578 Platinum Investor III VUL 2,036 (774) 1,262 Platinum Investor III VUL 117 (1,341) (1,224) Platinum Investor IV VUL 276 (125) 151 Platinum Investor Plus 354 (133) 221 Platinum Investor Plus 26 (303) (277) Platinum Investor Survivor II -- (25) (25) Platinum Investor VIP VUL 3,694 (6,529) (2,835) Platinum Investor VIP VUL 25 (2) 23 Protection Advantage Select VUL 429 (166) 263 Fidelity VIP Growth Portfolio - Service Class 2 AG Income Advantage VUL 532 (992) (460) AG Legacy Plus 1,829 (1,011) 818 AG Legacy Plus 3 (1,806) (1,803) Corporate America 629 (777) (148) Income Advantage Select VUL 1,115 (246) 869 Platinum Investor FlexDirector VUL 21 (21) -- Platinum Investor III VUL 94,726 (27,479) 67,247 Platinum Investor III VUL 993 (124,386) (123,393) Platinum Investor IV VUL 2,308 (4,892) (2,584) Platinum Investor Plus 39,037 (8,651) 30,386 Platinum Investor Plus 769 (30,075) (29,306) Platinum Investor Survivor 1,531 (1,302) 229 Platinum Investor Survivor II 550 (3,425) (2,875) Platinum Investor VIP VUL 5,300 (8,420) (3,120) Platinum Investor VUL 8,519 (11,747) (3,228) Platinum Investor VUL 16 -- 16 Protection Advantage Select VUL 1,635 (1,051) 584 Fidelity VIP Mid Cap Portfolio - Service Class 2 AG Income Advantage VUL 2,715 (5,311) (2,596) Corporate America 523 (421) 102 Corporate Investor Select -- (9) (9) Income Advantage Select VUL 5,862 (674) 5,188 Income Advantage Select VUL 17 (2) 15 Platinum Investor FlexDirector VUL 140 (50) 90 Platinum Investor FlexDirector VUL 32 (311) (279) Platinum Investor III VUL 82,864 (21,690) 61,174 Platinum Investor III VUL 1,012 (32,893) (31,881)
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, 2014.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------- ------------ -------------- ------------ Platinum Investor IV VUL 4,501 (7,467) (2,966) Platinum Investor Plus 19,418 (1,199) 18,219 Platinum Investor Plus 187 (8,411) (8,224) Platinum Investor Survivor 1,101 (1,250) (149) Platinum Investor Survivor II 282 (439) (157) Platinum Investor VIP VUL 6,926 (7,512) (586) Platinum Investor VIP VUL 75 (164) (89) Platinum Investor VUL 5,082 (4,513) 569 Platinum Investor VUL 5 (2,070) (2,065) Protection Advantage Select VUL 2,133 (462) 1,671 Fidelity VIP Money Market Portfolio - Service Class 2 Income Advantage Select VUL 74,836 (74,712) 124 Protection Advantage Select VUL 35,646 (33,407) 2,239 Franklin Templeton Franklin Small Cap Value VIP Fund - Class 2 AG Income Advantage VUL 3,423 (563) 2,860 Corporate America 999 (389) 610 Income Advantage Select VUL 1,952 (829) 1,123 Income Advantage Select VUL 6 (18) (12) Platinum Investor FlexDirector VUL 543 (12) 531 Platinum Investor FlexDirector VUL 21 (411) (390) Platinum Investor III VUL 49,844 (9,712) 40,132 Platinum Investor III VUL 445 (24,500) (24,055) Platinum Investor IV VUL 4,734 (7,769) (3,035) Platinum Investor Plus 21,391 (1,431) 19,960 Platinum Investor Plus 198 (11,915) (11,717) Platinum Investor Survivor 1,617 (751) 866 Platinum Investor Survivor II 377 (756) (379) Platinum Investor VIP VUL 6,670 (6,899) (229) Platinum Investor VIP VUL 54 (135) (81) Platinum Investor VUL 4,246 (9,710) (5,464) Platinum Investor VUL 6 (2,094) (2,088) Protection Advantage Select VUL 2,134 (464) 1,670 Franklin Templeton Franklin Small-Mid Cap Growth VIP Fund - Class 2 AG Legacy Plus 196 (305) (109) AG Legacy Plus 2 (196) (194) Franklin Templeton Franklin U.S. Government Securities VIP Fund - Class 2 Corporate America 3,920 (34,228) (30,308) Platinum Investor FlexDirector VUL 17 (15) 2 Platinum Investor III VUL 19,755 (7,928) 11,827 Platinum Investor III VUL 535 (21,430) (20,895) Platinum Investor IV VUL 1,706 (13,431) (11,725) Platinum Investor Plus 6,184 (2,101) 4,083 Platinum Investor Plus 259 (7,073) (6,814) Platinum Investor Survivor 448 (394) 54 Platinum Investor Survivor II 480 (97) 383 Platinum Investor VIP VUL 1,406 (6,697) (5,291) Platinum Investor VUL 4,007 (15,087) (11,080) Platinum Investor VUL 19 (980) (961) Franklin Templeton Franklin Mutual Shares VIP Fund - Class 2 AG Income Advantage VUL 745 (290) 455 Corporate America 1,275 (86) 1,189 Income Advantage Select VUL 1,059 (119) 940 Platinum Investor FlexDirector VUL 635 (3) 632 Platinum Investor FlexDirector VUL 51 (763) (712) Platinum Investor III VUL 51,939 (13,717) 38,222 Platinum Investor III VUL 687 (38,193) (37,506) Platinum Investor IV VUL 3,233 (8,308) (5,075) Platinum Investor Plus 8,294 (3,643) 4,651 Platinum Investor Plus 548 (7,419) (6,871) Platinum Investor Survivor 690 (1,150) (460) Platinum Investor Survivor II 434 (2,169) (1,735) Platinum Investor VIP VUL 5,932 (4,913) 1,019 Platinum Investor VIP VUL 65 (26) 39 Platinum Investor VUL 4,514 (11,108) (6,594) Platinum Investor VUL -- (1,387) (1,387) Protection Advantage Select VUL 4,222 (2,069) 2,153
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, 2014.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------- ------------ -------------- ------------ Franklin Templeton Templeton Foreign VIP Fund - Class 2 AG Legacy Plus 799 (1,941) (1,142) AG Legacy Plus 2 (1,337) (1,335) Corporate America 411 (2,922) (2,511) Platinum Investor FlexDirector VUL 8,940 (39) 8,901 Platinum Investor FlexDirector VUL 4 (5,706) (5,702) Platinum Investor III VUL 65,344 (8,911) 56,433 Platinum Investor III VUL 774 (39,317) (38,543) Platinum Investor IV VUL 1,509 (4,434) (2,925) Platinum Investor Plus 19,043 (3,302) 15,741 Platinum Investor Plus 1,410 (15,449) (14,039) Platinum Investor Survivor 6,316 (6,179) 137 Platinum Investor Survivor II 7,090 (2,678) 4,412 Platinum Investor VIP VUL 9,352 (5,342) 4,010 Platinum Investor VUL 3,568 (30,775) (27,207) Platinum Investor VUL -- (1,016) (1,016) Goldman Sachs VIT Strategic Growth Fund - Institutional Shares Platinum Investor III VUL 6 (387) (381) Platinum Investor Plus -- (2) (2) Platinum Investor Survivor -- (268,589) (268,589) Platinum Investor Survivor II -- (358) (358) Platinum Investor VUL -- (117) (117) Invesco V.I. Core Equity Fund - Series I Corporate America 742 (516) 226 Corporate America - Andesa 27 (133) (106) Platinum Investor III VUL 23,584 (19,537) 4,047 Platinum Investor III VUL 625 (18,282) (17,657) Platinum Investor IV VUL 1,508 (892) 616 Platinum Investor Plus 7,667 (845) 6,822 Platinum Investor Plus 204 (6,385) (6,181) Platinum Investor Survivor 1,120 (2,230) (1,110) Platinum Investor Survivor II 100 (30) 70 Platinum Investor VUL 9,195 (46,472) (37,277) Platinum Investor VUL -- (4,258) (4,258) Invesco V.I. Global Real Estate Fund - Series I AG Income Advantage VUL 235 (75) 160 Income Advantage Select VUL 5,552 (425) 5,127 Protection Advantage Select VUL 1,501 (116) 1,385 Invesco V.I. Government Securities Fund - Series I AG Legacy Plus 853 (3,665) (2,812) AG Legacy Plus -- (510) (510) Invesco V.I. High Yield Fund - Series I Platinum Investor III VUL 11,248 (3,025) 8,223 Platinum Investor III VUL 818 (10,811) (9,993) Platinum Investor IV VUL 87 (1,504) (1,417) Platinum Investor Plus 2,504 (35) 2,469 Platinum Investor Plus 108 (2,424) (2,316) Platinum Investor Survivor -- (22) (22) Platinum Investor Survivor II 7,145 (131) 7,014 Platinum Investor VUL 2,512 (6,855) (4,343) Invesco V.I. International Growth Fund - Series I AG Income Advantage VUL 759 (1,452) (693) AG Legacy Plus 1,347 (741) 606 AG Legacy Plus 2 (1,053) (1,051) Corporate America -- (1,068) (1,068) Corporate America - Andesa 21 (100) (79) Corporate Investor Select -- (11) (11) Income Advantage Select VUL 2,402 (518) 1,884 Platinum Investor FlexDirector VUL 31 (615) (584) Platinum Investor III VUL 47,672 (30,379) 17,293 Platinum Investor III VUL 1,092 (37,268) (36,176) Platinum Investor IV VUL 1,707 (4,705) (2,998) Platinum Investor Plus 11,455 (3,540) 7,915 Platinum Investor Plus 173 (7,707) (7,534)
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, 2014.
Accumulation Accumulation Net Increase Divisions Units Issued Units Redeemed (Decrease) --------- ------------ -------------- ------------ Platinum Investor Survivor 673 (2,530) (1,857) Platinum Investor Survivor II 1,347 (2,235) (888) Platinum Investor VIP VUL 6,802 (4,860) 1,942 Platinum Investor VIP VUL 199 (237) (38) Platinum Investor VUL 4,295 (55,351) (51,056) Platinum Investor VUL 88 (39) 49 Protection Advantage Select VUL 4,347 (413) 3,934 Invesco V.I. American Franchise Fund - Series I AG Legacy Plus -- (123) (123) Invesco V.I. Growth and Income Fund - Series I AG Income Advantage VUL 593 (318) 275 AG Income Advantage VUL -- (18) (18) Corporate America 76 (58) 18 Income Advantage Select VUL 445 (112) 333 Platinum Investor FlexDirector VUL 4 (90) (86) Platinum Investor III VUL 49,556 (11,159) 38,397 Platinum Investor III VUL 1,384 (39,941) (38,557) Platinum Investor IV VUL 2,994 (9,873) (6,879) Platinum Investor Plus 10,244 (2,940) 7,304 Platinum Investor Plus 319 (7,081) (6,762) Platinum Investor Survivor 186 (1,691) (1,505) Platinum Investor Survivor II 4,567 (1,824) 2,743 Platinum Investor VIP VUL 5,642 (3,287) 2,355 Platinum Investor VUL 8,005 (14,031) (6,026) Platinum Investor VUL -- (2,091) (2,091) Protection Advantage Select VUL 7,760 (1,207) 6,553 Janus Aspen Enterprise Portfolio - Service Shares AG Income Advantage VUL 957 (995) (38) Corporate America 459 (468) (9) Income Advantage Select VUL 254 (75) 179 Platinum Investor FlexDirector VUL 10 (4) 6 Platinum Investor III VUL 21,126 (22,911) (1,785) Platinum Investor III VUL 1,393 (26,744) (25,351) Platinum Investor IV VUL 1,136 (852) 284 Platinum Investor Plus 5,900 (1,589) 4,311 Platinum Investor Plus 91 (2,797) (2,706) Platinum Investor Survivor 214 (118) 96 Platinum Investor Survivor II 126 (58) 68 Platinum Investor VIP VUL 2,664 (1,510) 1,154 Platinum Investor VUL 1,428 (1,243) 185 Protection Advantage Select VUL 258 (654) (396) Janus Aspen Forty Portfolio - Service Shares AG Income Advantage VUL 5,441 (2,924) 2,517 AG Income Advantage VUL 1 (16) (15) Income Advantage Select VUL 816 (165) 651 Protection Advantage Select VUL 939 (1,255) (316) Janus Aspen Overseas Portfolio - Service Shares AG Income Advantage VUL 9,491 (792) 8,699 Corporate America 1,441 (209) 1,232 Platinum Investor FlexDirector VUL 1,203 (120) 1,083 Platinum Investor FlexDirector VUL 12 (927) (915) Platinum Investor III VUL 84,801 (40,593) 44,208 Platinum Investor III VUL 1,482 (46,941) (45,459) Platinum Investor IV VUL 2,848 (5,601) (2,753) Platinum Investor Plus 11,332 (3,531) 7,801 Platinum Investor Plus 290 (4,333) (4,043) Platinum Investor Survivor 10,221 (8,476) 1,745 Platinum Investor Survivor II 701 (735) (34) Platinum Investor VIP VUL 12,787 (8,949) 3,838 Platinum Investor VIP VUL 466 (2,313) (1,847) Platinum Investor VUL 5,650 (12,918) (7,268) Platinum Investor VUL 75 (1,284) (1,209) Protection Advantage Select VUL 2,611 (528) 2,083
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Janus Aspen Global Research Portfolio - Service Shares Corporate America -- (42) (42) Platinum Investor III VUL 23,808 (14,849) 8,959 Platinum Investor III VUL 764 (26,781) (26,017) Platinum Investor IV VUL 828 (1,441) (613) Platinum Investor Plus 4,561 (679) 3,882 Platinum Investor Plus 67 (3,541) (3,474) Platinum Investor Survivor 407 (810) (403) Platinum Investor Survivor II 265 (97) 168 Platinum Investor VUL 4,200 (5,991) (1,791) JPMorgan Insurance Trust Core Bond Portfolio - Class 1 AG Income Advantage VUL 118 (106) 12 Income Advantage Select VUL 5,498 (107) 5,391 Protection Advantage Select VUL 1,829 (358) 1,471 JPMorgan Insurance Trust International Equity Portfolio - Class 1 AG Income Advantage VUL 192 (1,163) (971) AG Income Advantage VUL -- (374) (374) Income Advantage Select VUL 352 (1,786) (1,434) Protection Advantage Select VUL 1,379 (3,709) (2,330) JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Platinum Investor III VUL 3,124 (293) 2,831 Platinum Investor III VUL -- (3,364) (3,364) Platinum Investor IV VUL -- (245) (245) Platinum Investor Plus 999 (114) 885 Platinum Investor Plus 1 (1,114) (1,113) Platinum Investor Survivor -- (7) (7) Platinum Investor Survivor II -- (104) (104) Platinum Investor VUL 1,658 (953) 705 Platinum Investor VUL -- (1,287) (1,287) JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Platinum Investor FlexDirector VUL 520 (11) 509 Platinum Investor III VUL 22,032 (3,861) 18,171 Platinum Investor III VUL 1,742 (19,353) (17,611) Platinum Investor IV VUL 3,382 (2,668) 714 Platinum Investor Plus 3,822 (1,195) 2,627 Platinum Investor Plus 773 (3,437) (2,664) Platinum Investor Survivor 11,217 (489) 10,728 Platinum Investor Survivor II 930 (451) 479 Platinum Investor VIP VUL 4,402 (6,938) (2,536) Platinum Investor VUL 2,829 (2,505) 324 Platinum Investor VUL 33 (1,016) (983) MFS VIT Core Equity Series - Initial Class Corporate America -- -- -- Platinum Investor III VUL 25,437 (10,831) 14,606 Platinum Investor III VUL 262 (20,478) (20,216) Platinum Investor IV VUL 523 (890) (367) Platinum Investor Plus 14,903 (900) 14,003 Platinum Investor Plus 287 (11,497) (11,210) Platinum Investor Survivor 1,002 (766) 236 Platinum Investor Survivor II -- (1,301) (1,301) Platinum Investor VUL 1,827 (2,705) (878) Platinum Investor VUL 17 (1) 16 MFS VIT Growth Series - Initial Class AG Legacy Plus 3,291 (652) 2,639 Corporate America -- (13) (13) Platinum Investor FlexDirector VUL 8,104 (37) 8,067 Platinum Investor FlexDirector VUL -- (5,656) (5,656) Platinum Investor III VUL 34,683 (24,463) 10,220 Platinum Investor III VUL 2,025 (46,678) (44,653) Platinum Investor IV VUL 474 (969) (495) Platinum Investor Plus 14,694 (3,875) 10,819 Platinum Investor Plus 380 (10,073) (9,693) Platinum Investor Survivor 485 (4,683) (4,198) Platinum Investor Survivor II 12 (1,286) (1,274) Platinum Investor VUL 6,879 (35,979) (29,100) Platinum Investor VUL -- -- --
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- MFS VIT New Discovery Series - Initial Class AG Income Advantage VUL 129 (142) (13) AG Legacy Plus 17 (3,457) (3,440) AG Legacy Plus -- (40) (40) Corporate America 41 (93) (52) Income Advantage Select VUL 875 (207) 668 Platinum Investor FlexDirector VUL 1,901 (46) 1,855 Platinum Investor FlexDirector VUL 4 (2,101) (2,097) Platinum Investor III VUL 27,844 (12,451) 15,393 Platinum Investor III VUL 576 (33,018) (32,442) Platinum Investor IV VUL 2,057 (3,340) (1,283) Platinum Investor Plus 5,258 (2,678) 2,580 Platinum Investor Plus 181 (3,985) (3,804) Platinum Investor Survivor 140 (182) (42) Platinum Investor Survivor II 1,750 (3,160) (1,410) Platinum Investor VIP VUL 1,720 (3,076) (1,356) Platinum Investor VIP VUL 2 (57) (55) Platinum Investor VUL 2,568 (2,173) 395 Platinum Investor VUL 35 (1,121) (1,086) Protection Advantage Select VUL 2,205 (754) 1,451 MFS VIT Research Series - Initial Class AG Income Advantage VUL 255 (256) (1) Income Advantage Select VUL 414 (346) 68 Platinum Investor III VUL 19,948 (8,598) 11,350 Platinum Investor III VUL 205 (20,944) (20,739) Platinum Investor IV VUL 260 (771) (511) Platinum Investor Plus 1,867 (1,081) 786 Platinum Investor Plus 93 (1,434) (1,341) Platinum Investor Survivor 756 (784) (28) Platinum Investor Survivor II 18 (1,237) (1,219) Platinum Investor VIP VUL 957 (1,876) (919) Platinum Investor VUL 564 (1,006) (442) Protection Advantage Select VUL 2,001 (185) 1,816 MFS VIT Total Return Series - Initial Class AG Legacy Plus 5,874 (3,518) 2,356 AG Legacy Plus 22 (14,028) (14,006) Neberger Berman AMT Mid-Cap Growth Portfolio - Class I AG Income Advantage VUL 79 (79) -- Corporate America -- (1,086) (1,086) Income Advantage Select VUL 757 (50) 707 Platinum Investor FlexDirector VUL 1 (1) -- Platinum Investor III VUL 25,818 (14,160) 11,658 Platinum Investor III VUL 867 (29,830) (28,963) Platinum Investor IV VUL 1,232 (2,417) (1,185) Platinum Investor Plus 23,289 (1,337) 21,952 Platinum Investor Plus 122 (14,176) (14,054) Platinum Investor Survivor 2,234 (747) 1,487 Platinum Investor Survivor II 149 (62) 87 Platinum Investor VIP VUL 4,097 (2,523) 1,574 Platinum Investor VUL 1,400 (2,792) (1,392) Platinum Investor VUL 15 (1) 14 Protection Advantage Select VUL 537 (692) (155) Neubeger Berman AMT Large Cap Value Portfolio - Class 1 AG Legacy Plus 206 (301) (95) AG Legacy Plus -- (104) (104) Neuberger Berman AMT Socially Responsive Portfolio - Class I AG Income Advantage VUL 3 (276) (273) Corporate America 457 (18) 439 Income Advantage Select VUL 10 -- 10 Protection Advantage Select VUL 24 (3) 21
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Oppenheimer Capital Income Fund A AG Income Advantage VUL 217 (58) 159 Income Advantage Select VUL 102 (59) 43 Platinum Investor FlexDirector VUL 35 (34) 1 Platinum Investor III VUL 21,572 (2,855) 18,717 Platinum Investor III VUL 678 (14,975) (14,297) Platinum Investor IV VUL 692 (26,623) (25,931) Platinum Investor Plus 2,819 (201) 2,618 Platinum Investor Plus 259 (2,308) (2,049) Platinum Investor Survivor 161 (323) (162) Platinum Investor Survivor II 434 (195) 239 Platinum Investor VIP VUL 2,401 (2,808) (407) Platinum Investor VUL 264 (505) (241) Protection Advantage Select VUL 152 (389) (237) Oppenheimer Global Fund/VA - Non-Service Shares AG Income Advantage VUL 1,042 (315) 727 Corporate America 246 (203) 43 Corporate Investor Select -- (14) (14) Income Advantage Select VUL 500 (550) (50) Platinum Investor FlexDirector VUL 85 -- 85 Platinum Investor FlexDirector VUL 21 (68) (47) Platinum Investor III VUL 78,541 (25,892) 52,649 Platinum Investor III VUL 745 (28,875) (28,130) Platinum Investor IV VUL 5,497 (3,697) 1,800 Platinum Investor Plus 17,012 (2,155) 14,857 Platinum Investor Plus 432 (7,368) (6,936) Platinum Investor Survivor 450 (275) 175 Platinum Investor Survivor II 2,223 (1,803) 420 Platinum Investor VIP VUL 7,739 (5,999) 1,740 Platinum Investor VIP VUL 17 (1) 16 Platinum Investor VUL 9,859 (1,170) 8,689 Platinum Investor VUL 29 (4,528) (4,499) Protection Advantage Select VUL 564 (1,060) (496) Oppenheimer Global Strategic Income Fund/VA (Non-Service) AG Legacy Plus 304 (352) (48) AG Legacy Plus 1 (20) (19) PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class AG Income Advantage VUL 1,507 (219) 1,288 AG Income Advantage VUL -- (10) (10) Corporate America 235 (1,233) (998) Income Advantage Select VUL 1,159 (673) 486 Platinum Investor FlexDirector VUL 7,366 (69) 7,297 Platinum Investor FlexDirector VUL 1 (5,175) (5,174) Platinum Investor III VUL 17,051 (14,413) 2,638 Platinum Investor III VUL 1,533 (8,763) (7,230) Platinum Investor IV VUL 1,755 (3,769) (2,014) Platinum Investor Plus 1,440 (478) 962 Platinum Investor Plus 947 (1,523) (576) Platinum Investor Survivor II 412 (34) 378 Platinum Investor VIP VUL 4,666 (2,481) 2,185 Platinum Investor VIP VUL 186 (84) 102 Platinum Investor VUL 37 (13,998) (13,961) Protection Advantage Select VUL 3,308 (365) 2,943 PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class AG Income Advantage VUL 43 (39) 4 Income Advantage Select VUL 3,837 (396) 3,441 Protection Advantage Select VUL 1,934 (351) 1,583 PIMCO VIT Real Return Portfolio - Administrative Class AG Income Advantage VUL 419 (4,015) (3,596) AG Legacy Plus 847 (4,358) (3,511) AG Legacy Plus 44 (855) (811) Corporate America 316 (966) (650) Corporate Investor Select -- (7) (7) Income Advantage Select VUL 1,732 (116) 1,616
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Platinum Investor FlexDirector VUL 490 (3) 487 Platinum Investor FlexDirector VUL -- (419) (419) Platinum Investor III VUL 83,078 (50,733) 32,345 Platinum Investor III VUL 1,669 (40,329) (38,660) Platinum Investor IV VUL 1,624 (6,229) (4,605) Platinum Investor Plus 12,397 (2,242) 10,155 Platinum Investor Plus 351 (9,204) (8,853) Platinum Investor Survivor 3,910 (5,065) (1,155) Platinum Investor Survivor II 718 (3,273) (2,555) Platinum Investor VIP VUL 2,457 (8,392) (5,935) Platinum Investor VUL 5,898 (22,668) (16,770) Platinum Investor VUL 49 (434) (385) Protection Advantage Select VUL 559 (146) 413 PIMCO VIT Short-Term Portfolio - Administrative Class AG Income Advantage VUL 872 (456) 416 AG Income Advantage VUL -- (14) (14) Corporate America 3,759 (101) 3,658 Corporate Investor Select -- (19) (19) Income Advantage Select VUL 1,686 (53) 1,633 Platinum Investor FlexDirector VUL 17,266 (28) 17,238 Platinum Investor FlexDirector VUL 5 (15,861) (15,856) Platinum Investor III VUL 55,338 (18,667) 36,671 Platinum Investor III VUL 1,211 (47,084) (45,873) Platinum Investor IV VUL 3,076 (2,819) 257 Platinum Investor Plus 10,640 (1,050) 9,590 Platinum Investor Plus 774 (21,210) (20,436) Platinum Investor Survivor 561 (6,942) (6,381) Platinum Investor Survivor II 3,119 (2,103) 1,016 Platinum Investor VIP VUL 4,544 (6,849) (2,305) Platinum Investor VIP VUL 362 (228) 134 Platinum Investor VUL 6,587 (6,530) 57 Protection Advantage Select VUL 790 (256) 534 PIMCO VIT Total Return Portfolio - Administrative Class AG Income Advantage VUL 1,328 (701) 627 AG Income Advantage VUL -- (12) (12) AG Legacy Plus 1,380 (2,331) (951) AG Legacy Plus 2 (1,765) (1,763) Corporate America 3,027 (2,186) 841 Income Advantage Select VUL 7,965 (409) 7,556 Platinum Investor FlexDirector VUL 653 (42) 611 Platinum Investor FlexDirector VUL 488 (838) (350) Platinum Investor III VUL 100,865 (52,885) 47,980 Platinum Investor III VUL 885 (61,613) (60,728) Platinum Investor IV VUL 3,979 (9,300) (5,321) Platinum Investor Plus 26,790 (6,264) 20,526 Platinum Investor Plus 661 (31,127) (30,466) Platinum Investor Survivor 1,655 (7,309) (5,654) Platinum Investor Survivor II 2,504 (1,577) 927 Platinum Investor VIP VUL 13,596 (18,163) (4,567) Platinum Investor VIP VUL 370 (333) 37 Platinum Investor VUL 8,707 (38,914) (30,207) Platinum Investor VUL 128 (481) (353) Protection Advantage Select VUL 9,140 (1,181) 7,959 Pioneer Fund VCT Portfolio - Class I Platinum Investor III VUL 1,194 (2,361) (1,167) Platinum Investor III VUL -- (175) (175) Platinum Investor Plus 328 (377) (49) Platinum Investor Plus 404 (404) -- Platinum Investor Survivor 130 (125) 5 Platinum Investor Survivor II -- (18) (18) Platinum Investor VUL 2,413 (12,536) (10,123)
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Pioneer Select Mid Cap Growth VCT Portfolio - Class I Corporate America - Andesa 17 (83) (66) Platinum Investor III VUL 1,752 (6,054) (4,302) Platinum Investor III VUL 6 (349) (343) Platinum Investor Plus 1,557 (58) 1,499 Platinum Investor Plus 43 (1,404) (1,361) Platinum Investor Survivor 140 (40) 100 Platinum Investor Survivor II -- (10) (10) Platinum Investor VUL 1,896 (12,825) (10,929) Pioneer Mid Cap Value VCT Portfolio - Class I AG Income Advantage VUL 292 (86) 206 Corporate America -- (582) (582) Income Advantage Select VUL 92 (186) (94) Platinum Investor FlexDirector VUL 8,626 (33) 8,593 Platinum Investor FlexDirector VUL 41 (8,052) (8,011) Platinum Investor III VUL 5,467 (6,578) (1,111) Platinum Investor III VUL 1,043 (3,081) (2,038) Platinum Investor IV VUL 1,192 (225) 967 Platinum Investor Plus 2,149 (61) 2,088 Platinum Investor Plus 80 (1,612) (1,532) Platinum Investor Survivor II 208 (1,553) (1,345) Platinum Investor VIP VUL 3,229 (2,171) 1,058 Platinum Investor VIP VUL 1,510 (41) 1,469 Platinum Investor VUL 1 (14) (13) Platinum Investor VUL 19 (4) 15 Protection Advantage Select VUL 311 (284) 27 Putnam VT Diversified Income Fund - Class IB AG Income Advantage VUL 117 (2,163) (2,046) AG Legacy Plus 1,015 (1,200) (185) AG Legacy Plus 21 (1,516) (1,495) Corporate America 501 (2,050) (1,549) Corporate America - Andesa -- (6,188) (6,188) Income Advantage Select VUL 81 (33) 48 Income Advantage Select VUL 114 (3) 111 Platinum Investor FlexDirector VUL 24 (23) 1 Platinum Investor FlexDirector VUL 4 (26) (22) Platinum Investor III VUL 13,065 (20,952) (7,887) Platinum Investor III VUL 1,050 (5,736) (4,686) Platinum Investor IV VUL 654 (1,214) (560) Platinum Investor Plus 3,872 (1,061) 2,811 Platinum Investor Plus 420 (2,598) (2,178) Platinum Investor Survivor 256 (90) 166 Platinum Investor Survivor II 7,296 (203) 7,093 Platinum Investor VIP VUL 3,113 (929) 2,184 Platinum Investor VUL 8,858 (5,779) 3,079 Platinum Investor VUL -- (4,141) (4,141) Protection Advantage Select VUL 127 (144) (17) Putnam VT Growth and Income Fund - Class IB Corporate America 729 (676) 53 Corporate America - Andesa 1 (7,519) (7,518) Platinum Investor III VUL 50,095 (20,744) 29,351 Platinum Investor III VUL 671 (47,377) (46,706) Platinum Investor IV VUL 2,234 (2,253) (19) Platinum Investor Plus 11,827 (4,243) 7,584 Platinum Investor Plus 425 (10,007) (9,582) Platinum Investor Survivor 594 (2,700) (2,106) Platinum Investor Survivor II 910 (970) (60) Platinum Investor VUL 3,439 (12,766) (9,327) Platinum Investor VUL -- -- --
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Putnam VT International Value Fund - Class IB Corporate America 1,769 (121) 1,648 Platinum Investor FlexDirector VUL 7 (9) (2) Platinum Investor III VUL 37,004 (14,924) 22,080 Platinum Investor III VUL 1,035 (19,754) (18,719) Platinum Investor IV VUL 1,672 (3,381) (1,709) Platinum Investor Plus 11,276 (1,660) 9,616 Platinum Investor Plus 430 (5,486) (5,056) Platinum Investor Survivor 296 (1,117) (821) Platinum Investor Survivor II 2,018 (719) 1,299 Platinum Investor VIP VUL 9,137 (7,225) 1,912 Platinum Investor VIP VUL 97 (2) 95 Platinum Investor VUL 3,741 (8,501) (4,760) Platinum Investor VUL 35 (8) 27 Putnam VT Multi-Cap Growth Fund - Class IB AG Legacy Plus 33 (668) (635) Putnam VT Small Cap Value Fund - Class IB AG Income Advantage VUL 260 (1,440) (1,180) AG Legacy Plus 77 (1,669) (1,592) AG Legacy Plus -- (418) (418) Income Advantage Select VUL 27 (15) 12 Protection Advantage Select VUL 54 (34) 20 Putnam VT Voyager Fund - Class IB AG Legacy Plus 1,551 (1,292) 259 AG Legacy Plus -- (2,592) (2,592) SunAmerica Aggressive Growth Portfolio - Class 1 AG Income Advantage VUL 88 (71) 17 Income Advantage Select VUL 47 (37) 10 Platinum Investor FlexDirector VUL 1 (2) (1) Platinum Investor III VUL 10,709 (17,026) (6,317) Platinum Investor III VUL 415 (9,493) (9,078) Platinum Investor IV VUL 1,075 (2,066) (991) Platinum Investor Plus 4,492 (407) 4,085 Platinum Investor Plus 123 (3,083) (2,960) Platinum Investor Survivor II 14 -- 14 Platinum Investor VIP VUL 4,587 (2,107) 2,480 Platinum Investor VUL 106 (741) (635) Protection Advantage Select VUL 52 (579) (527) SunAmerica Balanced Portfolio - Class 1 AG Income Advantage VUL 114 (34) 80 Corporate America 1,024 (8) 1,016 Income Advantage Select VUL 2,324 (105) 2,219 Platinum Investor FlexDirector VUL 3 (2) 1 Platinum Investor III VUL 23,663 (31,240) (7,577) Platinum Investor III VUL 406 (19,608) (19,202) Platinum Investor IV VUL 1,157 (1,714) (557) Platinum Investor Plus 6,293 (1,381) 4,912 Platinum Investor Plus 308 (4,790) (4,482) Platinum Investor Survivor 255 (2,205) (1,950) Platinum Investor Survivor II 93 (46) 47 Platinum Investor VIP VUL 508 (558) (50) Platinum Investor VUL 1,251 (1,069) 182 Protection Advantage Select VUL 250 (40) 210 UIF Capital Growth Portfolio - Class I Shares Platinum Investor III VUL 10,419 (4,580) 5,839 Platinum Investor III VUL 1,874 (11,155) (9,281) Platinum Investor IV VUL 1,280 (1,588) (308) Platinum Investor Plus 2,279 (581) 1,698 Platinum Investor Plus 98 (1,483) (1,385) Platinum Investor Survivor 345 (1,493) (1,148) Platinum Investor Survivor II -- (25) (25) Platinum Investor VUL 3,895 (18,341) (14,446) Platinum Investor VUL -- -- --
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- VALIC Company I Dynamic Allocation Fund Income Advantage Select VUL 215 (21) 194 Protection Advantage Select VUL 1,607 (92) 1,515 VALIC Company I Emerging Economies Fund Income Advantage Select VUL 565 (15) 550 Protection Advantage Select VUL 150 (24) 126 VALIC Company I Foreign Value Fund Protection Advantage Select VUL 138 (4) 134 VALIC Company II Mid Cap Value Income Advantage Select VUL 133 (13) 120 Protection Advantage Select VUL 68 (8) 60 VALIC Company II Strategic Bond Fund Income Advantage Select VUL 4,228 (46) 4,182 Protection Advantage Select VUL 762 (20) 742 VALIC Company II Socially Responsible Fund Income Advantage Select VUL 79 (19) 60 Protection Advantage Select VUL 1,026 (10) 1,016 VALIC Company I International Equities Index Fund AG Income Advantage VUL 11,309 (238) 11,071 AG Legacy Plus -- (325) (325) Corporate America 224 (111) 113 Income Advantage Select VUL 309 (118) 191 Platinum Investor FlexDirector VUL 447 (21) 426 Platinum Investor FlexDirector VUL -- (306) (306) Platinum Investor III VUL 19,126 (5,173) 13,953 Platinum Investor III VUL 359 (12,710) (12,351) Platinum Investor IV VUL 855 (298) 557 Platinum Investor Plus 3,837 (627) 3,210 Platinum Investor Plus 156 (4,972) (4,816) Platinum Investor Survivor 258 (193) 65 Platinum Investor Survivor II 165 (93) 72 Platinum Investor VIP VUL 5,961 (1,927) 4,034 Platinum Investor VUL 1,329 (8,241) (6,912) Platinum Investor VUL -- (127) (127) Protection Advantage Select VUL 663 (103) 560 VALIC Company I Mid Cap Index Fund AG Income Advantage VUL 290 (275) 15 AG Legacy Plus 1,471 (856) 615 AG Legacy Plus 2 (1,322) (1,320) Corporate America -- (27) (27) Corporate America - Andesa 20 (98) (78) Income Advantage Select VUL 337 (281) 56 Platinum Investor FlexDirector VUL 19 (14) 5 Platinum Investor III VUL 50,356 (25,277) 25,079 Platinum Investor III VUL 1,320 (33,884) (32,564) Platinum Investor IV VUL 2,529 (4,946) (2,417) Platinum Investor Plus 21,125 (2,842) 18,283 Platinum Investor Plus 145 (13,271) (13,126) Platinum Investor Survivor 688 (2,291) (1,603) Platinum Investor Survivor II 220 (304) (84) Platinum Investor VIP VUL 7,801 (4,738) 3,063 Platinum Investor VIP VUL 13 (26) (13) Platinum Investor VUL 2,728 (53,314) (50,586) Platinum Investor VUL -- -- -- Protection Advantage Select VUL 395 (219) 176
VL-R - 52 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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- VALIC Company I Money Market I Fund AG Income Advantage VUL 9,040 (2,163) 6,877 AG Income Advantage VUL 336 (13) 323 AG Legacy Plus 14,783 (15,036) (253) Corporate America 1,014 (1,131) (117) Income Advantage Select VUL 6,154 (262) 5,892 Platinum Investor FlexDirector VUL 2,943 (12) 2,931 Platinum Investor FlexDirector VUL 26 (2,659) (2,633) Platinum Investor III VUL 83,023 (42,660) 40,363 Platinum Investor III VUL 1,528 (91,645) (90,117) Platinum Investor IV VUL 11,521 (80,055) (68,534) Platinum Investor Plus 25,867 (5,499) 20,368 Platinum Investor Plus 17,240 (39,949) (22,709) Platinum Investor Survivor 16,624 (8,800) 7,824 Platinum Investor Survivor -- -- -- Platinum Investor Survivor II 17,061 (40,269) (23,208) Platinum Investor VIP VUL 23,235 (29,519) (6,284) Platinum Investor VIP VUL 179 (106) 73 Platinum Investor VUL 179,508 (199,991) (20,483) Platinum Investor VUL 2,220 (4,365) (2,145) Protection Advantage Select VUL 79,686 (67,437) 12,249 VALIC Company I Nasdaq-100 Index Fund AG Income Advantage VUL 213 (31) 182 Income Advantage Select VUL 958 (15) 943 Platinum Investor FlexDirector VUL 87 -- 87 Platinum Investor FlexDirector VUL 2 (71) (69) Platinum Investor III VUL 27,126 (25,820) 1,306 Platinum Investor III VUL 721 (36,120) (35,399) Platinum Investor IV VUL 1,259 (775) 484 Platinum Investor Plus 7,888 (3,616) 4,272 Platinum Investor Plus 63 (4,565) (4,502) Platinum Investor Survivor 116 (158) (42) Platinum Investor Survivor II 707 (231) 476 Platinum Investor VIP VUL 2,905 (1,907) 998 Platinum Investor VUL 7,263 (6,797) 466 Platinum Investor VUL 53 (645) (592) Protection Advantage Select VUL 902 (437) 465 VALIC Company I Science & Technology Fund AG Income Advantage VUL 131 (736) (605) Income Advantage Select VUL 360 (11) 349 Platinum Investor FlexDirector VUL 136 (47) 89 Platinum Investor FlexDirector VUL 246 (121) 125 Platinum Investor III VUL 14,335 (4,003) 10,332 Platinum Investor III VUL 1,214 (27,158) (25,944) Platinum Investor IV VUL 769 (520) 249 Platinum Investor Plus 3,644 (1,115) 2,529 Platinum Investor Plus 38 (2,240) (2,202) Platinum Investor Survivor 140 (89) 51 Platinum Investor Survivor II 3,608 (1,687) 1,921 Platinum Investor VIP VUL 800 (394) 406 Platinum Investor VUL 1,088 (426) 662 Platinum Investor VUL -- (788) (788) Protection Advantage Select VUL 1,431 (69) 1,362
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- VALIC Company I Small Cap Index Fund AG Income Advantage VUL 210 (304) (94) Corporate America 116 (1,279) (1,163) Corporate Investor Select -- (8) (8) Income Advantage Select VUL 2,589 (74) 2,515 Platinum Investor FlexDirector VUL 1,803 (7) 1,796 Platinum Investor FlexDirector VUL 5 (1,460) (1,455) Platinum Investor III VUL 37,998 (26,427) 11,571 Platinum Investor III VUL 1,081 (24,296) (23,215) Platinum Investor IV VUL 1,819 (4,747) (2,928) Platinum Investor Plus 13,950 (460) 13,490 Platinum Investor Plus 174 (10,279) (10,105) Platinum Investor Survivor 517 (789) (272) Platinum Investor Survivor II 849 (439) 410 Platinum Investor VIP VUL 8,703 (6,212) 2,491 Platinum Investor VUL 61,244 (5,614) 55,630 Platinum Investor VUL 43 (43) -- Protection Advantage Select VUL 1,050 (206) 844 VALIC Company I Stock Index Fund AG Income Advantage VUL 993 (779) 214 AG Legacy Plus 2,020 (500) 1,520 AG Legacy Plus -- (2,068) (2,068) Corporate America 394 (4,190) (3,796) Corporate America - Andesa 41 (203) (162) Corporate Investor Select 1 (9) (8) Income Advantage Select VUL 131 (8,477) (8,346) Platinum Investor FlexDirector VUL 8,987 (5) 8,982 Platinum Investor FlexDirector VUL 312 (7,407) (7,095) Platinum Investor III VUL 70,053 (41,985) 28,068 Platinum Investor III VUL 1,171 (63,135) (61,964) Platinum Investor IV VUL 3,034 (5,289) (2,255) Platinum Investor Plus 33,967 (4,248) 29,719 Platinum Investor Plus 940 (28,159) (27,219) Platinum Investor Survivor 1,936 (7,450) (5,514) Platinum Investor Survivor II 1,070 (2,963) (1,893) Platinum Investor VIP VUL 16,844 (5,663) 11,181 Platinum Investor VUL 6,377 (81,571) (75,194) Platinum Investor VUL 49 (49) -- Protection Advantage Select VUL 824 (479) 345 Vanguard VIF High Yield Bond Portfolio AG Income Advantage VUL 552 (376) 176 Corporate America 2,420 (198) 2,222 Corporate Investor Select -- (10) (10) Income Advantage Select VUL 236 (134) 102 Platinum Investor FlexDirector VUL 48 (46) 2 Platinum Investor FlexDirector VUL 6 (49) (43) Platinum Investor III VUL 40,758 (10,073) 30,685 Platinum Investor III VUL 882 (28,717) (27,835) Platinum Investor IV VUL 5,559 (4,529) 1,030 Platinum Investor Plus 9,802 (2,284) 7,518 Platinum Investor Plus 570 (7,684) (7,114) Platinum Investor Survivor 3,811 (3,396) 415 Platinum Investor Survivor II 5,275 (298) 4,977 Platinum Investor VIP VUL 5,602 (6,266) (664) Platinum Investor VIP VUL 36 (40) (4) Platinum Investor VUL 8,167 (8,040) 127 Platinum Investor VUL 27 (909) (882) Protection Advantage Select VUL 610 (265) 345
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, 2014.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Vanguard VIF REIT Index Portfolio AG Income Advantage VUL 2,964 (4,548) (1,584) AG Income Advantage VUL -- (8) (8) Corporate America 806 (203) 603 Income Advantage Select VUL 668 (739) (71) Income Advantage Select VUL 8 (84) (76) Platinum Investor FlexDirector VUL 4,465 (72) 4,393 Platinum Investor FlexDirector VUL 262 (2,865) (2,603) Platinum Investor III VUL 138,959 (20,803) 118,156 Platinum Investor III VUL 857 (48,095) (47,238) Platinum Investor IV VUL 4,339 (7,040) (2,701) Platinum Investor Plus 24,977 (4,688) 20,289 Platinum Investor Plus 476 (13,200) (12,724) Platinum Investor Survivor 615 (741) (126) Platinum Investor Survivor II 2,494 (1,724) 770 Platinum Investor VIP VUL 9,054 (8,672) 382 Platinum Investor VIP VUL 131 (166) (35) Platinum Investor VUL 4,773 (9,404) (4,631) Platinum Investor VUL -- (1,172) (1,172) Protection Advantage Select VUL 1,172 (563) 609
VL-R - 55 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, 2013.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Alger Capital Appreciation Portfolio - Class I-2 Shares AG Income Advantage VUL 822 (979) (157) Corporate America (reduced surrender charge) 385 (245) 140 Income Advantage Select 501 (291) 210 Platinum Investor I & II 9 (188) (179) Platinum Investor I & II (first reduction in expense ratio) 386 (12) 375 Platinum Investor III 4,459 (40,229) (35,770) Platinum Investor III (first reduction in expense ratio) 75,050 (7,485) 67,565 Platinum Investor IV 870 (1,158) (288) Platinum Investor FlexDirector 4,522 (7) 4,515 Platinum Investor PLUS 506 (5,708) (5,202) Platinum Investor Survivor (first reduction in expense ratio) 790 (97) 693 Platinum Investor Survivor II 866 (724) 143 Platinum Investor Plus (first reduction in expense ratio) 5,306 (167) 5,139 Platinum Investor VIP 3,903 (3,278) 625 Platinum Investor VIP (with GMWB rider) 386 (163) 222 Protection Advantage Select 1,365 (682) 683 Alger Mid Cap Growth Portfolio - Class I-2 Shares AG Income Advantage VUL 2,460 (2,827) (367) AG Income Advantage VUL (with GMWB rider) -- (17) (17) Corporate America (reduced surrender charge) 391 (2,686) (2,295) Income Advantage Select 96 (55) 41 Platinum Investor I & II 52 (317) (266) Platinum Investor I & II (first reduction in expense ratio) 344 (679) (335) Platinum Investor III 2,872 (14,884) (12,012) Platinum Investor III (first reduction in expense ratio) 25,104 (4,589) 20,515 Platinum Investor IV 1,139 (3,854) (2,715) Platinum Investor FlexDirector 4,320 (4,312) 9 Platinum Investor PLUS 577 (1,908) (1,331) Platinum Investor Plus (first reduction in expense ratio) 2,855 (132) 2,722 Platinum Investor Survivor (first reduction in expense ratio) -- (371) (371) Platinum Investor Survivor II 309 (137) 172 Platinum Investor VIP 4,710 (3,672) 1,038 Platinum Investor VIP (with GMWB rider) 23 (84) (61) Protection Advantage Select 327 (323) 4 American Century VP Value Fund - Class I AG Income Advantage VUL 1,957 (649) 1,309 AG Legacy Plus 270 (1,837) (1,568) AG Legacy Plus (first reduction in expense ratio) 3,367 (1,159) 2,208 Corporate America (reduced surrender charge) 534 (2,196) (1,662) Income Advantage Select 223 (32) 191 Platinum Investor I & II 2,292 (4,768) (2,476) Platinum Investor I & II (first reduction in expense ratio) 9,488 (10,491) (1,003) Platinum Investor III 7,606 (62,908) (55,302) Platinum Investor III (first reduction in expense ratio) 81,551 (26,600) 54,951 Platinum Investor IV 3,230 (5,232) (2,001) Platinum Investor FlexDirector 19 (12) 7 Platinum Investor PLUS 637 (18,318) (17,682) Platinum Investor III 2,426 (28,185) (25,759) Platinum Investor III (first reduction in expense ratio) 38,745 (13,975) 24,770 Platinum Investor IV 2,638 (2,523) 115 Platinum Investor Plus (first reduction in expense ratio) 24,839 (5,388) 19,451 Platinum Investor Survivor Platinum Investor Survivor (first reduction in expense ratio) 83,992 (83,831) 161 Platinum Investor Survivor II 3,768 (5,595) (1,827) Platinum Investor VIP 12,339 (6,993) 5,346 Protection Advantage Select 651 (2,511) (1,860) Dreyfus IP MidCap Stock Portfolio - Initial Shares Platinum Investor I & II (first reduction in expense ratio) 8,612 (8,612) -- Platinum Investor I & II (first reduction in expense ratio) 10,668 (10,574) 94 Platinum Investor FlexDirector 6,532 (42) 6,490
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, 2013.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Platinum Investor PLUS 263 (4,870) (4,607) Platinum Investor Plus (first reduction in expense ratio) 6,498 (1,919) 4,579 Platinum Investor Survivor (first reduction in expense ratio) 536 (229) 307 Platinum Investor Survivor II 71 (351) (281) Dreyfus VIF International Value Portfolio - Initial Shares AG Income Advantage VUL 2,231 (329) 1,901 AG Income Advantage VUL (with GMWB rider) -- (17) (17) Income Advantage Select 386 (183) 203 Protection Advantage Select 754 (411) 343 Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares Corporate America 32 (148) (116) Platinum Investor I & II 677 (908) (231) Platinum Investor I & II (first reduction in expense ratio) 53,950 (100,895) (46,944) Platinum Investor III 11,335 (55,415) (44,079) Platinum Investor III (first reduction in expense ratio) 44,751 (29,837) 14,915 Platinum Investor IV 2,248 (2,778) (530) Platinum Investor FlexDirector Platinum Investor PLUS 855 (11,723) (10,868) Platinum Investor Plus (first reduction in expense ratio) 8,065 (655) 7,411 Platinum Investor Survivor Platinum Investor Survivor (first reduction in expense ratio) 417 (1,625) (1,209) Platinum Investor Survivor II 9,246 (9,598) (352) Dreyfus VIF Quality Bond Portfolio - Initial Shares Corporate America 17 (73) (56) Corporate America (reduced surrender charge) 326 (577) (251) Platinum Investor I & II 223 (1,013) (790) Platinum Investor I & II (first reduction in expense ratio) 47,799 (78,801) (31,001) Platinum Investor III 5,398 (51,554) (46,156) Platinum Investor III (first reduction in expense ratio) 62,823 (20,938) 41,886 Platinum Investor IV 2,193 (5,666) (3,474) Platinum Investor Plus (first reduction in expense ratio) 9,089 (1,834) 7,255 Platinum Investor PLUS 350 (9,494) (9,145) Platinum Investor Survivor (first reduction in expense ratio) 2,373 (1,729) 644 Platinum Investor Survivor II 582 (407) 175 Fidelity VIP Asset Manager Portfolio - Service Class 2 AG Income Advantage VUL 626 (259) 367 AG Legacy Plus 3 (2,311) (2,308) AG Legacy Plus 2,617 (547) 2,071 Corporate America (reduced surrender charge) -- (338) (338) Income Advantage Select 81 (200) (119) Platinum Investor I & II -- (14,499) (14,499) Platinum Investor I & II (first reduction in expense ratio) 20,808 (8,974) 11,833 Platinum Investor III 2,231 (40,624) (38,393) Platinum Investor III (first reduction in expense ratio) 46,438 (13,703) 32,734 Platinum Investor IV 569 (971) (403) Platinum Investor FlexDirector 9 (22) (12) Platinum Investor PLUS 589 (11,925) (11,337) Platinum Investor Plus (first reduction in expense ratio) 16,008 (2,023) 13,985 Platinum Investor Survivor -- -- -- Platinum Investor Survivor (first reduction in expense ratio) 944 (231) 713 Platinum Investor Survivor II 149 (68) 81 Platinum Investor VIP 1,707 (1,473) 234 Protection Advantage Select 2,440 (2,323) 117 Fidelity VIP Contrafund Portfolio - Service Class 2 AG Income Advantage VUL 2,259 (2,486) (227) AG Legacy Plus 12 (5,017) (5,005) AG Legacy Plus (first reduction in expense ratio) 7,265 (1,158) 6,107 Corporate America (reduced surrender charge) 1,956 (4,059) (2,103) Corporate Investor Select 20 (505) (485) Income Advantage Select 867 (290) 576 Platinum Investor I & II 4,862 (12,744) (7,882) Platinum Investor I & II (first reduction in expense ratio) 22,460 (32,231) (9,772) Platinum Investor III 33,468 (170,450) (136,982) Platinum Investor III (first reduction in expense ratio) 185,107 (79,462) 105,644 Platinum Investor IV 5,867 (13,447) (7,579) Platinum Investor FlexDirector 117 (239) (121) Platinum Investor PLUS 1,387 (39,091) (37,703)
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, 2013.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Platinum Investor Plus (first reduction in expense ratio) 56,215 (3,259) 52,957 Platinum Investor Survivor -- -- -- Platinum Investor Survivor (first reduction in expense ratio) 18,580 (15,089) 3,491 Platinum Investor Survivor II 7,906 (8,383) (477) Platinum Investor VIP 22,570 (18,926) 3,645 Platinum Investor VIP (with GMWB rider) 57 (163) (105) Protection Advantage Select 1,208 (3,568) (2,360) Fidelity VIP Equity-Income Portfolio - Service Class 2 AG Income Advantage VUL 1,030 (1,214) (184) AG Legacy Plus 11 (5,187) (5,176) AG Legacy Plus (first reduction in expense ratio) 5,118 (1,491) 3,627 Corporate America (reduced surrender charge) 2,032 (8,756) (6,724) Corporate Investor Select 21 (535) (514) Income Advantage Select 373 (56) 317 Platinum Investor I & II 25,369 (28,157) (2,789) Platinum Investor I & II (first reduction in expense ratio) 15,339 (25,580) (10,242) Platinum Investor III 10,303 (103,565) (93,262) Fidelity VIP Equity-Income Portfolio - Service Class 2 Platinum Investor III (first reduction in expense ratio) 97,782 (32,702) 65,080 Platinum Investor IV 5,271 (3,275) 1,996 Platinum Investor FlexDirector 13,311 (14,546) (1,235) Platinum Investor PLUS 2,300 (24,361) (22,061) Platinum Investor Plus (first reduction in expense ratio) 29,021 (1,492) 27,529 Platinum Investor Survivor -- -- -- Platinum Investor Survivor (first reduction in expense ratio) 21,669 (32,458) (10,789) Platinum Investor Survivor II 14,180 (19,426) (5,246) Platinum Investor VIP 12,408 (12,251) 157 Platinum Investor VIP (with GMWB rider) 238 (183) 55 Protection Advantage Select 936 (813) 123 Fidelity VIP Freedom 2020 Portfolio - Service Class 2 AG Income Advantage VUL 1,118 (1,304) (187) Corporate Investor Select -- (10) (10) Income Advantage Select 64 (16) 49 Platinum Investor I & II (first reduction in expense ratio) -- (6,410) (6,410) Platinum Investor III 419 (794) (375) Platinum Investor III (first reduction in expense ratio) 4,632 (433) 4,199 Platinum Investor IV 57 (20) 37 Platinum Investor FlexDirector 52 (47) 5 Platinum Investor VIP 1,380 (4,570) (3,190) Protection Advantage Select 1,079 (750) 329 Fidelity VIP Freedom 2025 Portfolio - Service Class 2 AG Income Advantage VUL 8 (1,163) (1,155) Corporate America (reduced surrender charge) 9,008 (2,394) 6,614 Income Advantage Select 11 (2) 8 Platinum Investor I & II (first reduction in expense ratio) 30 (360) (330) Platinum Investor III 372 (5,297) (4,925) Platinum Investor III (first reduction in expense ratio) 11,311 (4,362) 6,948 Platinum Investor IV 20 (5) 14 Platinum Investor VIP 1,241 (581) 660 Platinum Investor VIP (with GMWB rider) 41 (127) (87) Platinum Investor Survivor II 2,354 (268) 2,086 Protection Advantage Select 63 (1,351) (1,288) Fidelity VIP Freedom 2030 Portfolio - Service Class 2 AG Income Advantage VUL 1,742 (229) 1,513 Income Advantage Select 787 (53) 735 Platinum Investor III 826 (1,508) (683) Platinum Investor III (first reduction in expense ratio) 6,325 (4,487) 1,838 Platinum Investor IV 58 (281) (224) Platinum Investor PLUS 31 (7) 24 Platinum Investor Plus (first reduction in expense ratio) 96 (188) (92) Platinum Investor Survivor II 278 (3) 275 Platinum Investor VIP 4,427 (430) 3,997 Platinum Investor VIP (with GMWB rider) 60 (185) (124) Protection Advantage Select 447 (379) 68
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, 2013.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Fidelity VIP Growth Portfolio - Service Class 2 AG Income Advantage VUL 885 (1,027) (142) AG Legacy Plus 18 (1,835) (1,816) AG Legacy Plus (first reduction in expense ratio) 1,331 (657) 674 Corporate America (reduced surrender charge) 899 (5,851) (4,952) Income Advantage Select 173 (72) 101 Platinum Investor I & II 29,599 (29,579) 20 Platinum Investor I & II (first reduction in expense ratio) 9,555 (17,347) (7,792) Fidelity VIP Growth Portfolio - Service Class 2 Platinum Investor III 36,794 (237,751) (200,957) Platinum Investor III (first reduction in expense ratio) 158,544 (48,151) 110,394 Platinum Investor IV 3,781 (3,048) 733 Platinum Investor FlexDirector 6,500 (6,501) (1) Platinum Investor PLUS 1,109 (37,715) (36,606) Platinum Investor Plus (first reduction in expense ratio) 46,157 (6,988) 39,169 Platinum Investor Survivor Platinum Investor Survivor (first reduction in expense ratio) 870 (1,035) (165) Platinum Investor Survivor II 3,029 (6,530) (3,501) Platinum Investor VIP 6,992 (3,318) 3,674 Protection Advantage Select 1,421 (3,173) (1,753) Fidelity VIP Mid Cap Portfolio - Service Class 2 AG Income Advantage VUL 1,280 (1,086) 193 Corporate America (reduced surrender charge) 911 (3,526) (2,615) Corporate Investor Select 20 (477) (457) Income Advantage Select 431 (432) (1) Income Advantage Select (with GMWB rider) 6 (3) 3 Platinum Investor I & II 26 (144) (118) Platinum Investor I & II (first reduction in expense ratio) 2,966 (209) 2,757 Platinum Investor III 12,354 (29,433) (17,078) Platinum Investor III (first reduction in expense ratio) 53,506 (17,896) 35,609 Platinum Investor IV 3,756 (9,724) (5,968) Platinum Investor FlexDirector 39 (16) 23 Platinum Investor PLUS 660 (4,253) (3,593) Platinum Investor Plus (first reduction in expense ratio) 7,633 (106) 7,527 Platinum Investor Survivor Platinum Investor Survivor (first reduction in expense ratio) 39,302 (39,235) 67 Platinum Investor Survivor II 3,540 (4,264) (723) Platinum Investor VIP 12,140 (9,586) 2,554 Platinum Investor VIP (with GMWB rider) 114 (12) 102 Protection Advantage Select 988 (381) 607 Franklin Templeton Franklin Small Cap Value VIP Fund - Class 2 AG Income Advantage VUL 1,105 (859) 246 Corporate America (reduced surrender charge) 811 (2,097) (1,286) Income Advantage Select 576 (141) 435 Income Advantage Select (with GMWB rider) 6 (3) 3 Platinum Investor I & II 20 (365) (344) Platinum Investor I & II (first reduction in expense ratio) 550 (904) (354) Platinum Investor III 7,122 (24,300) (17,178) Platinum Investor III (first reduction in expense ratio) 29,528 (18,037) 11,492 Platinum Investor IV 2,218 (10,639) (8,421) Platinum Investor FlexDirector 26 (61) (35) Platinum Investor PLUS 565 (5,982) (5,417) Platinum Investor Plus (first reduction in expense ratio) 6,437 (447) 5,990 Platinum Investor Survivor (first reduction in expense ratio) 3,899 (5,100) (1,201) Platinum Investor Survivor II 4,851 (5,591) (740) Platinum Investor VIP 11,153 (6,501) 4,652 Platinum Investor VIP (with GMWB rider) 77 (8) 69 Protection Advantage Select 754 (2,095) (1,340) Franklin Templeton Franklin Small-Mid Cap Growth VIP Fund - Class 2 AG Legacy Plus 628 (1,510) (882) AG Legacy Plus (first reduction in expense ratio) 1,034 (98) 937
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, 2013.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Franklin Templeton Franklin U.S. Government Securities VIP Fund - Class 2 Corporate America (reduced surrender charge) 4,007 (3,148) 859 Platinum Investor I & II 64 (1,254) (1,190) Platinum Investor I & II (first reduction in expense ratio) 2,688 (4,937) (2,249) Platinum Investor III 3,925 (26,467) (22,542) Platinum Investor III (first reduction in expense ratio) 30,406 (9,833) 20,573 Platinum Investor IV 2,998 (5,649) (2,651) Platinum Investor FlexDirector 18 (16) 2 Platinum Investor PLUS 569 (8,583) (8,014) Platinum Investor Plus (first reduction in expense ratio) 10,047 (731) 9,316 Platinum Investor Survivor (first reduction in expense ratio) 629 (4,252) (3,623) Platinum Investor Survivor II 355 (121) 234 Platinum Investor VIP 7,012 (4,320) 2,691 Franklin Templeton Franklin Mutual Shares VIP Fund - Class 2 AG Income Advantage VUL 1,034 (670) 364 Corporate America (reduced surrender charge) 1,459 (106) 1,353 Income Advantage Select 165 (123) 42 Platinum Investor I & II 1,415 (6,089) (4,674) Platinum Investor I & II (first reduction in expense ratio) 9,911 (14,378) (4,467) Platinum Investor III 7,111 (42,184) (35,074) Platinum Investor III (first reduction in expense ratio) 49,069 (30,632) 18,437 Platinum Investor IV 2,928 (13,313) (10,385) Platinum Investor FlexDirector 70 (295) (225) Platinum Investor PLUS 1,201 (13,696) (12,495) Platinum Investor Plus (first reduction in expense ratio) 14,828 (3,211) 11,618 Platinum Investor Survivor (first reduction in expense ratio) 803 (687) 116 Platinum Investor Survivor II 1,358 (490) 868 Platinum Investor VIP 5,720 (8,384) (2,664) Platinum Investor VIP (with GMWB rider) -- (33) (33) Protection Advantage Select 1,262 (3,421) (2,160) Franklin Templeton Templeton Foreign VIP Fund - Class 2 AG Legacy Plus 121 (2,582) (2,461) AG Legacy Plus (first reduction in expense ratio) 3,230 (781) 2,449 Corporate America (reduced surrender charge) 346 (3,934) (3,588) Platinum Investor I & II 6,902 (8,082) (1,180) Platinum Investor I & II (first reduction in expense ratio) 13,927 (15,282) (1,354) Platinum Investor III 14,499 (40,907) (26,408) Platinum Investor III (first reduction in expense ratio) 57,655 (25,424) 32,230 Platinum Investor IV 1,792 (2,871) (1,079) Platinum Investor FlexDirector 7,319 (7,902) (583) Platinum Investor PLUS 973 (8,253) (7,280) Platinum Investor Plus (first reduction in expense ratio) 8,499 (1,884) 6,615 Platinum Investor Survivor (first reduction in expense ratio) 5,195 (5,772) (577) Platinum Investor Survivor II 21,526 (22,167) (641) Platinum Investor VIP 9,621 (11,265) (1,645) Goldman Sachs VIT Strategic Growth Fund - Institutional Shares Platinum Investor I & II (first reduction in expense ratio) -- (132) (132) Platinum Investor III -- -- -- Platinum Investor III (first reduction in expense ratio) -- (252) (252) Platinum Investor Plus (first reduction in expense ratio) -- (1) (1) Platinum Investor Survivor (first reduction in expense ratio) -- (29,535) (29,535) Platinum Investor Survivor II 16,304 (16,626) (322) Invesco V.I. Core Equity Fund - Series I Corporate America 31 (143) (112) Corporate America (reduced surrender charge) 806 (376) 429 Platinum Investor I & II 31 (75) (44) Platinum Investor I & II (first reduction in expense ratio) 23,995 (50,861) (26,866) Platinum Investor III 2,911 (27,259) (24,348) Platinum Investor III (first reduction in expense ratio) 26,754 (26,852) (98) Platinum Investor IV 804 (1,372) (568) Platinum Investor PLUS 506 (8,254) (7,747) Platinum Investor Plus (first reduction in expense ratio) 8,976 (1,167) 7,809 Platinum Investor Survivor (first reduction in expense ratio) 1,420 (3,212) (1,792) Platinum Investor Survivor II 250 (28) 222
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, 2013.
Accumulation Units Accumulation Units Net Increase Divisions Issued Redeemed (Decrease) --------- ------------------ ------------------ ------------ Invesco V.I. Global Real Estate Fund - Series I AG Income Advantage VUL 332 (222) 110 Income Advantage Select 1,113 (241) 872 Protection Advantage Select 216 (99) 117 Invesco V.I. Government Securities Fund - Series I AG Legacy Plus 61 (2,484) (2,424) AG Legacy Plus (first reduction in expense ratio) 1,551 (788) 763 Invesco V.I. High Yield Fund - Series I Platinum Investor Plus (first reduction in expense ratio) 532 (65) 467 Platinum Investor I & II (first reduction in expense ratio) 13,617 (18,788) (5,171) Platinum Investor III 6,697 (13,018) (6,321) Platinum Investor III (first reduction in expense ratio) 14,200 (2,354) 11,846 Platinum Investor IV 318 (134) 183 Platinum Investor PLUS 217 (1,124) (908) Platinum Investor Survivor (first reduction in expense ratio) 2,087 (2) 2,085 Platinum Investor Survivor II 11,102 (113) 10,989 Invesco V.I. International Growth Fund - Series I AG Income Advantage VUL 1,069 (1,164) (95) AG Legacy Plus 43 (1,934) (1,891) AG Legacy Plus (first reduction in expense ratio) 1,310 (647) 663 Corporate America 23 (102) (80) Corporate America (reduced surrender charge) 766 (6,991) (6,224) Corporate Investor Select 23 (525) (502) Income Advantage Select 1,080 (262) 819 Platinum Investor I & II 7,065 (9,281) (2,215) Platinum Investor I & II (first reduction in expense ratio) 43,573 (23,113) 20,459 Platinum Investor III 7,431 (39,085) (31,654) Platinum Investor III (first reduction in expense ratio) 44,235 (28,394) 15,841 Platinum Investor IV 2,526 (8,590) (6,063) Platinum Investor FlexDirector 44 (138) (94) Platinum Investor PLUS 454 (4,390) (3,936) Platinum Investor Plus (first reduction in expense ratio) 8,422 (1,189) 7,234 Platinum Investor Survivor (first reduction in expense ratio) 1,919 (4,607) (2,688) Platinum Investor Survivor II 12,918 (12,509) 409 Platinum Investor VIP 10,995 (9,332) 1,663 Platinum Investor VIP (with GMWB rider) 221 (31) 190 Protection Advantage Select 1,073 (317) 756 Invesco V.I. American Franchise Fund - Series I AG Legacy Plus -- (346) (346) AG Legacy Plus (first reduction in expense ratio) 198 (41) 157 Invesco V.I. Growth and Income Fund - Series I AG Income Advantage VUL 838 (780) 58 AG Income Advantage VUL (with GMWB rider) -- (18) (18) Corporate America (reduced surrender charge) -- (709) (709) Income Advantage Select 144 (160) (16) Platinum Investor I & II 543 (2,439) (1,896) Platinum Investor I & II (first reduction in expense ratio) 4,743 (10,380) (5,637) Platinum Investor III 11,944 (52,246) (40,302) Platinum Investor III (first reduction in expense ratio) 52,974 (22,905) 30,069 Platinum Investor IV 3,338 (9,503) (6,165) Platinum Investor FlexDirector 4 (74) (70) Platinum Investor PLUS 687 (10,788) (10,101) Platinum Investor Plus (first reduction in expense ratio) 15,594 (962) 14,632 Platinum Investor Survivor (first reduction in expense ratio) 2,735 (795) 1,940 Platinum Investor Survivor II 21,862 (14,744) 7,118 Platinum Investor VIP 6,805 (3,681) 3,125 Protection Advantage Select 1,310 (2,473) (1,163)
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, 2013.
Accumulation Units Accumulation Net Increase Divisions Issued Units Redeemed (Decrease) --------- ------------------ -------------- ------------ Janus Aspen Enterprise Portfolio - Service Shares AG Income Advantage VUL 261 (1,084) (823) Corporate America (reduced surrender charge) 517 (1,555) (1,037) Income Advantage Select 98 (158) (60) Platinum Investor I & II 1,199 (1,199) -- Platinum Investor I & II (first reduction in expense ratio) 4,669 (1,347) 3,322 Platinum Investor III 3,947 (57,206) (53,260) Platinum Investor III (first reduction in expense ratio) 40,839 (16,914) 23,925 Platinum Investor IV 946 (2,346) (1,400) Platinum Investor FlexDirector 10 (17) (7) Platinum Investor PLUS 225 (2,546) (2,321) Platinum Investor Plus (first reduction in expense ratio) 4,552 (475) 4,077 Platinum Investor Survivor (first reduction in expense ratio) 123 (104) 18 Platinum Investor Survivor II 144 (194) (49) Platinum Investor VIP 3,281 (893) 2,388 Protection Advantage Select 143 (976) (833) Janus Aspen Forty Portfolio - Service Shares AG Income Advantage VUL 859 (174) 684 AG Income Advantage VUL (with GMWB rider) -- (16) (16) Income Advantage Select 782 (131) 651 Protection Advantage Select 863 (1,569) (706) Janus Aspen Overseas Portfolio - Service Shares AG Income Advantage VUL 3,105 (1,568) 1,537 Corporate America (reduced surrender charge) 627 (4,597) (3,970) Platinum Investor I & II 2,725 (2,876) (150) Platinum Investor I & II (first reduction in expense ratio) 8,125 (26,785) (18,660) Platinum Investor III 27,087 (62,960) (35,873) Platinum Investor III (first reduction in expense ratio) 92,837 (67,980) 24,857 Platinum Investor IV 3,492 (5,112) (1,621) Platinum Investor FlexDirector 11,931 (17,180) (5,249) Platinum Investor PLUS 511 (5,170) (4,659) Platinum Investor Plus (first reduction in expense ratio) 13,171 (2,814) 10,357 Platinum Investor Survivor Platinum Investor Survivor (first reduction in expense ratio) 144,073 (142,640) 1,433 Platinum Investor Survivor II 3,874 (4,218) (344) Platinum Investor VIP 16,506 (13,200) 3,306 Platinum Investor VIP (with GMWB rider) 949 (147) 802 Protection Advantage Select 2,424 (985) 1,439 Janus Aspen Global Research Portfolio - Service Shares Corporate America (reduced surrender charge) 121 (284) (163) Platinum Investor I & II 837 (837) 0 Platinum Investor I & II (first reduction in expense ratio) 6,281 (5,631) 650 Platinum Investor III 1,882 (60,251) (58,369) Platinum Investor III (first reduction in expense ratio) 44,668 (14,590) 30,077 Platinum Investor IV 637 (800) (163) Platinum Investor PLUS 408 (8,243) (7,835) Platinum Investor Plus (first reduction in expense ratio) 9,682 (572) 9,110 Platinum Investor Survivor (first reduction in expense ratio) 601 (263) 338 Platinum Investor Survivor II 290 (217) 73 JPMorgan Insurance Trust Core Bond Portfolio - Class 1 AG Income Advantage VUL 179 (129) 50 Income Advantage Select 229 (77) 152 Protection Advantage Select 900 (315) 585 JPMorgan Insurance Trust International Equity Portfolio - Class 1 AG Income Advantage VUL 238 (140) 99 AG Income Advantage VUL (with GMWB rider) -- (18) (18) Income Advantage Select 279 (249) 30 Protection Advantage Select 363 (365) (2)
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, 2013.
Accumulation Units Accumulation Net Increase Divisions Issued Units Redeemed (Decrease) --------- ------------------ -------------- ------------ JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Platinum Investor I & II -- (202) (202) Platinum Investor I & II (first reduction in expense ratio) -- (111) (111) Platinum Investor III -- (2,980) (2,980) Platinum Investor III (first reduction in expense ratio) 1,733 (3,105) (1,372) Platinum Investor IV 50 (290) (240) Platinum Investor PLUS -- (1,770) (1,770) Platinum Investor Plus (first reduction in expense ratio) 327 -- 327 Platinum Investor Survivor (first reduction in expense ratio) -- (5) (5) Platinum Investor Survivor II -- (113) (113) JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Platinum Investor I & II 8,067 (7,996) 71 Platinum Investor I & II (first reduction in expense ratio) 3,839 (5,530) (1,691) Platinum Investor III 4,697 (22,187) (17,490) Platinum Investor III (first reduction in expense ratio) 20,345 (7,176) 13,168 JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Platinum Investor IV 1,379 (6,971) (5,593) Platinum Investor FlexDirector 39 (13) 26 Platinum Investor PLUS 296 (4,751) (4,455) Platinum Investor Plus (first reduction in expense ratio) 6,327 (1,871) 4,455 Platinum Investor Survivor (first reduction in expense ratio) 65 (10) 55 Platinum Investor Survivor II 1,192 (2,123) (931) Platinum Investor VIP 5,472 (6,622) (1,150) MFS VIT Core Equity Series - Initial Class Corporate America (reduced surrender charge) 207 (414) (207) Platinum Investor I & II 1,140 (1,121) 20 Platinum Investor I & II (first reduction in expense ratio) 3,126 (9,652) (6,526) Platinum Investor III 2,293 (40,002) (37,709) Platinum Investor III (first reduction in expense ratio) 29,586 (15,183) 14,402 Platinum Investor IV 750 (697) 53 Platinum Investor PLUS 1,919 (17,953) (16,034) Platinum Investor Plus (first reduction in expense ratio) 21,620 (1,169) 20,451 Platinum Investor Survivor (first reduction in expense ratio) 1,167 (1,147) 20 Platinum Investor Survivor II -- (20) (20) MFS VIT Growth Series - Initial Class AG Legacy Plus 309 (929) (620) AG Legacy Plus (first reduction in expense ratio) 1,109 (769) 339 Corporate America (reduced surrender charge) -- (14) (14) Platinum Investor I & II 128 (128) -- Platinum Investor I & II (first reduction in expense ratio) 19,740 (38,220) (18,481) Platinum Investor III 8,680 (89,139) (80,459) Platinum Investor III (first reduction in expense ratio) 63,397 (14,760) 48,638 Platinum Investor IV 688 (750) (61) Platinum Investor FlexDirector 15,295 (16,508) (1,213) Platinum Investor PLUS 1,000 (13,441) (12,441) Platinum Investor Plus (first reduction in expense ratio) 17,471 (1,527) 15,943 Platinum Investor Survivor Platinum Investor Survivor (first reduction in expense ratio) 870 (1,345) (475) Platinum Investor Survivor II 525 (36) 488 MFS VIT New Discovery Series - Initial Class AG Income Advantage VUL 280 (259) 20 AG Legacy Plus 3,650 (5,521) (1,872) AG Legacy Plus (first reduction in expense ratio) 4,672 (107) 4,565 Corporate America (reduced surrender charge) 113 (1,105) (992) Income Advantage Select 84 (114) (30) Platinum Investor I & II 8,696 (8,626) 70 Platinum Investor I & II (first reduction in expense ratio) 1,169 (2,152) (983) Platinum Investor III 2,863 (55,280) (52,417) Platinum Investor III (first reduction in expense ratio) 45,481 (10,085) 35,395
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, 2013.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Platinum Investor IV 2,044 (1,263) 781 Platinum Investor FlexDirector 2,055 (2,384) (330) Platinum Investor PLUS 1,010 (9,805) (8,795) Platinum Investor Plus (first reduction in expense ratio) 10,332 (1,992) 8,340 Platinum Investor Survivor (first reduction in expense ratio) 167 (681) (514) Platinum Investor Survivor II 8,620 (8,441) 179 Platinum Investor VIP 3,174 (2,725) 448 Platinum Investor VIP (with GMWB rider) -- (6) (6) Protection Advantage Select 222 (760) (538) MFS VIT Research Series - Initial Class AG Income Advantage VUL 334 (186) 148 Income Advantage Select 588 (71) 517 Platinum Investor I & II (first reduction in expense ratio) 582 (1,089) (507) Platinum Investor III 6,462 (19,211) (12,749) Platinum Investor III (first reduction in expense ratio) 17,347 (5,920) 11,428 Platinum Investor IV 417 (870) (453) Platinum Investor PLUS 197 (5,756) (5,559) Platinum Investor Plus (first reduction in expense ratio) 7,770 (245) 7,525 Platinum Investor Survivor (first reduction in expense ratio) 856 (1,144) (288) Platinum Investor Survivor II 20 (63) (42) Platinum Investor VIP 2,156 (578) 1,578 Protection Advantage Select 436 (239) 197 MFS VIT Total Return Series - Initial Class AG Legacy Plus 625 (13,753) (13,128) AG Legacy Plus (first reduction in expense ratio) 8,549 (2,639) 5,909 Neuberger Berman AMT Mid-Cap Growth Portfolio - Class I AG Income Advantage VUL 76 (382) (306) Corporate America (reduced surrender charge) 328 (1,152) (823) Income Advantage Select 618 (77) 541 Platinum Investor I & II 16,036 (16,144) (108) Platinum Investor I & II (first reduction in expense ratio) 4,838 (11,193) (6,354) Platinum Investor III 4,968 (41,812) (36,844) Platinum Investor III (first reduction in expense ratio) 33,724 (10,199) 23,525 Platinum Investor IV 1,491 (1,049) 442 Platinum Investor FlexDirector 2 (2) -- Platinum Investor PLUS 753 (11,395) (10,642) Platinum Investor Plus (first reduction in expense ratio) 12,973 (847) 12,125 Platinum Investor Survivor (first reduction in expense ratio) 58,695 (57,583) 1,112 Platinum Investor Survivor II 358 (96) 263 Platinum Investor VIP 4,353 (2,854) 1,499 Platinum Investor VIP (with GMWB rider) 18 (78) (60) Protection Advantage Select 406 (1,217) (811) Neubeger Berman AMT Large Cap Value Portfolio -Class 1 AG Legacy Plus 419 (539) (120) AG Legacy Plus (first reduction in expense ratio) 979 (922) 57 Neuberger Berman AMT Socially Responsive Portfolio - Class I AG Income Advantage VUL 46 (4) 42 Corporate America (reduced surrender charge) 534 (18) 516 Income Advantage Select 12 (1) 11 Protection Advantage Select 27 (7) 20
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, 2013.
Accumulation Net Accumulation Units Increase Divisions Units Issued Redeemed (Decrease) --------- ------------ ------------ ---------- Oppenheimer Capital Income Fund A AG Income Advantage VUL 315 (235) 80 Income Advantage Select 109 (90) 20 Platinum Investor I & II 10 (1,221) (1,211) Platinum Investor I & II (first reduction in expense ratio) 1,992 (455) 1,538 Platinum Investor III 1,613 (11,721) (10,108) Platinum Investor III (first reduction in expense ratio) 19,586 (2,575) 17,011 Platinum Investor IV 1,108 (2,644) (1,535) Platinum Investor FlexDirector 37 (41) (3) Platinum Investor PLUS 494 (2,164) (1,670) Platinum Investor Plus (first reduction in expense ratio) 1,904 (50) 1,854 Platinum Investor Survivor (first reduction in expense ratio) 239 (9) 230 Platinum Investor Survivor II 471 (189) 283 Platinum Investor VIP 3,701 (5,769) (2,068) Protection Advantage Select 213 (499) (286) Oppenheimer Global Fund/VA - Non-Service Shares AG Income Advantage VUL 1,286 (472) 814 Corporate America (reduced surrender charge) 548 (2,449) (1,901) Corporate Investor Select 30 (751) (720) Income Advantage Select 334 (164) 170 Platinum Investor I & II 97 (2,575) (2,479) Platinum Investor I & II (first reduction in expense ratio) 5,099 (353) 4,745 Platinum Investor III 5,633 (19,331) (13,698) Platinum Investor III (first reduction in expense ratio) 29,091 (7,937) 21,153 Platinum Investor IV 2,658 (7,893) (5,235) Platinum Investor FlexDirector 22 (13) 9 Platinum Investor PLUS 542 (2,615) (2,073) Platinum Investor Plus (first reduction in expense ratio) 4,009 (80) 3,929 Platinum Investor Survivor (first reduction in expense ratio) 32,986 (22,820) 10,166 Platinum Investor Survivor II 5,809 (6,083) (274) Platinum Investor VIP 9,256 (4,933) 4,323 Platinum Investor VIP (with GMWB rider) 58 (158) (99) Protection Advantage Select 677 (1,777) (1,100) Oppenheimer Global Strategic Income Fund/VA (Non-Service) AG Legacy Plus (first reduction in expense ratio) 90 (130) (40) AG Legacy Plus 271 (4,070) (3,799) PIMCO VIT CommodityRealReturn Strategy Portfolio - Administrative Class AG Income Advantage VUL 938 (286) 652 AG Income Advantage VUL (with GMWB rider) -- (8) (8) Corporate America (reduced surrender charge) 562 (3,408) (2,845) Income Advantage Select 538 (78) 460 Platinum Investor I & II -- -- -- Platinum Investor I & II (first reduction in expense ratio) 13,649 (546) 13,103 Platinum Investor III 4,051 (5,108) (1,058) Platinum Investor III (first reduction in expense ratio) 12,595 (9,078) 3,517 Platinum Investor IV 2,230 (2,321) (91) Platinum Investor FlexDirector 9,469 (8,374) 1,096 Platinum Investor PLUS 214 (1,243) (1,029) Platinum Investor Plus (first reduction in expense ratio) 1,711 (159) 1,552 Platinum Investor Survivor II 6,784 (11,248) (4,464) Platinum Investor VIP 4,169 (13,830) (9,662) Platinum Investor VIP (with GMWB rider) 73 (8) 65 Protection Advantage Select 1,448 (1,917) (468) PIMCO VIT Global Bond Portfolio (Unhedged) - Administrative Class AG Income Advantage VUL 44 (49) (6) Income Advantage Select 485 (107) 378 Protection Advantage Select 587 (317) 271
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, 2013.
Accumulation Units Accumulation Net Increase Divisions Issued Units Redeemed (Decrease) --------- ------------------ -------------- ------------ PIMCO VIT Real Return Portfolio - Administrative Class AG Income Advantage VUL 666 (951) (286) AG Legacy Plus 376 (7,159) (6,783) AG Legacy Plus (first reduction in expense ratio) 4,651 (1,193) 3,458 Corporate America (reduced surrender charge) 748 (4,762) (4,014) Corporate Investor Select 12 (282) (269) Income Advantage Select 378 (127) 251 Platinum Investor I & II 418 (4,454) (4,036) Platinum Investor I & II (first reduction in expense ratio) 90,971 (94,577) (3,606) Platinum Investor III 2,231 (103,481) (101,250) Platinum Investor III (first reduction in expense ratio) 165,543 (30,729) 134,814 Platinum Investor IV 2,465 (8,177) (5,712) Platinum Investor FlexDirector -- (35) (35) Platinum Investor PLUS 1,293 (17,119) (15,826) Platinum Investor Plus (first reduction in expense ratio) 21,536 (2,907) 18,630 Platinum Investor Survivor (first reduction in expense ratio) 3,047 (7,831) (4,785) Platinum Investor Survivor II 5,983 (15,164) (9,180) Platinum Investor VIP 8,160 (12,748) (4,587) Protection Advantage Select 401 (228) 173 PIMCO VIT Short-Term Portfolio - Administrative Class AG Income Advantage VUL 1,469 (386) 1,083 AG Income Advantage VUL (with GMWB rider) -- (13) (13) Corporate America (reduced surrender charge) 323 (6,134) (5,812) Corporate Investor Select -- (16) (16) Income Advantage Select 329 (128) 201 Platinum Investor I & II 1,557 (1,557) -- Platinum Investor I & II (first reduction in expense ratio) 3,506 (5,578) (2,072) Platinum Investor III 12,398 (64,222) (51,824) Platinum Investor III (first reduction in expense ratio) 65,411 (84,448) (19,037) Platinum Investor IV 4,262 (3,207) 1,056 Platinum Investor FlexDirector 30,489 (19,082) 11,407 Platinum Investor PLUS 6,064 (6,949) (885) Platinum Investor Plus (first reduction in expense ratio) 3,812 (1,242) 2,570 Platinum Investor Survivor (first reduction in expense ratio) 1,306 (8,284) (6,978) Platinum Investor Survivor II 21,806 (102,212) (80,406) Platinum Investor VIP 7,264 (3,113) 4,151 Platinum Investor VIP (with GMWB rider) 195 (20) 175 Protection Advantage Select 246 (148) 98 PIMCO VIT Total Return Portfolio - Administrative Class AG Income Advantage VUL 1,731 (648) 1,082 AG Income Advantage VUL (with GMWB rider) -- (11) (11) AG Legacy Plus 38 (5,778) (5,740) AG Legacy Plus (first reduction in expense ratio) 6,859 (1,940) 4,918 Corporate America (reduced surrender charge) 6,927 (7,057) (130) Corporate Investor Select 28 (576) (549) Income Advantage Select 644 (212) 433 Platinum Investor I & II 1,283 (3,573) (2,290) Platinum Investor I & II (first reduction in expense ratio) 8,557 (20,324) (11,767) Platinum Investor III 5,696 (78,144) (72,448) Platinum Investor III (first reduction in expense ratio) 118,220 (44,191) 74,028 Platinum Investor IV 5,448 (6,117) (670) Platinum Investor FlexDirector 14,151 (21,873) (7,722) Platinum Investor PLUS 5,375 (27,995) (22,619) Platinum Investor Plus (first reduction in expense ratio) 32,789 (7,457) 25,332 Platinum Investor Survivor (first reduction in expense ratio) 5,904 (8,667) (2,763) Platinum Investor Survivor II 22,883 (50,936) (28,053) Platinum Investor VIP 15,388 (14,137) 1,251
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, 2013.
Accumulation Units Accumulation Net Increase Divisions Issued Units Redeemed (Decrease) --------- ------------------ -------------- ------------ PIMCO VIT Total Return Portfolio - Administrative Class Platinum Investor VIP (with GMWB rider) 247 (36) 210 Protection Advantage Select 6,554 (4,187) 2,367 Pioneer Fund VCT Portfolio - Class I Platinum Investor I & II -- (154) (154) Platinum Investor I & II (first reduction in expense ratio) 17,115 (37,344) (20,230) Platinum Investor III 80 (2,182) (2,102) Platinum Investor III (first reduction in expense ratio) 3,791 (6,093) (2,303) Platinum Investor PLUS 1 (449) (448) Platinum Investor Plus (first reduction in expense ratio) 589 (60) 529 Platinum Investor Survivor (first reduction in expense ratio) 196 (79) 117 Platinum Investor Survivor II -- (18) (18) Pioneer Select Mid Cap Growth VCT Portfolio - Class I Corporate America 20 (92) (72) Platinum Investor I & II 3 (68) (65) Platinum Investor I & II (first reduction in expense ratio) 6,784 (18,432) (11,648) Platinum Investor III 520 (9,606) (9,086) Platinum Investor III (first reduction in expense ratio) 9,637 (8,228) 1,409 Platinum Investor PLUS 142 (1,198) (1,056) Platinum Investor Plus (first reduction in expense ratio) 1,336 (69) 1,267 Platinum Investor Survivor (first reduction in expense ratio) 67 (43) 24 Platinum Investor Survivor II -- (10) (10) Pioneer Mid Cap Value VCT Portfolio - Class I AG Income Advantage VUL 362 (141) 221 Corporate America (reduced surrender charge) -- (336) (336) Income Advantage Select 116 (109) 6 Platinum Investor I & II 22 (6) 17 Platinum Investor I & II (first reduction in expense ratio) -- (15) (15) Platinum Investor III 465 (1,902) (1,437) Platinum Investor III (first reduction in expense ratio) 1,250 (1,085) 165 Platinum Investor IV 256 (172) 84 Platinum Investor FlexDirector 17,934 (19,467) (1,532) Platinum Investor PLUS 218 (718) (500) Platinum Investor Plus (first reduction in expense ratio) 518 (136) 382 Platinum Investor Survivor II 1,413 (61) 1,352 Platinum Investor VIP 3,683 (3,126) 557 Platinum Investor VIP (with GMWB rider) 365 (140) 225 Protection Advantage Select 416 (202) 215 Putnam VT Diversified Income Fund - Class IB AG Income Advantage VUL 2,240 (118) 2,122 AG Legacy Plus 85 (2,055) (1,971) AG Legacy Plus (first reduction in expense ratio) 2,168 (248) 1,920 Corporate America -- (6,092) (6,092) Corporate America (reduced surrender charge) 399 (1,040) (641) Income Advantage Select 110 (157) (46) Income Advantage Select (with GMWB rider) 8 (4) 4 Platinum Investor I & II -- (31) (31) Platinum Investor I & II (first reduction in expense ratio) 1,286 (1,549) (263) Platinum Investor III 893 (26,955) (26,062) Platinum Investor III (first reduction in expense ratio) 40,122 (28,840) 11,282 Platinum Investor IV 1,084 (1,017) 67 Platinum Investor FlexDirector 5 (7) (2) Platinum Investor PLUS 159 (3,211) (3,052) Platinum Investor Plus (first reduction in expense ratio) 4,189 (136) 4,053 Platinum Investor Survivor (first reduction in expense ratio) 699 (59) 640 Platinum Investor Survivor II 4,250 (86) 4,164 Platinum Investor VIP 4,138 (3,959) 179 Protection Advantage Select 156 (178) (22) Putnam VT Growth and Income Fund - Class IB Corporate America -- (8,484) (8,484) Corporate America (reduced surrender charge) 793 (1,091) (298)
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, 2013.
Accumulation Units Accumulation Net Increase Divisions Issued Units Redeemed (Decrease) --------- ------------------ -------------- ------------ Platinum Investor I & II 355 (414) (59) Platinum Investor I & II (first reduction in expense ratio) 3,034 (11,421) (8,388) Platinum Investor III 3,799 (91,540) (87,741) Platinum Investor III (first reduction in expense ratio) 83,637 (16,728) 66,909 Platinum Investor IV 3,299 (1,903) 1,396 Platinum Investor PLUS 795 (16,281) (15,486) Platinum Investor Plus (first reduction in expense ratio) 17,147 (2,540) 14,607 Platinum Investor Survivor (first reduction in expense ratio) 697 (1,498) (801) Platinum Investor Survivor II 1,247 (361) 886 Putnam VT International Value Fund - Class IB Corporate America (reduced surrender charge) 1,221 (616) 605 Platinum Investor I & II 1,917 (1,889) 27 Platinum Investor I & II (first reduction in expense ratio) 15,271 (35,855) (20,585) Platinum Investor III 4,040 (29,043) (25,003) Platinum Investor III (first reduction in expense ratio) 46,698 (20,431) 26,268 Platinum Investor IV 1,761 (1,909) (148) Platinum Investor FlexDirector 7 (12) (5) Platinum Investor PLUS 439 (5,119) (4,680) Platinum Investor Plus (first reduction in expense ratio) 8,922 (1,034) 7,888 Platinum Investor Survivor -- -- -- Platinum Investor Survivor (first reduction in expense ratio) 1,380 (1,178) 201 Platinum Investor Survivor II 9,070 (9,665) (595) Platinum Investor VIP 10,949 (6,450) 4,499 Platinum Investor VIP (with GMWB rider) 79 (164) (85) Putnam VT Multi-Cap Growth Fund - Class IB AG Legacy Plus 478 (663) (185) AG Legacy Plus (first reduction in expense ratio) 633 (80) 553 Putnam VT Small Cap Value Fund - Class IB AG Income Advantage VUL 1,456 (87) 1,369 AG Legacy Plus 1,165 (1,387) (222) AG Legacy Plus (first reduction in expense ratio) 932 (646) 286 Income Advantage Select 48 (12) 36 Protection Advantage Select 80 (94) (14) Putnam VT Voyager Fund - Class IB AG Legacy Plus 5,408 (11,265) (5,857) AG Legacy Plus (first reduction in expense ratio) 6,476 (277) 6,199 SunAmerica Aggressive Growth Portfolio - Class 1 AG Income Advantage VUL 98 (95) 3 Income Advantage Select 60 (18) 42 Platinum Investor I & II (first reduction in expense ratio) 96 (582) (486) Platinum Investor III 1,809 (22,354) (20,545) Platinum Investor III (first reduction in expense ratio) 27,700 (2,150) 25,551 Platinum Investor IV 1,633 (1,679) (46) Platinum Investor FlexDirector 1 (20) (19) Platinum Investor PLUS 276 (2,119) (1,843) Platinum Investor Plus (first reduction in expense ratio) 2,710 (519) 2,191 Platinum Investor Survivor II 16 -- 16 Platinum Investor VIP 3,746 (2,086) 1,660 Protection Advantage Select 103 (56) 47 SunAmerica Balanced Portfolio - Class 1 AG Income Advantage VUL 125 (36) 90 Income Advantage Select 41 (153) (111) Platinum Investor I & II (first reduction in expense ratio) 3,785 (1,263) 2,522 Platinum Investor III 1,431 (20,656) (19,225) Platinum Investor III (first reduction in expense ratio) 39,782 (2,456) 37,326 Platinum Investor IV 889 (1,024) (135) Platinum Investor FlexDirector 3 (2) 1 Platinum Investor PLUS 594 (8,841) (8,247) Platinum Investor Plus (first reduction in expense ratio) 9,791 (1,010) 8,781
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, 2013.
Accumulation Units Accumulation Net Increase Divisions Issued Units Redeemed (Decrease) --------- ------------------ -------------- ------------ Platinum Investor Survivor (first reduction in expense ratio) 6,553 (52) 6,501 Platinum Investor Survivor II 143 (44) 99 Platinum Investor VIP 1,414 (3,099) (1,685) Protection Advantage Select 50 (134) (84) UIF Capital Growth Portfolio - Class I Shares Platinum Investor I & II 253 (253) -- Platinum Investor I & II (first reduction in expense ratio) 2,919 (26,310) (23,390) Platinum Investor III 1,424 (14,847) (13,423) Platinum Investor III (first reduction in expense ratio) 10,392 (5,880) 4,512 Platinum Investor IV 210 (334) (124) Platinum Investor PLUS 151 (1,802) (1,650) Platinum Investor Plus (first reduction in expense ratio) 2,530 (134) 2,395 Platinum Investor Survivor (first reduction in expense ratio) 568 (471) 97 Platinum Investor Survivor II -- (26) (26) VALIC Company I International Equities Index Fund AG Income Advantage VUL 1,961 (393) 1,567 AG Legacy Plus -- -- -- AG Legacy Plus (first reduction in expense ratio) -- (176) (176) Corporate America (reduced surrender charge) 661 (113) 548 Income Advantage Select 143 (18) 125 Platinum Investor I & II 2,942 (4,594) (1,653) Platinum Investor I & II (first reduction in expense ratio) 6,050 (10,069) (4,019) Platinum Investor III 951 (12,904) (11,953) Platinum Investor III (first reduction in expense ratio) 13,434 (9,747) 3,688 Platinum Investor IV 1,294 (1,205) 88 Platinum Investor FlexDirector -- (51) (51) Platinum Investor PLUS 652 (4,528) (3,876) Platinum Investor Plus (first reduction in expense ratio) 6,264 (587) 5,677 Platinum Investor Survivor (first reduction in expense ratio) 334 (749) (414) Platinum Investor Survivor II 258 (558) (300) Platinum Investor VIP 4,630 (2,245) 2,385 Protection Advantage Select 280 (161) 119 VALIC Company I Mid Cap Index Fund AG Income Advantage VUL 2,016 (1,612) 403 AG Legacy Plus 285 (875) (589) AG Legacy Plus (first reduction in expense ratio) 1,521 (1,085) 435 Corporate America 23 (105) (82) Corporate America (reduced surrender charge) 234 (3,693) (3,460) Income Advantage Select 97 (12) 86 Platinum Investor I & II 1,117 (2,010) (892) Platinum Investor I & II (first reduction in expense ratio) 6,407 (22,779) (16,372) Platinum Investor III 2,550 (47,739) (45,189) Platinum Investor III (first reduction in expense ratio) 63,390 (45,741) 17,649 Platinum Investor IV 2,910 (2,575) 335 Platinum Investor FlexDirector 20 (20) -- Platinum Investor PLUS 1,296 (15,488) (14,192) Platinum Investor Plus (first reduction in expense ratio) 24,305 (2,466) 21,839 Platinum Investor Survivor (first reduction in expense ratio) 1,209 (1,585) (376) Platinum Investor Survivor II 5,019 (5,065) (45) Platinum Investor VIP 6,355 (4,382) 1,973 Platinum Investor VIP (with GMWB rider) 51 (155) (104) Protection Advantage Select 280 (455) (174) VALIC Company I Money Market I Fund AG Income Advantage VUL 12,424 (13,567) (1,142) AG Income Advantage VUL (with GMWB rider) -- (11) (11) AG Legacy Plus 1,120 (1,776) (656) AG Legacy Plus (first reduction in expense ratio) 9,655 (10,551) (896) Corporate America (reduced surrender charge) 5,009 (16,371) (11,362)
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, 2013.
Accumulation Units Accumulation Net Increase Divisions Issued Units Redeemed (Decrease) --------- ------------------ -------------- ------------ Income Advantage Select 1,417 (5,239) (3,822) Platinum Investor I & II 972 (6,565) (5,593) Platinum Investor I & II (first reduction in expense ratio) 158,001 (184,448) (26,448) Platinum Investor III 26,542 (151,212) (124,670) Platinum Investor III (first reduction in expense ratio) 137,086 (71,348) 65,737 Platinum Investor IV 68,438 (3,963) 64,475 Platinum Investor FlexDirector 3,211 (3,030) 181 Platinum Investor PLUS 2,077 (15,666) (13,588) Platinum Investor Plus (first reduction in expense ratio) 14,728 (2,102) 12,626 Platinum Investor Survivor (first reduction in expense ratio) 12,555 (33,243) (20,688) Platinum Investor Survivor II 42,897 (18,563) 24,334 Platinum Investor VIP 15,151 (46,261) (31,111) Platinum Investor VIP (with GMWB rider) 89 (9) 80 Protection Advantage Select 14,973 (3,878) 11,095 VALIC Company I Nasdaq-100 Index Fund AG Income Advantage VUL 880 (211) 668 Income Advantage Select 22 (3) 19 Platinum Investor I & II 2,317 (2,221) 96 Platinum Investor I & II (first reduction in expense ratio) 1,754 (1,867) (113) Platinum Investor III 7,357 (79,825) (72,468) Platinum Investor III (first reduction in expense ratio) 45,996 (7,798) 38,199 Platinum Investor IV 462 (884) (421) Platinum Investor FlexDirector 3 (5) (2) Platinum Investor PLUS 1,010 (7,814) (6,804) Platinum Investor Plus (first reduction in expense ratio) 10,955 (1,960) 8,995 Platinum Investor Survivor (first reduction in expense ratio) 588 (143) 445 Platinum Investor Survivor II 1,241 (2,806) (1,565) Platinum Investor VIP 2,923 (2,332) 590 Protection Advantage Select 879 (580) 299 VALIC Company I Science & Technology Fund AG Income Advantage VUL 228 (55) 173 Income Advantage Select 8 (1) 6 Platinum Investor I & II 63 -- 63 Platinum Investor I & II (first reduction in expense ratio) 3,330 (3,829) (500) Platinum Investor III 7,307 (22,964) (15,657) Platinum Investor III (first reduction in expense ratio) 9,990 (2,329) 7,661 Platinum Investor IV 407 (592) (185) Platinum Investor FlexDirector 17 (12) 5 Platinum Investor PLUS 191 (1,677) (1,486) Platinum Investor Plus (first reduction in expense ratio) 2,248 (34) 2,215 Platinum Investor Survivor (first reduction in expense ratio) 169 (89) 80 Platinum Investor Survivor II 1,191 (248) 943 Platinum Investor VIP 2,928 (4,044) (1,117) Protection Advantage Select 59 (60) (1) VALIC Company I Small Cap Index Fund AG Income Advantage VUL 2,022 (1,847) 174 Corporate America (reduced surrender charge) 296 (6,356) (6,059) Corporate Investor Select 20 (514) (495) Income Advantage Select 49 (13) 36 Platinum Investor I & II 1,987 (3,665) (1,678) Platinum Investor I & II (first reduction in expense ratio) 6,347 (6,487) (140) Platinum Investor III 4,471 (25,233) (20,761) Platinum Investor III (first reduction in expense ratio) 36,910 (13,446) 23,463 Platinum Investor IV 2,035 (4,981) (2,945) Platinum Investor FlexDirector 2,337 (2,706) (369) Platinum Investor PLUS 1,301 (9,437) (8,136) Platinum Investor Plus (first reduction in expense ratio) 10,906 (488) 10,418 Platinum Investor Survivor (first reduction in expense ratio) 698 (432) 266 Platinum Investor Survivor II 2,375 (1,941) 434 Platinum Investor VIP 6,666 (5,923) 744 Protection Advantage Select 697 (391) 306
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, 2013.
Accumulation Units Accumulation Net Increase Divisions Issued Units Redeemed (Decrease) --------- ------------------ -------------- ------------ VALIC Company I Stock Index Fund AG Income Advantage VUL 4,374 (900) 3,474 AG Legacy Plus 830 (1,117) (287) AG Legacy Plus (first reduction in expense ratio) 1,427 (2,010) (582) Corporate America 48 (222) (174) Corporate America (reduced surrender charge) 197 (3,492) (3,295) Corporate Investor Select 22 (556) (534) Income Advantage Select 1,208 (271) 936 Platinum Investor I & II 2,587 (3,970) (1,383) Platinum Investor I & II (first reduction in expense ratio) 11,191 (40,675) (29,484) Platinum Investor III 8,817 (100,040) (91,222) Platinum Investor III (first reduction in expense ratio) 90,169 (85,951) 4,218 Platinum Investor IV 2,379 (4,794) (2,415) Platinum Investor FlexDirector 7,476 (5,652) 1,824 Platinum Investor PLUS 1,810 (22,978) (21,168) Platinum Investor Plus (first reduction in expense ratio) 27,110 (1,128) 25,982 Platinum Investor Survivor (first reduction in expense ratio) 3,110 (8,601) (5,491) Platinum Investor Survivor II 23,238 (42,620) (19,382) Platinum Investor VIP 9,614 (4,991) 4,623 Protection Advantage Select 809 (595) 213 Vanguard VIF High Yield Bond Portfolio AG Income Advantage VUL 1,066 (4,870) (3,804) Corporate America (reduced surrender charge) 1,025 (2,178) (1,152) Corporate Investor Select 19 (467) (448) Income Advantage Select 294 (201) 93 Platinum Investor I & II 9,743 (11,033) (1,290) Platinum Investor I & II (first reduction in expense ratio) 10,165 (12,838) (2,673) Platinum Investor III 4,916 (30,771) (25,855) Platinum Investor III (first reduction in expense ratio) 34,776 (14,872) 19,905 Platinum Investor IV 2,738 (6,934) (4,196) Platinum Investor FlexDirector 8 (14) (5) Platinum Investor PLUS 503 (7,904) (7,402) Platinum Investor Plus (first reduction in expense ratio) 9,016 (1,756) 7,261 Platinum Investor Survivor (first reduction in expense ratio) 18,313 (16,925) 1,388 Platinum Investor Survivor II 6,469 (365) 6,104 Platinum Investor VIP 7,010 (6,600) 410 Platinum Investor VIP (with GMWB rider) 37 (4) 33 Protection Advantage Select 379 (340) 39 Vanguard VIF REIT Index Portfolio AG Income Advantage VUL 4,976 (979) 3,996 AG Income Advantage VUL (with GMWB rider) -- (7) (7) Corporate America (reduced surrender charge) 471 (3,614) (3,143) Income Advantage Select 378 (279) 99 Income Advantage Select (with GMWB rider) 7 (3) 4 Platinum Investor I & II 3,567 (4,419) (852) Platinum Investor I & II (first reduction in expense ratio) 8,245 (8,732) (487) Platinum Investor III 2,528 (33,147) (30,619) Platinum Investor III (first reduction in expense ratio) 71,907 (26,471) 45,436 Platinum Investor IV 4,408 (8,376) (3,968) Platinum Investor FlexDirector 4,994 (5,009) (16) Platinum Investor PLUS 842 (15,999) (15,156) Platinum Investor Plus (first reduction in expense ratio) 29,050 (3,779) 25,271 Platinum Investor Survivor (first reduction in expense ratio) 1,391 (649) 742 Platinum Investor Survivor II 12,413 (13,650) (1,237) Platinum Investor VIP 11,526 (12,035) (509) Platinum Investor VIP (with GMWB rider) 92 (21) 71 Protection Advantage Select 838 (2,179) (1,341)
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, 2014 are as follows:
At December 31 For the year ended December 31 ------------------------------------ --------------------------------------------- Investment Income Expense Ratio Ratio Total Return Unit Value Lowest to Lowest to Lowest to Units Lowest to Highest Net Assets Highest /(1)/ Highest /(2)/ Highest /(3)/ ------- ---------------- ----------- ------------- ------------- --------------- Alger Capital Appreciation Portfolio - Class I-2 Shares ------------------------------------------------- 2014 274,166 $22.94 to $28.79 $ 5,759,903 0.10% 0.20% to 1.45% 12.12% to 13.53% 2013 249,000 16.25 to 20.46 5,171,060 0.36% 0.20% to 1.45% 33.24% to 34.92% 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% Alger Mid Cap Growth Portfolio - Class I-2 Shares ------------------------------------------------- 2014 192,686 $11.46 to $14.25 $ 2,958,031 0.00% 0.20% to 1.45% 6.46% to 7.80% 2013 182,950 10.63 to 13.39 2,968,985 0.34% 0.20% to 1.45% 33.89% to 35.57% 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% American Century VP Value Fund - Class I ------------------------------------------------- 2014 919,159 $12.57 to $28.62 $16,723,661 1.54% 0.20% to 0.75% 12.23% to 12.85% 2013 933,185 20.51 to 22.46 15,724,871 1.69% 0.20% to 0.75% 30.74% to 31.46% 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% American Funds IS Asset Allocation Fund Class 2 /(5)/ ------------------------------------------------------- 2014 6,802 $11.45 to $11.54 $ 77,912 2.40% 0.20% to 0.70% 4.66% to 5.19% American Funds IS Global Growth Fund Class 2 /(5)/ ------------------------------------------------------- 2014 5,685 $11.73 to $11.83 $ 67,216 0.68% 0.20% to 0.70% 1.60% to 2.11% American Funds IS Growth Fund Class 2 /(5)/ ------------------------------------------------------- 2014 899 $12.34 to $12.44 $ 11,137 0.01% 0.20% to 0.70% 7.75% to 8.29% American Funds IS Growth-Income Fund Class 2 /(5)/ ------------------------------------------------------- 2014 5,674 $12.70 to $12.80 $ 72,411 0.02% 0.20% to 0.70% 9.86% to 10.41% American Funds IS High-Income Bond Fund Class2 /(5)/ ------------------------------------------------------- 2014 2,617 $10.17 to $10.26 $ 26,459 0.08% 0.20% to 0.70% -0.07% to 0.43% American Funds IS International Fund Class 2 /(5)/ ------------------------------------------------------- 2014 400 $10.76 to $10.85 $ 4,308 2.60% 0.20% to 0.70% -3.33% to -2.85% Anchor Series Trust Capital Appreciation Portfolio - Class 3 /(5)/ ------------------------------------------------------- 2014 1,023 $13.40 to $13.51 $ 13,792 0.00% 0.20% to 0.70% 14.15% to 14.73% Anchor Series Trust Government and Quality Bond Portfolio - Class 3 /(5)/ ------------------------------------------------------- 2014 337 $10.17 to $10.25 $ 3,454 3.42% 0.20% to 0.70% 4.18% to 4.70% Credit Suisse U.S. Equity Flex I Portfolio /(6)/ ------------------------------------------------- 2014 -- $ -- $ -- 0.00% 0.00% 0.00% 0.00% 0.00% 2013 -- -- -- 0.00% 0.00% 0.00% 0.00% 0.00% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 -------------------------------------- ---------------------------------------------------- Investment Income Ratio Expense Ratio Unit Value Lowest to Lowest to Total Return Units Lowest to Highest Net Assets Highest /(1)/ Highest /(2)/ Lowest to Highest /(3)/ --------- ---------------- ----------- ------------- ------------- ---------------------- Dreyfus IP MidCap Stock Portfolio - Initial Shares --------------------------------------------------- 2014 301,137 $18.20 to $28.43 $ 5,588,214 0.93% 0.20% to 0.75% 11.25% to 11.87% 2013 284,074 16.27 to 25.55 4,936,230 1.36% 0.20% to 0.75% 33.98% to 34.72% 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% Dreyfus VIF International Value Portfolio - Initial Shares --------------------------------------------------- 2014 14,043 $ 7.90 to $ 8.34 $ 139,628 1.65% 0.20% to 0.95% -10.18% to -9.50% 2013 12,994 8.80 to 9.21 145,715 1.83% 0.20% to 0.95% 21.83% to 22.75% 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% Dreyfus VIF Opportunistic Small Cap Portfolio - Initial Shares --------------------------------------------------- 2014 467,865 $16.60 to $20.39 $ 7,676,329 0.00% 0.20% to 0.75% 0.84% to 1.39% 2013 593,017 16.37 to 18.27 9,596,389 0.00% 0.20% to 0.75% 47.44% to 48.25% 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% Dreyfus VIF Quality Bond Portfolio - Initial Shares --------------------------------------------------- 2014 400,797 $13.90 to $19.29 $ 5,594,333 2.14% 0.20% to 0.75% 4.01% to 4.58% 2013 453,482 13.29 to 15.64 6,157,970 2.80% 0.20% to 0.75% -2.28% to -1.74% 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% Fidelity VIP Asset Manager Portfolio - Service Class 2 --------------------------------------------------- 2014 327,100 $18.65 to $19.04 $ 4,533,991 1.26% 0.20% to 0.75% 4.75% to 5.33% 2013 344,472 16.80 to 18.07 4,672,189 1.34% 0.20% to 0.75% 14.48% to 15.11% 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% Fidelity VIP Contrafund Portfolio - Service Class 2 --------------------------------------------------- 2014 1,992,046 $16.68 to $24.89 $34,117,348 0.74% 0.20% to 1.45% 10.05% to 11.43% 2013 1,979,018 15.16 to 22.34 31,814,973 0.83% 0.20% to 1.45% 29.07% to 30.69% 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% Fidelity VIP Equity-Income Portfolio - Service Class 2 --------------------------------------------------- 2014 1,176,181 $14.36 to $23.15 $17,933,840 2.62% 0.20% to 1.45% 6.92% to 8.26% 2013 1,236,243 13.43 to 21.38 17,985,957 2.32% 0.20% to 1.45% 25.99% to 27.57% 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% Fidelity VIP Freedom 2020 Portfolio - Service Class 2 --------------------------------------------------- 2014 26,350 $14.64 to $19.00 $ 362,588 1.45% 0.20% to 0.70% 3.87% to 4.39% 2013 26,325 14.09 to 18.20 348,635 1.26% 0.20% to 0.70% 14.83% to 15.40% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 -------------------------------------- ---------------------------------------------------- Investment Income Ratio Expense Ratio Unit Value Lowest to Lowest to Total Return Units Lowest to Highest Net Assets Highest /(1)/ Highest /(2)/ Lowest to Highest /(3)/ --------- ---------------- ----------- ------------- ------------- ---------------------- Fidelity VIP Freedom 2025 Portfolio - Service Class 2 --------------------------------------------------- 2014 44,417 $15.17 to $20.12 $ 637,712 1.32% 0.20% to 0.75% 4.07% to 4.64% 2013 53,321 14.58 to 19.22 722,900 1.78% 0.20% to 0.75% 18.82% to 19.48% 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% Fidelity VIP Freedom 2030 Portfolio - Service Class 2 --------------------------------------------------- 2014 68,363 $12.66 to $14.32 $ 1,009,535 1.36% 0.20% to 1.45% 3.24% to 4.53% 2013 68,826 13.87 to 19.55 979,103 1.59% 0.20% to 1.45% 19.66% to 21.17% 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% Fidelity VIP Growth Portfolio - Service Class 2 --------------------------------------------------- 2014 1,073,695 $15.34 to $15.47 $16,916,744 0.00% 0.20% to 0.75% 10.18% to 10.79% 2013 1,140,463 12.28 to 16.66 16,170,061 0.05% 0.20% to 0.75% 34.98% to 35.73% 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% Fidelity VIP Mid Cap Portfolio - Service Class 2 --------------------------------------------------- 2014 564,784 $12.56 to $17.18 $10,828,585 0.02% 0.20% to 1.45% 4.51% to 5.82% 2013 526,757 15.36 to 16.44 10,683,514 0.28% 0.20% to 1.45% 33.91% to 35.60% 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% Fidelity VIP Money Market Portfolio - Service Class 2 /(5)/ --------------------------------------------------- 2014 2,363 $ 9.89 to $ 9.97 $ 23,368 0.03% 0.20% to 0.70% -0.69% to -0.19% Franklin Templeton Franklin Small Cap Value VIP Fund - Class 2 --------------------------------------------------- 2014 430,935 $16.08 to $25.01 $ 8,238,202 0.62% 0.20% to 1.45% -0.88% to 0.37% 2013 410,633 16.22 to 16.44 8,569,689 1.28% 0.20% to 1.45% 34.28% to 35.97% 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% Franklin Templeton Franklin Small-Mid Cap Growth VIP Fund - Class 2 --------------------------------------------------- 2014 2,703 $16.52 $ 44,664 0.00% 0.50% 6.94% 2013 3,006 12.75 to 15.45 45,932 0.00% 0.50% to 0.75% 37.12% to 37.47% 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% Franklin Templeton Franklin U.S. Government Securities VIP Fund - Class 2 --------------------------------------------------- 2014 229,369 $12.29 to $15.25 $ 3,005,162 2.50% 0.20% to 0.75% 2.61% to 3.18% 2013 300,094 11.91 to 14.86 3,878,306 2.77% 0.20% to 0.75% -2.97% to -2.43% 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% Franklin Templeton Franklin Mutual Shares VIP Fund - Class 2 --------------------------------------------------- 2014 470,937 $14.24 to $20.61 $ 7,010,955 2.05% 0.20% to 1.45% 5.58% to 6.91% 2013 481,977 13.35 to 13.49 7,065,970 2.11% 0.20% to 1.45% 26.42% to 28.00% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 ----------------------------------- ---------------------------------------------------- Investment Income Ratio Expense Ratio Unit Value Lowest to Lowest to Total Return Units Lowest to Highest Net Assets Highest /(1)/ Highest /(2)/ Lowest to Highest /(3)/ ------- ---------------- ---------- ------------- ------------- ---------------------- Franklin Templeton Templeton Foreign VIP Fund - Class 2 ------------------------------------------------ 2014 478,259 $10.65 to $18.20 $5,837,832 2.01% 0.20% to 0.75% -11.80% to -11.31% 2013 483,045 12.01 to 20.63 7,138,619 2.33% 0.20% to 0.75% 22.05% to 22.72% 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% Goldman Sachs VIT Strategic Growth Fund - Institutional Shares ------------------------------------------------ 2014 192,544 $16.85 to $18.80 $3,320,170 0.23% 0.20% to 0.75% 12.79% to 13.41% 2013 461,991 14.86 to 16.67 6,936,211 0.41% 0.20% to 0.75% 31.43% to 32.16% 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% Invesco V.I. Core Equity Fund - Series I ------------------------------------------------ 2014 578,270 $15.64 to $17.27 $8,957,278 0.85% 0.20% to 0.75% 7.34% to 7.93% 2013 633,078 14.49 to 16.09 9,154,360 1.39% 0.20% to 0.75% 28.28% to 28.99% 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% Invesco V.I. Global Real Estate Fund - Series I ------------------------------------------------ 2014 15,016 $12.10 to $19.75 $ 210,658 1.52% 0.20% to 0.70% 13.82% to 14.39% 2013 8,344 10.63 to 17.27 116,994 4.19% 0.20% to 0.70% 2.00% to 2.51% 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% Invesco V.I. Government Securities Fund - Series I ------------------------------------------------ 2014 3,486 $10.91 $ 38,030 2.39% 0.50% 3.62% 2013 6,808 10.46 to 10.53 71,645 3.23% 0.50% to 0.75% -3.35% to -3.11% 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 ------------------------------------------------ 2014 215,634 $11.98 to $12.22 $2,592,381 4.73% 0.20% to 0.75% 0.97% to 1.52% 2013 216,019 11.87 to 12.04 2,569,236 4.98% 0.20% to 0.75% 6.21% to 6.79% 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 ------------------------------------------------ 2014 602,190 $11.19 to $14.19 $8,210,933 1.55% 0.20% to 1.45% -1.11% to 0.13% 2013 672,600 14.35 to 19.41 9,422,146 1.20% 0.20% to 1.45% 17.30% to 18.78% 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% Invesco V.I. American Franchise Fund - Series I ------------------------------------------------ 2014 315 $16.41 $ 5,172 0.05% 0.50% 7.90% 2013 438 15.21 6,664 0.42% 0.50% 39.44% 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% Invesco Van Kampen V.I. Government Fund - Series I /(7)/ ------------------------------------------------ 2014 -- $ -- $ -- 0.00% 0.00% 0.00% 2013 -- -- -- 0.00% 0.00% 0.00% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 -------------------------------------- ------------------------------------------------- Investment Expense Income Ratio Ratio Total Return Unit Value Lowest to Lowest to Lowest to Units Lowest to Highest Net Assets Highest /(1)/ Highest /(2)/ Highest /(3)/ ------- ------------------ ----------- --------------- ------------- ----------------- Invesco V.I. Growth and Income Fund - Series I ------------------------------------------------------------- 2014 604,758 $14.15 to $16.46 $10,490,134 1.79% 0.20% to 0.95% 9.24% to 10.06% 2013 608,704 12.95 to 14.95 9,952,150 1.52% 0.20% to 0.95% 32.81% to 33.81% 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% Invesco Van Kampen V.I. High Yield Fund - Series I /(8)/ ------------------------------------------------------------- 2014 -- $ -- $ -- 0.00% 0.00% 0.00% 2013 -- -- -- 0.00% 0.00% 0.00% 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% Janus Aspen Enterprise Portfolio - Service Shares ------------------------------------------------------------- 2014 285,729 $17.06 to $30.07 $ 5,329,079 0.03% 0.20% to 0.75% 11.40% to 12.02% 2013 309,731 15.07 to 26.99 5,081,183 0.37% 0.20% to 0.75% 31.05% to 31.77% 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% Janus Aspen Forty Portfolio - Service Shares ------------------------------------------------------------- 2014 32,828 $12.75 to $12.99 $ 492,985 0.03% 0.20% to 0.95% 7.44% to 8.25% 2013 29,991 12.09 to 12.67 416,706 0.56% 0.20% to 0.95% 29.65% to 30.62% 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% Janus Aspen Overseas Portfolio - Service Shares ------------------------------------------------------------- 2014 823,066 $ 8.23 to $12.14 $ 8,434,733 3.17% 0.20% to 1.45% -13.37% to -12.28% 2013 815,905 9.38 to 14.01 10,039,056 3.00% 0.20% to 1.45% 12.64% to 14.05% 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% Janus Aspen Global Research Portfolio - Service Shares ------------------------------------------------------------- 2014 244,595 $13.15 to $15.43 $ 3,195,683 0.97% 0.20% to 0.75% 6.38% to 6.97% 2013 263,926 12.30 to 14.50 3,174,577 1.08% 0.20% to 0.75% 27.12% to 27.82% 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% JPMorgan Insurance Trust Core Bond Portfolio - Class 1 ------------------------------------------------------------- 2014 13,975 $10.20 to $13.43 $ 166,280 2.80% 0.20% to 0.70% 4.19% to 4.71% 2013 7,101 12.53 to 12.83 89,709 4.33% 0.20% to 0.70% -2.16% to -1.67% 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% JPMorgan Insurance Trust International Equity Portfolio - Class 1 /(9)/ ------------------------------------------------------------- 2014 -- $ -- to $ -- $ -- 3.53% 0.00% 0.00% -3.92% to -3.23% 2013 5,109 9.55 to 10.00 63,788 1.84% 0.20% to 0.95% 14.36% to 15.22% 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% JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 ------------------------------------------------------------- 2014 28,625 $28.84 to $29.76 $ 834,494 0.78% 0.20% to 0.75% 14.25% to 14.88% 2013 30,324 25.25 to 25.90 770,690 1.11% 0.20% to 0.75% 31.31% to 32.04% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 ------------------------------------------------- ----------------------------------------------- Investment Income Expense Ratio Ratio Total Return Unit Value Lowest Lowest to Lowest to Lowest to Units to Highest Net Assets Highest /(1)/ Highest /(2)/ Highest /(3)/ --------- ---------------------- ----------- ------------- ------------- ----------------- JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 ------------------------------------------------------------- 2014 214,401 $18.70 to $28.76 $ 3,980,905 0.13% 0.20% to 0.75% 8.78% to 9.38% 2013 204,643 17.09 to 20.58 3,563,217 0.56% 0.20% to 0.75% 41.23% to 42.01% 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% MFS VIT Core Equity Series - Initial Class ------------------------------------------------------------- 2014 253,650 $12.96 to $16.81 $ 4,227,249 0.76% 0.20% to 0.75% 10.41% to 11.02% 2013 258,761 15.15 to 18.17 3,894,856 1.00% 0.20% to 0.75% 33.60% to 34.33% 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% MFS VIT Growth Series - Initial Class ------------------------------------------------------------- 2014 639,531 $17.36 to $23.97 $10,962,846 0.10% 0.20% to 0.75% 8.13% to 8.73% 2013 702,868 15.96 to 21.26 11,066,832 0.23% 0.20% to 0.75% 35.83% to 36.58% 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% MFS VIT New Discovery Series - Initial Class ------------------------------------------------------------- 2014 262,079 $18.44 to $19.37 $ 5,102,989 0.00% 0.20% to 1.45% -8.59% to -7.44% 2013 286,857 19.10 to 20.17 6,071,770 0.00% 0.20% to 1.45% 39.48% to 41.24% 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% MFS VIT Research Series - Initial Class ------------------------------------------------------------- 2014 159,337 $12.52 to $22.63 $ 2,760,517 0.81% 0.20% to 0.75% 9.38% to 9.98% 2013 170,517 15.29 to 20.69 2,692,142 0.33% 0.20% to 0.75% 31.30% to 32.02% 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% MFS VIT Total Return Series - Initial Class ------------------------------------------------------------- 2014 28,197 $14.66 $ 413,403 1.79% 0.50% 7.96% 2013 39,847 9.51 to 13.58 484,088 1.78% 0.50% to 0.75% 18.16% to 18.45% 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% Neberger Berman AMT Mid-Cap Growth Portfolio - Class I ------------------------------------------------------------- 2014 340,994 $12.60 to $14.70 $ 5,935,633 0.00% 0.20% to 0.75% 6.78% to 7.37% 2013 350,350 13.77 to 15.35 5,795,972 0.00% 0.20% to 0.75% 31.62% to 32.35% 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% Neubeger Berman AMT Large Cap Value Portfolio -Class 1 ------------------------------------------------------------- 2014 2,860 $12.35 $ 35,318 0.74% 0.50% 9.30% 2013 3,059 11.30 to 17.88 35,254 1.21% 0.50% to 0.75% 30.16% to 30.48% 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% Neuberger Berman AMT Socially Responsive Portfolio - Class I ------------------------------------------------------------- 2014 5,345 $15.86 to $24.37 $ 84,617 0.37% 0.20% to 0.70% 9.61% to 10.16% 2013 5,148 14.16 to 14.46 74,333 0.73% 0.20% to 0.70% 36.64% to 37.33% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 -------------------------------------- ------------------------------------------------- Investment Expense Income Ratio Ratio Total Return Unit Value Lowest Lowest to Lowest to Lowest to Units to Highest Net Assets Highest /(1)/ Highest /(2)/ Highest /(3)/ --------- ---------------- ----------- --------------- ------------- ----------------- Oppenheimer Capital Income Fund A ----------------------------------------------------------- 2014 112,858 $10.30 to $15.55 $ 1,313,231 2.24% 0.20% to 0.75% 7.39% to 7.98% 2013 134,405 9.54 to 14.48 1,540,831 2.35% 0.20% to 0.75% 12.32% to 12.94% 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% Oppenheimer Global Fund/VA - Non-Service Shares ----------------------------------------------------------- 2014 428,197 $13.10 to $14.75 $ 7,020,158 1.12% 0.20% to 1.45% 0.82% to 2.09% 2013 387,168 12.83 to 14.63 6,979,241 1.39% 0.20% to 1.45% 25.47% to 27.05% 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% Oppenheimer High Income Fund/VA - Non-Service Shares/(4)/ ----------------------------------------------------------- 2014 -- $ -- to $ -- $ -- 0.00% 0.00% 0.00% 0.00% 0.00% 2013 -- -- to -- -- 0.00% 0.00% 0.00% 0.00% 0.00% 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% Oppenheimer Global Strategic Income Fund/VA (Non-Service)/(4)/ ----------------------------------------------------------- 2014 435 $10.28 to $10.34 $ 4,497 6.00% 0.50% to 0.75% 2.07% to 2.33% 2013 502 $10.08 to $10.11 $ 5,071 87.83% 0.50% to 0.75% -0.88% to -0.63% 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 ----------------------------------------------------------- 2014 141,574 $ 7.35 to $ 7.45 $ 939,699 0.39% 0.20% to 1.45% -19.60% to -18.59% 2013 153,258 8.49 to 9.26 1,261,795 1.75% 0.20% to 1.45% -15.93% to -14.87% 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% PIMCO VIT Global Bond Portfolio(Unhedged) - Administrative Class ----------------------------------------------------------- 2014 9,366 $12.82 to $14.72 $ 109,767 2.02% 0.20% to 0.70% 1.55% to 2.06% 2013 4,338 12.63 to 14.42 58,532 1.05% 0.20% to 0.70% -9.12% to -8.66% 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% PIMCO VIT Real Return Portfolio - Administrative Class ----------------------------------------------------------- 2014 846,961 $12.83 to $19.98 $11,432,689 1.46% 0.20% to 0.75% 2.32% to 2.89% 2013 889,857 13.82 to 19.53 12,132,852 1.65% 0.20% to 0.75% -9.90% to -9.40% 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% PIMCO VIT Short-Term Portfolio - Administrative Class ----------------------------------------------------------- 2014 389,111 $10.97 to $11.22 $ 4,444,798 0.70% 0.20% to 1.45% -0.74% to 0.51% 2013 408,791 11.05 to 11.20 4,804,840 0.71% 0.20% to 1.45% -0.88% to 0.36% 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% PIMCO VIT Total Return Portfolio - Administrative Class ----------------------------------------------------------- 2014 1,018,466 $14.81 to $14.87 $15,298,326 2.21% 0.20% to 1.45% 2.78% to 4.07% 2013 1,071,774 14.23 to 14.47 16,119,465 2.18% 0.20% to 1.45% -3.37% to -2.16% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 -------------------------------------------- ------------------------------------------------- Investment Expense Income Ratio Ratio Total Return Unit Value Lowest Lowest to Lowest to Lowest to Units to Highest Net Assets Highest /(1)/ Highest /(2)/ Highest /(3)/ ------- --------------------- ----------- --------------- ------------- ----------------- Pioneer Fund VCT Portfolio - Class I ------------------------------------------------------ 2014 112,417 $15.16 to $18.38 $ 1,675,091 1.19% 0.20% to 0.75% 10.20% to 10.81% 2013 123,944 13.68 to 16.67 1,671,452 1.28% 0.20% to 0.75% 32.29% to 33.02% 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% Pioneer Select Mid Cap Growth VCT Portfolio - Class I ------------------------------------------------------ 2014 159,076 $18.89 to $19.30 $ 3,016,671 0.00% 0.20% to 0.75% 8.61% to 9.21% 2013 174,488 17.39 to 17.67 3,037,831 0.00% 0.20% to 0.75% 41.39% to 42.17% 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% Pioneer Mid Cap Value VCT Portfolio - Class I ------------------------------------------------------ 2014 78,736 $14.69 to $16.04 $ 1,295,160 0.86% 0.20% to 1.45% 13.43% to 14.86% 2013 79,039 12.79 to 14.14 1,145,657 0.93% 0.20% to 1.45% 31.19% to 32.84% 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% Putnam VT Diversified Income Fund - Class IB ------------------------------------------------------ 2014 373,499 $14.12 to $16.25 $ 6,577,843 8.12% 0.20% to 0.95% -0.60% to 0.15% 2013 388,960 16.35 to 17.00 6,887,646 3.16% 0.20% to 0.95% 6.79% to 7.60% 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% Putnam VT Growth and Income Fund - Class IB ------------------------------------------------------ 2014 753,606 $16.75 to $19.09 $12,972,211 1.32% 0.20% to 0.75% 9.91% to 10.51% 2013 791,936 15.15 to 17.37 12,432,215 1.66% 0.20% to 0.75% 34.66% to 35.41% 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% Putnam VT International Value Fund - Class IB ------------------------------------------------------ 2014 472,647 $ 8.64 to $ 9.61 $ 4,609,199 1.38% 0.20% to 1.45% -10.79% to -9.67% 2013 467,037 9.56 to 10.77 5,206,801 2.51% 0.20% to 1.45% 20.45% to 21.97% 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% Putnam VT Multi-Cap Growth Fund - Class IB ------------------------------------------------------ 2014 2,290 $18.83 to $19.04 $ 43,591 0.34% 0.50% to 0.75% 12.64% to 12.92% 2013 2,925 16.72 to 16.86 49,309 0.44% 0.50% to 0.75% 35.42% to 35.76% 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 ------------------------------------------------------ 2014 13,863 $32.71 to $14.61 $ 227,886 0.48% 0.20% to 0.75% 2.66% to 3.23% 2013 17,021 14.15 to 31.86 276,055 0.79% 0.20% to 0.75% 38.56% to 39.33% 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% Putnam VT Voyager Fund - Class IB ------------------------------------------------------ 2014 10,716 $18.82 $ 201,633 0.75% 0.50% 9.17% 2013 13,049 10.64 to 17.24 207,795 0.63% 0.50% to 0.75% 42.65% to 43.01% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 -------------------------------------- ----------------------------------------------- Investment Income Expense Ratio Ratio Total Return Unit Value Lowest to Lowest to Lowest to Units Lowest to Highest Net Assets Highest /(1)/ Highest /(2)/ Highest /(3)/ --------- ---------------- ----------- ------------- ------------- ----------------- SunAmerica Aggressive Growth Portfolio - Class 1 ------------------------------------------------------------- 2014 93,919 $11.81 to $17.37 $ 1,296,355 0.00% 0.20% to 0.75% -0.20% to 0.35% 2013 107,822 11.77 to 17.41 1,538,347 0.00% 0.20% to 0.75% 41.87% to 42.65% 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% SunAmerica Balanced Portfolio - Class 1 ------------------------------------------------------------- 2014 127,688 $18.75 to $12.03 $ 2,073,068 1.34% 0.20% to 0.75% 10.61% to 11.22% 2013 152,839 16.95 to 18.85 2,306,189 1.61% 0.20% to 0.75% 18.58% to 19.24% 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% UIF Capital Growth Portfolio - Class I Shares ------------------------------------------------------------- 2014 164,298 $18.53 to $23.89 $ 3,024,443 0.00% 0.20% to 0.75% 5.57% to 6.15% 2013 183,354 17.46 to 22.63 3,189,301 0.43% 0.20% to 0.75% 46.97% to 47.78% 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% VALIC Company I Dynamic Allocation Fund /(5)/ ------------------------------------------------------------- 2014 1,709 $10.97 to $11.06 $ 18,755 2.66% 0.20% to 0.70% 3.51% to 4.03% VALIC Company I Emerging Economies Fund /(5)/ ------------------------------------------------------------- 2014 676 $ 9.12 to $ 9.20 $ 6,209 0.00% 0.20% to 0.70% -6.23% to -5.76% VALIC Company I Foreign Value Fund /(5)/ ------------------------------------------------------------- 2014 134 $10.25 $ 1,369 0.00% 0.70% -12.25% VALIC Company II Mid Cap Value /(5)/ ------------------------------------------------------------- 2014 180 $12.36 to $12.46 $ 2,227 0.00% 0.20% to 0.70% 5.98% to 6.51% VALIC Company II Strategic Bond Fund /(5)/ ------------------------------------------------------------- 2014 4,924 $10.13 to $10.21 $ 50,223 0.00% 0.20% to 0.70% 3.22% to 3.74% VALIC Company II Socially Responsible Fund /(5)/ ------------------------------------------------------------- 2014 1,076 $13.15 to $13.25 $ 14,158 0.00% 0.20% to 0.70% 14.72% to 15.30% VALIC Company I International Equities Index Fund ------------------------------------------------------------- 2014 247,583 $10.86 to $15.70 $ 2,483,499 2.51% 0.20% to 0.75% -6.15% to -5.63% 2013 238,168 9.89 to 17.48 2,621,512 0.00% 0.20% to 0.75% 18.10% to 18.76% 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% VALIC Company I Mid Cap Index Fund ------------------------------------------------------------- 2014 832,872 $12.36 to $18.26 $15,463,977 1.11% 0.20% to 1.45% 7.84% to 9.19% 2013 887,398 16.93 to 25.70 15,589,772 0.00% 0.20% to 1.45% 31.20% to 32.84% 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% VALIC Company I Money Market I Fund ------------------------------------------------------------- 2014 1,134,201 $ 9.84 to $10.01 $11,413,517 0.01% 0.20% to 1.45% -1.43% to -0.19% 2013 1,273,784 9.98 to 10.20 13,099,199 0.01% 0.20% to 1.45% -1.43% to -0.19% 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%
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, 2014 are as follows:
At December 31 For the year ended December 31 -------------------------------------- --------------------------------------------- Investment Income Expense Ratio Ratio Total Return Unit Value Lowest Lowest to Lowest to Lowest to Units to Highest Net Assets Highest /(1)/ Highest /(2)/ Highest /(3)/ --------- ---------------- ----------- ------------- ------------- --------------- VALIC Company I Nasdaq-100 Index Fund ---------------------------------------------- 2014 264,337 $14.28 to $25.69 $ 5,678,276 0.78% 0.20% to 0.75% 17.80% to 18.45% 2013 295,262 10.29 to 18.29 5,132,899 0.00% 0.20% to 0.75% 35.21% to 35.96% 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% VALIC Company I Science & Technology Fund ---------------------------------------------- 2014 111,094 $20.41 to $30.27 $ 2,117,057 0.12% 0.20% to 0.75% 13.57% to 14.20% 2013 122,558 7.79 to 16.92 1,829,945 0.00% 0.20% to 0.75% 41.42% to 42.20% 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% VALIC Company I Small Cap Index Fund ---------------------------------------------- 2014 451,716 $17.57 to $28.49 $ 8,200,643 1.14% 0.20% to 0.75% 3.98% to 4.55% 2013 402,209 15.11 to 27.40 7,347,965 0.00% 0.20% to 0.75% 37.60% to 38.36% 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% VALIC Company I Stock Index Fund ---------------------------------------------- 2014 1,288,580 $12.78 to $21.51 $21,735,503 1.60% 0.20% to 0.75% 12.44% to 13.06% 2013 1,404,065 13.32 to 19.13 21,199,509 0.00% 0.20% to 0.75% 30.93% to 31.65% 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% Vanguard VIF High Yield Bond Portfolio ---------------------------------------------- 2014 444,782 $15.49 to $15.70 $ 7,720,929 5.45% 0.20% to 1.45% 2.90% to 4.20% 2013 433,735 15.06 to 15.07 7,457,681 5.28% 0.20% to 1.45% 2.84% to 4.14% 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% Vanguard VIF REIT Index Portfolio ---------------------------------------------- 2014 833,523 $15.35 to $15.83 $14,892,265 3.38% 0.20% to 1.45% 28.24% to 29.85% 2013 761,290 11.82 to 12.34 11,900,404 2.15% 0.20% to 1.45% 0.86% to 2.13% 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%
VL-R - 81 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. From 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, 2014, 2013, 2012, 2011, and 2010, 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)/ The Oppenheimer High Income Fund/VA merged into the Oppenheimer Global Strategic Income Fund/VA on October 26, 2012. /(5)/ Fund commenced operations on May 1, 2013. /(6)/ Fund closed on October 21, 2011. /(7)/ Effective April 29, 2011, Invesco Van Kampen V.I. Government Fund - Series I was acquired by Invesco V.I. Government Securities Fund - Series I /(8)/ Effective April 29, 2011, Invesco Van Kampen V.I. High Yield - Series I was acquired by Invesco V.I. High Yield Fund - Series I /(9)/ Fund closed on December 12, 2014. VL-R - 82 AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE 8 -SUBSEQUENT EVENTS Management has evaluated Account related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through April 27, 2015. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Account's financial statements. VL-R - 83 American General Life Insurance Company Audited GAAP Financial Statements At December 31, 2014 and 2013 and for the three years ended December 31, 2014 AMERICAN GENERAL LIFE INSURANCE COMPANY INDEX TO FINANCIAL STATEMENTS
Page ---- Report of Independent Registered Public Accounting Firm 2 Consolidated Balance Sheets at December 31, 2014 and 2013 3 Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012 4 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012 5 Consolidated Statements of Equity for the years ended December 31, 2014, 2013 and 2012 6 Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012 7 Notes to Consolidated Financial Statements 8
1 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, comprehensive income (loss), equity and 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., at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 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. /s/ PricewaterhouseCoopers LLP Houston, TX April 27, 2015 2 AMERICAN GENERAL LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS
December 31, ------------------ (in millions, except for share data) 2014 2013 ------------------------------------ -------- --------- (Revised) Assets: Investments: Fixed maturity securities: Bonds available for sale, at fair value (amortized cost: 2014 - $94,559; 2013 - $94,201) $102,743 $ 98,148 Other bond securities, at fair value 2,934 2,452 Equity securities: Common and preferred stock, available for sale, at fair value (cost: 2014 - $19; 2013 - $23) 26 29 Other common and preferred stock, at fair value -- 538 Mortgage and other loans receivable, net of allowance 11,812 10,085 Other invested assets (portion measured at fair value: 2014 - $3,176; 2013 - $3,223) 7,082 7,512 Flight equipment (net of accumulated depreciation and impairment: 2014 - $0; 2013 - $1,034) -- 762 Short-term investments (portion measured at fair value: 2014 - $558; 2013 - $2,735) 1,381 3,896 -------- --------- Total investments 125,978 123,422 Cash 277 202 Investment in AIG (cost: 2014 - $9; 2013 - $9) 6 5 Accrued investment income 1,042 1,074 Amounts due from related parties 82 138 Premiums and other receivables, net of allowance 602 488 Reinsurance assets, net of allowance 1,616 1,675 Derivative assets, at fair value 729 507 Deferred policy acquisition costs 5,643 5,444 Deferred sales inducements 442 502 Current income tax receivable 558 748 Deferred income taxes -- 328 Other assets (including restricted cash of $396 in 2014 and $183 in 2013) 1,153 1,081 Separate account assets, at fair value 40,627 35,701 -------- --------- Total assets $178,755 $ 171,315 ======== ========= Liabilities: Future policy benefits for life and accident and health insurance contracts $ 30,854 $ 29,277 Policyholder contract deposits (portion measured at fair value: 2014 - $1,341; 2013 - $367) 72,898 70,397 Policy claims and benefits payable 646 615 Other policyholder funds 2,079 1,986 Income taxes payable to parent 11 -- Deferred income taxes 255 -- Notes payable - to affiliates, net (portion measured at fair value: 2014 - $291; 2013 - $211) 658 260 Notes payable - to third parties, net 627 378 Amounts due to related parties 1,745 298 Securities lending payable -- 2,514 Derivative liabilities, at fair value 458 534 Other liabilities 3,450 3,627 Separate account liabilities 40,627 35,701 -------- --------- Total liabilities 154,308 145,587 -------- --------- Commitments and contingencies (see Note 13) American General Life Insurance Company (AGL) 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 18,514 23,163 Retained earnings (accumulated deficit) -- (337) Accumulated other comprehensive income 5,926 2,731 -------- --------- Total AGL shareholder's equity 24,447 25,564 Noncontrolling interests -- 164 -------- --------- Total equity 24,447 25,728 -------- --------- Total liabilities and equity $178,755 $ 171,315 ======== =========
See accompanying Notes to Consolidated Financial Statements. 3 AMERICAN GENERAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, ------------------------- (in millions) 2014 2013 2012 ------------- ------- ------- ------- Revenues: Premiums $ 1,666 $ 1,783 $ 1,616 Policy fees 1,976 1,766 1,837 Net investment income 6,942 6,692 7,001 Net realized capital gains (losses): Total other-than-temporary impairments on available for sale securities (81) (74) (127) Portion of other-than-temporary impairments on available for sale fixed maturity securities recognized in other comprehensive income (loss) (23) (1) (170) ------- ------- ------- Net other-than-temporary impairments on available for sale securities recognized in net income (104) (75) (297) Other realized capital gains 37 2,092 968 ------- ------- ------- Total net realized capital (losses) gains (67) 2,017 671 Other income 2,580 2,878 1,681 ------- ------- ------- Total revenues 13,097 15,136 12,806 ------- ------- ------- Benefits and expenses: Policyholder benefits 4,228 4,864 4,247 Interest credited to policyholder account balances 2,210 2,277 2,934 Amortization of deferred policy acquisition costs 623 535 665 General and administrative expenses 1,372 1,455 1,400 Commissions 341 345 321 Other expenses 1,310 1,166 839 ------- ------- ------- Total benefits and expenses 10,084 10,642 10,406 ------- ------- ------- Income before income tax expense (benefit) 3,013 4,494 2,400 Income tax expense (benefit): Current 401 95 (21) Deferred 727 (543) (601) ------- ------- ------- Income tax expense (benefit) 1,128 (448) (622) ------- ------- ------- Net income 1,885 4,942 3,022 Less: Net income attributable to noncontrolling interests -- 1 7 ------- ------- ------- Net income attributable to AGL $ 1,885 $ 4,941 $ 3,015 ======= ======= =======
See accompanying Notes to Consolidated Financial Statements. 4 AMERICAN GENERAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, - ----------------------- (in millions) 2014 2013 2012 ------------- ------ ------- ------ Net income $1,885 $ 4,942 $3,022 ------ ------- ------ Other comprehensive income (loss), net of tax Change in unrealized appreciation of fixed maturity investments on which other-than-temporary credit impairments were taken 48 242 907 Change in unrealized appreciation (depreciation) of all other investments 3,866 (5,265) 2,128 Adjustments to deferred policy acquisition costs, value of business acquired and deferred sales inducements (152) 542 (459) Change in insurance loss recognition (556) 1,325 (217) Change in foreign currency translation adjustments (11) (6) (2) ------ ------- ------ Other comprehensive income (loss) 3,195 (3,162) 2,357 ------ ------- ------ Comprehensive income 5,080 1,780 5,379 Comprehensive income attributable to noncontrolling interest -- 1 7 ------ ------- ------ Comprehensive income attributable to AGL $5,080 $ 1,779 $5,372 ====== ======= ======
See accompanying Notes to Consolidated Financial Statements. 5 AMERICAN GENERAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF EQUITY
Total Retained Accumulated AGL Additional Earnings Other Share- Non- Preferred Common Paid-in (Accumulated Comprehensive holder's controlling Total (in millions) Stock Stock Capital Deficit) Income Equity Interests Equity ------------- --------- ------ ---------- ------------ ------------- -------- ----------- ------- Balance, January 1, 2012 $ 1 $ 6 $27,245 $(8,296) $ 3,536 $22,492 $ 160 $22,652 --- --- ------- ------- ------- ------- ----- ------- Net income attributable to AGL or other noncontrolling interests -- -- -- 3,015 -- 3,015 7 3,022 Other comprehensive income -- -- -- -- 2,357 2,357 -- 2,357 Return of capital -- -- (1,882) -- -- (1,882) -- (1,882) Other -- -- -- (2) -- (2) -- (2) --- --- ------- ------- ------- ------- ----- ------- Balance, December 31, 2012 $ 1 $ 6 $25,363 $(5,283) $ 5,893 $25,980 $ 167 $26,147 === === ======= ======= ======= ======= ===== ======= Net income attributable to AGL or other noncontrolling interests -- -- -- 4,941 -- 4,941 1 4,942 Other comprehensive loss -- -- -- -- (3,162) (3,162) -- (3,162) Capital contributions from Parent -- -- 368 -- -- 368 -- 368 Return of capital -- -- (2,553) -- -- (2,553) -- (2,553) Other -- -- (15) 5 -- (10) (4) (14) --- --- ------- ------- ------- ------- ----- ------- Balance, December 31, 2013 $ 1 $ 6 $23,163 $ (337) $ 2,731 $25,564 $ 164 $25,728 === === ======= ======= ======= ======= ===== ======= Net income attributable to AGL or other noncontrolling interests -- -- -- 1,885 -- 1,885 -- 1,885 Dividends -- -- -- (1,548) -- (1,548) -- (1,548) Other comprehensive income -- -- -- -- 3,195 3,195 -- 3,195 Capital contributions from Parent -- -- 58 -- -- 58 -- 58 Return of capital -- -- (4,707) -- -- (4,707) -- (4,707) Deconsolidation of VIEs -- -- -- -- -- -- (167) (167) Other -- -- -- -- -- -- 3 3 --- --- ------- ------- ------- ------- ----- ------- Balance, December 31, 2014 $ 1 $ 6 $18,514 $ -- $ 5,926 $24,447 $ -- $24,447 === === ======= ======= ======= ======= ===== =======
See accompanying Notes to Consolidated Financial Statements. 6 AMERICAN GENERAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, ------------------------------ (in millions) 2014 2013 2012 ------------- -------- --------- --------- (Revised) (Revised) Cash flows from operating activities: Net income $ 1,885 $ 4,942 $ 3,022 -------- --------- --------- Adjustments to reconcile net income to net cash provided by operating activities: Interest credited to policyholder account balances 2,210 2,277 2,934 Amortization of deferred policy acquisition costs and value of business acquired 623 535 665 Depreciation and amortization 25 175 131 Fees charged for policyholder contract deposits (1,163) (946) (1,011) Net realized capital losses (gains) 67 (2,017) (671) Unrealized losses (gains) in earnings, net (280) 153 102 Equity in income of partnerships and other invested assets (476) (124) (314) Accretion of net premium/discount on investments (760) (631) (774) Capitalized interest (82) (531) (36) Provision for deferred income taxes 727 (543) (601) Changes in operating assets and liabilities: Accrued investment income 32 43 20 Amounts due to/from related parties 473 533 (125) Reinsurance assets 58 83 84 Deferred policy acquisition costs (877) (790) (604) Deferred sales inducements (13) (23) (5) Current income tax receivable/payable 200 38 (499) Future policy benefits 746 1,548 922 Other policyholders' funds (67) (21) (19) Other, net 165 (278) 340 -------- --------- --------- Total adjustments 1,608 (519) 539 -------- --------- --------- Net cash provided by operating activities 3,493 4,423 3,561 ======== ========= ========= Cash flows from investing activities: Proceeds from (payments for) Sales or distribution of: Available for sale investments 5,852 22,532 15,422 Flight equipment -- 71 7 Divested businesses, net -- -- 35 Other investments, excluding short-term investments 1,320 655 2,167 Redemption and maturities of fixed maturity securities available for sale 7,833 9,093 6,043 Principal payments received on sales and maturities of mortgage and other loans receivable 1,747 1,411 1,272 Redemption and maturities of other investments, excluding short-term investments 178 178 598 Purchase of: Available for sale investments (13,290) (30,112) (19,464) Mortgage and other loans receivable (3,572) (1,899) (961) Flight equipment -- (8) (11) Acquired businesses, net -- -- (48) Other investments, excluding short-term investments (930) (2,396) (4,215) Net change in restricted cash (213) (111) 23 Net change in short-term investments 2,515 884 (1,580) Other, net (60) (23) 31 -------- --------- --------- Net cash provided by (used in) investing activities 1,380 275 (681) ======== ========= ========= Cash flows from financing activities: Policyholder contract deposits 9,524 7,334 5,011 Policyholder contract withdrawals (7,006) (9,018) (7,402) Net exchanges to/from separate accounts (1,525) (1,291) (756) Change in repurchase agreements 225 -- 857 Repayment of notes payable -- (259) (202) Issuance of notes payable 494 230 -- Federal Home Loan Bank borrowings -- (28) 60 Security deposits on flight equipment -- (58) (12) Change in securities lending payable (2,514) 1,048 1,466 Cash overdrafts 21 (142) 67 Dividends and return of capital paid to Parent Company, net of cash contributions (4,017) (2,532) (1,882) -------- --------- --------- Net cash used in financing activities (4,798) (4,716) (2,793) ======== ========= ========= Net increase (decrease) in cash 75 (18) 87 Cash at beginning of year 202 220 133 -------- --------- --------- Cash at end of year $ 277 $ 202 $ 220 ======== ========= ========= Supplementary Disclosure of Consolidated Cash Flow Information Cash paid during the period for: Interest $ 7 $ 32 $ 25 Taxes 194 161 132 Non-cash activities: Sales inducements credited to policyholder contract deposits 20 39 66 Non-cash dividends declared 2,238 -- -- Non-cash contributions from Parent 58 348 -- ======== ========= =========
See accompanying Notes to Consolidated Financial Statements. 7 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION American General Life Insurance Company (AGL), 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 Parent). Unless the context indicates otherwise, the terms "AGL," "the Company," "we," "us" or "our" mean American General Life Insurance Company and its consolidated entities, and the term "AIG Parent" means American International Group, Inc. and not any of AIG Parent's consolidated subsidiaries. We are 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 and variable annuities. Our primary products include term life insurance, universal, variable universal and whole life insurance, accident and health insurance, single- and flexible-premium deferred fixed and variable annuities, fixed index deferred annuities, single-premium immediate and delayed-income annuities, private placement variable annuities, structured settlements, corporate- and bank-owned life insurance, terminal funding annuities, guaranteed investment contracts (GICs) and funding agreements, stable value wrap products and group benefits. We distribute our products through independent marketing organizations, independent and career insurance agents and financial advisors, banks, broker dealers, structured settlement brokers and benefit consultants, and direct-to-consumer through AIG Direct. We also provide support services to certain affiliated insurance companies through our subsidiaries, AIG Enterprise Services LLC (AIGES) and SunAmerica Asset Management LLC (SAAMCo). SAAMCo and its wholly owned distributor, AIG Capital Services, Inc. (AIGCS), and its wholly owned servicing agent, SunAmerica Fund Services, Inc. (SFS), represent our asset management operations. These companies earn fee income by managing, distributing and administering a diversified family of mutual funds and variable subaccounts offered within our variable annuity and variable universal life products, and by distributing retail mutual funds and providing professional management of individual, corporate and pension plan portfolios. Our operations are influenced by many factors, including general economic conditions, financial condition of AIG, monetary and fiscal policies of the United States federal government and policies of state and other regulatory authorities. The level of sales of our 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. We are exposed to the risks normally associated with a portfolio of fixed income securities, which include interest rate, option, liquidity and credit risks. We control our exposure to these risks by, among other things, closely monitoring and managing the duration and cash flows of our assets and liabilities, monitoring and limiting prepayments and extension risk in our portfolio, maintaining a large percentage of our portfolio in highly liquid securities, engaging in a disciplined process of underwriting, and reviewing and monitoring credit risk. We are also exposed to market risk, policyholder behavior risk and mortality/longevity risk. Market volatility and other equity market conditions may affect our exposure to risks related to guaranteed death benefits and guaranteed living benefits on variable annuity products, and may reduce fee income on variable product assets held in separate accounts. Such guaranteed benefits are sensitive to equity and interest rate market conditions. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). All significant intercompany accounts and transactions have been eliminated. Certain prior period items have been reclassified to conform to the current period's presentation. The consolidated financial statements include the accounts of the Company, our controlled subsidiaries (generally through a greater than 50 percent ownership of voting rights of a voting interest entity), and variable interest entities (VIEs) for which we are the primary beneficiary. Equity investments in entities that we do not consolidate, including corporate entities in which we have significant influence, and partnership and partnership-like entities in 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. Unless the context indicates otherwise, the terms "financial statements," "Balance Sheets," "Statements of Income," "Statements of Comprehensive Income," "Statements of Equity," "Statements of Cash Flows," "Notes to Financial Statements," "financial position," and "results of operations" refer to the applicable consolidated disclosure. 8 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Presentation Changes Policy fees related to features accounted for as embedded derivatives in variable annuity products, including guaranteed minimum withdrawal benefits and guaranteed minimum account value benefits, are included in the fair value measurement of embedded derivatives. Effective December 31, 2014, we reclassified fees related to these embedded derivatives to net realized capital gains, with no effect to the fair value measurement of the embedded derivatives, net income or shareholder's equity. Accordingly, a portion of prior period policy fees have been reclassified to net realized capital gains to conform to the current period presentation. See Note 11 for information on variable annuity guaranteed benefit features and Note 3 for discussion of the fair value measurement of embedded policy derivatives, including our policy on classification of fees. The effect of the change in presentation of these policy fees on the prior period financial statements was as follows:
As Previously Effect of As (in millions) Reported Change Reclassified ------------- ---------- --------- ------------ Statement of Income for the year ended December 31, 2013: Revenues: Policy fees $ 1,924 $(158) $ 1,766 Other net realized capital gains (losses) 1,934 158 2,092 Statement of Cash Flows for the year ended December 31, 2013: Cash flows from operating activities: Adjustments to reconcile net income to net cash provided by operating activities: Fees charged for policyholder contract deposits (1,104) 158 (946) Net realized capital (gains) losses (1,859) (158) (2,017) Statement of Income for the year ended December 31, 2012: Revenues: Policy fees 1,963 (126) 1,837 Other net realized capital gains (losses) 842 126 968 Statement of Cash Flows for the year ended December 31, 2012: Cash flows from operating activities: Adjustments to reconcile net income to net cash provided by operating activities: Fees charged for policyholder contract deposits (1,137) 126 (1,011) Net realized capital (gains) losses (545) (126) (671)
Out of Period Adjustments In 2014, we recorded out of period adjustments to correct errors related to prior periods, which resulted in a $20 million decrease to pre-tax income and an $8 million decrease to net income and comprehensive income. The most significant pre-tax item was to reverse interest that had incorrectly been accrued in prior years on mortgage loans that are troubled debt restructurings. In 2013, we recorded out of period adjustments to correct errors related to prior periods, which resulted in a $63 million decrease to pre-tax income and a $167 million increase to net income and comprehensive income. In 2012, we recorded out of period adjustments which decreased pre-tax income by $109 million and decreased net income and comprehensive income by $83 million. We have evaluated the effect of the errors on prior years and on the respective years in which they were corrected, taking into account both qualitative and quantitative factors. Management believes these errors and their corrections are not material to any previously issued financial statements. Revision of Prior Period Financial Statements The Balance Sheet at December 31, 2013 and the Statements of Cash Flows for the years ended December 31, 2013 and 2012 have been revised to correct the classification of certain items that had been reported in cash and short-term investments. These revisions had no impact on total assets, total liabilities or shareholder's equity in the prior periods that were revised. We evaluated the impact of these items on the respective balance sheet line items and on the categories within the statement of cash flows. The reclassifications included: 9 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) . Correction of the classification of cash held within consolidated VIEs from cash to restricted cash, which is reported within other assets; . Correction of the classification of certain collateral margin accounts related to derivative transactions from short-term investments to premiums and other receivables; and . Correction of the classification of certain accounts between cash and short-term investments to correctly reflect the nature of the related account as either a non-interest bearing depository account or an interest-bearing account. After evaluating the quantitative and qualitative aspects of these corrections, the revisions were not considered to be material, individually or in aggregate, to the previously issued 2013 and 2012 financial statements. The net effects on the financial statements resulting from these revisions were as follows:
As Effect Previously of As (in millions) Reported Change Revised ------------- ---------- ------ ------- Balance Sheet at December 31, 2013: Short-term investments $ 3,964 $ (68) $ 3,896 Cash 362 (160) 202 Premiums and other receivables, net of allowance 408 80 488 Other assets 933 148 1,081 Statement of Cash Flows for the year ended December 31, 2013: Cash flows from investing activities: Net change in restricted cash 37 (148) (111) Net change in short-term investments 819 65 884 Other, net (51) 28 (23) Net cash provided by (used in) investing activities 330 (55) 275 Net increase (decrease) in cash 37 (55) (18) Cash at beginning of year 325 (105) 220 Cash at end of year 362 (160) 202 Statement of Cash Flows for the year ended December 31, 2012: Cash flows from investing activities: Net change in short-term investments (1,583) 3 (1,580) Other, net (21) 52 31 Net cash provided by (used in) investing activities (736) 55 (681) Net increase (decrease) in cash 32 55 87 Cash at beginning of year 293 (160) 133 Cash at end of year 325 (105) 220
Use of Estimates The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Accounting policies that we believe are most dependent on the application of estimates and assumptions are considered our critical accounting estimates and are related to the determination of: .. income tax assets and liabilities, including recoverability of our net deferred tax asset and the predictability of future tax operating profitability of the character necessary to realize the net deferred tax asset; .. valuation of future policy benefit liabilities and timing and extent of loss recognition; .. valuation of liabilities for guaranteed benefit features of variable annuity products; .. recoverability of assets, including deferred policy acquisition costs (DAC) and reinsurance; .. estimated gross profits (EGP) to value DAC for investment-oriented products; .. impairment charges, including other-than-temporary impairments on available for sale securities; and 10 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) .. fair value measurements 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, our financial condition, results of operations and cash flows could be materially affected. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following table identifies our significant accounting policies presented in other Notes to these Financial Statements, with a reference to the Note where a detailed description can be found: Note 4. Investments . Fixed maturity and equity securities . Other invested assets . Short-term investments . Net investment income . Net realized capital gains (losses) . Other-than-temporary impairments Note 5. Lending Activities . Mortgage and other loans receivable - net of allowance Note 6. Reinsurance . Reinsurance assets, net of allowance Note 7. Derivatives and Hedge Accounting . Derivative assets and liabilities, at fair value Note 8. Deferred Policy Acquisition Costs . Deferred policy acquisition costs . Amortization of deferred policy acquisition costs . Deferred sales inducements Note 10. Insurance Liabilities . Future policy benefits . Policyholder contract deposits . Other policyholder funds Note 11. Variable Life and Annuity Contracts Note 12. Debt . Long-term debt Note 13. Commitments and contingencies . Legal contingencies Note 16. Income Taxes Other significant accounting policies Premiums for long-duration life insurance products and life contingent annuities are recognized as revenues when due. Estimates for premiums due but not yet collected are accrued. For limited-payment contracts, net premiums are recorded as revenue. The difference between the gross premium received and the net premium is deferred and recognized in policyholder benefits in the Statements of Income. Premiums on accident and health policies are earned primarily on a pro rata basis over the term of the related coverage. The reserves for unearned premiums includes the portion of premiums written relating to the unexpired terms of coverage. Reinsurance premiums ceded are recognized as a reduction in revenues over the period the reinsurance coverage is provided in proportion to the risks to which the premiums relate. 11 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Policy fees represent fees recognized from universal life and investment-type products consisting of policy charges for cost of insurance, policy administration charges, surrender charges and amortization of unearned revenue reserves. Other income primarily includes advisory fees and commissions from the broker dealer business and income from legal settlements. Aircraft leasing revenue from flight equipment under operating lease was recognized over the life of the leases as rental payments became receivable under the provision of the lease or, in case of leases with varying payments, under the straight-line method over the non-cancelable terms of the lease. In certain cases, leases provided for certain payments contingent on usage. In those cases, rental revenue was recognized at the time such usage occurred, net of estimated contractual aircraft maintenance reimbursements. Gains on sales of flight equipment were recognized when flight equipment was sold and the risk of ownership of the equipment passed to the new owner. Cash represents cash on hand and non-interest bearing demand deposits. Other assets consist of prepaid expenses, deposits, other deferred charges, real estate, other fixed assets, capitalized software costs and restricted cash. We offer sales inducements, which include enhanced crediting rates or bonus payments to contract holders (bonus interest) on certain annuity and investment contract products. Sales inducements provided to the contract holder are recognized as part of the liability for policyholder contract deposits on the Balance Sheets. Such amounts are deferred and amortized over the life of the contract using the same methodology and assumptions used to amortize DAC. To qualify for such accounting treatment, the bonus interest must be explicitly identified in the contract at inception, and we must demonstrate that such amounts are incremental to amounts we credit on similar contracts without bonus interest, and are higher than the contracts expected ongoing crediting rates for periods after the bonus period. The amortization expense associated with these assets is reported within interest credited to policyholder account balances in the Statements of Income. See Note 8 for additional information on deferred sales inducements. Separate accounts represent funds for which investment income and investment gains and losses accrue directly to the contract holders who bear the investment risk. Each account has specific investment objectives and the assets are carried at fair value. The assets of each account are legally segregated and are not subject to claims that arise from any of our other businesses. The liabilities for these accounts are equal to the account assets. Separate accounts may also include deposits for funds held under stable value wrap funding agreements, although the majority of stable value wrap sales are measured based on the notional amount included in assets under management and do not include the receipt of funds. For additional discussion of separate accounts, see Note 11. Other liabilities include other funds on deposit, other payables, and securities sold under agreements to repurchase. Accounting Standards Adopted During 2014 Presentation of Unrecognized Tax Benefits In July 2013, the FASB issued an accounting standard that requires a liability related to unrecognized tax benefits to be presented as a reduction to the related deferred tax asset for a net operating loss carryforward or a tax credit carryforward. When the carryforwards are not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the applicable jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit will be presented in the financial statements as a liability and will not be combined with the related deferred tax asset. We adopted the standard on its required effective date of January 1, 2014 on a prospective basis. The adoption of this standard had no material effect on our consolidated financial condition, results of operations or cash flows. 12 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Future Application of Accounting Standards Accounting for Investments in Qualified Affordable Housing Projects In January 2014, the FASB issued an accounting standard that revises the accounting and expands the disclosure requirements for investments in qualified affordable housing projects. The standard is effective for annual periods beginning after December 15, 2014, but early adoption is permitted. We plan to adopt the standard prospectively on its required effective date of January 1, 2015 and do not expect adoption of the standard to have a material effect on our financial condition, results of operations or cash flows. Revenue Recognition In May 2014, the FASB issued an accounting standard that supersedes most existing revenue recognition guidance. The new standard excludes from its scope the accounting for insurance contracts, leases, financial instruments, and other agreements that are governed under other GAAP guidance, but affects the revenue recognition for certain of our other activities. The standard is effective for interim and annual reporting periods beginning after December 15, 2016 and may be applied retrospectively or through a cumulative effect adjustment to retained earnings at the date of adoption. Early adoption is not permitted. We plan to adopt the standard with an effective date of January 1, 2018, which reflects proposed one-year deferral by the FASB and are assessing the impact of the standard on our financial condition, results of operations and cash flows. Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity In August 2014, the FASB issued an accounting standard that allows a reporting entity to measure the financial assets and financial liabilities of a qualifying consolidated collateralized financing entity using the fair value of either its financial assets or financial liabilities, whichever is more observable. The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The standard may be applied retrospectively to all relevant prior periods presented starting with January 1, 2010 or through a cumulative effect adjustment to retained earnings at the date of adoption. We plan to adopt the standard on its required effective date of January 1, 2016 and do not expect the adoption of the standard to have a material effect on our financial condition, results of operations or cash flows. Consolidation: Amendments to the Consolidation Analysis In February 2015, the FASB issued an accounting standard that affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities; eliminate the presumption that a general partner should consolidate a limited partnership; affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The standard may be applied retrospectively or through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. We plan to adopt the standard on its required effective date of January 1, 2016 and are assessing the impact of the standard on our financial condition, results of operations and cash flows. 13 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. FAIR VALUE MEASUREMENTS Fair Value Measurements on a Recurring Basis We carry certain financial instruments at fair value. We define the fair value of a financial instrument as the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are 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. We maximize the use of observable inputs and minimize 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. Fair Value Hierarchy Assets and liabilities recorded at fair value in the Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three levels based on the observability of valuation inputs: .. Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do 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, quoted prices for identical or similar assets or liabilities in markets that are not active, 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. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we 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 fair value may fall into different levels of the fair value hierarchy. In those 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 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 discussed 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. Valuation Methodologies of Financial Instruments Measured at Fair Value Incorporation of Credit Risk in Fair Value Measurements .. Our Own Credit Risk. Fair value measurements for certain freestanding derivatives incorporate our own credit risk by determining the explicit cost for each counterparty to protect against its net credit exposure to us at the balance sheet date by reference to observable AIG credit default swap (CDS) or cash bond spreads. A derivative counterparty's net credit exposure to us is determined based on master netting agreements, when applicable, which 14 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) take into consideration all derivative positions with us, as well as collateral we posted with the counterparty at the balance sheet date. We calculate the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates. .. Counterparty Credit Risk. Fair value measurements for freestanding derivatives incorporate counterparty credit risk by determining the explicit cost for us to protect against our 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. Our 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. 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 us by an independent third party. We utilize an interest rate based on the benchmark London Inter-Bank Offered Rate (LIBOR) curve to derive our 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 Whenever available, we obtain quoted prices in active markets for identical assets at the balance sheet date to measure fixed maturity securities at fair value. Market price data is generally obtained from dealer markets. We employ independent third-party valuation service providers to gather, analyze, and interpret market information 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 management, through 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. We have 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. We assess the reasonableness of individual security values received from valuation service providers through various analytical techniques, and have procedures to escalate related questions internally and to the third party valuation services for 15 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) resolution. To assess the degree of pricing consensus among various valuation services for specific asset types, we have conducted comparisons of prices received from available sources. We have used these comparisons to establish a hierarchy for the fair values received from third party valuations services to be used for particular security classes. We also validate 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 our 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, 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 residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDO), other asset-backed securities (ABS) and fixed maturity securities issued by government sponsored entities and corporate entities. Equity Securities Traded in Active Markets Whenever available, we obtain quoted prices in active markets for identical assets at the balance sheet date to measure equity securities at fair value. Market price data is generally obtained from exchange or dealer markets. Other Invested Assets We initially estimate the fair value of investments in certain hedge funds, private equity funds and other investment partnerships by reference to the transaction price. Subsequently, we generally obtain 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. We consider observable market data and perform certain control procedures to validate the appropriateness of using the net asset value as a fair value measurement. The fair values of other investments carried at fair value, such as direct private equity holdings, are initially determined based on transaction price and are subsequently estimated based on available evidence such as market transactions in similar instruments, other financing transactions of the issuer and other available financial information for the issuer, with adjustments made to reflect illiquidity as appropriate. 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. 16 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Freestanding Derivatives Derivative assets and liabilities can be exchange-traded or traded over-the-counter (OTC). We generally value 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 inherent in the instrument, as well as the availability of pricing information in the market. We generally use 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 generic forwards, 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. We will update valuation inputs in these models only when corroborated by evidence such as similar market transactions, independent third-party valuation service providers 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 Certain variable annuity and equity index annuity and life contracts contain embedded policy derivatives that we bifurcate from the host contracts and account for separately at fair value, with changes in fair value recognized in earnings. These embedded derivatives are classified within policyholder contract deposits. We have concluded these contracts contain (i) written option guarantees on minimum accumulation value, (ii) a series of written options that guarantee withdrawals from the highest anniversary value within a specific period or for life, or (iii) equity-indexed written options that meet the criteria of derivatives that must be bifurcated. The fair value of embedded policy derivatives contained in certain variable annuity and equity index 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 our historical experience. With respect to embedded policy derivatives in our 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 judgments regarding expected market rates of return, market volatility, correlations of market variables to funds, fund performance, discount rates and policyholder behavior. The portion of fees attributable to the fair value of expected benefit payments are included within the fair value measurement of these embedded policy derivatives and related fees are classified in net realized gains (losses) as collected, consistent with other changes in the fair value of these embedded policy derivatives. Any additional fees not attributed to the embedded derivative are excluded from the fair value measurement and classified in policy fees as collected. 17 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) With respect to embedded policy derivatives in our equity index annuity and life 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. These methodologies incorporate an explicit risk margin to take into consideration market participant estimates of projected cash flows and policyholder behavior. We also incorporate our own risk of non-performance in the valuation of the embedded policy derivatives associated with variable annuity and equity index annuity and life contracts. Expected cash flows are 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 non-complex swap against the floating rate (for example, LIBOR) leg of a related tenor. The non-performance risk adjustment reflects a market participant's view of our claims-paying ability by incorporating an additional spread to the swap curve used to value embedded policy derivatives. Notes Payable Certain VIEs that we consolidate have each elected the fair value option for a tranche of their structured securities (the Class X notes), which are included in notes payable - to affiliates, net. The fair value of the Class X notes is determined using a mark-to-model approach, discounting cash flows produced by an internally validated model. Cash flows are discounted based on current market spreads for U.S. collateralized loan obligations (CLOs), adjusted for structural specific attributes. The market spreads for U.S. CLOs include a spread premium to compensate for the complexity and perceived illiquidity of the Class X notes. The spread premium was derived on the respective issuance dates of the Class X notes, with reference to the issuance spread on tranches of structured securities issued by the same entities that were purchased by independent, non-affiliated third parties. 18 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents information about assets and liabilities measured at fair value on a recurring basis, and indicates the level of the fair value measurement based on the observability of the inputs used:
December 31, 2014 Counterparty Cash (in millions) Level 1 Level 2 Level 3 Netting/(a)/ Collateral Total ------------- ------- ------- ------- ------------ ---------- -------- Assets: Bonds available for sale: U.S. government and government sponsored entities $ -- $ 395 $ -- $ -- $ -- $ 395 Obligations of states, municipalities and political subdivisions -- 2,068 951 -- -- 3,019 Non-U.S. governments -- 2,887 -- -- -- 2,887 Corporate debt -- 69,416 959 -- -- 70,375 RMBS -- 8,218 7,240 -- -- 15,458 CMBS -- 3,411 1,294 -- -- 4,705 CDO/ABS -- 2,329 3,575 -- -- 5,904 ------- ------- ------- ----- ----- -------- Total bonds available for sale -- 88,724 14,019 -- -- 102,743 ------- ------- ------- ----- ----- -------- Other bond securities: U.S. government and government sponsored entities -- 1,135 -- -- -- 1,135 RMBS -- 109 275 -- -- 384 CMBS -- 105 48 -- -- 153 CDO/ABS -- 31 1,231 -- -- 1,262 ------- ------- ------- ----- ----- -------- Total other bond securities -- 1,380 1,554 -- -- 2,934 ------- ------- ------- ----- ----- -------- Equity securities available for sale: Common stock 4 2 1 -- -- 7 Preferred stock 19 -- -- -- -- 19 ------- ------- ------- ----- ----- -------- Total equity securities available for sale 23 2 1 -- -- 26 ------- ------- ------- ----- ----- -------- Other invested assets/(b)/ 2 1,372 1,802 -- -- 3,176 Short-term investments/(c)/ 298 260 -- -- -- 558 Investment in AIG 6 -- -- -- -- 6 Derivative assets: Interest rate contracts 2 568 -- -- -- 570 Foreign exchange contracts/(d)/ -- 523 -- -- -- 523 Equity contracts 53 4 51 -- -- 108 Other contracts -- -- 13 -- -- 13 Counterparty netting and cash collateral -- -- -- (198) (287) (485) ------- ------- ------- ----- ----- -------- Total derivative assets 55 1,095 64 (198) (287) 729 ------- ------- ------- ----- ----- -------- Separate account assets 38,369 2,258 -- -- -- 40,627 ------- ------- ------- ----- ----- -------- Total $38,753 $95,091 $17,440 $(198) $(287) $150,799 ======= ======= ======= ===== ===== ======== Liabilities: Policyholder contract deposits/(e)/ $ -- $ 125 $ 1,216 $ -- $ -- $ 1,341 Notes payable - to affiliates, net -- -- 291 -- -- 291 Derivative liabilities: Interest rate contracts -- 224 -- -- -- 224 Foreign exchange contracts -- 439 -- -- -- 439 Other contracts -- -- 7 -- -- 7 Counterparty netting and cash collateral -- -- -- (198) (14) (212) ------- ------- ------- ----- ----- -------- Total derivative liabilities -- 663 7 (198) (14) 458 ------- ------- ------- ----- ----- -------- Total $ -- $ 788 $ 1,514 $(198) $ (14) $ 2,090 ======= ======= ======= ===== ===== ========
19 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2013 Counterparty Cash (in millions) Level 1 Level 2 Level 3 Netting/(a)/ Collateral Total ----------------- ------- ------- ------- ------------ ---------- -------- Assets: Bonds available for sale: U.S. government and government sponsored entities $ -- $ 374 $ -- $ -- $ -- $ 374 Obligations of states, municipalities and political subdivisions -- 1,575 754 -- -- 2,329 Non-U.S. governments -- 2,347 -- -- -- 2,347 Corporate debt -- 68,335 724 -- -- 69,059 RMBS -- 8,338 6,587 -- -- 14,925 CMBS -- 1,668 2,448 -- -- 4,116 CDO/ABS -- 1,593 3,405 -- -- 4,998 ------- ------- ------- ----- ----- -------- Total bonds available for sale -- 84,230 13,918 -- -- 98,148 ------- ------- ------- ----- ----- -------- Other bond securities: U.S. government and government sponsored entities -- 903 -- -- -- 903 RMBS -- 119 213 -- -- 332 CMBS -- 30 126 -- -- 156 CDO/ABS -- 30 1,031 -- -- 1,061 ------- ------- ------- ----- ----- -------- Total other bond securities -- 1,082 1,370 -- -- 2,452 ------- ------- ------- ----- ----- -------- Equity securities available for sale: Common stock 7 -- -- -- -- 7 Preferred stock -- 22 -- -- -- 22 ------- ------- ------- ----- ----- -------- Total equity securities available for sale 7 22 -- -- -- 29 ------- ------- ------- ----- ----- -------- Other common and preferred stock 538 -- -- -- -- 538 Other invested assets/(b)/ 1 917 2,305 -- -- 3,223 Short-term investments/(c)/ 215 2,520 -- -- -- 2,735 Investment in AIG 5 -- -- -- -- 5 Derivative assets: Interest rate contracts 9 768 19 -- -- 796 Equity contracts 107 33 47 -- -- 187 Other contracts -- -- 10 -- -- 10 Counterparty netting and cash collateral -- -- -- (108) (378) (486) ------- ------- ------- ----- ----- -------- Total derivative assets 116 801 76 (108) (378) 507 ------- ------- ------- ----- ----- -------- Separate account assets 34,018 1,683 -- -- -- 35,701 ------- ------- ------- ----- ----- -------- Total $34,900 $91,255 $17,669 $(108) $(378) $143,338 ======= ======= ======= ===== ===== ======== Liabilities: Policyholder contract deposits/(e)/ $ -- $ 120 $ 247 $ -- $ -- $ 367 Notes payable - to affiliates, net -- -- 211 -- -- 211 Derivative liabilities: Interest rate contracts -- 652 13 -- -- 665 Counterparty netting and cash collateral -- -- -- (108) (23) (131) ------- ------- ------- ----- ----- -------- Total derivative liabilities -- 652 13 (108) (23) 534 ------- ------- ------- ----- ----- -------- Total $ -- $ 772 $ 471 $(108) $ (23) $ 1,112 ======= ======= ======= ===== ===== ========
(a)Represents netting of derivative exposures covered by qualifying master netting agreements. (b)Amounts exclude other invested assets not carried at fair value on a recurring basis. (c)Amounts exclude short-term investments that are carried at cost. (d)In 2014, we reclassified cross-currency swaps from interest rate contracts to foreign exchange contracts. This change was applied prospectively. (e)Amounts presented for policyholder contract deposits in the tables exclude those not measured at fair value on a recurring basis. At December 31, 2014 and 2013, Level 3 assets were 9.8 percent and 10.3 percent of total assets, respectively, and Level 3 liabilities were 1.0 percent and 0.3 percent of total liabilities, respectively. Transfers of Level 1 and Level 2 Assets and Liabilities Our 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. In 2014, we transferred $13 million of preferred stock from Level 2 to Level 1. In 2013, we transferred $93 million of securities issued by the U.S. government and government-sponsored entities from Level 1 to Level 2. We had no significant transfers from Level 1 to Level 2 during 2014 and from Level 2 to Level 1 during 2013. 20 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 2014 and 2013 in Level 3 assets (liabilities) measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 assets (liabilities) in the Balance Sheets at December 31, 2014 and 2013:
Changes in Unrealized Net Gains Realized (Losses) and Purchases, Included in Unrealized Sales, Income on Fair Gains Issuances Fair Instruments Value (Losses) Other and Gross Gross Value Held at Beginning Included Comprehensive Settlements, Transfers Transfers End of End of (in millions) of Year in Income Income (Loss) Net In Out Year Year ------------- --------- ---------- ------------- ------------ --------- --------- ------- ----------- December 31, 2014 Assets: Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 754 $ (1) $ 171 $ 183 $ -- $ (156) $ 951 $ -- Corporate debt 724 3 35 (236) 720 (287) 959 -- RMBS 6,587 422 78 197 11 (55) 7,240 -- CMBS 2,448 94 63 (69) 31 (1,273) 1,294 -- CDO/ABS 3,405 79 (2) 602 998 (1,507) 3,575 -- ------- ----- ----- ------ ------ ------- ------- ---- Total bonds available for sale 13,918 597 345 677 1,760 (3,278) 14,019 -- ------- ----- ----- ------ ------ ------- ------- ---- Other bond securities: RMBS 213 15 -- 47 -- -- 275 11 CMBS 126 (2) -- (1) -- (75) 48 1 CDO/ABS 1,031 56 -- 144 -- -- 1,231 29 ------- ----- ----- ------ ------ ------- ------- ---- Total other bond securities 1,370 69 -- 190 -- (75) 1,554 41 ------- ----- ----- ------ ------ ------- ------- ---- Equity securities available for sale: Common stock -- -- -- -- 1 -- 1 -- ------- ----- ----- ------ ------ ------- ------- ---- Total equity securities available for sale -- -- -- -- 1 -- 1 -- ------- ----- ----- ------ ------ ------- ------- ---- Other invested assets 2,305 25 (36) (132) 49 (409) 1,802 -- ------- ----- ----- ------ ------ ------- ------- ---- Total $17,593 $ 691 $ 309 $ 735 $1,810 $(3,762) $17,376 $ 41 ======= ===== ===== ====== ====== ======= ======= ==== Liabilities: Policyholder contract deposits $ (247) $(946) $ -- $ (23) $ -- $ -- $(1,216) $ -- Notes payable - to affiliates, net (211) (13) -- (67) -- -- (291) -- Derivative assets (liabilities), net: Interest rate contracts 6 1 -- (7) -- -- -- -- Equity contracts 47 14 -- (10) -- -- 51 9 Other contracts 10 58 -- (62) -- -- 6 56 ------- ----- ----- ------ ------ ------- ------- ---- Total $ (395) $(886) $ -- $ (169) $ -- $ -- $(1,450) $ 65 ======= ===== ===== ====== ====== ======= ======= ==== December 31, 2013 Assets: Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 633 $ 11 $(123) $ 280 $ -- $ (47) $ 754 $ -- Corporate debt 1,058 2 2 (321) 266 (283) 724 -- RMBS 4,957 355 258 997 20 -- 6,587 -- CMBS 2,205 89 (21) 125 50 -- 2,448 -- CDO/ABS 2,654 86 32 365 569 (301) 3,405 -- ------- ----- ----- ------ ------ ------- ------- ---- Total bonds available for sale 11,507 543 148 1,446 905 (631) 13,918 -- ------- ----- ----- ------ ------ ------- ------- ---- Other bond securities: RMBS 127 10 -- 76 -- -- 213 14 CMBS 41 (1) -- 86 -- -- 126 3 CDO/ABS 113 68 -- 850 -- -- 1,031 48 ------- ----- ----- ------ ------ ------- ------- ---- Total other bond securities 281 77 -- 1,012 -- -- 1,370 65 ------- ----- ----- ------ ------ ------- ------- ---- Equity securities available for sale: Common stock 9 -- -- (9) -- -- -- -- Preferred stock 26 -- 2 (28) -- -- -- -- ------- ----- ----- ------ ------ ------- ------- ---- Total equity securities available for sale 35 -- 2 (37) -- -- -- -- ------- ----- ----- ------ ------ ------- ------- ---- Other invested assets 1,905 101 50 107 268 (126) 2,305 -- ------- ----- ----- ------ ------ ------- ------- ---- Total $13,728 $ 721 $ 200 $2,528 $1,173 $ (757) $17,593 $ 65 ======= ===== ===== ====== ====== ======= ======= ==== Liabilities: Policyholder contract deposits $(1,040) $ 609 $ (1) $ 185 $ -- $ -- $ (247) $ -- Notes payable - to affiliates, net -- (12) 9 (208) -- -- (211) (12) Derivative assets (liabilities), net: Interest rate contracts (2) 7 -- 1 -- -- 6 -- Equity contracts 21 33 -- (7) -- -- 47 -- Other contracts 2 39 -- (31) -- -- 10 -- ------- ----- ----- ------ ------ ------- ------- ---- Total $(1,019) $ 676 $ 8 $ (60) $ -- $ -- $ (395) $(12) ======= ===== ===== ====== ====== ======= ======= ====
21 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Net realized and unrealized gains and losses included in income related to Level 3 assets and liabilities shown above were reported in the Statements of Income as follows:
Net Realized Net Capital Policy Investment Gains Other (in millions) Fees Income (Losses) Income Total ------------- ------ ---------- -------- ------ ----- December 31, 2014 Bonds available for sale $-- $610 $ (13) $ -- $ 597 Other bond securities -- 69 -- -- 69 Other invested assets -- 37 (12) -- 25 Policyholder contract deposits -- -- (946) -- (946) Notes payable - to affiliates, net -- -- -- (13) (13) Derivative assets/liabilities, net 62 -- 10 -- 72 --- ---- ----- ---- ----- December 31, 2013 Bonds available for sale $-- $491 $ 52 $ -- $ 543 Other bond securities -- 77 -- -- 77 Other invested assets -- 122 (21) -- 101 Policyholder contract deposits -- -- 617 -- 617 Notes payable - to affiliates, net -- -- -- (12) (12) Derivative assets/liabilities, net -- 39 40 -- 79
The following table presents the gross components of purchases, sales, issues and settlements, net, shown above:
Purchases, Sales, Issuances and Settlements, (in millions) Purchases Sales Issuances Settlements Net ------------- --------- ----- --------- ----------- ------------ December 31, 2014 Assets: Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 189 $ (4) $ -- $ (2) $ 183 Corporate debt 53 (3) -- (286) (236) RMBS 1,350 (105) -- (1,048) 197 CMBS 146 (100) -- (115) (69) CDO/ABS 1,709 (38) -- (1,069) 602 ------ ----- ---- ------- ----- Total bonds available for sale 3,447 (250) -- (2,520) 677 ------ ----- ---- ------- ----- Other bond securities: RMBS 66 -- -- (19) 47 CMBS -- (5) -- 4 (1) CDO/ABS -- -- -- 144 144 ------ ----- ---- ------- ----- Total other bond securities 66 (5) -- 129 190 ------ ----- ---- ------- ----- Other invested assets 242 -- -- (374) (132) ------ ----- ---- ------- ----- Total assets $3,755 $(255) $ -- $(2,765) $ 735 ====== ===== ==== ======= ===== Liabilities: Policyholder contract deposits $ -- $(145) $ -- $ 122 $ (23) Notes payable - to affiliates, net -- -- (67) -- (67) Derivative liabilities, net: Interest rate contracts -- -- -- (7) (7) Equity contracts -- -- -- (10) (10) Other contracts -- -- -- (62) (62) ------ ----- ---- ------- ----- Total liabilities $ -- $(145) $(67) $ 43 $(169) ====== ===== ==== ======= =====
22 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Purchases, Sales, Issuances and Settlements, (in millions) Purchases Sales Issuances Settlements Net ------------- --------- ----- --------- ----------- ------------ December 31, 2013 Assets: Bonds available for sale: U.S government and government Obligations of states, municipalities and political subdivisions $ 402 $(122) $ -- $ -- $ 280 Corporate debt 139 -- -- (460) (321) RMBS 2,123 (167) -- (959) 997 CMBS 495 (203) -- (167) 125 CDO/ABS 1,310 (121) -- (824) 365 ------ ----- ----- ------- ------ Total bonds available for sale 4,469 (613) -- (2,410) 1,446 ------ ----- ----- ------- ------ Other bond securities: RMBS 110 -- -- (34) 76 CMBS 98 (8) -- (4) 86 CDO/ABS 962 -- -- (112) 850 ------ ----- ----- ------- ------ Total other bond securities 1,170 (8) -- (150) 1,012 ------ ----- ----- ------- ------ Equity securities available for sale: Common stock -- -- -- (9) (9) Preferred stock -- -- -- (28) (28) ------ ----- ----- ------- ------ Total equity securities available for sale -- -- -- (37) (37) ------ ----- ----- ------- ------ Other invested assets 318 -- -- (211) 107 Derivative assets: ------ ----- ----- ------- ------ Total assets $5,957 $(621) $ -- $(2,808) $2,528 ====== ===== ===== ======= ====== Liabilities: Policyholder contract deposits $ -- $ (25) $ -- $ 210 $ 185 Notes payable - to affiliates, net -- -- (208) -- (208) Derivative liabilities, net: Interest rate contracts -- -- -- 1 1 Equity contracts 10 -- -- (17) (7) Other contracts -- -- -- (31) (31) ------ ----- ----- ------- ------ Total liabilities $ 10 $ (25) $(208) $ 163 $ (60) ====== ===== ===== ======= ======
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, 2014 and 2013 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs. Transfers of Level 3 Assets and Liabilities We 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. During 2014 and 2013, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, RMBS, CMBS, CDO/ABS, and investments in hedge funds and private equity funds. .. The transfers of investments in RMBS, CMBS and CDO and certain ABS into Level 3 assets were due to decreases in market transparency and liquidity for individual security types. .. Transfers of private placement corporate debt and certain ABS into Level 3 assets were primarily the result of limited market pricing information that required us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions regarding the characteristics of a specific security or associated market liquidity. .. Certain investments in hedge funds were transferred into Level 3 as a result of limited market activity due to fund-imposed redemption restrictions. .. Certain private equity 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. 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 23 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 our ownership interest. During 2014 and 2013, transfers out of Level 3 assets primarily related to certain investments in municipal securities, private placement corporate debt, CMBS, CDO/ABS and investments in hedge funds. .. Transfers of certain investments in municipal securities, CMBS and CDO/ABS out of Level 3 assets were based on consideration of market liquidity as well as related transparency of pricing and associated observable inputs for these investments. .. Transfers of certain investments in private placement corporate debt and certain ABS out of Level 3 assets were primarily the result of using observable pricing information that reflects the fair value of those securities without the need for adjustment based on our own assumptions regarding the characteristics of a specific security or the current liquidity in the market. .. The removal or easing of fund-imposed redemption restrictions, as well as certain fund investments becoming subject to the equity method of accounting, resulted in the transfer of certain hedge fund and private equity investments out of Level 3 assets. There were no significant transfers of derivative or other liabilities into or out of Level 3 during 2014 or 2013. 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 us, such as data from third-party valuation service providers and from internal valuation models. Because input information from third-parties with respect to certain Level 3 instruments (primarily CDO/ABS) may not be reasonably available to us, balances shown below may not equal total amounts reported for such Level 3 assets and liabilities:
Fair Value at December 31, (in millions) 2014 Valuation Technique Unobservable Input/(a)/ Range (Weighted Average )/(a)/ ------------- ------------- ---------------------- ------------------------------ ----------------------------- Assets: Corporate debt $ 923 Discounted cash flow Yield 3.96% - 4.61% (4.28%) RMBS 7,295 Discounted cash flow Constant prepayment rate/(b)/ 0.64% - 9.69% (5.16%) Loss severity/(b)/ 47.82% - 79.71% (63.77%) Constant default rate/(b)/ 4.06% - 9.86% (6.96%) Yield/(b)/ 3.22% - 6.46% (4.84%) CMBS 1,280 Discounted cash flow Yield/(b)/ 0.13% - 9.61% (4.87%) CDO/ABS 1,151 Discounted cash flow Yield 2.61% - 4.09% (3.35%) ----------------------------------------------------------------------------------------------------------------------------- Liabilities: Policyholder contract deposits: GMWB $ 696 Discounted cash flows Equity implied volatility 6.00% - 39.00% Base lapse rate 1.00% - 40.00% Dynamic lapse rate 0.20% - 60.00% Mortality rate 0.10% - 35.00% Utilization rate 0.50% - 30.00% Index annuities 250 Discounted cash flows Mortality rate 0.10% - 35.00% Lapse rate 1.00% - 40.00% Index life 255 Discounted cash flows Equity implied volatility 10.00% - 25.00% Base lapse rate 2.00% - 19.00% Mortality rate 0.00% - 20.00% -----------------------------------------------------------------------------------------------------------------------------
24 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value at December 31, (in millions) 2013 Valuation Technique Unobservable Input/(a)/ Range (Weighted Average )/(a)/ ------------- ------------- ---------------------- ------------------------------ ----------------------------- Assets: Corporate debt $ 360 Discounted cash flow Yield 3.48% - 9.44 (6.46%) RMBS 6,170 Discounted cash flow Constant prepayment rate/(b)/ 0.00% - 11.10% (5.37%) Loss severity/(b)/ 44.40% 80.07% (62.24%) Constant default rate/(b)/ 4.26% - 12.00% (8.13%) Yield/(b)/ 2.89% - 7.55% (5.22%) CMBS 2,396 Discounted cash flow Yield/(b)/ 0.00% - 11.23% (5.39%) -------------------------------------------------------------------------------------------------------------------------- Liabilities: Policyholder contract deposits: GMWB $ (89) Discounted cash flows Equity implied volatility 6.00% - 39.00% Base lapse rate 1.00% - 40.00% Dynamic lapse rate 0.20% - 60.00% Mortality rate 0.10% - 35.00% Utilization rate 0.50% - 30.00% Index annuities 125 Discounted cash flows Mortality rate 0.10% - 35.00% Lapse rate 1.00% - 40.00% Index life 196 Discounted cash flows Equity implied volatility 10.00% - 25.00% Base lapse rate 2.00% - 19.00% Mortality rate 0.00% - 20.00% -------------------------------------------------------------------------------------------------------------------------- Option budget --------------------------------------------------------------------------------------------------------------------------
(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 us. The ranges of these inputs do not directly correlate to changes in the fair values of the tranches purchased by us because there are other factors relevant to the specific tranches owned by us including, but not limited to, purchase price, position in the waterfall, senior versus subordinated position and attachment points. (b)Information received from independent third-party valuation service providers. The ranges of reported inputs for Corporate debt, RMBS, CMBS and CDO/ABS valued using a discounted cash flow technique consist of plus/minus one standard deviation in either direction from the value-weighted average. The preceding table does not give effect to our risk management practices that might offset risks inherent in these investments. Sensitivity to Changes in Unobservable Inputs We consider unobservable inputs to be those for which market data is not available and that are developed using the best information available to us 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. 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. Corporate Debt Corporate debt securities included in Level 3 are primarily private placement issuances that are not traded in active markets or that are subject to transfer restrictions. Fair value measurements consider illiquidity and non-transferability. 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 publicly-traded debt of the issuer or other comparable securities, considering illiquidity and structure. The significant unobservable input used in the fair value 25 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) measurement of corporate debt is the yield. The yield is affected by the market movements in credit spreads and U.S. Treasury yields. In addition, the migration in credit quality of a given security generally has a corresponding effect on the fair value measurement of the securities. For example, a downward migration of credit quality would increase spreads. Holding U.S. Treasury rates constant, an increase in corporate credit spreads would decrease the fair value of corporate debt. 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), loss severity, constant default rates (CDR), 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 CPR, loss severity, CDR, and yield, 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 Embedded policy derivatives within policyholder contract deposits relate to guaranteed minimum withdrawal benefits (GMWB) within variable annuity products and certain enhancements to interest crediting rates based on market indices within equity index annuities and guaranteed investment contracts (GIC). GMWB represents our largest exposure of these embedded policy derivatives, although the carrying value of the liability fluctuates based on the performance of the equity markets and therefore, at a point in time, can be low relative to the exposure. The principal unobservable input used for GMWBs and embedded derivatives in equity-indexed annuities measured at fair value is equity implied volatility. For GMWBs, other significant unobservable inputs include base and dynamic lapse rates, mortality rates, and utilization rates. Lapse, mortality, 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 of the liability associated with GMWB, while increases in lapse rates and mortality rates will decrease the fair value of the liability. Significant unobservable inputs used in valuing embedded derivatives within GICs include long-term forward interest rates and foreign exchange rates. Generally, the embedded derivative liability for GICs will increase as interest rates decrease or if the U.S. dollar weakens compared to the euro. 26 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 our 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 basis, we use the net asset value per share as a practical expedient to measure fair value.
December 31, 2014 December 31, 2013 ----------------------- ----------------------- Fair Value Fair Value Using Net Using Net Asset Asset Value Per Value Per Share (or Share (or its Unfunded its Unfunded (in millions) Investment Category Includes equivalent) Commitments equivalent) Commitments ------------- --------------------------------------------- ----------- ----------- ----------- ----------- 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 $ 983 $155 $1,178 $185 Real Estate / Investments in real estate properties and Infrastructure infrastructure positions, including power plants and other energy generating facilities 100 5 93 9 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 35 3 40 6 Distressed Securities of companies that are in default, under bankruptcy protection, or troubled 78 28 91 16 Other Includes multi-strategy and mezzanine strategies 11 35 9 12 ------ ---- ------ ---- Total private equity funds 1,207 226 1,411 228 ------ ---- ------ ---- Hedge funds: Event-driven Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations 416 -- 500 2 Long-short Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk 951 1 713 11 Distressed Securities of companies that are in default, under bankruptcy protection or troubled 413 3 405 11 Emerging markets Investments in the financial markets of developing countries 56 -- 64 -- Other Includes multi-strategy and other strategies 119 -- 77 -- ------ ---- ------ ---- Total hedge funds 1,955 4 1,759 24 ------ ---- ------ ---- Total $3,162 $230 $3,170 $252 ====== ==== ====== ====
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. The hedge fund investments included above may be redeemable monthly, quarterly, semi-annually and annually, as shown below, with redemption notices ranging from one day to 180 days. Certain hedge fund investments are currently not redeemable, either in whole or in part, because such investments include various contractual restrictions. The majority of these contractual restrictions, which may have been put in place at a fund's inception or thereafter, have pre-defined end dates and are generally expected to be lifted by the end of 2015. The fund investments for which redemption is restricted only in part generally relate to certain hedge funds that hold at least one investment that the fund manager deems to be illiquid. 27 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents information regarding the expected remaining lives of our investments in private equity funds, assuming average original expected lives of 10 years for the funds, and information regarding redemptions and contractual restrictions related to our hedge fund investments:
December 31, 2014 ------------ ---- Percentage of private equity fund investments with remaining lives of: Less than three years 82% Three to seven years 15 Seven to 10 years 3 --- Total 100% === Percentage of hedge fund investments redeemable: Monthly 9% Quarterly 38 Semi-annually 11 Annually 42 --- Total 100% === Percentage of hedge fund investments' fair value subject to contractual restrictions 40% ===
Fair Value Option Under the fair value option, we may elect to measure at fair value financial assets and financial liabilities that are not otherwise required to be measured at fair value. Subsequent changes in fair value for designated items are reported in earnings. We elect the fair value option for certain hybrid securities given the complexity of bifurcating the economic components associated with the embedded derivatives. Additionally, beginning in the third quarter of 2012, we elected the fair value option for investments in certain private equity funds, hedge funds and other alternative investments when such investments are eligible for this election. We believe this measurement basis is consistent with the applicable accounting guidance used by the respective investment company funds themselves. See Note 4 for additional information. Certain VIEs, which are securitization vehicles that we consolidate, have elected the fair value option for a tranche of their structured securities, referred to herein as the Class X notes, which are included in notes payable - to affiliates, net. See Notes 9 and 17 for additional information on these VIEs, which are securitization vehicles. The following table presents the difference between fair values and the aggregate contractual principal amounts of notes payable for which the fair value option was elected:
December 31, 2014 December 31, 2013 -------------------------------- -------------------------------- Outstanding Outstanding Principal Principal (in millions) Fair Value Amount Difference Fair Value Amount Difference ------------- ---------- ----------- ---------- ---------- ----------- ---------- Liabilities: Notes payable - to affiliates, net $291 $760 $(469) $211 $580 $(369)
In 2011, we assumed GIC liabilities, which are reported in policyholder contract deposits on the Balance Sheets, from an affiliate, AIG Matched Funding Corp. (AIGMFC). AIGMFC had elected the fair value option for these GIC liabilities and we have maintained this election. The change in the value of each of the GIC liabilities is partially offset by a swap used to economically hedge the changes in the fair value of the GICs. See Note 17 for additional information on the GIC assumption and the related swaps. 28 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents the gains or losses recorded related to the eligible instruments for which the fair value option was elected:
Gain (Loss) Years Ended December 31, ---------------- (in millions) 2014 2013 2012 ------------- ---- ---- ---- Assets: Other bond securities - certain hybrid securities $368 $(58) $206 Other bond securities - ML II interest -- -- 177 Other invested assets 100 194 5 ---- ---- ---- Liabilities: Policyholder contract deposits 15 (17) (3) Notes payable - to affiliates, net (13) (12) -- ---- ---- ---- Total gain $470 $107 $385 ==== ==== ====
Interest income, dividend income and net unrealized gains (losses) on assets measured under the fair value option are recognized and included in net investment income in the Statements of Income. Interest on liabilities measured under the fair value option is recognized in other income in the Statements of Income. See Note 4 herein for additional information about our policies for recognition, measurement, and disclosure of interest, dividend and other income. FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS We measure 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 4 herein for additional information about how we test various asset classes for impairment. The following table presents assets measured at fair value on a non-recurring basis at the time of impairment and the related impairment charges recorded during the periods presented:
Assets at Fair Value Impairment Charges ----------------------------- ------------------ Non-Recurring Basis December 31, ----------------------------- ------------------ (in millions) Level 1 Level 2 Level 3 Total 2014 2013 2012 ------------- ------- ------- ------- ----- ---- ---- ---- December 31, 2014 Other invested assets $-- $-- $ 2 $ 2 $2 $19 $-- December 31, 2013 Other invested assets $-- $-- $435 $435
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 loans on real estate and other loans receivable were estimated for disclosure purposes using discounted cash flow calculations based on discount rates that we believe market participants would use in determining the price that they would pay for such assets. For certain loans, our current incremental lending rates for similar types of loans are used as the discount rates, because we believe this rate approximates the rates market participants would use. The fair values of 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. No consideration is given to credit risk because policy loans are effectively collateralized by the cash surrender value of the policies. 29 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) .. Other invested assets: The majority of other invested assets that are not measured at fair value represent investments in hedge funds, private equity funds and other investment partnerships for which we use the equity method of accounting. The fair value of our investment in these funds is measured based on our share of the funds' reported net asset value. .. Cash and short-term investments: The carrying amounts 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. .. Policyholder contract deposits associated with investment-type contracts: Fair values for policyholder contract deposits associated with investment-type contracts not accounted for at fair value were estimated using discounted cash flow calculations based on interest rates currently being offered for similar contracts with maturities consistent with those of the contracts being valued. When no similar contracts are being offered, the discount rate is the appropriate swap rate (if available) or current risk-free interest rate consistent with the currency in which the cash flows are denominated. To determine fair value, other factors include current policyholder account values and related surrender charges and other assumptions include expectations about policyholder behavior and an appropriate risk margin. .. Notes Payable: Fair values of these obligations were estimated based on discounted cash flow calculations using a discount rate that is indicative of the current market for securities with similar risk characteristics. The following table presents the carrying values and estimated fair values of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:
Estimated Fair Value ------------------------------- Carrying (in millions) Level 1 Level 2 Level 3 Total Value ------------- ------- ------- ------- ------- -------- December 31, 2014 Assets: Mortgage and other loans receivable $ -- $ -- $12,614 $12,614 $11,812 Other invested assets -- 14 -- 14 14 Short-term investments -- 823 -- 823 823 Cash 277 -- -- 277 277 Liabilities: Policyholder contract deposits/(a)/ -- 224 61,771 61,995 56,951 Note payable - to affiliates, net/(b)/ -- -- 363 363 367 Note payable - to third parties, net -- -- 626 626 627 ---- ------ ------- ------- ------- December 31, 2013 Assets: Mortgage and other loans receivable $ -- $ 75 $10,562 $10,637 $10,085 Other invested assets -- 22 -- 22 22 Short-term investments -- 1,161 -- 1,161 1,161 Cash 202 -- -- 202 202 Liabilities: Policyholder contract deposits/(a)/ -- 185 59,505 59,690 55,476 Note payable - to affiliates, net/(b)/ -- -- 46 46 49 Note payable - to third parties, net -- -- 377 377 378 ---- ------ ------- ------- -------
(a)Excludes embedded policy derivatives which are carried at fair value on a recurring basis. (b)Excludes notes for which the fair value option has been elected. 30 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. INVESTMENTS Fixed Maturity and Equity Securities Bonds held to maturity are carried at amortized cost when we have the ability and positive intent to hold these securities until maturity. When we do not have the ability or positive intent to hold bonds until maturity, these securities are classified as available for sale and are measured at fair value at our election. None of our fixed maturity securities met the criteria for held to maturity classification at December 31, 2014 or 2013. 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 (AOCI), net of DAC, deferred sales inducements and deferred income taxes, in shareholder's equity. Realized and unrealized gains and losses from fixed maturity and equity securities that are measured at fair value under the fair value option are reflected in net investment income. Investments in fixed maturity and equity securities are recorded on a trade-date basis. 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. For investments in certain RMBS, CMBS, CDO and 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. Other Bond Securities and Other Common and Preferred Stock Securities for which we have elected the fair value option are carried at fair value and reported in other bond securities or other common and preferred stocks in the Balance Sheets. Changes in fair value of these assets are reported in net investment income. Interest income and dividend income on assets measured under the fair value option are recognized and included in net investment income. See Note 3 for additional information on financial assets designated under the fair value option. 31 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Securities Available for Sale The following table presents the amortized cost or cost and fair value of our available for sale securities:
Other-Than- Amortized Gross Gross Temporary Cost or Unrealized Unrealized Impairments (in millions) Cost Gains Losses Fair Value in AOCI/(a)/ ------------- --------- ---------- ---------- ---------- ----------- December 31, 2014 Bonds available for sale: U.S. government and government sponsored entities $ 333 $ 63 $ (1) $ 395 $ -- Obligations of states, municipalities and political subdivisions 2,699 325 (5) 3,019 2 Non-U.S. governments 2,782 167 (62) 2,887 -- Corporate debt 64,605 6,412 (642) 70,375 37 Mortgage-backed, asset-backed and collateralized: RMBS 14,169 1,433 (144) 15,458 739 CMBS 4,226 488 (9) 4,705 232 CDO/ABS 5,745 197 (38) 5,904 6 ------- ------ ------- -------- ------ Total mortgage-backed, asset-backed and collateralized 24,140 2,118 (191) 26,067 977 ------- ------ ------- -------- ------ Total bonds available for sale/(b)/ 94,559 9,085 (901) 102,743 1,016 ------- ------ ------- -------- ------ Equity securities available for sale: Common stock 3 4 -- 7 -- Preferred stock 16 3 -- 19 -- ------- ------ ------- -------- ------ Total equity securities available for sale 19 7 -- 26 -- ------- ------ ------- -------- ------ Investment in AIG 9 3 (6) 6 -- ------- ------ ------- -------- ------ Total $94,587 $9,095 $ (907) $102,775 $1,016 ======= ====== ======= ======== ====== December 31, 2013 Bonds available for sale: U.S. government and government sponsored entities $ 343 $ 46 $ (15) $ 374 $ -- Obligations of states, municipalities and political subdivisions 2,432 53 (156) 2,329 2 Non-U.S. governments 2,426 95 (174) 2,347 -- Corporate debt 66,412 4,459 (1,812) 69,059 44 Mortgage-backed, asset-backed and collateralized: RMBS 13,975 1,223 (273) 14,925 657 CMBS 3,760 419 (63) 4,116 235 CDO/ABS 4,853 188 (43) 4,998 16 ------- ------ ------- -------- ------ Total mortgage-backed, asset-backed and collateralized 22,588 1,830 (379) 24,039 908 ------- ------ ------- -------- ------ Total bonds available for sale/(b)/ 94,201 6,483 (2,536) 98,148 954 ------- ------ ------- -------- ------ Equity securities available for sale: Common stock 5 2 -- 7 -- Preferred stock 18 4 -- 22 -- ------- ------ ------- -------- ------ Total equity securities available for sale 23 6 -- 29 -- ------- ------ ------- -------- ------ Investment in AIG 9 2 (6) 5 -- ------- ------ ------- -------- ------ Total $94,233 $6,491 $(2,542) $ 98,182 $ 954 ======= ====== ======= ======== ======
(a)Represents the amount of other-than-temporary impairment losses recognized in accumulated other comprehensive income. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date. (b)At December 31, 2014 and 2013, bonds available for sale held by us that were below investment grade or not rated totaled $15.3 billion and $14.5 billion, respectively. 32 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Securities Available for Sale in a Loss Position The following table summarizes the fair value and gross unrealized losses on our available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position:
Less than 12 Months 12 Months or More Total - --------------------- --------------------- --------------------- Gross Gross Gross Unrealized Unrealized Unrealized (in millions) Fair Value Losses Fair Value Losses Fair Value Losses ------------- ---------- ---------- ---------- ---------- ---------- ---------- December 31, 2014 Bonds available for sale: U.S. government and government sponsored entities $ -- $ -- $ 24 $ 1 $ 24 $ 1 Obligations of states, municipalities and political subdivisions 47 1 171 4 218 5 Non-U.S. governments 357 14 607 48 964 62 Corporate debt 5,476 247 6,447 395 11,923 642 RMBS 1,664 42 1,879 102 3,543 144 CMBS 53 -- 331 9 384 9 CDO/ABS 1,742 16 399 22 2,141 38 ------- ------ ------ ---- ------- ------ Total bonds available for sale 9,339 320 9,858 581 19,197 901 ------- ------ ------ ---- ------- ------ Investment in AIG -- -- 6 6 6 6 ------- ------ ------ ---- ------- ------ Total $ 9,339 $ 320 $9,864 $587 $19,203 $ 907 ======= ====== ====== ==== ======= ====== December 31, 2013 Bonds available for sale: U.S. government and government sponsored entities $ 62 $ 13 $ 7 $ 2 $ 69 $ 15 Obligations of states, municipalities and political subdivisions 1,553 136 97 20 1,650 156 Non-U.S. governments 1,049 104 312 70 1,361 174 Corporate debt 20,214 1,368 3,119 444 23,333 1,812 RMBS 3,788 186 712 87 4,500 273 CMBS 827 38 167 25 994 63 CDO/ABS 1,016 18 373 25 1,389 43 ------- ------ ------ ---- ------- ------ Total bonds available for sale 28,509 1,863 4,787 673 33,296 2,536 ------- ------ ------ ---- ------- ------ Investment in AIG -- -- 5 6 5 6 ------- ------ ------ ---- ------- ------ Total $28,509 $1,863 $4,792 $679 $33,301 $2,542 ======= ====== ====== ==== ======= ======
As of December 31, 2014, we held 2,239 individual fixed maturity and equity securities that were in an unrealized loss position, of which 1,045 individual securities were in a continuous unrealized loss position for longer than 12 months. We did not recognize the unrealized losses in earnings on these fixed maturity securities at December 31, 2014, because we neither intend to sell the securities nor do we believe that it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. For fixed maturity securities with significant declines in value, we 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 available market data. Contractual Maturities of Fixed Maturity Securities Available for Sale The following table presents the amortized cost and fair value of fixed maturity securities available for sale by contractual maturity:
Total Fixed Maturity Securities Fixed Maturity Securities in a Loss Available for Sale Position Available for Sale - ------------------------------- ----------------------------------- (in millions) Amortized Cost Fair Value Amortized Cost Fair Value ------------- -------------- ---------- -------------- ---------- December 31, 2014 Due in one year or less $ 1,793 $ 1,843 $ 93 $ 91 Due after one year through five years 11,957 12,911 1,303 1,261 Due after five years through ten years 24,485 25,760 5,693 5,459 Due after ten years 32,184 36,162 6,750 6,318 Mortgage-backed, asset-backed and collateralized 24,140 26,067 6,259 6,068 ------- -------- ------- ------- Total $94,559 $102,743 $20,098 $19,197 ======= ======== ======= =======
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. 33 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Our investments at December 31, 2014 or 2013 did not include any investments in a single issuer that exceeded 10 percent of our shareholder's equity. The following table presents the gross realized gains and gross realized losses from sales or maturities of our available for sale securities:
Years Ended December 31, ----------------------------------------------------- 2014 2013 2012 ----------------- ----------------- ----------------- Gross Gross Gross Gross Gross Gross Realized Realized Realized Realized Realized Realized (in millions) Gains Losses Gains Losses Gains Losses ------------- -------- -------- -------- -------- -------- -------- Fixed maturity securities $259 $49 $1,863 $76 $1,598 $92 Equity securities 5 -- 28 -- 31 6 ---- --- ------ --- ------ --- Total $264 $49 $1,891 $76 $1,629 $98 ==== === ====== === ====== ===
In 2014, 2013, and 2012, the aggregate fair value of available for sale fixed maturity and equity securities sold was $6.1 billion, $22.5 billion and $11.8 billion, respectively. Other Securities Measured at Fair Value The following table presents the fair value of other securities measured at fair value at our election of the fair value option:
December 31, 2014 December 31, 2013 ---------------- ---------------- Percent Percent Fair of Fair of (in millions) Value Total Value Total ------------- ------ ------- ------ ------- U.S. government and government sponsored entities $1,135 39% $ 903 30% Mortgage-backed, asset-backed and collateralized: RMBS 384 13 332 11 CMBS 153 5 156 5 CDO/ABS 1,262 43 1,061 36 ------ --- ------ --- Total fixed maturities 2,934 100 2,452 82 Other common and preferred stock -- -- 538 18 ------ --- ------ --- Total $2,934 100% $2,990 100% ====== === ====== ===
Other Invested Assets The following table summarizes the carrying values of other invested assets:
December 31, ------------- (in millions) 2014 2013 ------------- ------ ------ Alternative investments/(a)/ $6,722 $7,047 Investment real estate/(b)/ 346 443 Federal Home Loan Bank (FHLB) common stock 14 22 ------ ------ Total $7,082 $7,512 ====== ======
(a)Includes hedge funds, private equity funds, affordable housing partnerships and other investment partnerships. (b)Net of accumulated depreciation of $148 million and $181 million at December 31, 2014 and 2013, respectively. Other Invested Assets Carried at Fair Value Certain hedge funds, private equity funds, affordable housing partnerships and other investment partnerships for which we have elected the fair value option are reported at fair value with changes in fair value recognized in net investment income. Other investments in hedge funds, private equity funds, affordable housing partnerships and other investment partnerships in which AIG's insurance operations do not hold aggregate interests sufficient to exercise more than minor influence over the respective partnerships are reported at fair value with changes in fair value recognized as a component of accumulated other comprehensive income. These investments are subject to other-than-temporary impairment evaluations (see discussion below on evaluating equity investments for other-than-temporary impairment). 34 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The gross unrealized loss recorded in Accumulated other comprehensive income on such investments was $26 million and $8 million at December 31, 2014 and 2013, respectively, the majority of which pertains to investments in private equity funds and hedge funds that have been in continuous unrealized loss positions for less than 12 months. Other Invested Assets - Equity Method Investments We account for hedge funds, private equity funds, affordable housing partnerships and other investment partnerships using the equity method of accounting unless AIG's interest is so minor that AIG may have virtually no influence over partnership operating and financial policies, or we have elected the fair value option. Under the equity method of accounting, the carrying value generally is our share of the net asset value of the funds or the partnerships, and changes in our share of the net asset values are recorded in net investment income. In applying the equity method of accounting, we consistently use the most recently available financial information provided by the general partner or manager of each of these investments, which is one to three months prior to the end of our reporting period. The financial statements of these investees are generally audited annually. Other Investments Real estate is classified as held for investment or held 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 carrying amount or fair value less estimated costs to sell the property. We are members of the FHLB of Dallas and such membership requires members to own stock in the FHLB. Our FHLB stock is carried at amortized cost, which approximates fair value, and is included in other invested assets. Other invested assets also include mutual funds, which consist of seed money for mutual funds and investments in retail mutual funds used as investment vehicles for our variable annuity separate accounts, and are carried at market value. Aircraft Aircraft owned by the Aircraft Trusts were recorded at cost (adjusted for impairment charges), net of accumulated depreciation. Depreciation was generally computed on a straight-line 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 have been capitalized. The residual value estimates were reviewed periodically to ensure continued appropriateness. Aircraft were periodically reviewed for impairment and impairment losses recorded when the estimate of undiscounted future cash flows expected to be generated by the aircraft was less than its carrying value. See Notes 9 for additional information. 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. Net Investment Income Net investment income represents income primarily from the following sources: .. 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. 35 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) .. Dividend income from common and preferred stock and distributions from other investments, including distributions from private equity funds and hedge funds that are not accounted for under the equity method. .. Realized and unrealized gains and losses from investments in other securities and investments for which we elected the fair value option. .. Earnings from private equity funds and hedge fund investments accounted for under the equity method. .. Interest income on mortgage, policy and other loans. The following table presents the components of net investment income:
Years Ended December 31, ---------------------- (in millions) 2014 2013 2012 ------------- ------ ------ ------ Fixed maturity securities, including short-term investments $5,686 $5,275 $5,792 Equity securities (51) (20) 67 Interest on mortgage and other loans 645 626 628 Investment real estate 61 79 73 Other invested assets 778 919 650 Securities lending 1 3 2 Other investments 69 52 12 ------ ------ ------ Total investment income 7,189 6,934 7,224 Investment expenses 247 242 223 ------ ------ ------ Net investment income $6,942 $6,692 $7,001 ====== ====== ======
The carrying value of investments that produced no investment income during 2014 was $109 million, which is less than less than 0.1 percent of total invested assets. The ultimate disposition of these investments is not expected to have a material effect on our results of operations and financial position. Net Realized Capital Gains and Losses Net realized capital gains and losses are determined by specific identification. The net realized capital gains and losses are generated primarily from the following sources: .. Sales of available for sale fixed maturity and equity securities, real estate, investments in private equity funds and hedge funds and other types of investments. .. Reductions to the cost basis of available for sale fixed maturity and equity securities and certain other invested assets for other-than-temporary impairments. .. Changes in fair value of derivatives except for those instruments that are designated as hedging instruments when the change in the fair value of the hedged item is not reported in net realized capital gains and losses. .. Exchange gains and losses resulting from foreign currency transactions. The following table presents the components of net realized capital gains (losses):
Years Ended December 31, --------------------- (in millions) 2014 2013 2012 ------------- ----- ------ ------ Sales of fixed maturity securities $ 210 $1,787 $1,506 Sales of equity securities 5 28 25 Mortgage and other loans (46) (57) 73 Investment real estate 116 73 12 Other invested assets 51 2 (12) Derivatives (432) 340 (509) Other 148 (30) (45) Other-than-temporary impairments (119) (127) (379) ----- ------ ------ Net realized capital (losses) gains $ (67) $2,016 $ 671 ===== ====== ======
36 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Evaluating Investments for Other-Than-Temporary Impairments Fixed Maturity Securities If we intend to sell a fixed maturity security or it is more likely than not that we 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 realized capital losses. When assessing our intent to sell a fixed maturity security, or whether it is more likely than not that we 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 our investment portfolio, sales of securities to meet cash flow needs and sales of securities to take advantage of favorable pricing. For 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 realized capital losses. The estimated recovery value is the present value of cash flows expected to be collected, as determined by management. The difference between fair value and amortized cost that is not related to a credit impairment is recognized in unrealized appreciation (depreciation) of fixed maturity securities on which other-than-temporary credit impairments were taken (a component of accumulated other comprehensive income). When estimating future cash flows for structured fixed maturity securities (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; .. 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. Management considers severe price declines in its assessment of potential credit impairments. We may also modify model inputs when management determines that price movements in certain sectors are indicative of factors not captured 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 is not foreign exchange related, we prospectively accrete into earnings the difference between the new amortized cost and the expected undiscounted recovery value over the remaining expected holding period of the security. 37 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Credit Impairments The following table presents a rollforward of the cumulative credit losses in other-than-temporary impairments recognized in earnings for available for sale fixed maturity securities:
Years Ended December 31, ---------------------- (in millions) 2014 2013 2012 ------------- ------ ------ ------ Balance, beginning of year $1,585 $2,126 $2,775 Increases due to: Credit impairments on new securities subject to impairment losses 22 15 96 Additional credit impairments on previously impaired securities 40 31 194 Reductions due to: Credit impaired securities fully disposed for which there was no prior intent or requirement to sell (153) (184) (520) Credit impaired securities for which there is a current intent or anticipated requirement to sell (170) -- -- Accretion on securities previously impaired due to credit/*/ -- (403) (422) Other -- -- 3 ------ ------ ------ Balance, end of year $1,324 $1,585 $2,126 ====== ====== ======
* Represents both accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit impaired securities and the accretion due to the passage of time. Equity Securities We evaluate our 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 .. We have 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. In addition to the above criteria, management also considers circumstances of a rapid and severe market valuation decline (50 percent or more discounts to cost), in which we could not reasonably assert that the impairment period would be temporary (severity losses). Other Invested Assets Investments in private equity funds and hedge funds are evaluated for impairment in a manner similar to the evaluation of equity securities for impairments as discussed above. This evaluation considers market conditions, events and volatility that may impact the recoverability of the underlying investments within these private equity funds and hedge funds 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. 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, we compare 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. Purchased Credit Impaired Securities We purchase certain RMBS securities that have experienced deterioration in credit quality since their issuance. We determined, based on our expectations as to the timing and amount of cash flows expected to be received, that it was 38 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) probable at the date of acquisition that we would not collect all contractually required payments for these PCI securities, including both principal and interest after 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 our 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. The accretable yield and the non-accretable difference will change over time, based on actual payments received and changes in estimates of undiscounted expected future cash flows, which are 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 our 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. The following table presents information on our PCI securities, which are included in bonds available for sale:
At Date of (in millions) Acquisition ------------- ----------- Contractually required payments (principal and interest) $11,962 Cash flows expected to be collected/*/ 9,700 Recorded investment in acquired securities 6,457
* Represents undiscounted expected cash flows, including both principal and interest
December 31, ------------- (in millions) 2014 2013 ------------- ------ ------ Outstanding principal balance $6,934 $5,805 Amortized cost 5,020 3,969 Fair value 5,473 4,397
The following table presents activity for the accretable yield on PCI securities:
Years Ended December 31, -------------- (in millions) 2014 2013 ------------- ------ ------ Balance, beginning of year $2,677 $1,734 Newly purchased PCI securities 545 826 Disposals -- (39) Accretion (345) (258) Effect of changes in interest rate indices (226) 118 Net reclassification from non-accretable difference, including effects of prepayments 10 296 ------ ------ Balance, end of year $2,661 $2,677 ====== ======
Pledged Investments Secured Financing We enter into secured financing transactions whereby certain securities are sold under agreements to repurchase (repurchase agreements), in which we transfer securities in exchange for cash, with an agreement by us to repurchase the same or substantially similar securities. In the majority of these repurchase agreements, the securities transferred by us may be sold or repledged by the counterparties. Repurchase agreements are recorded at their contracted repurchase amounts plus accrued interest. 39 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At December 31, 2013, our secured financing transactions also included those that involve the transfer of securities to financial institutions in exchange for cash or other liquid collateral. Securities transferred by us under these financing transactions may be sold or repledged by the counterparties. As collateral for the securities transferred by us, counterparties transfer assets to us, such as cash or high quality fixed maturity securities. Collateral levels are monitored daily and are generally maintained at an agreed-upon percentage of the fair value of the transferred securities during the life of the transactions. When we receive fixed maturity securities as collateral, we do not have the right to sell or repledge this collateral unless an event of default occurs by the counterparties. At the termination of the transactions, we and our counterparties are obligated to return the collateral provided and the securities transferred, respectively. The following table presents the fair value of securities pledged to counterparties under secured financing transactions:
December 31, ------------- (in millions) 2014 2013 ------------- ------ ------ Securities available for sale $ -- $2,425 Other securities 1,135 903
Insurance - Statutory and Other Deposits Total carrying values of cash and securities deposited by us under requirements of regulatory authorities were $72 million and $70 million at December 31, 2014 and 2013, respectively. Other Pledges We are members of FHLBs and such membership requires the members to own stock in these FHLBs. We owned an aggregate of $14 million and $22 million of stock in FHLBs at December 31, 2014 and 2013, respectively. To the extent we borrow from an FHLB, our ownership interest in the stock of the FHLB will be pledged to the FHLB. In addition, we have pledged securities with a fair value of $330 million and $67 million at December 31, 2014 and 2013, respectively, associated with advances from the FHLBs. The increase in pledged securities in 2014 primarily reflects securities pledged to the FHLB prior to obtaining advances, pursuant to our plan to facilitate the ability to obtain cash advances on a same-day basis up to an internally approved limit, to more effectively manage short-term liquidity. As a result, we had $312 million of available FHLB borrowing capacity at December 31, 2014. 5. LENDING ACTIVITIES Mortgage and other loans receivable include commercial and residential mortgages, life insurance policy loans, commercial loans, and other loans and notes receivable. Commercial mortgages, commercial loans, and other loans and notes receivable are carried at unpaid principal balances less credit allowances and plus or minus adjustments for the accretion or amortization of discount or premium. Interest income on such loans is accrued as earned. Direct costs of originating commercial mortgages, commercial loans, and other loans and notes receivable, net of nonrefundable points and fees, are deferred and included in the carrying amount of the related receivables. The amount deferred is amortized to net investment income over the life of the related loan as an adjustment of the loan's yield using the interest method. Life insurance 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. 40 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents the composition of mortgages and other loans receivable:
December 31, ---------------- (in millions) 2014 2013 ------------- ------- ------- Commercial mortgages/(a)/ $ 9,441 $ 8,167 Life insurance policy loans 1,501 1,554 Commercial loans, other loans and notes receivable/(b)/ 964 503 ------- ------- Total mortgage and other loans receivable 11,906 10,224 Allowance for losses (94) (139) ------- ------- Mortgage and other loans receivable, net $11,812 $10,085 ======= =======
(a)Commercial mortgages primarily represent loans for office, retail, apartments and industrial properties, with exposures in California and New York representing the largest geographic concentrations (both 15 percent at December 31, 2014 and 19 percent and 14 percent, respectively, at December 31, 2013). (b)Amount at December 31, 2014 also includes $110 million of residential mortgages. The following table presents the credit quality indicators for commercial mortgage loans:
Number Percent Class of ------------------------------------------------- of (dollars in millions) Loans Apartments Offices Retail Industrial Hotel Others Total/(c)/ Total $ --------------------- ------ ---------- ------- ------ ---------- ----- ------ --------- ------- December 31, 2014 Credit Quality Indicator: In good standing 609 $1,541 $3,164 $1,852 $863 $958 $ 833 $9,211 97% Restructured/(a)/ 9 -- 159 10 -- -- -- 169 2 90 days or less delinquent 3 -- -- -- -- -- -- -- -- >90 days delinquent or in process of foreclosure 3 -- 61 -- -- -- -- 61 1 --- ------ ------ ------ ---- ---- ------ ------ --- Total/(b)/ 624 $1,541 $3,384 $1,862 $863 $958 $ 833 $9,441 100% === ====== ====== ====== ==== ==== ====== ====== === Allowance for losses $ 2 $ 41 $ 16 $ 2 $ 3 $ 9 $ 73 1% ====== ====== ====== ==== ==== ====== ====== === December 31, 2013 Credit Quality Indicator: In good standing 623 $1,347 $2,427 $1,626 $839 $771 $ 952 $7,962 98% Restructured/(a)/ 11 13 90 -- -- -- 84 187 2 >90 days delinquent or in process of foreclosure 2 -- -- 18 -- -- -- 18 -- --- ------ ------ ------ ---- ---- ------ ------ --- Total/(b)/ 636 $1,360 $2,517 $1,644 $839 $771 $1,036 $8,167 100% === ====== ====== ====== ==== ==== ====== ====== === Allowance for losses $ 2 $ 61 $ 6 $ 1 $ 3 $ 33 $ 106 1% ====== ====== ====== ==== ==== ====== ====== ===
(a)Includes 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. (c)Over 99 percent of the commercial mortgages held at such respective dates were current as to payments of principal and interest. We hold mortgages with a carrying value of $71 million on certain properties that are owned by an affiliate, AIG Global Real Estate Investment Corporation, as of both December 31, 2014 and 2013. Methodology Used to Estimate the Allowance for Losses Mortgage and other loans receivable are considered impaired when collection of all amounts due under contractual terms is not probable. Impairment is measured using either i) the present value of expected future cash flows discounted at the loan's effective interest rate, ii) the loan's observable market price, if available, or iii) the fair value of the collateral if the loan is collateral dependent. Impairment of commercial mortgages is typically determined using the fair value of collateral while impairment of other loans is typically determined using the present value of cash flows or the loan's observable market price. 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 past due status, 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 impaired loans is recognized as cash is received. For impaired loans where it has been determined 41 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) that not all of the contractual principal due will be collected, any cash received is recorded as a reduction of the current carrying amount of the loan. 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 us to have cause to enforce the provisions of a guarantee on a commercial real estate or mortgage loan. The following table presents a rollforward of the changes in the allowance for losses on mortgage and other loans receivable:
2014 2013 2012 --------------------- --------------------- --------------------- Years Ended December 31, Commercial Other Commercial Other Commercial Other (in millions) Mortgages Loans Total Mortgages Loans Total Mortgages Loans Total ------------- ---------- ----- ----- ---------- ----- ----- ---------- ----- ----- Allowance, beginning of year $106 $ 33 $139 $ 68 $ 87 $155 $149 $84 $233 Additions (reductions) to allowance (17) 11 (6) 49 10 59 (74) 11 (63) Charge-offs, net of recoveries (16) (23) (39) (11) (64) (75) (7) (8) (15) ---- ---- ---- ---- ---- ---- ---- --- ---- Allowance, end of year $ 73 $ 21 $ 94 $106 $ 33 $139 $ 68 $87 $155 ==== ==== ==== ==== ==== ==== ==== === ====
The following table presents information regarding impaired mortgage loans:
Years Ended December 31, ---------------- (in millions) 2014 2013 2012 ------------- ---- ---- ---- Impaired loans with valuation allowances $104 $137 $ 75 Impaired loans without valuation allowances -- -- 7 ---- ---- ---- Total impaired loans 104 137 82 Valuation allowances on impaired loans (26) (56) (27) ---- ---- ---- Impaired loans, net $ 78 $ 81 $ 55 ==== ==== ==== $ 5 $ 7 $ 4 Interest income on impaired loans ==== ==== ====
Troubled Debt Restructurings We modify 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 us granting a concession to the troubled debtor, the modification is deemed to be a troubled debt restructuring (TDR). We assess 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. We held $139 million and $67 million of commercial mortgage loans that had been modified in a TDR at December 31, 2014 and 2013, respectively. We have no other loans that had been modified in a TDR. At December 31, 2014 and 2013, these commercial mortgage loans had related total allowances for credit losses of $13 million and $11 million, respectively. The commercial mortgage loans modified in a TDR are included among the restructured loans in the credit quality indicators table above, if they are performing according to the restructured terms. 6. REINSURANCE In the ordinary course of business, we utilize internal and third-party reinsurance relationships to manage insurance risks and to facilitate capital management strategies. Long-duration reinsurance is effected principally under yearly renewable term treaties. Pools of highly-rated third party reinsurers are utilized to manage net amounts at risk in excess of retention limits. In addition, we assume reinsurance from other insurance companies. We generally limit our exposure to loss on any single life to $10 million by ceding additional risks through reinsurance contracts with other insurers. On an exception basis, we can increase our exposure to loss on any single life up to $15 million. 42 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Amounts recoverable from reinsurers are estimated in a manner consistent with the assumptions used for the underlying policy benefits and are presented as a component of reinsurance assets. The premiums with respect to these treaties are earned over the contract period in proportion to the protection provided. The following table presents the effect of reinsurance on our premiums:
Years Ended December 31, ---------------------- (in millions) 2014 2013 2012 ------------- ------ ------ ------ Direct premiums $2,561 $2,661 $2,456 Assumed premiums 22 22 20 Ceded premiums (917) (900) (860) ------ ------ ------ Net $1,666 $1,783 $1,616 ====== ====== ======
Reinsurance recoveries, which reduced Policyholder benefits, were approximately $641 million, $658 million and $694 million during 2014, 2013 and 2012, respectively. The National Association of Insurance Commissioners (NAIC) Model Regulation "Valuation of Life Insurance Policies" (Regulation XXX) requires U.S. life insurers to establish additional statutory reserves for term life insurance policies with long-term premium guarantees and universal life policies with secondary guarantees (ULSGs). In addition, NAIC Actuarial Guideline 38 (Guideline AXXX) clarifies the application of Regulation XXX as to these guarantees, including certain ULSGs. We manage the capital impact of statutory reserve requirements under Regulation XXX and Guideline AXXX through intercompany reinsurance transactions. Regulation XXX and Guideline AXXX reserves related to new and in-force business (term and universal life) are ceded to our Parent, AGC Life, under a coinsurance/modified coinsurance agreement effective January 1, 2011. This agreement does not meet the criteria for reinsurance accounting under GAAP; therefore, deposit accounting is applied. The agreement between us and AGC Life also provides for an experience refund of all profits, less a reinsurance risk charge. The main impact of the agreement on our results of operations during 2014, 2013 and 2012 was a pre-tax expense of approximately $81 million, $73 million and $66 million, respectively, which represented the risk charge associated with the reinsurance agreement. On October 1, 2003, we entered into a coinsurance/modified coinsurance agreement with AIG Life of Bermuda, Ltd. (AIGB). Under the agreement, AIGB reinsured 100 percent quota share of our liability on virtually all of our general account deferred annuity contracts 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, we 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 our results of operations during 2014, 2013 and 2012 was pre-tax expense of approximately $2 million in each year, which represented the risk charge associated with the reinsurance agreement. In 2003, we entered into two coinsurance/modified coinsurance agreements with AIGB. These agreements have an effective date of January 1, 2003. Under the agreements, AIGB reinsured a 100 percent quota share of our liability on selective level term products and universal life products issued by us. These agreements do not meet the criteria for reinsurance accounting under GAAP; therefore, deposit accounting is applied. These agreements were amended to terminate for new business issued on and after August 1, 2009. Effective July 1, 2013, we fully recaptured these agreements and simultaneously reinsured this in-force block to AGC Life, under the January 1, 2011 coinsurance/modified coinsurance agreement mentioned above. Management received approvals of the recapture and reinsurance transactions on our behalf and AGC Life from the Texas and Missouri Departments of Insurance, in July 2013, with July 1, 2013 effective dates. On the effective date of the recapture with AIGB and day one of the treaty with AGC Life, we recorded a net zero impact to pre-tax earnings. The agreements also provide for an experience refund of all profits, less a reinsurance risk charge. The main impact of the agreements on our results of operations during 2013 and 2012 was pre-tax expense of approximately $3 million and $4 million, respectively, representing the risk charge associated with the coinsurance agreement. 43 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Our third-party reinsurance arrangements do not relieve us from our direct obligations to our beneficiaries. Thus, a credit exposure exists with respect to reinsurance ceded, to the extent that any reinsurer fails to meet the obligations assumed under any reinsurance agreement. We believe that no exposure to a single reinsurer represents an inappropriate concentration of credit risk to the Company. Gross reinsurance assets with our three largest reinsurers aggregated to approximately $1.0 billion at both December 31, 2014 and 2013, of which approximately $198 million was secured by collateral at both December 31, 2014 and 2013. 7. DERIVATIVES AND HEDGE ACCOUNTING We use derivatives and other financial instruments as part of our financial risk management programs and our investment operations. Interest rate and cross-currency swaps, swaptions, options and forward transactions are accounted for as derivatives, recorded on a trade-date basis and carried at fair value. See Note 3 for discussion of fair value measurements. Unrealized gains and losses are reflected in income, when appropriate. Aggregate asset or liability positions are netted on the Balance Sheets only to the extent permitted by qualifying master netting arrangements in place with each respective counterparty. Cash collateral posted with counterparties in conjunction with transactions supported by qualifying master netting arrangements is reported as a reduction of the corresponding net derivative liability, while cash collateral received in conjunction with transactions supported by qualifying master netting arrangements is reported as a reduction of the corresponding net derivative asset. We are exposed to potential credit-related losses in the event of nonperformance by counterparties to derivative instruments. The credit exposure related to our derivative financial instruments is limited to the fair value of contracts that are favorable to us at the reporting date less collateral received from that counterparty. Derivatives, with the exception of bifurcated embedded derivatives, are reflected in the Balance Sheets in derivative assets, at fair value and derivative liabilities, at fair value. A bifurcated embedded derivative is measured at fair value and accounted for in the same manner as a free standing derivative contract. The corresponding host contract is accounted for according to the accounting guidance applicable to that instrument. A bifurcated embedded derivative is generally presented with the host contract. See Notes 3 and 11 for additional information on embedded policy derivatives. Our interest rate contracts ,which include interest rate swaps, swaptions, futures and options, are used to economically hedge interest rate exposures associated with embedded derivatives contained in insurance contract liabilities and fixed maturity securities, as well as other interest rate sensitive assets and liabilities. Foreign exchange derivatives (principally forwards and swaps) are used to economically mitigate risk associated with foreign currency-denominated transactions, primarily investments and GICs denominated in foreign currencies. Effective April 1, 2014, we reclassified cross-currency swaps from interest rate contracts to foreign exchange contracts. This change was applied prospectively. Equity derivatives are used to mitigate financial risk embedded in certain insurance liabilities. We purchase equity contracts, such as futures and call and put options, to economically hedge certain guarantees of specific equity index universal life and annuities and variable annuity products. Our exchange-traded index futures contracts have no recorded fair value as they are cash settled daily. We believe our economic hedging instruments have been and remain economically effective, but for the most part they have not been designated as hedges receiving hedge accounting treatment. Changes in the fair value of derivatives not designated as hedges are reported within net realized capital gains and losses. Certain swaps associated with GIC liabilities and available for sale investments have been designated as fair value hedges. Changes in fair value hedges of GIC liabilities and available for sale securities are reported in net policyholder benefits, along with changes in the hedged item. 44 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents the notional amounts and fair values of our derivatives:
December 31, 2014 December 31, 2013 -------------------------------- -------------------------------- Gross Derivative Gross Derivative Gross Derivative Gross Derivative Assets Liabilities Assets Liabilities --------------- --------------- --------------- --------------- Notional Fair Notional Fair Notional Fair Notional Fair (in millions) Amount Value Amount Value Amount Value Amount Value ------------- -------- ------ -------- ------ -------- ------ -------- ------ Derivatives designated as hedging instruments: Interest rate contracts $ 243 $ 172 $ -- $ -- $ 161 $ 105 $ 133 $ 15 Foreign exchange contracts 182 11 99 29 -- -- -- -- Derivatives not designated as hedging instruments: Interest rate contracts 24,499 398 2,992 275 5,996 691 4,125 650 Foreign exchange contracts 2,654 512 2,068 410 -- -- -- -- Equity contracts/(a)/ 5,481 108 35,433 1,216 26,497 282 5,039 403 Other contracts/(b)/ 30,580 13 65 7 24,561 10 -- -- ------- ------ ------- ------ ------- ------ ------ ------ Total derivatives, gross $63,639 1,214 $40,657 1,937 $57,215 1,088 $9,297 1,068 ------- ------ ------- ------ ------- ------ ------ ------ Counterparty netting/(c)/ (198) (198) (108) (108) Cash collateral/(d)/ (287) (14) (378) (23) ------ ------ ------ ------ Total derivatives, net 729 1,725 602 937 Less: Bifurcated embedded derivatives -- 1,267 95 403 ------ ------ ------ ------ Total derivative on balance sheets $ 729 $ 458 $ 507 $ 534 ====== ====== ====== ======
(a)Includes bifurcated embedded policy derivatives, which are recorded in policyholder contract deposits. (b)Consists primarily of contacts with multiple underlying exposures and stable value wrap contracts. (c)Represents netting of derivative exposures covered by a qualifying master netting agreement. (d)Represents cash collateral posted and received that is eligible for netting. The following table presents gains (losses) from our derivatives recognized in the Statements of Income:
Years Ended December 31, ----------------------- (in millions) 2014 2013 2012 ------------- ----- ----- ----- Net effect of derivative instruments in fair value hedging relationships:/(a)/ Interest rate contracts $ (7) $ (1) $ -- Foreign exchange contracts (4) -- -- ----- ----- ----- Total $ (11) $ (1) $ -- ===== ===== ===== Derivatives not designated as hedging instruments By derivative type: Interest rate contracts $ 506 $(193) $ 13 Foreign exchange contracts (33) -- (48) Equity contracts/(b)/ (880) 525 (206) Other contracts 57 39 (243) ----- ----- ----- Total $(350) $ 371 $(484) ===== ===== ===== By classification: Policy fees $ 62 $ -- $ -- Net investment income -- 39 4 Net realized capital gains (losses) (432) 340 (509) Policyholder benefits 17 (5) 21 Interest credited to policyholder account balances (8) (4) -- ----- ----- ----- Total $(361) $ 370 $(484) ===== ===== =====
(a)The amounts presented do not include the periodic net coupon settlements of derivative contract or coupon income (expense) related to the hedged item. (b)Includes embedded derivative gains (losses) of $(643) million, $972 million and $(105) million during 2014, 2013 and 2012, respectively. 8. DEFERRED POLICY ACQUISITION COSTS AND DEFERRED SALES INDUCEMENTS Deferred Policy Acquisition Costs DAC represents those costs that are incremental and directly related to the successful acquisition of new or renewal of existing insurance contracts. We defer incremental costs that result directly from, and are essential to, the acquisition or renewal of an insurance contract. Such deferred policy acquisition costs generally include agent or broker commissions and bonuses, premium taxes, and medical and inspection fees that would not have been incurred if the insurance 45 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) contract had not been acquired or renewed. Each cost is analyzed to assess whether it is fully deferrable. We partially defer costs, including certain commissions, when we do not believe that the entire cost is directly related to the acquisition or renewal of insurance contracts. We also defer 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. Short-duration insurance contracts: Policy acquisition costs are deferred and amortized over the period in which the related premiums written are earned, generally 12 months. 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 profitability of the underlying insurance contracts. Investment income is anticipated in assessing the recoverability of DAC. We assess the recoverability of DAC on an annual basis or more frequently if circumstances indicate an impairment may have occurred. This assessment is performed by comparing recorded net unearned premiums and anticipated investment income on in-force business to the sum of expected claims, claims adjustment expenses, unamortized DAC and maintenance costs. If the sum of these costs exceeds the amount of recorded net unearned premiums and anticipated investment income, the excess is recognized as an offset against the asset established for DAC. This offset is referred to as a premium deficiency charge. Increases in expected claims and claims adjustment expenses can have a significant impact on the likelihood and amount of a premium deficiency charge. Long-duration insurance contracts: Policy acquisition costs for participating life, traditional life and accident and health insurance products are generally deferred and amortized, with interest, over the premium paying period. The assumptions used to calculate the benefit liabilities and DAC for these traditional products are set when a policy is issued and do not change with changes in actual experience, unless a loss recognition event occurs. These "locked-in" assumptions include mortality, morbidity, persistency, maintenance expenses and investment returns, and include margins for adverse deviation to reflect uncertainty given that actual experience might deviate from these assumptions. A loss recognition event occurs when there is a shortfall between the carrying amounts of future policy benefit liabilities, net of DAC, and the amount the future policy benefit liabilities, net of DAC, would be when applying updated current assumptions. When we determine that a loss recognition event has occurred, we first reduce any DAC related to that block of business through amortization of acquisition expense, and after DAC is depleted, we record additional liabilities through a charge to policyholder benefits and claims incurred. Groupings for loss recognition testing are consistent with the manner of acquiring and servicing the business and applied by product groupings. We perform separate loss recognition tests for traditional life products, payout annuities and long-term care products. Once loss recognition has been recorded for a block of business, the old assumption set is replaced and the assumption set used for the loss recognition would then be subject to the lock-in principle. Investment-oriented contracts: Policy acquisition costs and policy issuance costs related to universal life and investment-type products (collectively, investment-oriented products) are deferred and amortized, with interest, in relation to the incidence of estimated gross profits (EGPs) to be realized over the estimated lives of the contracts. EGPs include net investment income and spreads, net realized investment gains and losses, fees, surrender charges, expenses, and mortality and morbidity gains and losses. In each reporting period, current period amortization expense is adjusted to reflect actual gross profits. If EGPs change significantly, DAC is recalculated using the new assumptions, and any resulting adjustment is included in income (unlocking). If the new assumptions indicate that future EGPs are higher than previously estimated, DAC will be increased resulting in a decrease in amortization expense and increase in income in the current period; if future EGPs are lower than previously estimated, DAC will be decreased resulting in an increase in amortization expense and decrease in income in the current period. Unlocking of assumptions may result in acceleration of amortization in some products and deceleration of amortization in other products. 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. To estimate future EGPs for variable annuity products, a long-term annual asset growth assumption is applied to determine the future growth in assets and related asset-based fees. In determining the asset growth rate, the effect of short-term fluctuations in the equity markets is partially mitigated through the use of a "reversion to the mean" methodology whereby short-term asset growth above or below long-term annual rate assumptions impact the growth assumption applied to the five-year period subsequent to the current balance sheet date. The reversion to the mean 46 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) methodology allows us to maintain our long-term growth assumptions, while also giving consideration to the effect of actual investment performance. When actual performance significantly deviates from the annual long-term growth assumption, as evidenced by growth assumptions in the five-year reversion to the mean period falling below a certain rate (floor) or above a certain rate (cap) for a sustained period, judgment may be applied to revise or "unlock" the growth rate assumptions to be used for both the five-year reversion to the mean period as well as the long-term annual growth assumption applied to subsequent periods. Shadow DAC and Shadow Loss Recognition: DAC held for investment-oriented products is also adjusted to reflect the effect of unrealized gains or losses on fixed maturity and equity securities available for sale on EGPs, with related changes recognized through other comprehensive income (shadow DAC). The adjustment is made at each balance sheet date, as if the securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. Similarly, for long-duration traditional insurance contracts, if the assets supporting the liabilities maintain a temporary net unrealized gain position at the balance sheet date, loss recognition testing assumptions are updated to exclude such gains from future cash flows by reflecting the impact of reinvestment rates on future yields. If a future loss is anticipated under this basis, any additional shortfall indicated by loss recognition tests is recognized as a reduction in accumulated other comprehensive income (shadow loss recognition). Similar to other loss recognition on long-duration insurance contracts, such shortfall is first reflected as a reduction in DAC and secondly as an increase in liabilities for future policy benefits. The change in these adjustments, net of tax, is included with the change in net unrealized appreciation of investments that is credited or charged directly to other comprehensive income. Internal Replacements of Long-duration and Investment-Oriented Products: For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. If the modification does not substantially change the contract, we do not change the accounting and amortization of existing DAC and related reserves. If an internal replacement represents a substantial change, the original contract is considered to be extinguished and any related DAC or other policy balances are charged or credited to income, and any new deferrable costs associated with the replacement contract are deferred. The following table presents a rollforward of DAC:
Years Ended December 31, - ---------------------- (in millions) 2014 2013 2012 ------------- ------ ------ ------ Balance, beginning of year $5,096 $4,158 $4,704 Acquisition costs deferred 877 790 584 Accretion of interest/amortization (660) (581) (592) Effect of unlocking assumptions used in estimating future gross profits 96 105 45 Effect of realized gains/loss on securities (45) (37) (85) Effect of unrealized gains/loss on securities (204) 661 (498) Other/*/ 161 -- -- ------ ------ ------ Balance, end of year $5,321 $5,096 $4,158 ====== ====== ======
* The increase in the DAC asset, which principally reflected the impact of the change on periods prior to 2014, was substantially offset by a related increase in the unearned revenue reserves. Value of Business Acquired (VOBA): VOBA is determined at the time of acquisition and is reported in the 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 in a manner similar to that for DAC based on the assumptions at purchase. For investment-oriented products, VOBA is amortized in relation to EGPs and adjusted for the effect of unrealized gains or losses on fixed maturity and equity securities available for sale in a manner similar to DAC. 47 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents a rollforward of VOBA:
Years Ended December 31, - ---------------- (in millions) 2014 2013 2012 ------------- ---- ---- ---- Balance, beginning of year $348 $339 $391 Accretion of interest/amortization (24) (27) (15) Effect of unlocking assumptions used in estimating future gross profits 13 10 5 Effect of realized gains/loss on securities (3) (5) (23) Effect of unrealized gains/loss on securities (12) 31 (19) ---- ---- ---- Balance, end of year $322 $348 $339 ==== ==== ====
VOBA amortization, net of accretion of interest, expected to be recorded in each of the next five years is $30 million, $27 million, $25 million, $24 million and $23 million, respectively. The following table presents a rollforward of deferred sales inducements:
Years Ended December 31, - ------------------- (in millions) 2014 2013 2012 ------------- ----- ----- ----- Balance, beginning of year $ 502 $ 354 $ 555 Acquisition costs deferred 33 62 112 Accretion of interest/amortization (114) (109) (140) Effect of unlocking assumptions used in estimating future gross profits 60 65 27 Effect of realized gains/loss on securities (12) (13) (1) Effect of unrealized gains/loss on securities (27) 143 (199) ----- ----- ----- Balance, end of year $ 442 $ 502 $ 354 ===== ===== =====
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). We amortize 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. 9. VARIABLE INTEREST ENTITIES A variable interest entity (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 or 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. We enter into various arrangements with VIEs in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE's capital structure, related contractual relationships and terms, nature of the VIE's operations and purpose, nature of the VIE's interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks the variable interest holders are exposed to through the design of the entity. 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 VIE'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 48 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE. The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Balance Sheets:
Real Estate and Affordable Investment Securitization Housing (in millions) Entities/(d)/ Vehicles Partnerships Total ------------- ------------ -------------- ------------ ------ December 31, 2014 Assets: Bonds available for sale $-- $6,705 $ -- $6,705 Mortgage and other loans receivable -- 1,753 -- 1,753 Other invested assets 1 -- 348 349 Other/(a)/ -- 481 171 652 --- ------ ---- ------ Total assets/(b)/ $ 1 $8,939 $519 $9,459 === ====== ==== ====== Liabilities: Notes payable - to affiliates, net $-- $ 660 $ -- $ 660 Notes payable - to third parties, net -- 488 10 498 Other/(c)/ -- -- 19 19 --- ------ ---- ------ Total liabilities $-- $1,148 $ 29 $1,177 === ====== ==== ====== December 31, 2013 Assets: Bonds available for sale $-- $6,884 $ -- $6,884 Mortgage and other loans receivable -- 1,015 -- 1,015 Other invested assets 1 19 434 454 Other/(a)/ -- 936 176 1,112 --- ------ ---- ------ Total assets/(b)/ $ 1 $8,854 $610 $9,465 === ====== ==== ====== Liabilities: Notes payable - to affiliates, net $-- $ 237 $ -- $ 237 Notes payable - to third parties, net -- 346 -- 346 Other/(c)/ -- 241 31 272 --- ------ ---- ------ Total liabilities $-- $ 824 $ 31 $ 855 === ====== ==== ======
(a)Comprised primarily of short-term investments and other assets at both December 31, 2014 and 2013. (b)The assets of each VIE can be used only to settle specific obligations of that VIE. (c)Comprised primarily of amounts due to related parties and other liabilities and derivative liabilities, at fair value, at both December 31, 2014 and 2013. (d)At December 31, 2014 and 2013, we had no significant off-balance sheet exposure associated with commitments to real estate and investment entities. We calculate our maximum exposure to loss to be the amount invested in the debt or equity of the VIE and other commitments to the VIE. Interest holders in VIEs sponsored by us generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to us. In limited circumstances, AIG Parent has provided guarantees to certain VIE interest holders. The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:
Maximum Exposure to Loss ---------------------------- Total VIE On-Balance Off-Balance (in millions) Assets Sheet/*/ Sheet Total ------------- ------ ---------- ----------- ----- December 31, 2014 Real estate and investment entities $4,180 $528 $85 $613 Affordable housing partnerships 1,055 288 -- 288 ------ ---- --- ---- Total $5,235 $816 $85 $901 ====== ==== === ==== December 31, 2013 Real estate and investment entities $4,130 $492 $50 $542 Affordable housing partnerships 1,125 191 -- 191 ------ ---- --- ---- Total $5,255 $683 $50 $733 ====== ==== === ====
* At December 31, 2014 and 2013, $816 million and $683 million, respectively, of our total unconsolidated VIE assets were recorded as other invested assets. 49 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Real Estate and Investment Entities and Affordable Housing Partnerships We participate as a passive investor in the equity issued primarily by third party-managed hedge and private equity funds, and certain real estate entities managed by AIG Asset Management (US), LLC (AIG Investments), an affiliate, and in limited partnerships that develop and operate affordable housing qualifying for tax credits, that are VIEs. We are typically not involved in the design or establishment of these VIEs, nor do we actively participate in the management of the VIEs. Securitization Vehicles Aircraft Trusts In 2003, AIG Parent created two VIEs, Castle 2003-1 Trust and Castle 2003-2 Trust (collectively, the Aircraft Trusts), for the purpose of acquiring, owning, leasing, maintaining, operating and selling aircraft. AGL and other AIG subsidiaries held beneficial interests in these entities, including passive investments in non-voting preferred equity and in debt issued by these entities. Debt of these entities is not an obligation of, or guaranteed by, AGL or by AIG Parent or any of AIG's subsidiaries. Effective June 30, 2014, AGL transferred its non-voting preferred equity interests in the Aircraft Trusts to AIG Parent though the distribution of a non-cash dividend and return of capital, which totaled $500 million. Prior to this distribution, AGL bore the obligation to absorb economic losses or receive economic benefits that could possibly be significant to the Aircraft Trusts and, as a result, we were deemed the primary beneficiary and fully consolidated the Aircraft Trusts. Subsequent to the distribution, AGL is no longer deemed the primary beneficiary of the Aircraft Trusts and, as a result, the accompanying financial statements exclude the financial position, operating results and cash flows of the Aircraft Trusts subsequent to the date of the distribution. Ambrose During 2013 and 2014, we entered into securitization transactions that involved the transfer of portfolios of our high grade corporate securities, along with a portfolio of structured securities acquired from AIG, to newly formed special purpose entities, Ambrose 2013-2 (Ambrose 2), Ambrose 2013-3 (Ambrose 3) Ambrose 2013-5 (Ambrose 5) and Ambrose 2014-6 (Ambrose 6) (collectively referred to as the Ambrose entities), which are VIEs. In each transaction, the Ambrose entities issued beneficial interests to us in consideration for the transferred securities. We own the majority of the beneficial interests issued by the Ambrose entities and we maintain the power to direct the activities of the VIEs that most significantly impact their economic performance and bear the obligation to absorb losses or receive benefits from the VIEs that could potentially be significant to the VIEs, accordingly, we consolidate the Ambrose entities. See Note 17 for additional information on these securitization transactions. Selkirk During 2013 and 2014, we entered into securitization transactions in which portfolios of our commercial mortgage loans were transferred to special purpose entities, with us retaining a significant beneficial interest in the securitized loans. As consideration for the transferred loans, we received beneficial interests in certain special purpose entities and cash proceeds from the securitized notes issued to third party investors by other special purpose entities. We determined that we control or we are the primary beneficiary of all of the special purpose entities in the securitization structures, and therefore we consolidate all of these entities, including those that are VIEs. See Note 17 for additional information on these securitization transactions. RMBS, CMBS, Other ABS and CDOs We are passive investors in RMBS, CMBS, other ABS and CDOs, the majority of which are issued by domestic special purpose entities. We generally do not sponsor or transfer assets to, or act as the servicer to these asset backed 50 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) structures, and were not involved in the design of these entities. Our maximum exposure in these types of structures is limited to our investment in securities issued by these entities. Based on the nature of our investments and our passive involvement in these types of structures, we have determined that we are not the primary beneficiary of these entities. We have not included these entities in the tables above, however, the fair values of our investments in these structures are reported in Note 3 and Note 4. 10.INSURANCE LIABILITIES Future Policy Benefits Future policy benefits primarily include reserves for traditional life and annuity payout contracts, which represent an estimate of the present value of future benefits less the present value of future net premiums. Included in future policy benefits are liabilities 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. Future policy benefits also include certain guaranteed benefits of variable annuity products that are not considered embedded derivatives, primarily guaranteed minimum death benefits. See Note 11 for additional information on guaranteed minimum death benefits. The liability for long-duration future policy benefits has been established including assumptions for interest rates which vary by year of issuance and product, and range from approximately zero percent to 12.0 percent. Mortality and surrender rate assumptions are generally based on actual experience when the liability is established. For universal life policies with secondary guarantees, we recognize a future policy benefit reserve, in addition to policyholder contract deposits, based on a benefit ratio of (a) the present value of total expected payments, in excess of the account value, over the life of the contract, divided by (b) the present value of total expected assessments over the life of the contract. For universal life policies without secondary guarantees, for which profits followed by losses are first expected after contract inception, we establish future policy benefit reserves, in addition to policyholder contract deposits, so that expected future losses are recognized in proportion to the emergence of profits in the earlier (profitable) years. For long duration traditional business, a "lock-in" principle applies. The assumptions used to calculate the benefit liabilities and DAC are set when a policy is issued and do not change with changes in actual experience, unless a loss recognition event occurs. The assumptions include mortality, morbidity, persistency, maintenance expenses, and investment returns. These assumptions are typically consistent with pricing inputs. These assumptions include margins for adverse deviation in the event that actual experience might deviate from these assumptions. A loss recognition event occurs if observed changes in actual experience or estimates result in projected future losses under loss recognition testing. To determine whether a loss recognition event has occurred, we determine whether a future loss is expected based on updated current assumptions. If a loss recognition event occurs, we recognize the loss by first reducing DAC through amortization expense, and, if DAC is depleted, record additional liabilities through a charge to policyholder benefit expense. See Note 8 for additional information on loss recognition. Sales of investment securities in connection with a program to utilize capital loss carryforwards, as well as other investment sales with subsequent reinvestment at lower yields, triggered loss recognition expense primarily on certain long-term payout annuity contracts of $21 million, $886 million and $807 million, in 2014, 2013 and 2012, respectively. We also recorded loss recognition expense of $87 million in 2014 and $61 million in 2012 to increase reserves for certain long-term care business. 51 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Policyholder Contract Deposits The liability for policyholder contract deposits is recorded at accumulated value (deposits received and net transfers from separate accounts, plus accrued interest credited at rates ranging from 0.3 percent to 8.4 percent, less withdrawals and assessed fees). Deposits collected on investment-oriented products are not reflected as revenues, as they are recorded directly to policyholder contract deposits upon receipt. Amounts assessed against the contract holders for mortality, administrative, and other services are included in revenues. In addition to liabilities for universal life, fixed annuities, fixed options with variable annuities, annuities without life contingencies, funding agreements and guaranteed investment contracts, policyholder contract deposits also include our liability for (i) certain guaranteed benefits and equity-indexed features accounted for as embedded derivatives at fair value, (ii) annuities issued in a structured settlement arrangement with no life contingency and (iii) certain contracts we have elected to account for at fair value. In addition, certain GIC contracts contain embedded derivatives that are bifurcated and carried at fair value in policyholder contract deposits with the change in fair value recorded in policyholder benefits. See Note 3 for discussion of the fair value measurement of embedded policy derivatives and Note 11 for additional discussions of guaranteed benefits accounted for as embedded derivatives. Under a funding agreement-backed note issuance program, an unaffiliated, non-consolidated statutory trust issues medium-term notes to investors, which are secured by GICs issued to the trust by the Company. In 2014, a $450 million GIC was issued in conjunction with the funding agreement-backed notes program. 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. We are now taking enhanced measures to, among other things, routinely match policyholder records with the Social Security Administration Death Master File (SSDMF) to determine if 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 us within 120 days, we 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 our records. Other Policyholder Funds Other policyholder funds include unearned revenue reserves (URR). URR consists of front-end loads on investment-oriented contracts, representing those policy loads that are non-level and typically higher in initial policy years than in later policy years. URR for investment-oriented contracts 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. Amortization of URR is recorded in policy fees. Other policyholder funds also include provisions for future dividends to participating policyholders, accrued in accordance with all applicable regulatory or contractual provisions. Participating policyholders are the policyholders who share in our earnings based on provisions within the policy contract. These dividends are declared annually by our 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, we established 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 52 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Participating life business represented approximately 1.0 percent of the gross insurance in force at December 31, 2014 and 6.0 percent of gross premiums in 2014. Policyholder dividends were $28 million, $28 million and $35 million in 2014, 2013 and 2012, respectively, and are included in policyholder benefits in the Statements of Income. Certain products are subject to experience adjustments. These include group life and group medical products, credit life contracts, accident and health insurance contracts/riders attached to life policies and, to a limited extent, reinsurance agreements with other direct insurers. Ultimate premiums from these contracts are estimated and recognized as revenue, and the unearned portions of the premiums recorded as liabilities. Experience adjustments vary according to the type of contract and the territory in which the policy is in force and are subject to local regulatory guidance. 11.VARIABLE LIFE AND ANNUITY CONTRACTS We report variable contracts within the separate accounts when investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder and the separate account meets additional accounting criteria to qualify for separate account treatment. The assets supporting the variable portion of variable annuity and variable universal life contracts that qualify for separate account treatment are carried at fair value and reported as separate account assets, with an equivalent summary total reported as separate account liabilities. Policy values for variable products and investment contracts are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. The current liability at any time is the sum of the current unit value of all investment units in the separate accounts, plus any liabilities for guaranteed minimum death or guaranteed minimum withdrawal benefits included in future policy benefits or policyholder contract deposits, respectively. Amounts assessed against the contract holders for mortality, administrative, and other services are included in revenue. Net investment income, net investment gains and losses, changes in fair value of assets, and policyholder account deposits and withdrawals related to separate accounts are excluded from the Statements of Income, Comprehensive Income and Cash Flows. Variable annuity contracts may include certain contractually guaranteed benefits to the contract holder. These guaranteed features include guaranteed minimum death benefits (GMDB) that are payable in the event of death, and living benefits that are payable in the event of annuitization, or, in other instances, at specified dates during the accumulation period. Living benefits include guaranteed minimum income benefits (GMIB), guaranteed minimum withdrawal benefits (GMWB), and guaranteed minimum account value (GMAV). A variable annuity contract may include more than one type of guaranteed benefit feature; for example, it may have both a GMDB and a GMWB. However, a policyholder can only receive payout from one guaranteed feature on a contract containing a death benefit and a living benefit, i.e. the features are mutually exclusive. A policyholder cannot purchase more than one living benefit on one contract. The net amount at risk for each feature is calculated irrespective of the existence of other features; as a result, the net amount at risk for each feature is not additive to that of other features. 53 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Account balances of variable annuity contracts with guarantees were invested in separate account investment options as follows:
December 31, --------------- (in millions) 2014 2013 ------------- ------- ------- Equity funds $14,844 $15,084 Bond funds 4,380 4,517 Balanced funds 16,856 11,777 Money market funds 295 320 ------- ------- Total $36,375 $31,698 ======= =======
GMDB and GMIB Depending on the contract, the GMDB feature may provide a death benefit of either (a) total deposits made to the contract less any partial withdrawals plus a minimum return or (b) the highest contract value attained, typically on any anniversary date minus any subsequent withdrawals following the contract anniversary. GMIB guarantees a minimum level of periodic income payments upon annuitization. GMDB is our most widely offered benefit; our variable annuity contracts may also include GMIB to a lesser extent. The liabilities for GMDB and GMIB, which are recorded in future policyholder benefits, represent the expected value of the guaranteed benefits in excess of the projected account value, with the excess recognized ratably over the accumulation period based on total expected assessments, through policyholder benefits. The net amount at risk for GMDB represents the amount of benefits in excess of account value if death claims were filed on all contracts on the balance sheet date. The following table presents details concerning our GMDB exposures, by benefit type:
December 31, 2014 December 31, 2013 ----------------------- ----------------------- Highest Highest Net Deposits Contract Net Deposits Contract Plus a Minimum Value Plus a Minimum Value (dollars in millions) Return Attained Return Attained --------------------- -------------- -------- -------------- -------- Account value $25,715 $14,373 $20,108 $14,428 Net amount at risk 586 496 635 620 Average attained age of contract holders 66 68 65 67 Range of guaranteed minimum return rates 0% -5% 0% -5%
The following table presents a rollforward of the GMDB and GMIB liabilities related to variable annuity contracts:
Years Ended December 31, ---------------- (in millions) 2014 2013 2012 ------------- ---- ---- ---- Balance, beginning of year $378 $401 $439 Reserve increase 68 32 30 Benefits paid (63) (55) (68) ---- ---- ---- Balance, end of year $383 $378 $401 ==== ==== ====
We regularly evaluate estimates used to determine the GMDB liability and adjust the additional liability balance, with a related charge or credit to policyholder benefits and losses incurred, if actual experience or other evidence suggests that earlier assumptions should be revised. The following assumptions and methodology were used to determine the reserve for GMDB at December 31, 2014: .. Data used was up to 500 stochastically generated investment performance scenarios. .. Mean investment performance assumption was 8.5 percent. .. Volatility assumption was 16.0 percent. .. Mortality was assumed to be 89.6 percent to 138.7 percent of the 2012 individual annuity mortality table. .. Lapse rates vary by contract type and duration and range from zero percent to 37.0 percent. 54 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) .. The discount rate ranged from 5.5 percent to 10.0 percent and is based on the growth rate assumptions for the underlying contracts in effect at the time of policy issuance. GMWB and GMAV Certain guaranteed benefit and equity index features, which are recorded in policyholder contract deposits, are bifurcated from the host contract and accounted for separately as embedded policy derivatives at fair value, with changes in fair value recognized in net realized capital gains (losses) in the Statements of Income. These include GMWB, GMAV as well as equity index annuities and equity index universal life contracts, which offer a guaranteed minimum interest rate plus a contingent return based on some internal or external equity index. Certain of our variable annuity contracts contain optional GMWB and, to a lesser extent, GMAV benefits, which are not currently offered. With a GMWB, the contract holder can monetize the excess of the guaranteed amount over the account value of the contract only through a series of withdrawals that do not exceed a specific percentage per year of the guaranteed amount. If, after the series of withdrawals, the account value is exhausted, the contract holder will receive a series of annuity payments equal to the remaining guaranteed amount, and, for lifetime GMWB products, the annuity payments continue as long as the covered person(s) are living. With a GMAV benefit, the contract holder can monetize the excess of the guarantee amount over the account value of the contract, provided the contract holder persists until the maturity date. The fair value of our GMWB and GMAV embedded policy derivatives was a net liability of $698 million and a net asset of $89 million at December 31, 2014 and 2013, respectively. We had account values subject to GMWB and GMAV that totaled $30.0 billion and $23.0 billion at December 31, 2014 and 2013, respectively. The net amount at risk for GMWB represents the present value of minimum guaranteed withdrawal payments, in accordance with contract terms, in excess of account value. The net amount at risk for GMAV represents the present value of minimum guaranteed account value in excess of the current account balance, assuming no lapses. The net amount at risk related to these guarantees was $269 million and $51 million at December 31, 2014 and 2013, respectively. We use derivative instruments and other financial instruments to mitigate a portion of the exposure that arises from GMWB and GMAV benefits. 12.DEBT Notes payable are carried at the principal amount borrowed, including unamortized discounts and fair value adjustments, when applicable, except for certain notes payable - to affiliates, for which we have elected the fair value option. The change in fair value of notes for which the fair value option has been elected is recorded in other income in the Statements of Income. See Note 3 for discussion of fair value measurements. The following table lists our total debt outstanding. The interest rates presented in the following table are the range of contractual rates in effect at December 31, 2014, including fixed and variable-rates:
Balance at December 31, Range of Maturity ----------- (in millions) Interest Rate(s) Date(s) 2014 2013 ------------- ---------------- ---------- ------ ---- Notes payable - to affiliates, net: Notes payable of consolidated VIEs 0.00% - 10.00% 2040-2061 $ 367 $ 26 Notes payable of consolidated VIEs, at fair value 3.06% - 3.26% 2041-2060 291 211 Debt of consolidated investments -- 23 ------ ---- Total notes payable - to affiliates, net 658 260 ------ ---- Notes payable - to third parties, net: Notes payable of consolidated VIEs 1.86% - 7.03% 2041-2060 470 346 FHLB borrowings 0.50% - 0.54% 2015 32 32 Debt of consolidated investments 5.35% - 7.68% 2016-2038 125 -- ------ ---- Total notes payable - to third parties, net 627 378 ------ ---- Total notes payable $1,285 $638 ====== ====
55 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents maturities of long-term debt, including fair value adjustments, when applicable:
Year Ending December 31, 2014 ----------------------------------- (in millions) Total 2015 2016 2017 2018 2019 Thereafter ------------- ------ ---- ---- ---- ---- ---- ---------- Notes payable - to affiliates, net: Notes payable of consolidated VIEs $ 367 $-- $-- $-- $-- $-- $ 367 Notes payable of consolidated VIEs, at fair value 291 -- -- -- -- -- 291 Debt of consolidated investments -- -- -- -- -- -- -- ------ --- --- --- --- --- ------ Total notes payable - to affiliates, net $ 658 $-- $-- $-- $-- $-- $ 658 ------ --- --- --- --- --- ------ Notes payable - to third parties, net: Notes payable of consolidated VIEs 470 -- -- -- -- -- 470 FHLB borrowings 32 32 -- -- -- -- -- Debt of consolidated investments 125 -- -- -- 7 -- 118 ------ --- --- --- --- --- ------ Total notes payable - to third parties, net 627 32 -- -- 7 -- 588 ------ --- --- --- --- --- ------ Total notes payable $1,285 $32 $-- $-- $ 7 $-- $1,246 ====== === === === === === ======
FHLB Borrowings Membership with the FHLB provides us with collateralized borrowing opportunities, primarily as an additional source of contingent liquidity. When a cash advance is obtained, we are required to pledge certain mortgage-backed securities, government and agency securities, other qualifying assets and our ownership interest in the FHLB to secure advances obtained from the FHLB. Upon any event of default, the FHLB's recovery would generally be limited to the amount of our liability under advances borrowed. See Note 4 for additional information. 13.COMMITMENTS AND CONTINGENCIES Commitments Leases We have various long-term, noncancelable operating leases, primarily for office space and equipment, which expire at various dates. The following table presents the future minimum lease payments under operating leases:
(in millions) ------------- 2015 $ 30 2016 26 2017 20 2018 14 2019 11 Remaining years after 2019 32 ---- Total $133 ====
Rent expense was $29 million, $32 million and $33 million in 2014, 2013 and 2012, respectively. Commitments to Fund Partnership Investments We had commitments totaling $580 million and $526 million at December 31, 2014 and 2013, respectively, to provide funding to various limited partnerships. 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 fund's governing documents, for funding new investments, follow-on investments and/or fees and other expenses of the fund. Of the total commitments at December 31, 2014, $549 million are currently expected to expire by 2015. 56 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Mortgage Loan Commitments We have $651 million and $99 million in commitments related to commercial and residential mortgage loans, respectively, at December 31, 2014. Other Commitments 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 carryforward 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, 2014. Contingencies Legal Matters Various lawsuits against us have arisen in the ordinary course of business. Except as discussed below, we believe it is unlikely that contingent liabilities arising from litigation, income taxes and other matters will have a material adverse effect on our financial position, 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. We accrue liabilities for guaranty fund assessments when an assessment is probable and can be reasonably estimated. We estimate the liability using the latest information available from the National Organization of Life and Health Insurance Guaranty Associations. While we cannot predict the amount and timing of any future guaranty fund assessments, we have established reserves we believe are adequate for assessments relating to insurance companies that are currently subject to insolvency proceedings. We had accrued $12 million for these guaranty fund assessments at both December 31, 2014 and 2013, which was reported within other liabilities in the Balance Sheets. Policyholder benefit expense in 2014 included an increase of approximately $104 million to the estimated reserves for incurred but not reported (IBNR) death claims. The $104 million reserve increase was in addition to amounts previously provided for IBNR claims in 2011 and 2012, which totaled $237 million. We are continuing our efforts to identify deceased insureds and their beneficiaries who have not presented a valid claim, pursuant to the 2012 resolution of a multi-state audit and market conduct examination. The 2014 increase in the IBNR reserve was related primarily to a legacy block of in-force and lapsed small face amount policies, for which the personal data elements to effect a match against the Social Security Death Master File are unavailable or incomplete, such as full legal name, date of birth or Social Security number. In the process of reviewing these policies as required under the terms of the regulatory agreement, we have refined estimates of the ultimate cost of these claims. We believe the reserves for such claims are adequate; however, there can be no assurance that the ultimate cost will not vary from the current estimate. In addition, the state of West Virginia has two lawsuits pending against us relating to alleged violations of the West Virginia Uniform Unclaimed Property Act, in connection with policies issued by us and by American General Life and 57 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Accident Insurance Company (AGLA, which merged into AGL on December 31, 2012). The State of West Virginia has also filed similar lawsuits against other insurers. Various federal, state and other regulatory agencies may from time to time review, examine or inquire into our operations, practices and procedures, such as through financial examinations, market conduct exams or regulatory inquiries. Based on the current status of pending regulatory examinations and inquiries involving us, we believe it is not likely that these regulatory examinations or inquiries will have a material adverse effect on our consolidated financial position, results of operations or cash flows. 14.EQUITY Accumulated Other Comprehensive Income The following table presents the components of accumulated other comprehensive income:
December 31, ---------------- (in millions) 2014 2013 ------------- ------- ------- Fixed maturity and equity securities, available for sale: Gross unrealized gains $ 9,096 $ 6,491 Gross unrealized losses (908) (2,542) Net unrealized gains on other invested assests 832 897 Adjustments to DAC, VOBA and deferred sales inducements (1,183) (940) Shadow loss recognition (872) (10) Foreign currency translation adjustments (13) 3 Deferred income tax (1,026) (1,168) ------- ------- Accumulated other comprehensive income $ 5,926 $ 2,731 ======= =======
The following table presents the other comprehensive income (loss) reclassification adjustments:
Unrealized Appreciation of Fixed Maturity Investments on Which Other-Than- Adjustments Temporary Unrealized to DAC, Credit Appreciation VOBA, and Foreign Impairments (Depreciation) Deferred Insurance Currency were of All Other Sales Loss Translation (in millions) Recognized Investments Inducements Recognition Adjustments Total ------------- ------------ -------------- ----------- ----------- ----------- ------- Year ended December 31, 2012 Unrealized change arising during period $1,682 $ 1,787 $(817) $(1,143) $ (4) $ 1,505 Less: Reclassification adjustments included in net income 230 (1,356) (101) (807) -- (2,034) ------ ------- ----- ------- ---- ------- Total other comprehensive income (loss), before income tax expense (benefit) 1,452 3,143 (716) (336) (4) 3,539 Less: Income tax expense (benefit) 545 1,015 (257) (119) (2) 1,182 ------ ------- ----- ------- ---- ------- Total other comprehensive income (loss), net of income tax expense (benefit) $ 907 $ 2,128 $(459) $ (217) $ (2) $ 2,357 ====== ======= ===== ======= ==== ======= Year ended December 31, 2013 Unrealized change arising during period $ 461 $(6,597) $ 885 $ 1,152 $ (9) $(4,108) Less: Reclassification adjustments included in net income 92 1,726 50 (886) -- 982 ------ ------- ----- ------- ---- ------- Total other comprehensive income (loss), before income tax expense (benefit) 369 (8,323) 835 2,038 (9) (5,090) Less: Income tax expense (benefit) 127 (3,058) 293 713 (3) (1,928) ------ ------- ----- ------- ---- ------- Total other comprehensive income (loss), net of income tax expense (benefit) $ 242 $(5,265) $ 542 $ 1,325 $ (6) $(3,162) ====== ======= ===== ======= ==== ======= Year ended December 31, 2014 Unrealized change arising during period $ 130 $ 4,261 $(183) $ (963) $(17) $ 3,228 Less: Reclassification adjustments included in net income 52 163 60 (101) -- 174 ------ ------- ----- ------- ---- ------- Total other comprehensive income (loss), before income tax expense (benefit) 78 4,098 (243) (862) (17) 3,054 Less: Income tax expense (benefit) 30 232 (91) (306) (6) (141) ------ ------- ----- ------- ---- ------- Total other comprehensive income (loss), net of income tax expense (benefit) $ 48 $ 3,866 $(152) $ (556) $(11) $ 3,195 ====== ======= ===== ======= ==== =======
58 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents the effect of the reclassification of significant items out of accumulated other comprehensive income on the respective line items in the Statements of Income:
Amount Reclassified from Accumulated Other Comprehensive Income --------------- December 31, --------------- Affected Line Item in the (in millions) 2014 2013 Statements of Income ------------- ----- ------ ------------------------------------------------- Unrealized appreciation of fixed maturity investments on which other-than-temporary credit impairments were recognized $ 52 $ 92 Net realized capital gains (losses) Unrealized appreciation of all other investments 163 1,726 Net realized capital gains (losses) Adjustments to DAC, VOBA and deferred sales inducements 60 50 Amortization of deferred policy acquisition costs Shadow loss recognition (101) (886) Policyholder benefits ----- ------ Total reclassifications for the period $ 174 $ 982 ===== ======
Dividends Dividends that we 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 our unassigned surplus. Subject to the TDI requirements, the maximum dividend payout that may be made in 2015 without prior approval of the TDI is $1.9 billion. Dividend payments in excess of positive retained earnings were classified and reported as a return of capital. Statutory Financial Data We are required to file financial statements prepared in accordance with statutory accounting practices prescribed or permitted by state insurance regulatory authorities. The principal differences between statutory financial statements and financial statements prepared in accordance with U.S. GAAP are that statutory financial statements do not reflect DAC, some bond portfolios may be carried at amortized cost, investment impairments are determined in accordance with statutory accounting practices, assets and liabilities are presented net of reinsurance, policyholder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted. In addition, state insurance regulatory authorities have the right to permit specific practices that deviate from prescribed statutory practices. The following table presents our statutory net income and capital and surplus:
(in millions) 2014 2013 2012 ------------- ------ ------- ------ Years Ended December 31, Statutory net income $1,862 $ 3,431 $3,641 At December 31, Statutory capital and surplus 9,167 12,656 Aggregate minimum required statutory capital and surplus 2,184 2,624
15.BENEFIT PLANS Effective January 1, 2002, our 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. We are 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 59 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 us. Accordingly, we are contingently liable for such obligations. We believe that the likelihood of payment under any of these plans is remote. Accordingly, we have not established any liability for such contingencies. 16.INCOME TAXES The following table presents the income tax expense (benefit) attributable to pre-tax income (loss):
Years Ended December 31, (in millions) 2014 2013 2012 ------------- ------ ----- ----- Current $ 401 $ 95 $ (21) Deferred 727 (543) (601) ------ ----- ----- Total income tax expense (benefit) $1,128 $(448) $(622) ====== ===== =====
The U.S. statutory income tax rate is 35 percent for 2014, 2013 and 2012. Actual income tax (benefit) expense differs from the statutory U.S. federal amount computed by applying the federal income tax rate, due to the following:
Years Ended December 31, (in millions) 2014 2013 2012 ------------- ------ ------- ------- U.S federal income tax expense at statutory rate $1,055 $ 1,573 $ 845 Adjustments: Valuation allowance 68 (1,999) (1,457) State income tax (1) 8 (2) Capital loss carryover write-off 32 -- -- Dividends received deduction (25) (23) (24) Other credits, taxes and settlements (1) (7) 16 ------ ------- ------- Total income tax expense (benefit) $1,128 $ (448) $ (622) ====== ======= =======
Deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, at the enacted tax rates expected to be in effect when the temporary differences reverse. The effect of a tax rate change is recognized in income in the period of enactment. State income taxes are included in income tax expense. The following table presents the components of the net deferred tax assets (liabilities):
Years Ended December 31, (in millions) 2014 2013 ------------- ------- ------- Deferred tax assets: Excess capital losses and other tax carryovers $ 258 $ 568 Basis differential of investments 1,865 2,043 Policy reserves 1,855 2,308 ------- ------- Total deferred tax assets 3,978 4,919 ------- ------- Deferred tax liabilities: Deferred policy acquisition costs (1,699) (1,973) Net unrealized gains on debt and equity securities available for sale (2,433) (1,365) State deferred tax liabilities (30) (21) Capitalized EDP (44) (33) Other (27) (26) ------- ------- Total deferred tax liabilities (4,233) (3,418) ------- ------- Net deferred tax (liability) asset before valuation allowance (255) 1,501 Valuation allowance -- (1,173) ------- ------- Net deferred tax (liability) asset $ (255) $ 328 ======= =======
60 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents our tax losses and credit carryforwards on a tax return basis.
December 31, 2014 Tax Expiration (in millions) Gross Effected Periods ------------- ----- -------- ------------ Net operating loss carryforwards $65 $ 23 2028 to 2032 Foreign tax credit carryforwards -- 43 2015 to 2023 Business credit carryforwards -- 192 2025 to 2033 ---- Total carryforwards $258 ====
We are included in the consolidated federal income tax return of our ultimate parent, AIG Parent. Under the tax sharing agreement with AIG Parent, 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, we will recognize tax benefits based upon the amount of the deduction and credits utilized in the consolidated federal income tax return. We calculate current and deferred state income taxes using the actual apportionment and statutory rates for states in which we are required to file on a separate basis. In states that have a unitary regime, AIG Parent accrues and pays the taxes owed and does not allocate the provision or cash settle the expense with the members of the unitary group. Unlike for federal income tax purposes, AIG does not have state tax sharing agreements. AIG has determined that because the unitary tax expense will never be borne by the subsidiaries, the state tax unitary liability is not included in this separate company expense. Assessment of Deferred Tax Asset Valuation Allowance The evaluation of the recoverability of the deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion 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. Our framework for assessing the recoverability of deferred tax assets requires us 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; and .. 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 in 2014, we determined that an additional portion of the capital loss carryforwards will more-likely-than-not be realized prior to their expiration. Accordingly, in 2014, we released $1.2 billion of our deferred tax asset valuation associated with the capital loss carryforwards, of which $68 million was recognized as a reduction to income and the remainder was allocated to other comprehensive income. 61 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Accounting For Uncertainty in Income Taxes The following table presents a reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits:
Years Ended December 31, ------------ (in millions) 2014 2013 ------------- ---- ---- Gross unrecognized tax benefits at beginning of year $ 92 $85 Increases in tax position for prior years -- 7 Decreases in tax position for prior years (55) -- ---- --- Gross unrecognized tax benefits at end of year $ 37 $92 ==== ===
We regularly evaluate proposed adjustments by taxing authorities. At December 31, 2014, such proposed adjustments would not have resulted in a material change to our financial condition. Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next twelve months, based on the information currently available, we do not expect any change to be material to our financial condition. At December 31, 2014 and 2013, our unrecognized tax benefits, excluding interest and penalties, were $27 million and $36 million, respectively. At December 31, 2014 and 2013, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate were $27 million for both years. Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At December 31, 2014 and 2013, we had accrued $7 million and $16 million, respectively, for the payment of interest (net of the federal benefit) and penalties. In 2014, we recognized income of $10 million, while in 2013 and 2012, we recognized expense of $6 million and $11 million, respectively, of interest (net of the federal benefit) and penalties. We are currently under IRS examination for the taxable year 2006. Although the final outcome of possible issues raised in any future examination is uncertain, we believe that the ultimate liability, including interest, will not materially exceed amounts recorded in the financial statements. Taxable years 2001 to 2013 remain subject to examination by major tax jurisdictions. 17.RELATED PARTY TRANSACTIONS Events Related to AIG AIG Parent is subject to regulation by the Board of Governors of the Federal Reserve System (the Federal Reserve) as a systemically important financial institution (SIFI) pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. AIG Parent was subject to regulation by the Federal Reserve as a savings and loan holding company as of March 31, 2014. The Federal Reserve approved AIG Parent's application to deregister as a savings and loan holding company effective April 4, 2014. AIG Parent will continue to be supervised by the Federal Reserve due to its designation by the Financial Stability Oversight Council as a non-bank SIFI. On July 1, 2014, as a non-bank SIFI, AIG Parent submitted to its regulators its initial annual plan for rapid and orderly resolution in the event of material financial distress or failure, which must meet several specific standards, including requiring a detailed resolution strategy and analyses of material entities, organizational structure, interconnections and interdependencies, and management information systems, among other elements. The public section of the plan can be found on the websites of the Federal Reserve and the Federal Deposit Insurance Corporation. The Federal Reserve has yet to complete the regulatory framework that will be applicable to AIG Parent as a non-bank SIFI. On July 18, 2013, the Financial Stability Board (consisting of representatives of national financial authorities of the G20 nations), in consultation with the International Association of Insurance Supervisors and national authorities, identified an initial list of Global Systemically Important Insurers, which included AIG Parent. 62 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Additional information on AIG Parent is publicly available in AIG Parent's regulatory filings with the SEC, which can be found at www.sec.gov. Information regarding AIG Parent as described herein is qualified by regulatory filings AIG Parent files from time to time with the SEC. Operating Agreements Pursuant to a cost allocation agreement, we purchase administrative, investment management, accounting, marketing and data processing services from AIG Parent 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. We incurred approximately $305 million, $297 million and $198 million for such services in 2014, 2013 and 2012, respectively. Accounts payable for such services were $240 million and $190 million at December 31, 2014 and 2013, respectively. We rent facilities and provide services on an allocated cost basis to various affiliates. We also provide shared services, including technology, to a number of AIG's life insurance subsidiaries. Effective January 1, 2013, we became the service provider for additional affiliated companies. We earned approximately $813 million, $805 million and $282 million for such services and rent in 2014, 2013 and 2012, respectively. Accounts receivable for rent and services were $57 million and $91 million at December 31, 2014 and 2013, respectively. We pay commissions and fees, including support fees to defray marketing and training costs, to affiliated broker-dealers for distributing our annuity products and mutual funds. Amounts incurred related to the broker-dealer services totaled $55 million, $50 million and $39 million in 2014, 2013 and 2012, respectively. These broker-dealers distribute a significant portion of our variable annuity products, representing approximately 6.0 percent, 7.0 percent and 8.0 percent of premiums received in 2014, 2013 and 2012, respectively. These broker-dealers also distribute a significant portion of our mutual funds, representing approximately 15.0 percent, 16.0 percent and 16.0 percent of sales in 2014, 2013 and 2012, respectively. On February 1, 2004, SAAMCo entered into an administrative services agreement with our affiliate, 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 FSA'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 we incurred under this agreement totaled $6 million, $4 million and $3 million in 2014, 2013 and 2012, respectively, and are included in other expenses in our Statements of Income. On October 1, 2001, SAAMCo entered into two administrative services agreements with business trusts established by our affiliate, The Variable Annuity Life Insurance Company (VALIC), whereby the trusts pay 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 $18 million, $17 million and $15 million in 2014, 2013 and 2012, respectively, and are net of certain administrative costs incurred by VALIC of $5 million in each of 2014 and 2013 and $4 million in 2012. The net amounts earned by SAAMCo are included in other revenue in our Statements of Income. Notes of Affiliates In 2011, we invested $300 million in a 5.57 percent Senior Promissory Note due September 30, 2014, issued by AIG Life Holdings, Inc. (AIGLH) (formerly known as SunAmerica Financial Group, Inc.). We received principal payments of $100 million in each of 2014, 2013 and 2012. As of September 30, 2014, AIGLH had paid all outstanding principal and interest on this loan, thereby extinguishing this note. We recognized interest income of $4 million, $10 million and $16 million on this note during 2014, 2013 and 2012, respectively. 63 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Selkirk Transactions During 2013 and 2014, we transferred portfolios of commercial mortgage loans to newly formed special purpose entities, Selkirk No. 1 Investments (SPV1) and Selkirk No. 3A Investments (SPV1A), respectively. The transactions involved securitizations of the transferred loans and we retained significant beneficial interests in the securitized loans. As consideration for the transferred loans, we received beneficial interests in loan-backed and structured securities (Notes) issued by other newly formed special purpose entities, equity interests in SPV1 and SPV1A, and cash proceeds of $230 million and $144 million from notes issued to third party investors and an affiliate by other special purpose entities, Selkirk No. 1 Limited and Selkirk No. 3 Limited, respectively. The consideration received had an aggregate fair value of $973 million for the SPV1 transaction and $624 million for the SPV1A transaction. AIG Investments services the securitized commercial mortgage loans on behalf of SPV1 and SPV1A. We consolidate certain of the special purpose entities in the securitization structures, some of which are VIEs. See Note 9 for additional disclosures related to VIEs. As a result, certain of the Notes and our equity interests in SPV1 and SPV1A are eliminated in consolidation, while the securitized commercial mortgage loans remain on our Balance Sheets. On a consolidated basis, the net change in our Balance Sheets as a result of these transactions consisted of additional assets in the form of cash consideration received, which was subsequently invested, and the liabilities for notes payable to third party investors and to an affiliate, VALIC. Lighthouse VI During 2013, we, along with VALIC (collectively, the Insurers), executed three transactions in which a portfolio of securities (Transferred Portfolios) was, in each transaction, transferred into a newly established Common Trust Fund (CTF) in exchange for proportionate interests in all assets within each CTF as evidenced by specific securities controlled by and included within our representative security account. In each transaction, a portion of our securities (Exchange Assets) were transferred into the representative security account of VALIC in exchange for other VALIC securities. Only the transfers of the Exchange Assets between the Insurers qualify for derecognition treatment under ASC 860, "Transfers and Servicing," and thus were the only assets derecognized in the transfer of the Transferred Portfolios into the CTFs. The securities we received for the transfers of the Exchange Assets were initially recognized at fair value and will subsequently be carried at accreted value, based on cash flow projections. We transferred securities with an aggregate fair value of $7.7 billion into the CTFs for all three transactions and recognized gains totaling $250 million on the transfer of the Exchange Assets. AIG Investments manages the portfolio of assets included in the CTFs. Ambrose Transactions During 2013 and 2014, we acquired certain financial assets from AIG Parent and subsequently entered into four related securitization transactions with certain affiliates and third parties to enhance our statutory risk-based capital ratio, liquidity and net investment income. The financial assets acquired from AIG Parent in each transaction consisted of a structured security backed by a portfolio of structured securities (Repack Note) and were exchanged for an intraday Demand Note, which was subsequently extinguished. In each securitization transaction, we transferred a portfolio of high grade corporate securities and the Repack Note to one of the newly formed special purpose entities; Ambrose 2, Ambrose 3, Ambrose 5 and Ambrose 6 (the Ambrose entities). As consideration for the transferred securities, we received beneficial interests in three tranches of structured securities (Class A1, B, C and X) issued by each Ambrose entity. The Class A1, B and C Notes were designed to closely replicate the interest and principal amortization payments of the transferred securities. The Class X notes were subsequently transferred to AIG in exchange for cancellation of the Demand Notes described above, which resulted in capital contributions to us. Each Ambrose entity also issued a tranche of Class A2 notes to third party investors. Ambrose 6 also issued Class A1, B and C notes to an affiliate, VALIC, as consideration for similar transferred financial assets. Capital commitments from a non-U.S. subsidiary of AIG Parent, which are guaranteed by AIG Parent, were received by Ambrose 2, Ambrose 3, Ambrose 5 and Ambrose 6 in the amount of $300 million, $300 million, $400 million and $200 million, respectively, pursuant to which the promissor will contribute funds to the respective Ambrose entity upon demand. AIG Parent indirectly bears the first loss position in each transaction through its ownership of the Class X 64 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) notes and its guarantee of the capital commitments. AIG Investments manages the portfolio of assets on behalf of each Ambrose entity. Each of the Ambrose entities is a VIE and we consolidate all of the Ambrose entities. See Note 9 for additional disclosures related to VIEs. The Class A1, Class B and Class C structured securities we received are eliminated in consolidation. The notes issued by the Ambrose entities that are held by AIG Parent, third parties and an affiliate are classified as notes payable. The Ambrose entities each elected the fair value option for their Class X notes payable. On a consolidated basis, the Ambrose transactions resulted in an increase in our assets (Repack Note and cash), liabilities (notes payable) and AGL shareholder's equity (capital contribution from AIG Parent). The following table presents the details of the Ambrose transactions:
(in millions) Ambrose 2 Ambrose 3 Ambrose 5 Ambrose 6 ------------- ----------------- --------------- -------------- ----------------- Date of transaction February 6, 2013 April 10, 2013 July 25, 2013 October 10, 2014 Combined carrying value of transferred securities and Repack Note $ 1,985 $ 2,117 $ 2,618 $ 292 Fair value of Class A1 and Class B notes received 1,933 2,069 2,413 328 Fair value of Class X notes received 67 58 83 40
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 Parent, have terminated the General Guarantee Agreements (the Guarantees) with respect to our prospectively issued policies and contracts. The Guarantees terminated on December 29, 2006 (Point of Termination). Pursuant to their 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 policies, contracts and certificates with issue dates 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 our registration statements for the variable products that we issued prior to the Point of Termination. Capital Maintenance Agreement In March 2011, we entered into a Capital Maintenance Agreement (CMA) with AIG Parent. Among other things, the CMA provided that AIG Parent would maintain our statutory-basis total adjusted capital at or above a specified minimum percentage of our projected Company Action Level Risk-Based Capital. AIG Parent did not make any capital contributions to us under the CMA in the three years ended December 31, 2014. As a result of managing capital through internal AIG Board-approved policies and guidelines, we and AIG agreed to terminate the CMA effective October 31, 2014. Financing Agreements On June 1, 2009, we amended and restated a short-term financing arrangement with SAFG Retirement Services, Inc. (SAFGRS), whereby we had the right to borrow up to $500 million from SAFGRS. There was no outstanding balance under this agreement at December 31, 2014 or 2013. This agreement was terminated as of December 31, 2014. On June 1, 2009, we amended and restated a short-term financing arrangement with SAFGRS, whereby SAFGRS had the right to borrow up to $500 million from us. There was no outstanding balance under this arrangement at December 31, 2014 or 2013. This agreement was terminated as of December 31, 2014. On September 15, 2006, we amended and restated a short-term financial arrangement with SA Affordable Housing, LLC (SAAH LLC), whereby SAAH LLC had the right to borrow up to $200 million from us. There was no outstanding 65 AMERICAN GENERAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) balance under this agreement at December 31, 2014 or 2013. This agreement was terminated as of December 31, 2014. GIC Assumption In 2011, we entered into three assignment and assumption agreements with AIGMFC, certain bank trustees, and three unaffiliated bond issuers (the Issuers), pursuant to which we assumed all of AIGMFC's obligations under certain GIC agreements previously entered into between AIGMFC and the bank trustees which related to certain bond obligations of the Issuers. As part of this assignment and assumption, we received from AIGMFC amounts that represented the then-outstanding principal amount of investments under the referenced GIC agreements, plus related accrued but unpaid interest. We also entered into a swap with AIG Markets, Inc. (AIG Markets) in connection with each of these transactions, which, among other things, provides a fee to us for assuming the obligations under the GIC agreements and economically hedges our interest rate risk associated with the assumed GICs. Obligations of AIG Markets under the swaps are guaranteed by AIG Parent. Other We engage in structured settlement transactions, certain of which involve affiliated property and casualty insurers that are subsidiaries of AIG Parent. 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 us for the ultimate benefit of the claimant. The portion of our liabilities related to structured settlements involving life contingencies is reported in future policy benefits, while the portion not involving life contingencies is 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. We had liabilities of $1.4 billion at both December 31, 2014 and 2013 related to SPIAs issued by us in conjunction with structured settlement transactions involving affiliated property and casualty insurers where those members remained contingently liable for the payments to the claimant. In addition, we had liabilities for the structured settlement transactions where the affiliated property and casualty insurers were no longer contingently liable for the payments to the claimant. During 2014, we entered into a Share Purchase Agreement with AIG Parent by which we sold all of our interests in The People's Insurance Company (Group) of China Limited (PICC Group) to AIG Parent at fair market value, based on the closing price of the PICC Group shares as quoted on the Hong Kong Stock Exchange on August 13, 2014. The transaction closed on August 15, 2014 and we received $484 million as consideration for the sale. 18. SUBSEQUENT EVENTS We have evaluated subsequent events through April 27, 2015. 66 AMERICAN HOME ASSURANCE COMPANY AN AIG COMPANY NAIC Code: 19380 Statutory Basis Financial Statements As of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 [LOGO] AIG AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements As of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 TABLE OF CONTENTS Independent Auditor's Report 1 Statements of Admitted Assets 3 Statements of Liabilities, Capital and Surplus 4 Statements of Operations and Changes in Capital and Surplus 5 Statements of Cash Flows 6 Note 1 Organization and Summary of Significant Statutory Basis Accounting Policies 7 Note 2 Accounting Adjustments to Statutory Basis Financial Statements 19 Note 3 Investments 22 Note 4 Fair Value of Financial Instruments 31 Note 5 Reserves for Losses and Loss Adjustment Expenses 33 Note 6 Related Party Transactions 35 Note 7 Reinsurance 45 Note 8 Income Taxes 47 Note 9 Capital and Surplus, Dividend Restrictions and Quasi-Reorganizations 53 Note 10 Contingencies 54 Note 11 Other Significant Matters 58 Note 12 Subsequent Events 60
INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of American Home Assurance Company We have audited the accompanying statutory basis financial statements of American Home Assurance Company (the "Company"), which comprise the statements of admitted assets, liabilities and capital and surplus as of December 31, 2014 and 2013, and the related statements of operations and changes in capital and surplus and of cash flows for each of the three years in the period ended December 31, 2014. MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the New York State Department of Financial Services. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR'S RESPONSIBILITY Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BASIS FOR ADVERSE OPINION ON U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES As described in Note 1B to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the New York State Department of Financial Services, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the statutory basis of accounting described in Note 1B and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. ADVERSE OPINION ON U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES In our opinion, because of the significance of the matter discussed in the "Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles" paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2014 and 2013, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2014. OPINION ON STATUTORY BASIS OF ACCOUNTING In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities and capital and surplus of the Company as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in accordance with the accounting practices prescribed or permitted by the New York State Department of Financial Services, as described in Note 1B. EMPHASIS OF MATTERS As discussed in Notes 1 and 6 to the accompanying financial statements, effective January 1, 2014, the National Union Admitted Lines Pooling Agreement and the AIG Property Casualty Surplus Lines Pooling Agreement were amended and replaced with a combined pooling agreement among the existing companies and AIU Insurance Company (the "Combined Pooling Agreement"). The Company's financial information as of and for the year ended December 31, 2014 has therefore been presented in accordance with the terms of the Combined Pooling Agreement. The comparative financial statements as of December 31, 2013 and for each of the years ended December 31, 2013 and 2012 are reflective of the National Union Admitted Lines Pooling Agreement participation percentage that was in place during those years. Our opinion is not modified with respect to this matter. As discussed in Notes 1, 5 and 6 to the accompanying financial statements, the Company has entered into significant transactions with certain affiliated entities. Our opinion is not modified with respect to this matter. /s/ PricewaterhouseCoopers LLP April 28, 2015 New York, New York AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- STATEMENTS OF ADMITTED ASSETS
------------------------------------------------------------------------------------ DECEMBER 31, DECEMBER 31, 2014 2013 ------------------------------------------------------------------------------------ Cash and invested assets: Bonds, primarily at amortized cost (fair value: 2014 - $19,061,711; 2013 - $17,496,763) $ 18,100,940 $ 16,780,357 Common stocks, at carrying value adjusted for nonadmitted assets (cost: 2014 - $86,761; 2013 - $126,081) 107,011 122,839 Preferred stocks, primarily at fair value (cost: 2014 - $18,412; 2013 - $0) 18,412 - Other invested assets (cost: 2014 - $2,482,642; 2013 - $1,642,346) 2,861,427 1,993,925 Mortgage loans 1,049,708 536,056 Derivative instruments 1,342 13,978 Short-term investments, at amortized cost (approximates fair value) 294,574 308,868 Cash and cash equivalents 432,496 185,319 Receivable for securities sold and other 2,821 9,116 ------------------------------------------------------------------------------------ TOTAL CASH AND INVESTED ASSETS $ 22,868,731 $ 19,950,458 ------------------------------------------------------------------------------------ Investment income due and accrued $ 161,436 $ 168,495 Agents' balances or uncollected premiums: Premiums in course of collection 710,959 770,420 Premiums and installments booked but deferred and not yet due 284,714 301,572 Accrued retrospective premiums 694,174 938,213 Amounts billed and receivable from high deductible policies 89,026 90,030 Reinsurance recoverable on loss payments 404,789 443,153 Funds held by or deposited with reinsurers 190,688 184,412 Net deferred tax assets 794,369 639,865 Equities in underwriting pools and associations 117,991 138,321 Receivables from parent, subsidiaries and affiliates 737 17,586 Other assets 140,861 149,983 Allowance provision (81,531) (121,029) ------------------------------------------------------------------------------------ TOTAL ADMITTED ASSETS $ 26,376,944 $ 23,671,479 ------------------------------------------------------------------------------------
SEE NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 3 STATEMENTS OF ADMITTED ASSETS - As of December 31, 2014 and 2013. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION) -------------------------------------------------------------------------------- STATEMENTS OF LIABILITIES, CAPITAL AND SURPLUS
-------------------------------------------------------------------------------------- DECEMBER 31, DECEMBER 31, 2014 2013 -------------------------------------------------------------------------------------- LIABILITIES Reserves for losses and loss adjustment expenses $ 13,429,560 $ 12,445,415 Paid loss clearing contra liability (loss reserve offset) (172,490) (164,131) Unearned premium reserves 2,969,133 3,062,890 Commissions, premium taxes, and other expenses payable 247,430 330,831 Reinsurance payable on paid loss and loss adjustment expenses 163,373 316,486 Current federal taxes payable to parent 4,811 2,818 Funds held by company under reinsurance treaties 1,050,864 1,080,691 Provision for reinsurance 60,702 57,751 Ceded reinsurance premiums payable, net of ceding commissions 366,538 443,051 Collateral deposit liability 339,680 414,290 Payable for securities purchased 50,011 13,163 Payable to parent, subsidiaries and affiliates 250,332 16,642 Derivative instruments - 20,781 Other liabilities 369,096 539,114 -------------------------------------------------------------------------------------- TOTAL LIABILITIES $ 19,129,040 $ 18,579,792 -------------------------------------------------------------------------------------- CAPITAL AND SURPLUS Common capital stock, par value - 2014: $17, 2013: $11.5065; 1,758,158 shares authorized, 1,695,054 shares issued and outstanding $ 28,816 $ 19,504 Capital in excess of par value 5,363,191 4,048,510 Unassigned surplus 1,853,236 1,022,075 Special surplus funds from retroactive reinsurance 1,884 1,598 Special surplus funds from health insurance providers 777 - -------------------------------------------------------------------------------------- TOTAL CAPITAL AND SURPLUS $ 7,247,904 $ 5,091,687 -------------------------------------------------------------------------------------- TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 26,376,944 $ 23,671,479 --------------------------------------------------------------------------------------
SEE NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 4 STATEMENTS OF LIABILITIES, CAPITAL and SURPLUS - As of December 31, 2014 and 2013. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS AND CHANGES IN CAPITAL AND SURPLUS
-------------------------------------------------------------------------------------------------- FOR THE YEARS ENDED DECEMBER 31, ----------------------------------------- 2014 2013 2012 -------------------------------------------------------------------------------------------------- STATEMENT OF OPERATIONS Underwriting Income: PREMIUMS EARNED $ 5,592,905 $ 5,426,625 $ 5,357,689 -------------------------------------------------------------------------------------------------- Underwriting deductions: Losses incurred 3,415,939 3,156,380 3,633,608 Loss adjustment expenses incurred 732,787 644,056 625,094 Other underwriting expenses incurred 1,673,831 2,156,743 1,765,943 -------------------------------------------------------------------------------------------------- TOTAL UNDERWRITING DEDUCTIONS 5,822,557 5,957,179 6,024,645 -------------------------------------------------------------------------------------------------- Loss portfolio transfer: Premiums from affiliated loss portfolio transfer - - (40,241) Losses recognized from affiliated loss portfolio transfer - - 40,241 -------------------------------------------------------------------------------------------------- NET UNDERWRITING LOSS (229,652) (530,554) (666,956) -------------------------------------------------------------------------------------------------- Investment gain: Net investment income earned 1,187,728 896,309 911,306 Net realized capital (losses) gains (net of capital gains tax expense (benefit): 2014 - $53,044; 2013 - $37,062; 2012 - $48,295) (160,836) 344,178 56,339 -------------------------------------------------------------------------------------------------- NET INVESTMENT GAIN 1,026,892 1,240,487 967,645 -------------------------------------------------------------------------------------------------- Net gain (loss) from agents' or premium balances charged-off (1,256) (24,262) (57,047) Other (expense) income (10,795) (8,825) 10,700 -------------------------------------------------------------------------------------------------- INCOME AFTER CAPITAL GAINS TAXES AND BEFORE FEDERAL INCOME TAXES 785,189 676,846 254,342 Federal and foreign income tax (benefit) expense (23,041) (26,144) (31,163) -------------------------------------------------------------------------------------------------- NET INCOME $ 808,230 $ 702,990 $ 285,505 -------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Changes in Capital and Surplus Capital and surplus, as of December 31, previous year $ 5,091,687 $ 6,004,343 $ 5,667,303 Adjustment to beginning surplus (Note 2) (6,366) (94,261) (29,278) -------------------------------------------------------------------------------------------------- Capital and surplus, as of January 1, 5,085,321 5,910,082 5,638,025 Other changes in capital and surplus: Net income 808,230 702,990 285,505 Change in net unrealized capital losses (net of capital gains tax expense (benefit) : 2014 - $8,243; 2013 - $(30,923); 2012 - $21,950) (46,716) (172,094) (40,778) Change in net deferred income tax (390,531) (27,917) (22,439) Change in nonadmitted assets 731,170 (210,064) 208,727 Change in provision for reinsurance (2,951) (8,640) 29,414 Capital contribution (distribution) 1,314,681 - (645,750) Quasi-reorganization - - 1,000,000 Change in par value of common stock 9,312 - - Dividends to stockholder (383,554) (1,214,959) (522,716) Foreign exchange translation 122,577 113,151 74,961 Other surplus adjustments 365 (862) (606) -------------------------------------------------------------------------------------------------- TOTAL CHANGES IN CAPITAL AND SURPLUS 2,162,583 (818,395) 366,318 -------------------------------------------------------------------------------------------------- Capital and Surplus, as of December 31, $ 7,247,904 $ 5,091,687 $ 6,004,343 --------------------------------------------------------------------------------------------------
SEE NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 5 STATEMENTS OF OPERATIONS and CHANGES IN CAPITAL AND SURPLUS - for the years ending December 31, 2014, 2013 and 2012 AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, ------------------------------------------ 2014 2013 2012 ------------------------------------------------------------------------------------------------ CASH FROM OPERATIONS Premiums collected, net of reinsurance $ 5,588,211 $ 5,894,743 $ 5,313,202 Net investment income 1,007,711 782,466 809,251 Miscellaneous expense (93,572) (75,119) (6,214) ------------------------------------------------------------------------------------------------ SUB-TOTAL $ 6,502,350 $ 6,602,090 $ 6,116,239 ------------------------------------------------------------------------------------------------ Benefit and loss related payments 3,768,172 3,564,863 3,593,294 Commission and other expense paid 2,427,080 2,706,806 2,502,676 Federal and foreign income taxes (recovered) paid (17,295) 6,848 1,012 ------------------------------------------------------------------------------------------------ NET CASH PROVIDED FROM OPERATIONS $ 324,393 $ 323,573 $ 19,257 ------------------------------------------------------------------------------------------------ CASH FROM INVESTMENTS PROCEEDS FROM INVESTMENTS SOLD, MATURED, OR REPAID Bonds 5,593,141 4,490,034 4,505,552 Stocks 16,579 4,875 2,833 Mortgage loans 42,692 1,447 149 Other 387,924 196,798 243,676 ------------------------------------------------------------------------------------------------ TOTAL PROCEEDS FROM INVESTMENTS SOLD, MATURED, OR REPAID $ 6,040,336 $ 4,693,154 $ 4,752,210 ------------------------------------------------------------------------------------------------ COST OF INVESTMENTS ACQUIRED Bonds 6,009,703 4,170,608 3,659,690 Stocks 360,248 39,032 2,736 Mortgage loans 583,079 464,025 59,296 Other 896,503 641,962 278,203 ------------------------------------------------------------------------------------------------ TOTAL COST OF INVESTMENTS ACQUIRED $ 7,849,533 $ 5,315,627 $ 3,999,925 ------------------------------------------------------------------------------------------------ NET CASH (USED IN) PROVIDED FROM INVESTING ACTIVITIES $ (1,809,197) $ (622,473) $ 752,285 ------------------------------------------------------------------------------------------------ CASH FROM FINANCING AND MISCELLANEOUS SOURCES Capital contributions 610 - 300,000 Dividends to stockholder (150,000) (820,000) (455,589) Intercompany receipts (payments) 1,991,197 91,276 (164,090) Net deposit activity on deposit-type contracts and other insurance (9,767) (23,833) (1,683) Equities in underwriting pools and associations 94,797 476,434 54,713 Collateral deposit liability (payments) receipts (74,610) 37,313 77,021 Other (payments) receipts (134,540) (102,417) 105,869 ------------------------------------------------------------------------------------------------ NET CASH PROVIDED BY (USED IN) FINANCING AND MISCELLANEOUS ACTIVITIES 1,717,687 (341,227) (83,759) ------------------------------------------------------------------------------------------------ NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS 232,883 (640,127) 687,783 CASH AND SHORT-TERM INVESTMENTS ------------------------------------------------------------------------------------------------ BEGINNING OF YEAR $ 494,187 $ 1,134,314 $ 446,531 ------------------------------------------------------------------------------------------------ END OF YEAR $ 727,070 $ 494,187 $ 1,134,314 ------------------------------------------------------------------------------------------------
Refer to Note 11 E for description of non-cash items. SEE NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 6 STATEMENTS OF CASH FLOW - for the years ended December 31, 2014, 2013 and 2012 AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT STATUTORY BASIS ACCOUNTING POLICIES -------------------------------------------------------------------------------- A. BASIS OF ORGANIZATION AND PRESENTATION -------------------------------------------------------------------------------- Organization -------------------------------------------------------------------------------- American Home Assurance Company ("the Company" or "American Home") is a direct wholly-owned subsidiary of AIG Property Casualty U.S., Inc. ("AIG PC US"), a Delaware corporation, which is in turn owned by AIG Property Casualty Inc. ("AIG PC"), a Delaware corporation. The Company's ultimate parent is American International Group, Inc. (the "Ultimate Parent" or "AIG"). AIG conducts its property and casualty operations through multiple line companies writing substantially all commercial (casualty, property, specialty and financial liability) and consumer (accident & health and personal lines) both domestically and abroad. During 2013, Chartis U.S., Inc., Chartis Inc., Chartis International, LLC, Chartis Property Casualty Company, Chartis Specialty Insurance Company and Chartis Casualty Company were renamed as AIG Property Casualty U.S., Inc., AIG Property Casualty Inc., AIG Property Casualty International, LLC, AIG Property Casualty Company, AIG Specialty Insurance Company and AIG Assurance Company, respectively. Effective January 1, 2014, the National Union Admitted Lines Pooling Agreement (the "Admitted Pooling Agreement") and the AIG Property Casualty Surplus Lines Pooling Agreement (the "Surplus Pooling Agreement") were amended and replaced with a combined pooling agreement among the existing companies and AIU Insurance Company (the "Combined Pooling Agreement"), as listed below (the "Combined Pool"). The member companies of the 2014 Combined Pool, their National Association of Insurance Commissioners ("NAIC") company codes, inter-company pooling percentages under the Combined Pooling Agreement, previous participation in the terminated pools, and states of domicile are as follows:
2014 COMBINED 2013 ADMITTED 2013 SURPLUS NAIC POOL PARTICIPATION PARTICIPATION 2014 STATE OF COMPANY COMPANY CODE PERCENTAGE PERCENTAGE PERCENTAGE DOMICILE --------------------------------------------------------------------------------------------------------------------------- National Union Fire Insurance Company of Pittsburgh, Pa. (National Union)* 19445 30% 38% N/A Pennsylvania American Home 19380 30% 36% N/A New York Lexington Insurance Company (Lexington) 19437 30% N/A 90% Delaware Commerce and Industry Insurance Company (C&I) 19410 5% 11% N/A New York AIG Property Casualty Company (APCC) 19402 5% 5% N/A Pennsylvania The Insurance Company of the State of Pennsylvania (ISOP) 19429 0% 5% N/A Pennsylvania New Hampshire Insurance Company (New Hampshire) 23841 0% 5% N/A Illinois/**/ AIG Specialty Insurance Company (Specialty) 26883 0% N/A 10% Illinois AIG Assurance Company (Assurance) 40258 0% 0% N/A Pennsylvania Granite State Insurance Company (Granite) 23809 0% 0% N/A Illinois/**/ Illinois National Insurance Co. (Illinois National) 23817 0% 0% N/A Illinois AIU Insurance Company (AIU) 19399 0% N/A N/A New York
*Lead Company of the Combined Pool **Companies were re-domesticated to Illinois from Pennsylvania in 2014 Refer to Note 6 for additional information on the Combined Pool and the effects of the changes in the intercompany pooling arrangements (the "2014 Pooling Restructure Transaction"). The Company accepts commercial business primarily through a network of independent retail and wholesale brokers and through an independent agency network. In addition, the Company accepts consumer business primarily through agents and brokers, as well as through direct marketing, partner organizations and the internet. There were no Managing Agents or Third party administrators who placed direct written premium with the Company in an account exceeding more than 5.0 percent of surplus of the Company for the years ending December 31, 2014 and 2013. -------------------------------------------------------------------------------- 7 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The Company is diversified in terms of classes of its business, distribution network and geographic locations. The Company has direct written premium concentrations of 5.0 percent or more in the following locations:
STATE/ LOCATION 2014 2013 2012 ------------------------------------------------------ Florida $ 69,724 $ 49,869 $ 36,719 New York 27,936 15,068 41,487 Foreign - Japan *(443,765) 785,232 1,022,151
*Includes impact of (726,095) reserve transfer due to the Japan Branch Conversion. Basis of Presentation -------------------------------------------------------------------------------- The accompanying financial statements of the Company have been prepared in conformity with accounting practices prescribed or permitted by the New York State Department of Financial Services ("NY SAP"). Certain balances relating to prior periods have been reclassified to conform to the current year's presentation. Additionally, the financial statements include the Company's U.S. operations, its Japan and Argentina branch operations and its participation in the American International Overseas Association (the "Association"), as described in Note 6. The Company's financial information as of and for the year ended December 31, 2014 has been presented in accordance with the terms of the Combined Pooling Agreement. The 2013 and 2012 financial information is reflective of the Company's Admitted Pooling Agreement participation percentage in place during those years. B. Permitted and Prescribed Practices -------------------------------------------------------------------------------- NY SAP recognizes only statutory accounting practices prescribed or permitted by the New York State Department of Financial Services ("NY DFS") for determining and reporting the financial position and results of operations of an insurance company and for the purpose of determining its solvency under the New York Insurance Code. The NAIC Statutory Accounting Principles included within the Accounting Practices and Procedures Manual ("NAIC SAP") have been adopted as a component of prescribed practices by the NY DFS. The Superintendent of the NY DFS (the "Superintendent") has the right to permit other specific practices that differ from prescribed practices. NY SAP has prescribed the practice of discounting workers' compensation known case loss reserves on a non-tabular basis. This practice is not prescribed under NAIC SAP. With the concurrence of the NY DFS, the Company has also discounted certain of its asbestos reserves, specifically, those for which future payments have been identified as fixed and determinable. NY SAP has prescribed the availability of certain offsets in the calculation of the Provision for reinsurance which are not prescribed by NAIC SAP. With the concurrence of NY DFS, the Company has reduced its Provision for reinsurance to reflect the transfer of the collection risk on certain of the Company's asbestos related reinsurance recoverables to an authorized third party reinsurer in connection with its participation in the Combined Pool. For 2013, the Company applied the specific NY SAP requirements in the determination of the Provision for reinsurance. In 2014, the Company received a permitted practice to present the consideration received in relation to loss reserves transferred as part of the updated and amended Combined Pooling Agreement transaction within paid losses rather than as premiums written and earned. For more information, see Note 6. Similarly, in 2013, the Company received a permitted practice to present the consideration received in relation to loss reserves transferred by novation as negative paid losses rather than premium written and earned, in relation to the withdrawal of a foreign affiliate from the Association, as described in Note 6. The Company requested such permitted practices as it believed the presentation within premiums would be distortive to the financial statements and not indicative of the economic substance of the respective transactions. The use of the aforementioned prescribed and permitted practices has not affected the Company's ability to comply with the NAIC's risk based capital and surplus requirements for the 2014, 2013 and 2012 reporting periods. -------------------------------------------------------------------------------- 8 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- A reconciliation of the net income and capital and surplus between NAIC SAP and practices prescribed or permitted by NY SAP is shown below:
----------------------------------------------------------------------------------------------------------------- 2014 2013 2012 ----------------------------------------------------------------------------------------------------------------- NET INCOME, NEW YORK BASIS $ 808,230 $ 702,990 $ 285,505 State Prescribed Practices - addition (charge) NAIC SAP: Change in non-tabular discounting 40,320 31,634 (70,542) ----------------------------------------------------------------------------------------------------------------- NET INCOME, NAIC SAP 848,550 734,624 214,963 ----------------------------------------------------------------------------------------------------------------- STATUTORY SURPLUS, NEW YORK BASIS 7,247,904 5,091,687 6,004,343 State Prescribed Practices - (charge) NAIC SAP: Non-tabular discounting (383,098) (423,418) (455,052) Credits for reinsurance (39,545) (27,834) (118,047) Credits for collection risk on certain asbestos reinsurance recoveries (81,048) (156,997) (88,189) ----------------------------------------------------------------------------------------------------------------- STATUTORY SURPLUS, NAIC SAP $6,744,213 $4,483,438 $5,343,055 -----------------------------------------------------------------------------------------------------------------
C. Use of Estimates in the Preparation of the Financial Statements -------------------------------------------------------------------------------- The preparation of statutory financial statements in accordance with NY SAP requires the application of accounting policies that often involve a significant degree of judgment. The Company's accounting policies that are most dependent on the application of estimates and assumptions are considered critical accounting estimates and are related to the determination of: .. Reserves for losses and loss adjustment expenses ("LAE") including estimates and recoverability of the related reinsurance assets; .. Legal contingencies, including those related to the settlement and adjudication of claims; .. Other than temporary impairment ("OTTI") losses on investments; .. Fair value of certain financial assets, impacting those investments measured at fair value in the Statements of Admitted Assets, Liabilities, Capital and Surplus, as well as unrealized gains (losses) included in capital and surplus; and .. Income tax assets and liabilities, including the recoverability and admissibility of net deferred tax assets and the predictability of future tax operating profitability of the character necessary to realize the net deferred tax asset. These accounting estimates require the use of assumptions about matters, including some that are highly uncertain at the time of estimation. It is reasonably possible that actual experience may materially differ from the assumptions used and therefore the Company's statutory financial condition, results of operations and cash flows could be materially affected. D. Accounting Policy Differences -------------------------------------------------------------------------------- NAIC SAP is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America ("US GAAP"). NAIC SAP varies from US GAAP in certain respects, including:
------------------------------------------------------------------------------------------------------------------ TRANSACTIONS NAIC SAP TREATMENT US GAAP TREATMENT ------------------------------------------------------------------------------------------------------------------ POLICY ACQUISITION COSTS Costs are immediately expensed and are Costs directly related to the successful Principally brokerage included in Other Underwriting Expenses, acquisition of new or renewal insurance commissions and premium except for reinsurance ceding commissions contracts are deferred and amortized over taxes arising from the received in excess of the cost to acquire the term of the related insurance issuance of insurance business which are recognized as a coverage. contracts. deferred liability and amortized over the period of the reinsurance agreement. ------------------------------------------------------------------------------------------------------------------ UNEARNED PREMIUMS, UNPAID Presented net of reinsurance recoverable. Presented gross of reinsurance with LOSSES AND LOSS EXPENSE corresponding reinsurance recoverable LIABILITIES assets for prepaid reinsurance and reinsurance recoverable on unpaid losses, respectively. ------------------------------------------------------------------------------------------------------------------ RETROACTIVE REINSURANCE Gains and losses are recognized in Gains are deferred and amortized over the CONTRACTS earnings and surplus is segregated to the settlement period of the ceded claim extent gains are recognized. Certain recoveries. Losses are immediately retroactive intercompany reinsurance recognized in the Statements of contracts are accounted for as Operations. prospective reinsurance if there is no gain in surplus as a result of the transaction.
-------------------------------------------------------------------------------- 9 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
TRANSACTIONS NAIC SAP TREATMENT US GAAP TREATMENT ------------------------------------------------------------------------------------------------------------------ INVESTMENTS IN BONDS HELD Investment grade securities (rated by All available for sale investments are AS: NAIC as class 1 or 2) are carried at carried at fair value with changes in 1) AVAILABLE FOR SALE amortized cost. Non- investment grade fair value, net of applicable taxes, 2) FAIR VALUE OPTION securities (NAIC rated 3 to 6) are reported in accumulated other carried at the lower of amortized cost comprehensive income within shareholder's and fair value. equity. Fair value option investments are carried at fair value with changes in fair value, net of applicable projected income taxes, reported in net investment income. ------------------------------------------------------------------------------------------------------------------ INVESTMENTS IN EQUITY Carried at fair value with unrealized Same treatment as available for sale SECURITIES CLASSIFIED AS: gains and losses reported, net of investments in bonds. 1) AVAILABLE FOR SALE applicable taxes, in the Statement of 2) FAIR VALUE OPTION Changes in Capital and Surplus. Fair value option investments are carried at fair value with changes in fair value, net of applicable projected income taxes, reported in net investment income. ------------------------------------------------------------------------------------------------------------------ INVESTMENTS IN LIMITED Carried at the underlying US GAAP equity If aggregate interests allow the holding PARTNERSHIPS, HEDGE FUNDS with results from the investment's entity to exercise more than minor AND PRIVATE EQUITY INTERESTS operations recorded, net of applicable influence (typically more than 3%), the taxes, as Unrealized gains (losses) investment is carried at Net Asset Value directly in the Statements of Changes in ("NAV") with changes in value recorded to Capital and Surplus. net investment income. Where the aggregate interests allow the entity to exercise only minor influence (typically less than 3%), the investment is recorded at NAV with changes in value recorded, net of tax, as a component of accumulated other comprehensive income in shareholder's equity. ------------------------------------------------------------------------------------------------------------------ INVESTMENTS IN SUBSIDIARY, Subsidiaries are not consolidated. Consolidation is required when there is a CONTROLLED AND AFFILIATED determination that the affiliated entity ENTITIES (SCAS) The equity investment in SCAs are is a variable interest entity (VIE) and accounted for under the equity method and the holding entity is the primary recorded as Common stock investments. beneficiary of the activities of the VIE. Dividends are recorded within Net Investment Income. Investments in SCAs with greater than 50 percent ownership of voting rights are generally consolidated. Investments in SCAs where the holding entity exercises significant influence (generally ownership of voting interests between 20 percent and 50 percent) are recorded at equity value. The change in equity is included within operating income. ------------------------------------------------------------------------------------------------------------------ STRUCTURED SETTLEMENTS Structured settlement annuities where the For structured settlements in which the claimant is the payee are treated as reporting entity has not been legally completed transactions (thereby allowing released from its obligation with the for immediate gain recognition), claimant (i.e. the reporting entity regardless of whether the reporting remains the primary obligor), resulting entity is the owner of the annuity. gains are deferred and amounts expected to be recovered from such annuities are recorded as assets. ------------------------------------------------------------------------------------------------------------------ STATEMENT OF CASH FLOWS Statutory Statements of Cash Flows must The Statements of Cash Flows can be be presented using the direct method. presented using the direct or indirect Changes in cash and short-term methods, however are typically presented investments and certain sources of cash using the indirect method. Presentation are excluded from operational cash flows. is limited to changes in cash and cash Certain non-cash items are required to be equivalents (short-term investments are included in the statement of cash flows excluded). All non-cash items are and disclosed to the extent material. eliminated from the presentation of cash flows.
-------------------------------------------------------------------------------- 10 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------ TRANSACTIONS NAIC SAP TREATMENT US GAAP TREATMENT ------------------------------------------------------------------------------------------------------------------ DEFERRED FEDERAL INCOME Deferred income taxes are established for The provision for deferred income taxes TAXES the temporary differences between tax and is recorded as a component of income tax book assets and liabilities, subject to expense, as a component of the Statement limitations on admissibility of tax of Operations, except for changes assets. associated with items that are included Changes in deferred income taxes are within other comprehensive income where recorded within capital and surplus and such items are recorded net of applicable have no impact on the Statement of income taxes. Operations. ------------------------------------------------------------------------------------------------------------------ STATUTORY ADJUSTMENTS Certain asset balances are designated as All assets and liabilities are included (applied to certain assets nonadmitted, are excluded from the in the financial statements. Provisions including Goodwill, Statutory Statement of Assets and are for uncollectible receivables are furniture and equipment, reflected as deductions from capital and established as valuation allowances and deferred taxes in excess of surplus. are recognized as expense within the limitations, prepaid Statement of Operations. expenses, overdue receivable balances and unsecured reinsurance amounts) A Provision for reinsurance is established for unsecured reinsurance amounts recoverable from unauthorized and certain authorized reinsurers with a corresponding reduction to Unassigned surplus. ------------------------------------------------------------------------------------------------------------------
The effects on the financial statements of the variances between NAIC SAP and US GAAP, although not reasonably determinable, are presumed to be material. E. Significant Statutory Accounting Policies -------------------------------------------------------------------------------- Premiums -------------------------------------------------------------------------------- Premiums for insurance and reinsurance contracts are recorded as gross premiums written on the inception date of the policy. Premiums are earned primarily on a pro-rata basis over the term of the related insurance coverage. Extended reporting endorsements are reflected as premiums written and are earned on a pro-rata basis over the stated term of the endorsement unless the term of the endorsement is indefinite in which case premiums are fully earned at inception of the endorsement along with the recognition of associated loss and LAE. Unearned premium reserves are established on an individual policy basis, reflecting the terms and conditions of the coverage being provided. Unearned premium reserves include the portion of premiums written relating to the unexpired terms of coverage as of the date of the financial statements. For policies with coverage periods equal to or greater than thirteen months and generally not subject to cancellation or modification by the Company, premiums are earned using a prescribed percentage of completion method. Reinsurance premiums under a reinsurance contract are typically earned over the same period as the underlying policies, or risks, covered by the contracts. As a result, the earnings pattern of a reinsurance contract generally written for a 12-month term may extend up to 24 months, reflecting the inception dates of the underlying attaching policies throughout the 12-month period of the reinsurance contract. Reinsurance premiums ceded are recognized as a reduction in revenues over the period reinsurance coverage is provided. Insurance premiums billed and outstanding for 90 days or more are nonadmitted and deducted from Unassigned surplus. Premiums for retrospectively rated contracts are initially recorded based on the expected loss experience, based upon historical ratios of retrospectively rated loss development and earned on a pro-rata basis over the term of the related insurance coverage. Additional or returned premium is recorded if the estimated loss experience differs from the initial estimate and is immediately recognized in earned premium. The Company records accrued retrospectively rated premiums as written premiums. Gross written premium net of ceded written premium ("Net written premiums") that were subject to retrospective rating features as of December 31, 2014, 2013 and 2012 were as follows:
--------------------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 2014 2013 2012 --------------------------------------------------------------------------------------------- Net written premiums subject to retrospectively rated premiums $112,287 $114,240 $154,505 Percentage of total net written premiums 2.1% 2.0% 3.0% ---------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 11 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- As of December 31, 2014 and 2013, the admitted portion of accrued premiums related to the Company's retrospectively rated contracts were $694,174 and $938,213, respectively, which will be billed in future periods based primarily on the payment of the underlying expected losses and LAE. Unsecured amounts associated with these accrued retrospective premiums were $144,799 and $211,983 as of December 31, 2014 and 2013, respectively. Ten percent of the amount of accrued retrospective premiums receivable not offset by retrospective return premiums or other liabilities to the same party, other than loss and LAE reserves, or collateral (collectively referred to as the unsecured amount) have been nonadmitted. The following table represents the reconciliation of total accrued retrospective premiums to the admitted amounts:
----------------------------------------------------------------------------------- DECEMBER 31, 2014 2013 ----------------------------------------------------------------------------------- Total accrued retrospective premium $ 713,461 $ 965,890 Less: nonadmitted amount (10 percent) (13,151) (19,017) Less: nonadmitted for any person for whom agents' balances or uncollected premiums are nonadmitted (6,136) (8,660) ----------------------------------------------------------------------------------- ADMITTED AMOUNTS $ 694,174 $ 938,213 -----------------------------------------------------------------------------------
Adjustments to premiums for changes in the level of exposure to insurance risk are generally determined based upon audits conducted after the policy expiration date. The Company establishes loss reserves for high deductible policies net of the insured's contractual deductible (such deductibles are referred to as "reserve credits"). The Company establishes a nonadmitted asset for 10 percent of paid losses recoverable in excess of collateral held on an individual insured basis, or for 100 percent of paid losses recoverable where no collateral is held and amounts are outstanding for more than ninety days. Additionally, the Company establishes an allowance for doubtful accounts for such paid losses recoverable in excess of collateral and after nonadmitted assets. Similarly, the Company does not recognize reserve credit offsets where such credits are deemed uncollectible, as the Company ultimately bears credit risk on the underlying policies' insurance obligations. As of December 31, 2014 and 2013, the amounts of offsetting reserve credits on unpaid claims, recoverable on paid claims and nonadmitted balances were:
DECEMBER 31, 2014 2013 ------------------------------------------------------------------------------------ Reserve Credits on Unpaid Claims $ 3,698,401 $ 4,270,652 Recoverable on Paid Claims 110,084 114,716 Nonadmitted Balance 21,058 24,686 ------------------------------------------------------------------------------------
For warranty insurance, the Company generally provides reimbursement coverage on service contracts issued by an authorized administrator and sold through a particular retail channel. Premiums are recognized over the life of the policy in proportion to the expected loss emergence. The expected loss emergence can vary substantially by policy due to the characteristics of products sold by the retailer, the terms and conditions of service contracts sold as well as the duration of original warranties provided by the equipment manufacturer, if any. Deposit Accounting -------------------------------------------------------------------------------- Direct insurance transactions where management determines insufficient insurance risk transfer are recorded as deposits unless the policy was issued (i) in respect of the insured's requirement for evidence of coverage pursuant to applicable statutes (insurance statutes or otherwise), contractual terms or normal business practices, (ii) in respect of an excess insurer's requirement for an underlying primary insurance policy in lieu of self-insurance, or (iii) in compliance with filed forms, rates and/or rating plans. Assumed and ceded reinsurance contracts which do not transfer a sufficient amount of insurance risk are recorded as deposits with the net consideration paid or received recognized as a deposit asset or liability, respectively. Deposit assets are admitted if (i) the assuming company is licensed, accredited or qualified by the NY DFS, or (ii) the collateral (i.e., funds withheld, letters of credit or trusts) provided by the reinsurer meets all the requirements of the NY SAP, as applicable. The deposit asset or liability is adjusted by calculating the effective yield on the deposit to reflect the actual payments made or received to date and expected future payments with a corresponding credit or charge to Other Income in the Statements of Operations. Deposit assets are recorded to Other assets within the Statements of Admitted Assets, refer to Note 11A. Deposit liabilities and deposit liabilities - funds held are recorded to Other liabilities within the Statements of Liabilities, Capital and Surplus, refer to Note 11B. -------------------------------------------------------------------------------- 12 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Premium Deficiency -------------------------------------------------------------------------------- The Company periodically reviews its expected ultimate losses with respect to its unearned premium reserves. A premium deficiency loss and related liability is established if the unearned premium reserves and related investment income are collectively not sufficient to cover the expected ultimate loss projection. As of December 31, 2014 and 2013, the Company did not incur any premium deficiency losses. Retroactive Reinsurance -------------------------------------------------------------------------------- Transactions involving the transfer of loss and LAE reserves associated with loss events that occurred prior to the effective date of the transfer are recorded as retroactive reinsurance and reported separately from Reserves for loss and loss adjustment expenses in the Statements of Liabilities, Capital and Surplus. Initial gains or losses are recorded in Other Income within the Statements of Operations. Any resulting surplus gains are separately identified as Special surplus funds from retroactive reinsurance within Capital and surplus and are restricted for dividend payment. Amounts recorded in Special surplus funds from retroactive reinsurance are amortized into Unassigned surplus when actual retroactive reinsurance recovered exceeds the consideration paid. The special surplus from retroactive reinsurance for each respective retroactive reinsurance agreement shall be reduced at the time the ceding entity begins to recover funds from the assuming entity in amounts exceeding the consideration paid by the ceding entity under such agreement, or adjusted due to changes in reserves ceded under the contract. For each agreement, the reduction in the special surplus is limited to the lesser of amounts recovered in excess of consideration paid or the initial surplus gain. Any remaining balance in the special surplus from retroactive reinsurance derived from any such agreement shall be returned to Unassigned surplus upon elimination of all policy obligations. To the extent that the transfer of loss and LAE reserves is between affiliated entities and neither entity records a gain or loss, the transaction is accounted for as prospective reinsurance. Insurance Related Acquisition Costs -------------------------------------------------------------------------------- Commissions, premium taxes, and certain underwriting costs are expensed as incurred and are included in Other underwriting expenses incurred. The Company records a ceding commission liability equal to the excess of the ceding commissions received from reinsurers compared to the acquisition cost of the business ceded. The liability is amortized over the effective period of the reinsurance agreement in proportion to the amount of insurance coverage provided. Provisions for Allowances and Unauthorized or Overdue Reinsurance -------------------------------------------------------------------------------- The recoverability of certain assets, including insurance receivables with counterparties, is reviewed periodically by management. Amounts deemed uncollectible are reduced, with the required statutory basis provision for reinsurance deducted from surplus and reflected as a liability in Provision for reinsurance. Various factors are taken into consideration when assessing the recoverability of these balances including: the age of the related amounts due and the nature of the unpaid balance; disputed balances, historical recovery rates and any significant decline in the credit standing of the counterparty. Following the 2014 Pooling Restructure Transaction, the accounting practices prescribed or permitted by the Insurance Department of the Commonwealth of Pennsylvania ("PA SAP") are applied in the determination of the Company's Provision for reinsurance. For 2013 and 2012, NY SAP was applied in the determination of the Provision for reinsurance. Loss and Loss Adjustment Expenses -------------------------------------------------------------------------------- Reserves for case, IBNR and LAE losses are determined on the basis of actuarial specialists' evaluations and other estimates, including historical loss experience. The methods of making such estimates and for establishing the resulting reserves are reviewed and updated based on available information, and any resulting adjustments are recorded in the period they are determined. Accordingly, newly established reserves for losses and LAE, or subsequent changes, are charged to income as incurred. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsurance policy based upon the terms of the underlying contract. See Note 5 for further discussion of policies and methodologies for estimating the liabilities and losses. -------------------------------------------------------------------------------- 13 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Structured Settlements -------------------------------------------------------------------------------- In the ordinary course of business, the Company enters into structured settlements to settle certain claims. Structured settlements involve the purchase of an annuity by the Company, generally from life insurers, to fund future claim obligations. In the event the life insurers providing the annuity do not meet their obligations, the Company would, in certain cases, become liable for the payments of benefits. As of December 31, 2014, the Company has not incurred a loss and there has been no default by any of the life insurers included in the transactions and the Company has not reduced its loss reserves for any annuities purchased where it is both the owner and the payee. Management believes that based on the financial strength of the life insurers involved (mostly affiliates) the likelihood of the Company becoming liable, and therefore incurring an incremental loss, is remote. The estimated loss reserves eliminated by such structured settlement annuities and the unrecorded loss contingencies are $1,135,621 as of December 31, 2014. As of December 31, 2014, the Company had annuities with aggregate statement values in excess of 1 percent of its policyholders' surplus with life insurer affiliates as follows:
LICENSED IN LIFE INSURANCE COMPANY STATE OF DOMICILE NEW YORK STATEMENT VALUE ---------------------- ----------------- ----------- --------------- American General Life Insurance Company Texas No $104,512 American General Life Insurance Company of Delaware Delaware No 251,372 The United State Life Insurance Company in the City of New York New York Yes 727,988
Fair Value of Financial Instruments -------------------------------------------------------------------------------- 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. Assets and liabilities recorded at fair value are measured and classified in accordance with a fair value hierarchy consisting of three 'levels' based upon the observability of inputs available in the marketplace as discussed below: . Level 1: Fair value measurements that are based upon quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. The quoted price for such instruments is not subject to adjustment. . 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, quoted prices for identical or similar assets or liabilities in markets that are not active, 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. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we 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 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 policy is to recognize transfers in and out at the end of the reporting period, consistent with the date of the determination of fair value. The valuation methods and assumptions used in estimating the fair values of financial instruments are as follows: . The fair values of bonds, mortgage loans, unaffiliated common stocks and preferred stocks are based on fair values that reflect the price at which a security would sell in an arm's length transaction between a willing buyer and seller. As such, sources of valuation include third party pricing sources, stock exchanges, brokers or custodians or the NAIC Capital Markets and Investment Analysis Office ("NAIC IAO"). -------------------------------------------------------------------------------- 14 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- . The fair value of derivatives are determined using quoted prices in active markets and other market evidence whenever possible, including market-based updates, broker or dealer quotations or alternative pricing sources. . The carrying value of all other financial instruments approximates fair value. Cash Equivalents and Short Term Investments -------------------------------------------------------------------------------- Cash equivalents are short-term, highly liquid investments, with original maturities of three months or less, that are both; (a) readily convertible to known amounts of cash; and (b) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Highly liquid debt securities with maturities of greater than three months but less than twelve months from the date of purchase are classified as short-term investments. Short-term investments are carried at amortized cost which approximates fair value. Bonds (including Loan Backed and Structured Securities) -------------------------------------------------------------------------------- Loan-backed and structured securities ("LBaSS") include residential mortgage-backed securities ("RMBS"), commercial mortgage-backed securities ("CMBS"), and asset-backed securities ("ABS"), pass-through securities, lease-backed securities, equipment trust certificates, loan-backed securities issued by special purpose corporations or trusts, and securities where there is not direct recourse to the issuer. Bonds and LBaSS with an NAIC designation NAIC IAO of "1" or "2" (considered to be investment grade) are carried at amortized cost. Bonds and LBaSS with an NAIC designation of "3," "4", "5", 5*, "6" or "6*" (considered to be non-investment grade) are carried at the lower of amortized cost or fair value. LBaSS fair values are primarily determined using independent pricing services and broker quotes. Bonds and LBaSS that have not been filed and have not received a designation in over a year, from the NAIC IAO, are assigned a 6* designation and carried at zero, with unrealized losses charged to surplus. Bond and LBaSS securities that have been filed and received a 6* designation can carry a value greater than zero. Bond and LBaSS securities are assigned a 5* designation when the following conditions are met: a) the documentation required for a full credit analysis did not exist, b) the issuer/obligor has made all contractual interest and principal payments, and c) an expectation of repayment of interest and principal exists. Amortization of premium or discount on bonds and LBaSS is calculated using the effective yield method. Additionally, mortgage-backed securities ("MBS") and ABS prepayment assumptions were obtained from an outside vendor or internal estimates. The retrospective adjustment method is used to account for the effect of unscheduled payments affecting high credit quality securities, while securities with less than high credit quality and securities for which the collection of all contractual cash flows is not probable are both accounted for using the prospective adjustment method. Mortgage Loans -------------------------------------------------------------------------------- Mortgage loans on real estate are stated primarily at unpaid principal balances, net of unamortized premiums, discounts and impairments. Impaired loans are identified by management as loans in which it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The Company accrues income on impaired loans to the extent it is deemed collectible and the loan continues to perform under its original or restructured contractual terms. Non-performing loan interest income that is delinquent more than 90 days is generally recognized on a cash basis. Internal credit risk ratings are assigned based on the consideration of risk factors including past due status, 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. Preferred Stocks -------------------------------------------------------------------------------- Perpetual preferred stocks with an NAIC rating of "P1" or "P2", having characteristics of equity securities are carried at fair value. Redeemable preferred stocks with an NAIC rating of "RP1" or "RP2", which have characteristics of debt securities, are carried at amortized cost. All preferred stocks with an NAIC rating of "3" through "6" are carried at the lower of amortized cost or fair value. Unaffiliated Common Stock Securities -------------------------------------------------------------------------------- Unaffiliated common stock investments are carried at fair value with changes in fair value recorded as Unrealized gains(losses) in Unassigned surplus, or as realized losses in the event a decline in value is determined to be other than temporary. -------------------------------------------------------------------------------- 15 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Investments in subsidiaries and affiliated companies -------------------------------------------------------------------------------- Investments in non-publicly traded affiliates are recorded based on the underlying equity of the respective entity's financial statements as presented on a basis consistent with the nature of the affiliates operations (including any defined nonadmitted amounts). The Company's share of undistributed earnings and losses of affiliates are recorded as Unrealized gains (losses) in Unassigned surplus. Investments in joint ventures, partnerships and limited liability companies -------------------------------------------------------------------------------- Other invested assets include joint ventures and partnerships and are accounted for under the equity method, based on the most recent financial statements of the entity. Changes in carrying value are recorded as Unrealized gains(losses). Additionally, other invested assets include investments in collateralized loans that are recorded at the lower of amortized cost and the fair value of the underlying collateral. Changes in carrying value resulting from adjustments where the fair value is less than amortized cost are recorded as Unrealized gains (losses) in Unassigned surplus, while changes resulting from amortization are recorded as Net investment income. Derivatives -------------------------------------------------------------------------------- Derivative financial instruments are accounted for at fair value using quoted prices in active markets and other market evidence whenever possible, including market-based inputs to valuation models, broker or dealer quotations or alternative pricing sources, reduced by the amount of collateral held or posted by the Company with respect to the derivative position. Changes in carrying value are recorded as Unrealized gains/(losses) in Unassigned surplus. Net investment income and gain/loss -------------------------------------------------------------------------------- Investment income is recorded as earned and includes interest, dividends, and earnings from subsidiaries, loans and joint ventures. Realized gains or losses on the disposition or impairment of investments are determined on the basis of specific identification. Investment income due and accrued is assessed for collectability. The Company records a valuation allowance on investment income receivable when it is probable that an amount is uncollectible by recording a charge against investment income in the period such determination is made. Any amounts receivable over 90 days past due, or 180 days past due for mortgage loans that do not have a valuation allowance are nonadmitted by the Company. Evaluating Investments for Other-Than-Temporary Impairment -------------------------------------------------------------------------------- If a bond is determined to have an OTTI in value the cost basis is written down to fair value as a new cost basis, with the corresponding charge to Net realized capital gains (losses) as a realized loss. For bonds, other than loan-backed and structured securities, an OTTI shall be considered to have occurred if it is probable that the Company will not be able to collect all amounts due under the original contractual terms. For loan-backed and structured securities, an OTTI shall be considered to have occurred if the fair value of a security is below its amortized cost and management intends to sell or does not have the ability and intent to retain the security until recovery of the amortized cost (i.e., intent based impairment). When assessing the intent to sell a security, management evaluates relevant facts and circumstances including, but not limited to, decisions to rebalance the investment portfolio, sales of securities to meet cash flow needs and sales of securities to take advantage of favorable pricing. In general, a security is considered a candidate for OTTI evaluation if it meets any of the following criteria: .. The Company may not realize a full recovery on their investment based on lack of ability or intent to hold a security to recovery; .. Fundamental credit risk of the issuer exist; and/or .. Other qualitative/quantitative factors exist indicating an OTTI has occurred. When a credit-related OTTI is present, the amount of OTTI recognized as a realized capital loss is equal to the difference between the investment's amortized cost basis and the present value of cash flows expected to be collected regardless of management's ability or intent to hold the security. -------------------------------------------------------------------------------- 16 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Common and preferred stock investments whose fair value is less than their carrying value for a period greater than nine months or at a significant discount to acquisition value are considered to be potentially impaired. For securities with unrealized losses, an analysis is performed. Factors include: .. If management intends to sell a security that is in an unrealized loss position then an OTTI loss is considered to have occurred. .. If the investments are trading at a significant (25 percent or more) discount to par, amortized cost (if lower) or cost for an extended period of time (nine consecutive months or longer); or .. If a discrete credit event occurs resulting in: (i) the issuer defaulting on a material outstanding obligation; (ii) the issuer seeking protection from creditors under bankruptcy law 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 .. If there are other factors precluding a full recovery of the investment. Limited partnership investments whose fair value is less than its book value for a period greater than twelve months with a significant unrealized loss are considered candidates for OTTI. OTTI factors that are periodically considered include: .. If an order of liquidation or other fundamental credit issues with the partnership exists; .. If there is a significant reduction in scheduled cash flow activities between the Company and the partnership or fund during the year; .. If there is an intent to sell, or the Company may be required to sell, the investment prior to the recovery of cost of the investment; or .. If other qualitative/quantitative factors indicating an OTTI exist. Equities in Pools & Associations -------------------------------------------------------------------------------- The Company accounts for its participation in the Association (See Note 6) by recording its participation in .. net premium participation as gross premium, .. the underwriting and net investment income results in the Statements of Operations and Changes in Capital and Surplus, .. insurance and reinsurance balances in the Statements of Admitted Assets and Liabilities, Capital and Surplus; and .. all other non-insurance assets and liabilities recorded as Equities in Underwriting Pools and Associations in the Statements of Admitted Assets and Liabilities, Capital and Surplus. Foreign Currency Transactions -------------------------------------------------------------------------------- Financial statement accounts expressed in foreign currencies are translated into U.S. dollars. Foreign currency assets and liabilities are translated into U.S. dollars using rates of exchange prevailing at the period end date with the related translation adjustments recorded as unrealized gains or losses within Unassigned surplus in the Statements of Capital and Surplus. Gains or losses due to translating foreign operations to U.S. dollars are recorded as unrealized gains or losses. All other realized gains and losses resulting from foreign currency transactions, not in support of foreign insurance operations, are included in Other Income in the Statements of Operations. Retirement Plans, Deferred Compensation, Postemployment Benefits and Compensated Absences and Other Postretirement Benefit Plans -------------------------------------------------------------------------------- The Company's employees participate in various AIG-sponsored defined benefit pension and postretirement plans. AIG, as sponsor, is ultimately responsible for the maintenance of these plans in compliance with applicable laws. The Company is not directly liable for obligations under these plans. AIG charges the Company and its insurance company affiliates pursuant to intercompany expense sharing agreements; the expenses are then shared by the pool participants in accordance with the pooling agreement. The Company incurred the following employee related costs associated with these plans during 2014, 2013 and 2012:
------------------------------------------------------------------------------------------------ YEARS ENDED DECEMBER 31, 2014 2013 2012 ------------------------------------------------------------------------------------------------ Defined benefit plans $ 4,692 $ 14,572 $ 9,915 Defined contribution plans 5,875 7,066 7,246 Postretirement medical and life insurance plans 651 788 652 ------------------------------------------------------------------------------------------------ TOTAL $ 11,218 $ 22,426 $ 17,813 ------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 17 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Depreciation -------------------------------------------------------------------------------- Certain assets, principally electronic data processing ("EDP") equipment, software and leasehold improvements are designated as nonadmitted assets and their net book value is deducted from surplus. EDP equipment primarily consists of non-operating software and is depreciated over its useful life, generally not exceeding five years. Leasehold improvements are amortized over the lesser of the remaining lease term or the estimated useful life of the leasehold improvement. Income Taxes -------------------------------------------------------------------------------- The Company files a consolidated U.S. federal income tax return with AIG. AIG has more than 300 subsidiaries which form part of this tax return. A complete listing of the participating subsidiaries is included in Note 8. The Company is allocated U.S. federal income taxes based upon a tax sharing agreement (the "Tax Sharing Agreement") with AIG, effective January 1, 2012 and approved by the Company's Board of Directors. This agreement provides that the Company shall incur tax results that would have been paid or received by such company if it had filed a separate federal income tax return, with limited exceptions. Additionally, while the agreement described above governs the current and deferred tax recorded in the income tax provision, the amount of cash that will be paid or received for U.S. federal income taxes may at times be different. The terms of this agreement are based on principles consistent with the allocation of income tax expense or benefit on a separate company basis, except that: .. The sections of the Internal Revenue Code relating to Alternative Minimum Tax ("AMT") are applied, but only if the AIG consolidated group is subject to AMT in the Consolidated Tax Liability, and; .. The impact of deferred Intercompany Transactions (as defined in Treas. Reg. (S)1.1502-13(b)(1), if the "intercompany items" from such transaction, as defined in Treas. Reg. (S)1.1502-13(b)(2), have not been taken into account pursuant to the "matching rule" of Treas. Reg. (S)1.1502-13(c)), are excluded from current taxation, provided however, that the Company records the appropriate deferred tax asset and/or deferred tax liability related to the gain or loss and includes such gain or loss in its separate return tax liability in the subsequent tax year when the deferred tax liability or deferred tax asset becomes current. In 2014, the Company, modified the Tax Sharing Agreement to clarify certain tax attributes related to the 2013 Association distribution of AIG Europe Holdings Limited's ("AEHL") shares (see Note 6D). The gain resulting from the transfer was treated as currently taxable and the Company's resulting tax liability was waived in the form of a deemed capital contribution. As a result, the Company recognized a benefit to surplus of $21,494. The NY DFS responded to the related informational submissions describing the amendment with no objection. The Company has an enforceable right to recoup federal income taxes in the event of future net losses that it may incur or to recoup its net losses carried forward as an offset to future net income subject to federal income taxes. Under the Tax Sharing Agreement, tax liabilities related to uncertain tax positions and tax authority audit adjustments ("TAAAs") shall remain with the Company for which the tax liabilities relate. Furthermore, if and when such tax liabilities are realized or determined to no longer be necessary, the responsibility for any additional tax liabilities, benefits or rights to any refunds due remains with the Company. In 2014, the Company settled for cash certain tax payables and receivables with AIG. Such payables and receivables related to TAAAs that were reflected in an amended federal income tax return filing for the tax years 2007 to 2011, which was filed with the Internal Revenue Service ("IRS"). In the prior year, the tax receivables were not admitted into surplus and as a result, the Company recognized a statutory capital benefit of $17,533 upon cash settlement. In accordance with Circular Letter 1979-33 issued by the NY DFS, AIG shall establish and maintain an escrow account for amounts where the Company's separate return liability exceeds the AIG consolidated tax liability. -------------------------------------------------------------------------------- 18 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Deferred Taxes -------------------------------------------------------------------------------- The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be realized ("adjusted gross deferred tax asset"). The evaluation of the recoverability of the deferred tax asset and the need for a valuation allowance requires management to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion 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 would be to support a conclusion that a valuation allowance is not needed. Our framework for assessing the recoverability of deferred tax assets requires us to consider all available evidence, including: .. the nature, frequency, and amount of cumulative financial reporting income and losses in recent years; .. the sustainability of recent operating profitability of our subsidiaries; .. 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; and, .. prudent and feasible actions and tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset. The adjusted gross deferred tax asset is then assessed for statutory admissibility. The reversing amount eligible for loss carryback or the amount expected to be realized in three years is admissible, subject to the defined surplus limitation. The remaining adjusted gross deferred tax asset can be admitted to the extent of offsetting deferred tax liabilities. 2. ACCOUNTING ADJUSTMENTS TO STATUTORY BASIS FINANCIAL STATEMENTS -------------------------------------------------------------------------------- A. Change in Accounting Principles -------------------------------------------------------------------------------- 2014 Changes -------------------------------------------------------------------------------- In 2014, the Company adopted the following changes in the Statements of Statutory Accounting Principles ("SSAP"): Affordable Care Act Assessments: On June 12, 2014, the NAIC issued SSAP No. 106, Affordable Care Act Assessments ("SSAP 106"), which provides accounting and disclosure guidance related to assessments on entities that issue health insurance. Under the Affordable Care Act ("ACA"), an assessment becomes payable to the U.S. Treasury once a health insurer provides health insurance for any subject U.S. health risk during the calendar year, in an amount based upon the amount of health insurance provided by such company in the prior year. Under SSAP 106, the amount of the assessment shall be expensed and recognized as a liability once the entity provides qualifying health insurance. Additionally, the guidance requires the recognition in Special Surplus, as a reclassification from Unassigned Surplus, of an amount equal to its estimated subsequent fee year assessment based upon the health insurance written in the current year. The special surplus is restored to unassigned surplus in the following year, when the health insurer recognizes the expense for the assessment. The guidance additionally requires disclosure regarding certain information relevant to the calculation of the assessment. The Company has segregated surplus in the amount of $777 related to the assessment expected to be payable in 2015, and the company recognized an expense during 2014 of $621. Risk-Sharing Provisions: On December 12, 2014, the NAIC issued SSAP No. 107, Accounting for the Risk-Sharing Provisions of the Affordable Care Act. This statement provides accounting guidance for the Risk Adjustment Program, the Transitional Reinsurance Program, and the Transitional Risk Corridor Program of the ACA. While the Company participates in the health insurance market and is subject to certain provisions of the ACA, such as the assessment described above, with the exception of the industry-wide assessment on health insurers to fund the Transitional Reinsurance Program, the Company's health insurance policies are not subject to the risk sharing provisions of the ACA. The impact of the guidance on the Company relates solely to the treatment of Transitional Reinsurance Program assessment. -------------------------------------------------------------------------------- 19 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- 2013 Change -------------------------------------------------------------------------------- In 2013, the Company adopted the following change in the SSAP: Transfers and Servicing of Financial Assets: In March 2012, the NAIC issued SSAP No. 103 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This guidance supersedes SSAP No. 91R Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and conforms to the US GAAP guidance on accounting for transfers of financial assets. The adoption, which was effective January 1, 2013, did not have any impact on the Company's statutory basis financial statements. B. Adjustments to Surplus -------------------------------------------------------------------------------- During 2014, 2013 and 2012 the Company identified corrections that resulted in after-tax statutory adjustments to beginning capital and surplus of $(6,366), $(94,261) and $(29,278), respectively. In accordance with SSAP No. 3, Accounting Changes and Corrections of Errors ("SSAP 3"), the corrections of errors have been reported in the 2014, 2013 and 2012 statutory financial statements as adjustments to Unassigned Surplus. The impact of these corrections would have been to reduce the 2013 and 2012 net income by $25,080 and $40,655, respectively. Management has concluded that the effects of these errors on the previously issued financial statements were immaterial based on quantitative and qualitative assessment. The impact to surplus, assets and liabilities as of January 1, 2014, 2013 and 2012 is presented in the following tables:
----------------------------------------------------------------------------------------------------- POLICYHOLDERS' TOTAL ADMITTED 2014 ADJUSTMENTS SURPLUS ASSETS TOTAL LIABILITIES ----------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2013 $ 5,091,687 $ 23,671,479 $ 18,579,792 ADJUSTMENTS TO BEGINNING CAPITAL AND SURPLUS: ASSET CORRECTIONS 58,578 58,578 - LIABILITY CORRECTIONS (70,960) - 70,960 INCOME TAX CORRECTIONS 6,016 6,016 - ----------------------------------------------------------------------------------------------------- TOTAL ADJUSTMENTS TO BEGINNING CAPITAL AND SURPLUS (6,366) 64,594 70,960 ----------------------------------------------------------------------------------------------------- BALANCE AT JANUARY 1, 2014 AS ADJUSTED $ 5,085,321 $ 23,736,073 $ 18,650,752 -----------------------------------------------------------------------------------------------------
An explanation for each of the adjustments for prior period corrections is described below: Asset corrections - The increase in net admitted assets is the result of a) an increase in reinsurance recoverables related to the reversal of an accrued liability; b) an adjustment of an intangible asset resulting from the sale of the Canadian Branch of American Home Assurance Company c) an increase in admitted assets due to AIOA's under utilization of reserves to offset the aged premium receivable in their nonadmitted penalty determination; partially offset by d) a decrease in reinsurance recoverables due to an increase in the related SSAP No. 5R, Liabilities, Contingencies and Impairment of Assets ("SSAP 5R") reserve; and e) a decrease in reinsurance recoverables on paid losses related to miscoded ceded reinsurance. Liability corrections - The increase in total liabilities is primarily the result of a) an increase in loss reserves resulting from errors identified during the completion of a reserve substantiation study, b) an increase in IBNR related to asbestos business and in the calculation of the insolvent and commute estimate, c) an increase in the "Taxes, licenses, and fees" related to workers' compensation surcharges, d) an increase in "Ceded reinsurance premiums payable" resulting from unrecorded profit commission with Aerospace Agency, e) an increase in intercompany payables due to prior year costs incurred from the development of a claims systems; and f) an increase to the unpaid loss reserves resulting from miscoded ceded reinsurance on a facultative claim; partially offset by g) a correction to the historical loss provision for balances previously charged off. Income tax corrections - The decrease in taxes is primarily the result of a) corrections to prior period balances for adjustments to the current and deferred tax assets and liabilities and b) the tax effect of the corresponding change in asset and liability corrections. -------------------------------------------------------------------------------- 20 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
POLICYHOLDERS' TOTAL ADMITTED 2013 ADJUSTMENTS SURPLUS ASSETS TOTAL LIABILITIES ---------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2012 $ 6,004,343 $ 23,974,474 $ 17,970,131 Adjustments to beginning Capital and Surplus: Asset corrections (237,503) (237,503) - Liability corrections 154,162 - (154,162) Income tax corrections (10,920) (10,920) - ---------------------------------------------------------------------------------------------------- Total adjustments to beginning Capital and Surplus (94,261) (248,423) (154,162) ---------------------------------------------------------------------------------------------------- BALANCE AT JANUARY 1, 2013 AS ADJUSTED $ 5,910,082 $ 23,726,051 $ 17,815,969 ----------------------------------------------------------------------------------------------------
An explanation for each of the adjustments for prior period corrections is described below: Asset corrections - The decrease in total admitted assets is primarily the result of a) nonadmitting investment assets; b) a reduction in deductible recoverable relating to high deductible policies; c) a decrease in other assets; and d) reductions in premium and reinsurance assets partially offset by e) an increase in assets identified as deposits. Liability corrections - The increase in total liabilities is primarily the result of a) an increase in reinsurance payables; b) adjustments to tax, license, and fee reserves; c) an increase in excess ceding commission accruals; d) corrections to deposit accounting liabilities; and e) an increase in loss reserves relating to an asset correction noted in b) above. Income tax corrections - The decrease in taxes is primarily the result of a) correction to prior period balances for adjustments to the current and deferred tax assets and liabilities and b) the tax effect of the corresponding change in asset and liability corrections.
---------------------------------------------------------------------------------------------------- POLICYHOLDERS' TOTAL ADMITTED 2012 ADJUSTMENTS SURPLUS ASSETS TOTAL LIABILITIES ---------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2011 $ 5,667,303 $ 23,901,312 $ 18,234,009 Adjustments to beginning Capital and Surplus: Asset corrections 4,232 4,232 -- Liability corrections (26,436) -- 26,436 Income tax corrections (7,074) (7,074) -- ---------------------------------------------------------------------------------------------------- Total adjustments to beginning Capital and Surplus (29,278) (2,842) 26,436 ---------------------------------------------------------------------------------------------------- BALANCE AT JANUARY 1, 2012 AS ADJUSTED $ 5,638,025 $ 23,898,470 $ 18,260,445 ----------------------------------------------------------------------------------------------------
An explanation for each of the adjustments for prior period corrections is described below: Asset corrections - The net amount relates to corrections for the following items: a) deemed dividend resulting from the forgiveness of a loan to an affiliate, b) reconciling items relating to other assets and deposit programs partially offset by c) overstated allowance accounts; d) reduction of accrued recoverable related to self insured retention programs. Liability corrections - The increase in total liabilities is primarily the result of corrections for: a) IBNR statutory to GAAP differences; b) unearned premium and outstanding loss reserves resulting from reserve validations; partially offset by c) taxes, licenses and fees reserve for residual market plans and, d) deposit program liabilities. Income tax corrections- The decrease in taxes is primarily the result of corrections for: a) current and deferred tax assets and liabilities; and b) the tax effect of the corresponding change in asset and liability corrections. -------------------------------------------------------------------------------- 21 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- 3. INVESTMENTS -------------------------------------------------------------------------------- A. Bond (including Loan-backed and Structured Security) Investments -------------------------------------------------------------------------------- The reconciliation from carrying value to fair value of the Company's bond investments as of December 31, 2014 and 2013 are outlined in the table below:
--------------------------------------------------------------------------------------------------------------- GROSS GROSS CARRYING UNREALIZED UNREALIZED FAIR DECEMBER 31, 2014 VALUE GAINS LOSSES VALUE --------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENTS $ 618,156 $ 12,266 $ (4,731) $ 625,691 ALL OTHER GOVERNMENTS 265,689 9,436 (149) 274,976 STATES, TERRITORIES AND POSSESSIONS 1,121,081 91,461 (14) 1,212,528 POLITICAL SUBDIVISIONS OF STATES, TERRITORIES AND POSSESSIONS 1,628,632 79,441 (3) 1,708,070 SPECIAL REVENUE AND SPECIAL ASSESSMENT OBLIGATIONS AND ALL NON-GUARANTEED OBLIGATIONS OF AGENCIES AND AUTHORITIES AND THEIR POLITICAL SUBDIVISIONS 4,187,851 225,779 (1,629) 4,412,001 INDUSTRIAL AND MISCELLANEOUS 10,279,531 597,624 (48,710) 10,828,445 --------------------------------------------------------------------------------------------------------------- TOTAL $18,100,940 $1,016,007 $ (55,236) $19,061,711 --------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- GROSS GROSS CARRYING UNREALIZED UNREALIZED FAIR DECEMBER 31, 2013 VALUE GAINS LOSSES VALUE --------------------------------------------------------------------------------------------------------------- U.S. governments $ 458,904 $ 13,227 $ (6,956) $ 465,174 All other governments 421,888 13,773 (286) 435,375 States, territories and possessions 1,360,768 69,716 (6,325) 1,424,159 Political subdivisions of states, territories and possessions 1,808,897 80,496 (5,332) 1,884,061 Special revenue and special assessment obligations and all non-guaranteed obligations of agencies and authorities and their political subdivisions 4,706,143 161,925 (55,943) 4,812,125 Industrial and miscellaneous 8,023,757 496,437 (44,325) 8,475,869 --------------------------------------------------------------------------------------------------------------- TOTAL $16,780,357 $ 835,574 $(119,167) $17,496,763 ---------------------------------------------------------------------------------------------------------------
The carrying values and fair values of bonds at December 31, 2014, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.
------------------------------------------------------------------------------------------- CARRYING FAIR DECEMBER 31, 2014 VALUE VALUE ------------------------------------------------------------------------------------------- Due in one year or less $ 374,198 $ 377,017 Due after one year through five years 2,541,961 2,634,811 Due after five years through ten years 4,296,130 4,489,244 Due after ten years 3,373,310 3,580,414 Structured securities 7,515,341 7,980,225 ------------------------------------------------------------------------------------------- Total bonds $18,100,940 $19,061,711 -------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 22 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- B. Mortgage Loan Investments -------------------------------------------------------------------------------- The minimum and maximum lending rates for mortgage loans during 2014 were: --------------------------------------------------------------------------------
----------------------------------------------------------------------- MINIMUM MAXIMUM LENDING LENDING CATEGORY RATE % RATE % ----------------------------------------------------------------------- RETAIL 4.2% 5.1% OFFICE 3.2% 5.5% INDUSTRIAL 3.8% 5.0% MULTI-FAMILY 3.9% 5.3% HOTEL/MOTEL 3.8% 4.4% OTHER COMMERCIAL 4.3% 6.3% -----------------------------------------------------------------------
The maximum percentage of any one loan to the value of security at the time of the loan, exclusive of insured or guaranteed or purchase money mortgages was 75 percent. All of the mortgage loans were in good standing as of December 31, 2014. The Company did not have any advanced amounts for taxes or assessments. The following table details an analysis of mortgage loans as of December 31, 2014 and 2013:
---------------------------------------------------------------------------------------------------------------------- RESIDENTIAL COMMERCIAL ----------------------------------------------- FARM INSURED ALL OTHER INSURED ALL OTHER MEZZANINE TOTAL ---------------------------------------------------------------------------------------------------------------------- 2014 RECORDED INVESTMENT CURRENT $-- $-- $-- $-- $1,049,708 $-- $1,049,708 2013 Recorded Investment Current $-- $-- $-- $-- $ 536,056 $-- $ 536,056 ----------------------------------------------------------------------------------------------------------------------
C. Loan-Backed and Structured Investments -------------------------------------------------------------------------------- The Company did not record any non-credit other than temporary impairment losses during 2014 for loan-backed and structured securities. As of December 31, 2014, the Company held the following loan-backed and structured securities for which it recognized $27,338 of credit-related OTTI during 2014 based on the present value of projected cash flows being less than the amortized cost of the securities: -------------------------------------------------------------------------------- 23 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
BOOK/ADJUSTED CARRYING VALUE AMORTIZED COST PRESENT VALUE OF FAIR VALUE AT DATE OF FINANCIAL BEFORE CURRENT PROJECTED CASH RECOGNIZED AMORTIZED COST TIME OF STATEMENT WHERE CUSIP PERIOD OTTI FLOWS OTTI AFTER OTTI OTTI REPORTED ---------------------------------------------------------------------------------------------------- 00703QAD4 $11,079 $10,961 $ 118 $10,961 $10,929 3/31/2014 02148DAE0 6,211 6,079 132 6,079 5,700 3/31/2014 02149DAN9 7,890 7,869 20 7,869 7,511 3/31/2014 02150XAA9 11,486 11,427 59 11,427 10,988 3/31/2014 05949A4R8 8,190 8,124 66 8,124 8,069 3/31/2014 073870AA5 13,468 12,762 705 12,762 13,235 3/31/2014 07820QCD5 5,450 5,362 88 5,362 5,302 3/31/2014 12668AGN9 12,623 12,351 271 12,351 12,518 3/31/2014 12669GY70 16,707 16,505 202 16,505 15,787 3/31/2014 23243AAB2 334 206 128 206 328 3/31/2014 320516AA5 11,501 11,299 202 11,299 11,106 3/31/2014 45254NKQ9 3,525 3,417 108 3,417 3,504 3/31/2014 46630GAH8 7,061 7,044 17 7,044 7,014 3/31/2014 52523MAD2 7,174 7,097 77 7,097 7,007 3/31/2014 576433QT6 5,819 5,766 53 5,766 5,779 3/31/2014 57645TAA5 228 185 43 185 224 3/31/2014 59023RAJ8 6,680 6,604 76 6,604 6,594 3/31/2014 751150AH6 2,513 2,441 72 2,441 2,474 3/31/2014 863579B72 12,868 12,465 403 12,465 12,053 3/31/2014 86359LTG4 10,502 10,399 103 10,399 10,378 3/31/2014 94984NAA0 8,361 8,324 37 8,324 8,277 3/31/2014 007036HV1 3,995 3,960 35 3,960 3,950 6/30/2014 007036VF0 6,569 6,509 60 6,509 6,270 6/30/2014 00703AAA5 12,664 12,290 374 12,290 11,961 6/30/2014 02149DAN9 7,770 7,712 58 7,712 7,495 6/30/2014 02150XAA9 11,001 10,869 131 10,869 10,576 6/30/2014 02151JAA9 17,086 16,977 109 16,977 16,817 6/30/2014 02151RAB9 7,369 7,225 144 7,225 7,360 6/30/2014 05530MAA7 4,686 4,581 105 4,581 4,684 6/30/2014 07820QCD5 5,368 5,298 70 5,298 5,306 6/30/2014 12566TAD9 8,648 8,311 337 8,311 8,622 6/30/2014 12638PAH2 5,674 3,216 2,458 3,216 5,671 6/30/2014 12667FX34 3,552 3,504 49 3,504 3,543 6/30/2014 126694A40 46 32 15 32 43 6/30/2014 126694GF9 7,489 7,392 97 7,392 7,289 6/30/2014 12669FN25 4,884 4,817 66 4,817 4,767 6/30/2014 12669GY70 16,079 15,602 478 15,602 15,524 6/30/2014 17025TBE0 9,113 9,027 86 9,027 9,056 6/30/2014 320516AA5 16,713 16,399 314 16,399 16,264 6/30/2014 32051GJ55 6,285 6,095 190 6,095 6,185 6/30/2014 32053AAB2 6,742 6,623 119 6,623 6,666 6/30/2014 45670PAC2 5,851 5,688 162 5,688 5,830 6/30/2014 52524YAK9 17,511 16,944 567 16,944 17,228 6/30/2014 52525LAQ3 2,853 2,563 290 2,563 2,808 6/30/2014 55027YAD0 1,835 1,792 43 1,792 1,809 6/30/2014 61748HLA7 7,245 7,208 37 7,208 7,102 6/30/2014 76110H2J7 8,102 7,927 176 7,927 8,076 6/30/2014 855541AC2 10,181 10,156 25 10,156 9,987 6/30/2014 863579B72 12,042 12,027 15 12,027 11,638 6/30/2014 88522WAD5 12,071 11,790 281 11,790 12,060 6/30/2014
-------------------------------------------------------------------------------- 24 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
BOOK/ADJUSTED CARRYING VALUE AMORTIZED COST PRESENT VALUE OF DATE OF FINANCIAL BEFORE CURRENT PROJECTED CASH RECOGNIZED AMORTIZED COST FAIR VALUE AT STATEMENT WHERE CUSIP PERIOD OTTI FLOWS OTTI AFTER OTTI TIME OF OTTI REPORTED ---------------------------------------------------------------------------------------------------- 933634AA5 4,393 4,346 46 4,346 4,303 6/30/2014 94980MAA6 24,777 24,065 712 24,065 24,636 6/30/2014 94984NAA0 7,902 7,790 112 7,790 7,840 6/30/2014 94984SAE1 10,766 10,584 181 10,584 10,695 6/30/2014 94984UAE6 6,675 6,585 91 6,585 6,445 6/30/2014 007036QE9 5,149 5,120 29 5,120 5,134 9/30/2014 007036VF0 6,492 6,424 67 6,424 6,178 9/30/2014 02149DAN9 7,587 7,570 17 7,570 7,298 9/30/2014 02150XAA9 10,641 10,611 30 10,611 10,264 9/30/2014 02660KAA0 14,671 12,317 2,354 12,317 14,402 9/30/2014 02660LAB6 3,052 3,041 11 3,041 2,932 9/30/2014 05949A4R8 7,290 7,132 158 7,132 7,259 9/30/2014 126380AU8 2,449 2,417 32 2,417 2,356 9/30/2014 12668AXL4 4,345 4,330 15 4,330 4,341 9/30/2014 126694GF9 7,317 7,253 64 7,253 7,154 9/30/2014 12669FN25 4,706 4,700 6 4,700 4,629 9/30/2014 16163LAR3 9,165 9,020 145 9,020 9,012 9/30/2014 17313FAA0 15,003 14,733 270 14,733 14,864 9/30/2014 25150RAF2 12,180 11,993 186 11,993 11,870 9/30/2014 320516AA5 16,168 15,981 187 15,981 15,924 9/30/2014 32053AAB2 6,470 6,369 101 6,369 6,431 9/30/2014 41161PJX2 13,506 11,844 1,662 11,844 12,777 9/30/2014 456610AA2 3,799 3,769 30 3,769 3,627 9/30/2014 45662FAA8 3,028 2,937 90 2,937 3,020 9/30/2014 45662FAD2 3,861 3,817 45 3,817 3,850 9/30/2014 45668JAF3 5,013 4,920 93 4,920 4,948 9/30/2014 466286AA9 4,699 4,662 36 4,662 4,616 9/30/2014 46630GAH8 6,488 6,371 117 6,371 6,462 9/30/2014 68389FKQ6 14,454 14,221 233 14,221 13,951 9/30/2014 93936RAA2 8,764 8,693 72 8,693 8,714 9/30/2014 94983GAD0 6,860 6,765 95 6,765 6,856 9/30/2014 94984NAA0 7,548 7,292 256 7,292 7,529 9/30/2014 007036HV1 3,700 3,693 7 3,693 3,639 12/31/2014 007036QE9 5,027 4,915 111 4,915 4,964 12/31/2014 007036VF0 6,442 6,315 127 6,315 6,137 12/31/2014 02149DAN9 7,561 7,413 148 7,413 7,188 12/31/2014 02150XAA9 10,531 10,321 209 10,321 10,065 12/31/2014 02151RAB9 6,885 6,724 161 6,724 6,872 12/31/2014 05530VAA7 522 515 7 515 513 12/31/2014 05530VAB5 5,137 5,046 91 5,046 4,948 12/31/2014 058928AD4 1,248 1,237 11 1,237 1,219 12/31/2014 05946XR62 3,215 3,077 138 3,077 3,171 12/31/2014 05946XYX5 7,269 6,991 278 6,991 7,179 12/31/2014 05951GAD4 4,405 4,368 37 4,368 4,056 12/31/2014 07387AEG6 3,383 3,358 25 3,358 3,349 12/31/2014 07401CAS2 8,564 8,236 328 8,236 8,521 12/31/2014 125439AA7 6,338 6,206 132 6,206 6,234 12/31/2014 12628KAE2 3,199 2,927 272 2,927 3,094 12/31/2014 126380AU8 2,415 2,230 184 2,230 2,251 12/31/2014 12669FN25 4,517 4,465 52 4,465 4,380 12/31/2014
-------------------------------------------------------------------------------- 25 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
BOOK/ADJUSTED CARRYING VALUE AMORTIZED COST PRESENT VALUE OF DATE OF FINANCIAL BEFORE CURRENT PROJECTED CASH RECOGNIZED AMORTIZED COST FAIR VALUE AT STATEMENT WHERE CUSIP PERIOD OTTI FLOWS OTTI AFTER OTTI TIME OF OTTI REPORTED ---------------------------------------------------------------------------------------------------- 12669GA92 5,695 5,513 181 5,513 5,591 12/31/2014 16162WPG8 12,605 12,304 301 12,304 12,434 12/31/2014 17313FAA0 14,828 14,335 493 14,335 14,642 12/31/2014 25150WAA2 6,539 6,407 133 6,407 6,354 12/31/2014 25151YAC3 7,033 6,992 41 6,992 7,018 12/31/2014 320516AA5 15,837 15,511 326 15,511 15,507 12/31/2014 32051GJ55 5,959 5,830 129 5,830 5,824 12/31/2014 32051GLQ6 7,751 7,642 109 7,642 7,679 12/31/2014 32053AAB2 6,273 6,160 113 6,160 6,235 12/31/2014 36242D4W0 4,458 4,423 35 4,423 4,331 12/31/2014 45254NML8 5,150 5,089 61 5,089 5,147 12/31/2014 45660LDE6 29,837 29,017 820 29,017 29,839 12/31/2014 45660LP29 9,966 9,810 155 9,810 9,769 12/31/2014 45662FAD2 3,742 3,683 58 3,683 3,702 12/31/2014 45668JAF3 4,969 4,847 122 4,847 4,931 12/31/2014 46630GAH8 6,051 5,953 97 5,953 6,046 12/31/2014 550279AA1 7,297 6,732 565 6,732 7,161 12/31/2014 55027YAD0 1,717 1,680 38 1,680 1,680 12/31/2014 576433QT6 5,066 5,013 53 5,013 5,017 12/31/2014 57645TAA5 304 303 1 303 302 12/31/2014 59023RAJ8 5,676 5,564 112 5,564 5,540 12/31/2014 61748HLA7 6,737 6,628 109 6,628 6,333 12/31/2014 617538AC7 8,225 8,080 145 8,080 7,356 12/31/2014 74923JAE7 5,992 5,574 418 5,574 5,250 12/31/2014 76110H7B9 5,095 4,999 96 4,999 4,848 12/31/2014 768277AA3 2,920 2,611 308 2,611 2,798 12/31/2014 78473WAE3 14,381 14,196 185 14,196 14,048 12/31/2014 855541AC2 9,943 9,794 149 9,794 9,636 12/31/2014 86359B5P2 5,846 5,835 11 5,835 5,747 12/31/2014 86359DUR6 5,383 5,280 103 5,280 5,357 12/31/2014 86359PAC4 8,253 8,149 103 8,149 7,920 12/31/2014 86361PAA4 3,856 3,831 25 3,831 3,760 12/31/2014 86362RAC5 4,734 4,576 158 4,576 4,694 12/31/2014 92922F7Q5 9,923 9,700 223 9,700 9,797 12/31/2014 92926WAA5 28,240 27,371 869 27,371 27,646 12/31/2014 933634AA5 4,038 3,994 44 3,994 4,028 12/31/2014 933638AA6 8,045 7,979 66 7,979 7,887 12/31/2014 93364AAB8 1,907 1,896 11 1,896 1,841 12/31/2014 93364FAD3 3,789 3,736 53 3,736 3,751 12/31/2014 94983GAA6 3,974 3,889 85 3,889 3,968 12/31/2014 94984SAE1 9,797 9,485 312 9,485 9,649 12/31/2014 94984UAE6 6,286 6,101 185 6,101 6,077 12/31/2014
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 26 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The following table shows the aggregate unrealized losses and related fair value relating to those securities for which an OTTI has not been recognized as of the reporting date and the length of time that the securities have been in a continuous unrealized loss position: Aggregate unrealized losses: Less than 12 Months $ 15,151 12 Months or longer $ 20,215 Aggregate related fair value of securities with unrealized losses: Less than 12 Months $1,046,407 12 Months or longer $ 371,592
D. Unrealized losses -------------------------------------------------------------------------------- The fair value of the Company's bonds and stocks that had gross unrealized losses (where fair value is less than amortized cost) as of December 31, 2014 and 2013 are set forth in the table below:
-------------------------------------------------------------------------------------------------------- DECEMBER 31, 2014 LESS THAN 12 MONTHS 12 MONTHS OR LONGER TOTAL --------------------------------------------------------------- FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED DESCRIPTION OF SECURITIES VALUE LOSSES VALUE LOSSES VALUE LOSSES -------------------------------------------------------------------------------------------------------- U.S. GOVERNMENTS $ 337,299 $ (1,255) $ 24,724 $ (1,364) $ 362,023 $ (2,619) ALL OTHER GOVERNMENTS 24,617 (2,415) 573 (50) 25,190 (2,465) STATES, TERRITORIES AND POSSESSIONS 13,639 (4) 1,086 (10) 14,725 (14) POLITICAL SUBDIVISIONS OF STATES, TERRITORIES AND POSSESSIONS 4,826 (3) - - 4,826 (3) SPECIAL REVENUE 197,974 (48) 121,146 (1,581) 319,120 (1,629) INDUSTRIAL AND MISCELLANEOUS 1,913,012 (49,247) 421,245 (25,229) 2,334,257 (74,476) -------------------------------------------------------------------------------------------------------- TOTAL BONDS 2,491,367 (52,972) 568,774 (28,234) 3,060,141 (81,206) -------------------------------------------------------------------------------------------------------- AFFILIATED - - 21,736 (4,858) 21,736 (4,858) NON-AFFILIATED 27,724 (5,435) - - 27,724 (5,435) -------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 27,724 (5,435) 21,736 (4,858) 49,460 (10,293) -------------------------------------------------------------------------------------------------------- TOTAL STOCKS 27,724 (5,435) 21,736 (4,858) 49,460 (10,293) -------------------------------------------------------------------------------------------------------- TOTAL BONDS AND STOCKS $2,519,091 $(58,407) $590,510 $(33,092) $3,109,601 $(91,499) --------------------------------------------------------------------------------------------------------
DECEMBER 31, 2013 LESS THAN 12 MONTHS 12 MONTHS OR LONGER TOTAL --------------------------------------------------------------- FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED DESCRIPTION OF SECURITIES VALUE LOSSES VALUE LOSSES VALUE LOSSES -------------------------------------------------------------------------------------------------------- U.S. governments $ 166,481 $ (4,910) $ 4,513 $ (511) $ 170,994 $ (5,422) All other governments 54,133 (5,929) - - 54,133 (5,929) States, territories and possessions 184,341 (6,325) - - 184,341 (6,325) Political subdivisions of states, territories and possessions 160,011 (5,332) - - 160,011 (5,332) Special revenue 1,182,735 (48,499) 46,375 (7,444) 1,229,110 (55,943) Industrial and miscellaneous 1,606,368 (53,144) 279,823 (4,201) 1,886,190 (57,345) -------------------------------------------------------------------------------------------------------- TOTAL BONDS 3,354,069 (124,139) 330,711 (12,156) 3,684,779 (136,296) -------------------------------------------------------------------------------------------------------- Affiliated - - 21,480 (5,115) 21,480 (5,115) Non-affiliated 27,570 (2,893) - - 27,570 (2,893) -------------------------------------------------------------------------------------------------------- Total common stocks 27,570 (2,893) 21,480 (5,115) 49,050 (8,008) -------------------------------------------------------------------------------------------------------- TOTAL STOCKS 27,570 (2,893) 21,480 (5,115) 49,050 (8,008) -------------------------------------------------------------------------------------------------------- TOTAL BONDS AND STOCKS $3,381,639 $(127,032) $352,191 $(17,271) $3,733,829 $(144,304) --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 27 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- E. Realized Gains/(Losses) -------------------------------------------------------------------------------- Proceeds from sales and associated gross realized gains (losses) for the years ended December 31, 2014, 2013 and 2012 were as follows:
----------------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31 2014 2013 2012 ----------------------------------------------------------------------------------------- EQUITY EQUITY EQUITY BONDS SECURITIES BONDS SECURITIES BONDS SECURITIES ----------------------------------------------------------------------------------------- Proceeds from sale $2,737,487 $21,041 $1,834,014 $3,272 $3,047,963 $2,830 Gross realized gains 78,299 5,154 56,537 50 133,853 21 Gross realized losses (13,617) (804) (6,960) (61) (6,685) (86)
F. Derivative Financial Instruments -------------------------------------------------------------------------------- The Company's currency derivative financial instruments were entered into to manage risk from currency exchange rate fluctuations, and the impact of such fluctuations to surplus and cash flows on investments or loss reserves. While not accounted for under hedge accounting, the currency derivatives are economic hedges of the Company's exposure to fluctuations in the value of receipts on certain investments held by the Company denominated in foreign currencies (primarily GBP and EUR), or of the Company's exposure to fluctuations in recorded amounts of loss reserves denominated in foreign currencies (primarily JPY). Market Risk The Company is exposed under its currency derivatives to fluctuations in value of the swaps and forwards and variability of cash flows due to changes in exchange rates. Credit Risk The current credit exposure of the Company's derivative contracts is limited to the fair value of such contracts. Credit risk is managed by entering into transactions with creditworthy counterparties and obtaining collateral. Cash Requirement The Company is subject to collateral requirements on its currency derivative contracts. Additionally, the Company is required to make currency exchanges on fixed dates and fixed amounts or fixed exchange rates, or make a payment in the amount of foreign currency physically received on certain foreign denominated investments. The currency derivatives do not qualify for hedge accounting. As a result, the Company's currency contracts are accounted for at fair value and the changes in fair value are recorded as unrealized gains or losses in the Statements of Operations and Changes in Capital and Surplus until the derivative expires at which time the related unrealized amounts are recognized in Realized capital gains/losses. The Company did not apply hedge accounting to any of its derivatives for any period in these financial statements. The following tables summarize the outstanding notional amounts, the fair values and the realized and unrealized gains or losses of the derivative financial instruments held by the Company for the year ended December 31, 2014 and 2013.
------------------------------------------------------------------------------------------ DECEMBER 31, 2014 YEAR ENDED DECEMBER 31, 2014 ------------------------ ------------------------------ UNREALIZED OUTSTANDING FAIR REALIZED GAINS/ CAPITAL GAINS / DERIVATIVE FINANCIAL INSTRUMENT NOTIONAL AMOUNT VALUE (LOSSES) (LOSSES) ------------------------------------------------------------------------------------------ SWAPS $ 933,978 $ 33,230 $(14,509) $ 33,230 FORWARDS 70,662 (578) 3,028 (578) ------------------------------------------------------------------------------------------ TOTAL $1,004,640 $ 32,652 $(11,481) $ 32,652 ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ DECEMBER 31, 2013 YEAR ENDED DECEMBER 31, 2013 ------------------------ ------------------------------ UNREALIZED OUTSTANDING FAIR REALIZED GAINS/ CAPITAL GAINS / DERIVATIVE FINANCIAL INSTRUMENT NOTIONAL AMOUNT VALUE (LOSSES) LOSSES ------------------------------------------------------------------------------------------ Swaps $ 655,560 $(17,416) $ (7,575) $(17,416) ------------------------------------------------------------------------------------------ Forwards 83,105 (2,937) (4,812) (2,937) ------------------------------------------------------------------------------------------ TOTAL $ 738,665 $(20,353) $(12,387) $(20,353) ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 28 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Derivative instruments reported on the Statements of Admitted Assets and the Statements of Liabilities, Capital and Surplus have been reduced by the amount of collateral held or posted by the Company with respect to the derivative position. G. Other Invested Assets -------------------------------------------------------------------------------- During 2014, 2013 and 2012, the Company recorded the following OTTI impairment losses on investments in joint ventures and partnerships:
--------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2014 2013 2012 --------------------------------------------------------------------------------------- Advanced Technology Ventures VII, L.P. $ 7,329 $ - - Prides Capital Fund I LP 3,781 3,904 - General Atlantic Partners 78, L.P. 1,850 - - PineBridge Private Equity Portfolio, L.P. 1,060 - - GA-GTCO US AIV, L.P. - 10,704 - Steel Partners Holdings L.P. - - 4,569 General Atlantic Mauritius Limited - - 2,276 Hunter Global Investors LP - - 1,578 Investments individually less than $1 million - 1,919 - --------------------------------------------------------------------------------------- TOTAL $ 14,020 $ 16,527 8,423 ---------------------------------------------------------------------------------------
H. Investment Income -------------------------------------------------------------------------------- The Company had no accrued investment income receivables over 90 days past due. Investment expenses of $24,394, $23,870 and $29,000 were included in Net Investment Income for the years ended December 31, 2014, 2013 and 2012, respectively. I. Financial Instruments with Credit Risk -------------------------------------------------------------------------------- The Company is exposed to credit risk relating to its investments both from potential issuer, geographic or activity concentrations. These risks are managed strategically using asset allocation methodologies that select primarily high quality investments and asset diversification. In addition, AIG company-wide credit risks are monitored by AIG's Financial Risk Group ("FRG") who attempt to avoid unwanted or excessive risk accumulations, whether funded or unfunded. To minimize the level of credit risk, the Company may require third party guarantees, reinsurance or collateral, such as letters of credit and trust collateral accounts. The Company monitors its aggregate credit exposure. The Company's largest exposures by investment category to a single issuer/borrower/investment, excluding the U.S. government, U.S. government agency securities and those U.S. government money market funds as of December 31, 2014 are as follows:
--------------------------------------------------------------------------------------------- ISSUER DESCRIPTION OF EXPOSURE AMOUNT PERCENTAGE OF TOTAL ADMITTED ASSETS --------------------------------------------------------------------------------------------- L Street II Limited Liability Company Bonds $ 335,092 1.3% Operating Pool Short Term Investments 282,664 1.1% New York New York Bonds 262,433 1.0% Washington Mutual Incorporated Bonds 220,315 0.8% The Bear Stearns Companies Limited Liability Company Bonds 216,513 0.8% New York State Dormitory Authority Bonds 199,491 0.8% Chamonix Portfolio Other Invested Assets 175,311 0.7% Wells Fargo & Company Bonds 172,090 0.7% California State Bonds 168,921 0.6% Knightsbridge Student Housing - United Kingdom Student Accommodation Portfolio Commercial Mortgage Loan 159,970 0.6%
-------------------------------------------------------------------------------- 29 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The amounts and percentages of the Company's total admitted assets held in bonds by NAIC rating as of December 31, 2014 are: --------------------------------------------------------------------------------
------------------------------------------------------------------------------------ PERCENTAGE OF TOTAL ADMITTED BONDS AMOUNT ASSETS ------------------------------------------------------------------------------------ NAIC-1 $ 15,111,207 57.3% NAIC-2 2,341,980 8.9% NAIC-3 426,532 1.6% NAIC-4 415,194 1.6% NAIC-5 49,832 0.2% NAIC-6 50,769 0.2% ------------------------------------------------------------------------------------ Total 18,395,514 69.8% ------------------------------------------------------------------------------------
The following table shows the Company's foreign investment exposures by country categorized by NAIC sovereign ratings as of December 31, 2014:
---------------------------------------------------------------------------------------- NAIC - 3 COUNTRY NAIC - 1 NAIC - 2 OR BELOW ---------------------------------------------------------------------------------------- United Kingdom $ 897,174 $ - $ - Cayman Islands 579,073 - - Spain - 20,505 - Mexico - 8,608 - Argentina - - 38,104 Barbados - - 6,707 Other 1,064,246 11,376 1,066 ---------------------------------------------------------------------------------------- Total $ 2,540,493 $ 40,489 $ 45,877 ----------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- The Company's unhedged foreign currency exposures, categorized by the country's NAIC sovereign rating as of December 31, 2014:
---------------------------------------------------------------------------------------- NAIC -3 OR COUNTRY NAIC -1 NAIC -2 BELOW ---------------------------------------------------------------------------------------- United Kingdom $ 513,185 $ - $ - Netherlands 79,742 - - Spain - 6,961 - Argentina - - 13,575 Other 179,543 - - ---------------------------------------------------------------------------------------- TOTAL $ 772,470 $ 6,961 $ 13,575 ----------------------------------------------------------------------------------------
The following table shows the three largest non-affiliated privately placed equity investments held by the Company as of December 31, 2014:
---------------------------------------------------------------------------------------- PERCENTAGE OF TOTAL ADMITTED ISSUER AMOUNT ASSETS ---------------------------------------------------------------------------------------- Chamonix Portfolio $ 175,311 0.7% Blackstone Real Estate Partners (BREP) VI, LP 105,453 0.4% Sands Portfolio Final Upsize 56,833 0.2% ---------------------------------------------------------------------------------------- Aggregate Exposure $ 2,485,904 9.4% ----------------------------------------------------------------------------------------
J. Restricted Assets -------------------------------------------------------------------------------- The Company had securities deposited with regulatory authorities, as required by law, with a carrying value of $890,664 and $1,155,475 as of December 31, 2014 and 2013, respectively. -------------------------------------------------------------------------------- 30 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- 4. FAIR VALUE OF FINANCIAL INSTRUMENTS -------------------------------------------------------------------------------- The following table presents information about financial instruments carried at fair value on a recurring basis and indicates the level of the fair value measurement as of December 31, 2014 and 2013:
--------------------------------------------------------------------------------------------------------- 2014 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL --------------------------------------------------------------------------------------------------------- BONDS $ - $ 418,887 $ 122,153 $ 541,040 COMMON STOCKS 25,664 - - 25,664 DERIVATIVE ASSET - 25,874 7,774 33,648 DERIVATIVE LIABILITIES - (996) - (996) MUTUAL FUNDS 26,832 - - 26,832 --------------------------------------------------------------------------------------------------------- TOTAL $ 52,496 $ 443,765 $ 129,927 $ 626,188 --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- 2013 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL --------------------------------------------------------------------------------------------------------- Bonds $ - $ 286,787 $ 24,684 $ 311,471 Common stocks 36,576 - - 36,576 Derivative asset - - 428 428 Derivative liabilities - (16,279) (4,502) (20,781) Mutual funds 31,747 - - 31,747 --------------------------------------------------------------------------------------------------------- Total $ 68,323 $ 270,508 $ 20,610 $ 359,441 ---------------------------------------------------------------------------------------------------------
There were no assets carried at fair value that were transferred between Level 1 and Level 2 during 2014 and 2013. A. Fair Value Measurements in (Level 3) of the Fair Value Hierarchy -------------------------------------------------------------------------------- The following tables show the balance and activity of financial instruments classified as level 3 in the fair value hierarchy for the years ended December 31, 2014 and 2013.
------------------------------------------------------------------------------------------------------------------ TOTAL UNREALIZED PURCHASES, REALIZED GAINS GAINS SALES, BEGINNING (LOSSES) INCLUDED IN (LOSSES) ISSUANCES, BALANCE AT BALANCE AT TRANSFERS TRANSFERS OUT NET INVESTMENT INCLUDED IN SETTLEMENTS, DECEMBER 31, 2014 JANUARY 1, 2014 INTO LEVEL 3 OF LEVEL 3 INCOME SURPLUS NET 2014 ------------------------------------------------------------------------------------------------------------------ BONDS $ 24,684 $81,179 $(110,203) $3,644 $(79,264) $202,113 $122,153 DERIVATIVES (4,074) - - - 11,848 - 7,774 ------------------------------------------------------------------------------------------------------------------ TOTAL $ 20,610 $81,179 $(110,203) $3,644 $(67,416) $202,113 $129,927 ------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2014, bonds of $110,203 which are no longer carried at fair value, were transferred out of Level 3. Bond balances of $81,179 were transferred into Level 3 and carried at fair value during 2014. Prior to the transfer, the securities were Level 3 but not carried at fair value. There were no bonds or common stocks carried at fair value transferred to/from Level 3 originating in Levels 1 or 2. There were no derivative balances transferred to/from Level 3 during 2014. -------------------------------------------------------------------------------- 31 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------- TOTAL REALIZED GAINS (LOSSES) UNREALIZED PURCHASES, BEGINNING INCLUDED IN GAINS SALES, BALANCE AT NET (LOSSES) ISSUANCES, BALANCE AT JANUARY 1, TRANSFERS TRANSFERS OUT INVESTMENT INCLUDED SETTLEMENTS, DECEMBER 31, 2013 2013 INTO LEVEL 3 OF LEVEL 3 INCOME IN SURPLUS NET 2013 ---------------------------------------------------------------------------------------------------------------------- Bonds $ 55,092 $ 44,342 $ (171,814) $ 5,699 $ (33,231) $ 124,596 $ 24,684 Derivatives - 7,975 - - (12,049) - (4,074) ---------------------------------------------------------------------------------------------------------------------- TOTAL $ 55,092 $ 52,317 $ (171,814) $ 5,699 $ (45,280) $ 124,596 $ 20,610 ----------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2013, bonds of $171,814 which are no longer carried at fair value, were transferred out of Level 3. Bond balance of $44,342 was transferred into Level 3 and carried at market value during 2013. Prior to the transfer, the securities were Level 3 but not carried at fair value. Derivative balances of $7,975 were transferred into Level 3 and carried at fair value during 2013. Prior to the transfer, the securities were level 2 and carried at fair value. There were no bonds or common stocks carried at fair value transferred to/from Level 3 originating in Levels 1 or 2. B. Fair Value of all Financial Instruments -------------------------------------------------------------------------------- The table below details the fair value of all financial instruments except for those accounted for under the equity method as of December 31, 2014 and 2013:
--------------------------------------------------------------------------------------------------------------------- AGGREGATE FAIR NOT PRACTICABLE DECEMBER 31, 2014 VALUE ADMITTED ASSETS LEVEL 1 LEVEL 2 LEVEL 3 (CARRY VALUE) --------------------------------------------------------------------------------------------------------------------- BONDS $ 19,061,712 $ 18,100,940 $ 199,531 $ 15,199,173 $ 3,663,008 $ - COMMON STOCK 25,664 25,664 25,664 - - - DERIVATIVES - ASSETS 33,648 2,338 - 25,874 7,774 - DERIVATIVES - LIABILITIES (996) (996) - (996) - - MORTGAGE LOANS 1,112,182 1,049,708 - - 1,112,182 - MUTUAL FUNDS 26,832 26,832 26,832 - - - PREFERRED STOCK 34,674 18,412 - - 34,674 - SHORT TERM INVESTMENTS 294,574 294,574 10,923 283,651 - - --------------------------------------------------------------------------------------------------------------------- TOTAL $ 20,588,290 $ 19,517,472 $ 262,950 $ 15,507,702 $ 4,817,638 $ - --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- AGGREGATE FAIR NOT PRACTICABLE DECEMBER 31, 2013 VALUE ADMITTED ASSETS LEVEL 1 LEVEL 2 LEVEL 3 (CARRY VALUE) --------------------------------------------------------------------------------------------------------------------- Bonds $ 17,496,764 $ 16,780,357 1,938 14,654,585 2,840,241 - Common stock 36,576 36,576 36,576 - - - Derivatives - assets 428 428 - - 428 - Derivatives - liabilities (20,781) (20,781) - (16,280) (4,502) - Mortgage loans 551,617 536,056 - - 551,617 - Mutual funds 31,747 31,747 31,747 - - - Short term investments 308,868 308,868 233 308,634 - - --------------------------------------------------------------------------------------------------------------------- TOTAL $ 18,405,219 $ 17,673,251 $ 70,494 $ 14,946,939 $ 3,387,784 $ - ---------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 32 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- 5. RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (LAE) -------------------------------------------------------------------------------- A roll forward of the Company's net reserves for losses and LAE as of December 31, 2014, 2013 and 2012, is set forth in the table below:
-------------------------------------------------------------------------------------------------------------- 2014 2013 2012 -------------------------------------------------------------------------------------------------------------- RESERVES FOR LOSSES AND LAE, END OF PRIOR YEAR $ 12,445,415 $ 12,300,489 $ 12,466,514 -------------------------------------------------------------------------------------------------------------- Incurred losses and LAE related to: Current accident year 3,957,869 3,525,027 4,006,581 Prior accident year 190,857 275,409 252,121 -------------------------------------------------------------------------------------------------------------- TOTAL INCURRED LOSSES AND LAE $ 4,148,726 $ 3,800,436 $ 4,258,702 -------------------------------------------------------------------------------------------------------------- Paid losses and LAE related to: Impact of pooling restructure transaction 1,563,011 - - Current accident year (1,033,539) (744,185) (1,218,287) Prior accident year (3,694,053) (2,911,325) (3,206,440) -------------------------------------------------------------------------------------------------------------- TOTAL PAID LOSSES AND LAE (3,164,581) (3,655,510) (4,424,727) -------------------------------------------------------------------------------------------------------------- RESERVES FOR LOSSES AND LAE, END OF CURRENT YEAR $ 13,429,560 $ 12,445,415 $ 12,300,489 --------------------------------------------------------------------------------------------------------------
For 2014, the Company reported adverse loss and LAE net reserve development of $190,857, which includes a loss reserve discount benefit of $14,789 due to changes in the payout pattern assumptions, accretion, as well as the impact of the Combined Pooling Agreement (Note 6). The adverse development is comprised mainly of development on the Constructions class of business of $87,439, the National Accounts class of business of $82,957, and the Executive Liability class of business of $68,784 partially offset with $(119,961) of favorable develpoment from the Japan branch transfer. Original estimates are increased or decreased, as additional information becomes known regarding individual claims. Included in this increase, is $31,500 of unfavorable prior year loss development on retrospectively rated policies as of December 31, 2014, which was offset by additional premiums. For 2013, the Company reported adverse loss and LAE net reserve development of $275,409 including accretion of loss reserve discount of $58,231. The adverse development was mostly attributable to Transportation, Construction and Property classes of business partially offset by favorable development in Excess Casualty and Personal lines. Included in this increase, is $32,040 of unfavorable prior year loss development on retrospectively rated policies as of December 31, 2013, which was offset by additional premiums. For 2012, the Company reported adverse loss and LAE net reserve development of $252,121 including accretion of loss reserve discount of $24,929. The adverse development was mostly attributable to Primary Casualty, Public Entity Runoff, and the Excess Casualty classes of business partially offset by favorable development of Financial Lines. Included in this increase, the Company experienced $22,320 of unfavorable prior year loss development on retrospectively rated policies as of December 31, 2012, which was offset by additional premiums. The commutation of an internal reinsurance treaty under which a U.S. subsidiary previously ceded workers' compensation claims Defense Base Act (DBA) to a non-U.S. subsidiary also contributed $33,549 of adverse development. The Company's reserves for losses and LAE have been reduced for anticipated salvage and subrogation of $189,882, $197,595 and $173,365 as of December 31, 2014, 2013 and 2012, respectively. The Company paid $11,270 $10,186 and $16,673 in the reporting period to settle 190, 173 and 194 claims related to extra contractual obligations or bad faith claims stemming from lawsuits as of December 31, 2014, 2013 and 2012, respectively. A. ASBESTOS/ENVIRONMENTAL RESERVES -------------------------------------------------------------------------------- The Company has indemnity claims asserting injuries from toxic waste, hazardous substances, asbestos and other environmental pollutants and alleged damages to cover the clean-up costs of hazardous waste dump sites (environmental claims). Estimation of environmental claims loss reserves is a difficult process, as these claims, which emanate from policies written in 1986 and prior years, cannot be estimated by conventional reserving techniques. Environmental claims development is affected by factors such as inconsistent court resolutions, the broadening of the intent of policies and scope of coverage and increasing number of new claims. The Company and other industry members have and will continue to litigate the broadening judicial interpretation of policy coverage and the liability issues. If the courts continue in the future to expand the intent of the policies and the scope of the coverage, as they have in the past, additional liabilities would emerge for amounts in excess of reserves held. This emergence cannot now be reasonably estimated, but could have a material impact on the Company's future operating results or financial position. -------------------------------------------------------------------------------- 33 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The Company has exposure to asbestos and/or environmental losses and LAE costs arising from pre-1986 general liability, product liability, commercial multi-peril and excess liability insurance or reinsurance policies as noted below:
ASBESTOS LOSSES ENVIRONMENTAL LOSSES ------------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 2014 2013 2012 2014 2013 2012 ------------------------------------------------------------------------------------------------------------------------ Direct - Loss and LAE reserves, beginning of year $ 1,185,364 $ 1,229,896 $ 1,350,806 $ 83,569 $ 84,847 $ 55,848 Impact of pooling restructure transaction (438) - - 5,907 - - Incurred losses and LAE (107,471) 96,945 (20,822) 33,094 26,547 42,532 Calendar year paid losses and LAE (109,053) (141,477) (100,088) (24,787) (27,825) (13,533) ------------------------------------------------------------------------------------------------------------------------ Loss and LAE Reserves, end of year $ 968,402 $ 1,185,364 $ 1,229,896 $ 97,783 $ 83,569 $ 84,847 ------------------------------------------------------------------------------------------------------------------------ Assumed reinsurance - Loss and LAE reserves, beginning of year $ 280,670 $ 158,787 $ 161,724 $ 5,357 $ 6,941 $ 5,628 Impact of pooling restructure transaction (40,857) - - (815) - - Incurred losses and LAE 113,981 9,271 19,159 8,876 3,084 1,379 Calendar year paid losses and LAE (81,371) 112,612 (22,096) (672) (4,668) (66) ------------------------------------------------------------------------------------------------------------------------ Loss and LAE Reserves, end of year $ 272,423 $ 280,670 $ 158,787 $ 12,746 $ 5,357 $ 6,941 ------------------------------------------------------------------------------------------------------------------------ Net of reinsurance - Loss and LAE reserves, beginning of year $ - $ - $ - $ 50,205 $ 51,573 $ 38,587 Impact of pooling restructure transaction - - - (1,164) - - Incurred losses and LAE - - - 18,030 18,668 22,205 Calendar year paid losses and LAE - - - (11,515) (20,036) (9,219) ------------------------------------------------------------------------------------------------------------------------ Loss and LAE Reserves, end of year $ - $ - $ - $ 55,556 $ 50,205 $ 51,573 ------------------------------------------------------------------------------------------------------------------------
The Company estimates the full impact of the asbestos and environmental exposure by establishing full case basis reserves on all known losses and establishes bulk reserves for IBNR losses and LAE based on management's judgment after reviewing all the available loss, exposure, and other information. The Company had asbestos loss and LAE - IBNR and bulk reserves as follows:
------------------------------------------------------------------------------------------------------------------------- ASBESTOS LOSS RESERVE LAE RESERVE DECEMBER 31, 2014 2013 2012 2014 2013 2012 ------------------------------------------------------------------------------------------------------------------------- Direct basis: $ 547,464 $ 748,407 $ 718,611 $ 60,829 $ 84,188 $ 81,879 Assumed reinsurance basis: 95,699 133,025 83,016 10,633 13,315 7,822
The Company had environmental loss and LAE - IBNR and bulk reserves as follows: --------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------- ENVIRONMENTAL LOSS RESERVE LAE RESERVE DECEMBER 31, 2014 2013 2012 2014 2013 2012 -------------------------------------------------------------------------------------------------------------------------- Direct basis: $ 31,779 $ 16,406 $ 13,897 $ 13,619 $ 7,031 $ 5,956 Assumed reinsurance basis: 1,290 683 203 552 199 62 Net of ceded reinsurance basis: 18,118 10,046 6,579 7,765 4,212 2,795
B. LOSS PORTFOLIO TRANSFER -------------------------------------------------------------------------------- Effective April 1, 2014, the Company and certain AIG affiliated insurers (collectively, the "2014 Reinsureds", each of which is a member of the US Combined Pool) entered into two loss portfolio transfer reinsurance agreements with Eaglestone Reinsurance Company ("Eaglestone"), an affiliate. Under these agreements, Eaglestone assumed loss portfolio transfers of certain Public Entity and Occupational Accident reserves from the 2014 Reinsureds. The total consideration received from Eaglestone, on a funds withheld basis, was $252,606, equal to the total of the subject reserves for losses and LAE. -------------------------------------------------------------------------------- 34 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- C. Discounting of Liabilities for Unpaid Losses or Unpaid Loss Adjustment Expenses -------------------------------------------------------------------------------- The Company discounts both its workers' compensation (both tabular and non-tabular) and certain retained asbestos (non-tabular) reserves. The calculation of the Company's tabular discount is based upon the mortality table used in the 1999 US Decennial Life Table, and applying a 3.5 percent interest rate. Only case basis reserves are discounted. The December 31, 2014 and 2013 liabilities include $1,275,727 and $1,677,259 of such discounted reserves, respectively. Tabular Reserve Discount -------------------------------------------------------------------------------- The table below presents the amount of tabular discount applied to the Company's reserves as of December 31, 2014, 2013 and 2012.
----------------------------------------- LINES OF BUSINESS 2014 2013 2012 ---------------------------------------------------------------------------------------------- Workers' Compensation Case Reserves $ 186,911 $ 214,846 $ 211,531
Non-Tabular Discount -------------------------------------------------------------------------------- The Company's non-tabular workers' compensation case reserves are discounted using the Company's own payout pattern and a 5 percent interest rate, as prescribed by NY SAP. The table below presents the amount of non-tabular discount applied to the Company's reserves as of December 31, 2014, 2013 and 2012.
----------------------------------------- LINES OF BUSINESS 2014 2013 2012 ---------------------------------------------------------------------------------------------- Workers' Compensation Case Reserves $ 383,098 $ 423,418 $ 455,052
6. RELATED PARTY TRANSACTIONS -------------------------------------------------------------------------------- A. Combined Pooling Agreement -------------------------------------------------------------------------------- As described in Note 1, effective January 1, 2014, the National Union Admitted Lines Pooling Agreement and the AIG Property Casualty Surplus Lines Pooling Agreement, were ammended through a series of reinsurance commutations and novations, and subsequently entered into the Combined Pooling Agreement. The Combined Pooling Agreement represents a new reinsurance quota share agreement whereby the Pool Members share the underwriting risks including premiums earned, losses and LAE incurred, underwriting and other expenses and related assets and liabilities in accordance with the respective companies' percentage participation. All lines of business written by the Combined Companies are subject to the pooling arrangement with the exception of American Home's Japan and Argentina Branches. The Combined Companies are also parties to reinsurance agreements with non-affiliated reinsurers covering the business subject to the pooling agreement and have a contractual right of direct recover from the non-affiliated reinsurers per the terms of such reinsurance agreements. As a result of the January 1, 2014 transaction, insurance assets and liabilities (subject to the agreement) were transferred and the new pooling agreement was accounted for on a prospective basis. The objective of the transaction was to better align legal entity underwriting risk with AIG PC's capital structure. The new Combined Pooling Agreement was approved by the individual company's Insurance Department state of domicile. -------------------------------------------------------------------------------- 35 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Consideration received or (paid) on the 2014 pooling restructure is as follows:
------------------------------------------------ COMPANY AMOUNT ------------------------------------------------ National Union $ 1,494,167 American Home 2,075,418 Lexington 3,019,176 Specialty (1,680,822) C&I (1,672,791) APCC 779,421 New Hampshire (1,988,914) ISOP (1,988,914) AIU (36,741)
-------------------------------------------------------------------------------- 36 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The following table shows the changes in assets, liabilities and surplus of the Company corresponding to the consideration recieved as a result of the 2014 Pooling Restructure Transaction:
---------------- AMOUNT ---------------- ASSETS: Agents' balances or uncollected premiums $ (197,645) Funds held by or deposited with reinsured companies (29,716) Other insurance assets (88,509) --------------- TOTAL ASSETS (315,869) --------------- LIABILITIES Unearned premium reserves 334,466 Reinsurance payable on paid losses and loss adjustment expenses (50,050) Reserves for losses and loss adjustment expenses 1,563,011 Funds held by company under reinsurance treaties 19,344 Ceded reinsurance premiums payable 38,066 Other insurance liabilities (138,645) --------------- TOTAL LIABILITIES $ 1,766,193 --------------- STATEMENT OF OPERATIONS AND CHANGES IN SURPLUS Net premiums written 334,466 Change in unearned premium reserves (334,466) --------------- Premiums earned - --------------- Other underwriting expenses incurred (6,644) --------------- Net income (6,644) --------------- TOTAL CHANGE IN SURPLUS (6,644) --------------- NET IMPACT $ 2,075,418 --------------- CONSIDERATION RECEIVED Securities received $ 272,133 Cash received 1,803,285 --------------- CONSIDERATION RECEIVED $ 2,075,418 ---------------
The Combined Pool members received a permitted practice from the domiciliary states that resulted in the reporting of consideration for the transfer of undiscounted loss reserves as paid (or negative paid) losses within losses incurred, rather than presenting such amounts within premiums written and earned. This permitted practice only relates to the inception of the pooling arrangement. As a result, the consideration paid relating to unearned premium is reflected as negative premiums written, as offset by the change in unearned premium and the consideration relating to the transfer of undiscounted loss reserves and loss adjustment expenses were recorded as negative paid losses, as offset by the change in net losses incurred. This permitted practice had no effect upon net income or surplus for the period. Statutory accounting principles allow for prospective accounting treatment for modifications to existing intercompany pooling agreements that do not result in a gain in surplus to the insurance group or to the impacted companies. Transfer of both assets and the liabilities valued at statutory book value ensures that there is no impact to surplus as a result of implementing a modification to an existing pooling arrangement. Under the terms of the Combined Pooling agreement, which was approved by the individual company's Insurance Department state of domicile, all assets and liabilities were transferred at statutory book value, gross of admissibility, recoverability allowances, provisions and discount amounts. Due to the exclusions of these amounts, there were impacts to the individual companies' net income and surplus amounts, mainly due to the prescribed or permitted practices of the individual company's Insurance Department state of domicile. Specifically, changes in discount resulting from the net reduction in workers' compensation reserves retained following the reduction in the Company's pooling participation percentage were reflected as a charge to income based on the state prescribed discount rates. In addition, the Combined Pool members were compensated for any previous acquisition costs associated with unearned premium reserves that were subject to transfer, as well as certain expense reallocations that had no net effect to the Combined Pool. As a result of the transaction, the Company recorded an increase/(decrease) in its Assets, Liabilities, Surplus and Net Income subsequent to the changes associated with the net consideration received (described above), yet inclusive of the change in discount, acquisition costs and expense reallocation adjustments as follows:
NET ADMITTED LINE DESCRIPTION ASSETS LIABILITIES SURPLUS NET INCOME ---------------- ------------ ----------- --------- ---------- Change in nonadmitted assets $41,668 $ - $ 41,668 $ - Worker's compensation discount - 106,377 (106,377) (106,377) Other allocations 12,230 10,302 1,928 5,793 ------- -------- --------- --------- TOTAL $53,898 $116,679 $ (62,781) $(100,584) ------- -------- --------- ---------
B. American International Overseas Association -------------------------------------------------------------------------------- AIG formed the Association, a Bermuda unincorporated association, in 1976, as the pooling mechanism for AIG's international general insurance operations. In exchange for membership in the Association at the assigned participation, the members contributed capital in the form of cash and other assets, including rights to future business written by international operations owned by the members. The legal ownership and insurance licenses of these international branches remain in the name of New Hampshire, American Home and National Union. -------------------------------------------------------------------------------- 37 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- At the time of forming the Association, the member companies entered into a reinsurance agreement, cancelable with six months written notice by any member. The reinsurance agreement governs the insurance business pooled in the Association. The initial participation established was subsequently amended in 2013. See Note 6D for changes in this business and percentages. The 2014 and 2013 participation percentages for the pool member companies are set forth in the table below:
-------------------------------------------------------------------------------- NAIC CO. PARTICIPATION MEMBER COMPANY CODE PERCENT -------------------------------------------------------------------------------- Combined Pool member companies, as follows: National Union 19445 78% New Hampshire 23841 12% American Home 19380 10% --------------------------------------------------------------------------------
The Company's participation in the Association is pooled among all Pool members in proportion to their participation in the Pool. The Association's fiscal year end is November 30. Although the fiscal year end for the members of the Company is December 31, their financial statements have historically and consistently reported the results of their participation in the Association as of the Association's fiscal year end (and therefore on a one month lag). The Company's participation in the Association's assets and liabilities at December 31, 2014 and 2013 was as follows:
-------------------------------------------------------------------------------- DECEMBER 31, 2014 2013 -------------------------------------------------------------------------------- Assumed reinsurance premiums receivable $ 249,779 $ 243,127 Funds held by ceding reinsurers 165,795 164,884 Reinsurance recoverable 86,823 120,033 Equity in underwriting pools and associations 117,991 138,321 -------------------------------------------------------------------------------- TOTAL ASSETS 620,388 666,365 -------------------------------------------------------------------------------- Loss and LAE reserves 726,202 977,472 Unearned premium reserves 254,927 303,265 Funds held 14,994 26,494 Ceded balances payable 77,566 138,809 Assumed reinsurance payable 82,202 147,633 Other liabilities 45,354 17,682 -------------------------------------------------------------------------------- TOTAL LIABILITIES 1,201,245 1,611,355 -------------------------------------------------------------------------------- TOTAL SURPLUS $ (580,857) $ (944,990) --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 38 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- C. Significant Transactions -------------------------------------------------------------------------------- The following table summarizes transactions (excluding reinsurance and cost allocation transactions) that occurred during 2014, 2013 and 2012 between the Company and affiliated companies in which the value exceeded one-half of one percent of the Company's admitted assets as of December 31, 2014, 2013 and 2012. This table also includes all capital contributions and dividends:
ASSETS RECEIVED BY ASSETS TRANSFERRED BY 2014 THE COMPANY THE COMPANY -------------------------------------------------------------------------------------------------------------- DATE OF EXPLANATION OF TRANSACTION TRANSACTION NAME OF AFFILIATE STATEMENT VALUE DESCRIPTION STATEMENT VALUE DESCRIPTION -------------------------------------------------------------------------------------------------------------- 01/17/14 CAPITAL CONTRIBUTION (a) AIG PC US $1,292,577 SECURITIES $ - - 01/17/14 CAPITAL CONTRIBUTION (a) AIG PC US 610 CASH - - 01/17/14 CAPITAL CHANGES (a) AIG PC US 9,312 IN KIND - - 04/01/14 DIVIDEND (b) AIG PC US - - 233,554 SECURITIES 12/19/14 DIVIDEND AIG PC US - - 150,000 CASH 12/31/14 CAPITAL CONTRIBUTION (c) AIG PC US 21,494 IN KIND - - VARIOUS PURCHASE OF SECURITIES C&I 629,431 SECURITIES 630,124 VARIOUS VARIOUS PURCHASE OF SECURITIES ISOP 648,111 SECURITIES 653,606 CASH VARIOUS PURCHASE OF SECURITIES NHIC 581,580 SECURITIES 585,029 CASH --------------------------------------------------------------------------------------------------------------
(a)Refer to Note 6A for more details on the 2014 Pooling Restructure Transaction (b)Refer to Note 6D for more details on The Company's Japan Branch Conversion (c)Refer to Note 1E, Income Taxes, for more detail --------------------------------------------------------------------------------
------------------------------------------------------- ASSETS RECEIVED BY ASSETS TRANSFERRED BY 2013 THE COMPANY THE COMPANY ------------------------------------------------------------------------------------------------------------- DATE OF EXPLANATION OF TRANSACTION TRANSACTION NAME OF AFFILIATE STATEMENT VALUE DESCRIPTION STATEMENT VALUE DESCRIPTION ------------------------------------------------------------------------------------------------------------- 3/19/2013 Dividend AIG PC US $ - - $ 77,000 Cash 3/26/2013 Purchase of securities Lexington 66,542 Securities 66,551 Cash 3/31/2013 Dividend AIG PC US - - 524 In kind 4/1/2013 Dividend AIG PC US - - 23,000 Cash 5/13/2013 Dividend AIG PC US - - 180,000 Cash 9/6/2013 Dividend AIG PC US - - 220,000 Cash 9/30/2013 Dividend AIG PC US - - 320,000 Cash 9/1/2013 Dividend AIG PC US - - 394,435 In kind 12/11/2013 Purchase of securities Association 34,884 Securities 35,446 Cash 12/19/2013 Sale of securities National Union 372,650 Cash 353,142 Securities -------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 39 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------- ASSETS RECEIVED BY ASSETS TRANSFERRED BY 2012 THE COMPANY THE COMPANY ----------------------------------------------------------------------------------------------------------------- DATE OF TRANSACTION EXPLANATION OF TRANSACTION NAME OF AFFILIATE STATEMENT VALUE DESCRIPTION STATEMENT VALUE DESCRIPTION ----------------------------------------------------------------------------------------------------------------- 3/27/2012 Dividend AIG PC US $ - - $ 1,589 Cash 3/27/2012 Dividend AIG PC US - - 48,411 Securities 5/10/2012 Dividend AIG PC US - - 315,000 Cash 6/27/2012 Dividend AIG PC US - - 10,000 Cash 11/1/2012 Dividend AIG PC US - - 129,000 Cash Various Dividend AIG PC US - - 18,716 In kind 10/23/2012 Sale of securities LSTREET I, LLC 159,498 Cash 153,951 Securities 12/27/2012 Sale of securities AIG 563,313 Cash 514,499 Securities 12/27/2012 Capital contribution AIG PC US 300,000 Cash - - Various Capital contribution AIG PC US 1,471 In kind - - Various Capital contribution AIG PC US 52,613 In kind - - Various Capital contribution AIG PC US 166 In kind - - -----------------------------------------------------------------------------------------------------------------
D. Restructuring Foreign Operations -------------------------------------------------------------------------------- As part of its efforts to simplify the legal entity structure, enhance transparency and streamline financial visibility, AIG PC continued to restructure the foreign branch operations of the Pool members. Generally, the results of these foreign branch operations, with the exception of American Home's Japan and Argentina branches, were historically reported as part of the operations of the Association by its member companies. The U.S. member companies of the Association share their participation with the other members of the Combined Pool. Japan Branch Conversion -------------------------------------------------------------------------------- On April 1, 2014, The Company transferred substantially all the assets and liabilities of its Japan Branch to American Home Assurance Co. Ltd. (AHJ), a Japanese-domiciled insurance company that is 100% owned by AIG Property Casualty International (PCI), in exchange for 1,000 Class A shares of AHJ (the AHJ Shares). The AHJ Shares received by American Home were then distributed to AIG and such shares were further distributed to AIG PC and then contributed to PCI as capital contributed from AIG PC. The fair value for the AHJ shares was $233,554 equal to the fair value of the branch on the effective date of transfer. -------------------------------------------------------------------------------- 40 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The following reflects the impact of American Home's Japan Branch transfer (at statement value) on American Home's statutory financial statements during 2014:
NET IMPACT -------------- ASSETS Cash and invested assets $ (895,105) Agents' balances or uncollected premiums (34,695) Reinsurance recoverable on loss payments (28,835) Receivables from parent, subsidiaries and affiliates (2,909) Other admitted assets (15,652) --------------------------------------------------------------------- TOTAL ADMITTED ASSETS (977,196) --------------------------------------------------------------------- LIABILITIES Reserves for losses and LAE (181,096) Unearned premium reserves (385,617) Commissions, premium taxes and other expenses payable (8,738) Reinsurance payable on paid loss and LAE (32,740) Funds held by company under reinsurance treaties (3,833) Other liabilities (81,958) --------------------------------------------------------------------- TOTAL LIABILITIES (693,982) --------------------------------------------------------------------- NET ASSETS $ (283,214) --------------------------------------------------------------------- STATEMENT OF OPERATIONS Premium written $ (566,713) Premiums earned (181,096) Losses incurred (181,096) Net realized capital gains - investment 26,437 Net realized capital (losses) - foreign exchange (39,181) Net realized capital (losses) - other (95,992) --------------------------------------------------------------------- Net Income / (Loss) (108,736) --------------------------------------------------------------------- Change in unrealized capital (loss) (26,437) Change in unrealized foreign exchange 39,181 Change in nonadmitted assets 46,332 --------------------------------------------------------------------- Total change in capital and surplus (49,660) --------------------------------------------------------------------- NET IMPACT (233,554) --------------------------------------------------------------------- DIVIDENDS TO STOCKHOLDER (233,554) ---------------------------------------------------------------------
The impact on net income from the transaction includes a net realized loss of $108,736 comprised of the difference between the statutory net assets transferred, adjusted for nonadmitted assets (primarily capitalized EDP costs) of $95,992, the fair value of the stock distributed, to a loss on the realization of foreign exchange net assets $39,181, partially offset by the gain on the sale of invested assets of $26,437. The Company and AHJ followed a statutory notice procedure, provided for under Japanese law, to facilitate the transfer of the branch's in-force business to AHJ without the need to obtain consent from each policyholder or ceding company individually. Based on the responses received during the notice procedure, the Company and AHJ determined that eligible policyholders effectively consented to the transfer. As a result, the completion of the notice procedure resulted in complete extinguishment of American Home's obligations under insurance policies eligible for transfer under the notice procedure. AHJ agreed to assume primary responsibility (including policy administration and claims handling) for the policies not eligible under the notice procedure (the "Excluded Policies"), and further agreed to indemnify, defend and hold harmless the Company for any costs or expense the Company incurs with respect to such policies. In addition, AIG Japan Holding Kabushiki Kaisha ("AIGJHKK"), an affiliated company which owns 100% of AHJ, has agreed to guarantee AHJ's obligations to indemnify the Company for any costs or expenses arising from the Excluded Policies after the transfer date. -------------------------------------------------------------------------------- 41 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- As a result of AHJ's assuming primary responsibility for the Excluded Policies and the Company's determination that it is probable that the Company will not be called upon to make any payments with respect to the Excluded Policies, the Company has reduced its loss reserves on such policies to zero from the effective date of the transfer. As of December 31, 2014, there was approximately $62,130 in loss reserves on Excluded Policies recorded by AHJ. Loss Portfolio Transfers -------------------------------------------------------------------------------- Japan Redirect In 2013, the AIG PC US insurance companies entered into a series of novations, commutations and other agreement modifications that redirected the Japanese exit reinsurance flows from the Association members and nominees to National Union. The transaction had the overall effect of eliminating the Association's participation in any business from Japan, by transferring such reinsurance arrangements directly to the former Admitted Pool members through National Union. The difference between the consideration paid and the reserves transferred represents reimbursement of commissions ceded and the transfer of other receivables and payables. American International Overseas, Ltd. (AIOL) De-risk In 2013, AIOL withdrew from the Association and entered into a final settlement with American Home, New Hampshire and National Union that effected a full transfer to National Union of all assets, liabilities, and interests (whether present or future, and known or unknown) relating to AIOL's membership in the Association and participation in the reinsurance agreement that governs the insurance business pooled in the Association. Effective December 1, 2013 all profits and losses arising from the Association are shared as follows: American Home (10 percent), New Hampshire (12 percent) and National Union (78 percent). A majority of the loss reserves transferred were executed by novation agreements, with the remaining reserve transfers being executed via commutation or other forms of agreement. The companies have obtained a permitted practice to present the consideration received in relation to loss reserves transferred as negative paid losses rather than as premiums earned. Therefore, all of the consideration received in relation to loss reserves transferred to the former Admitted pool members as a result of this transaction are treated the same way, regardless of the legal form of the agreement that effected the change. Absent this permitted practice, $654,906 of negative paid losses would instead have been presented as earned premiums at the total pool level. Commission expenses represent an allowance for acquisition expenses to AIOL associated with the transferred unearned premiums. -------------------------------------------------------------------------------- 42 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The impact of the Japan redirect and AIOL de-risk loss portfolio transfers are reflected in the following table after the impact of the US pooling:
---------------------------------------------------------------------------------- JAPAN AIOL DE- REDIRECT RISK TOTAL ---------------------------------------------------------------------------------- ASSETS: Insurance balances receivable, net $ 46,249 $ 134,472 $ 180,721 Equities in pools and associations - 322,942 322,942 ---------------------------------------------------------------------------------- TOTAL ASSETS $ 46,249 $ 457,414 $ 503,663 ---------------------------------------------------------------------------------- LIABILITIES: Reserves for loss and LAE $ 155,132 $ 654,906 $ 810,038 Unearned premium reserves 428,153 203,188 631,341 ---------------------------------------------------------------------------------- TOTAL LIABILITIES $ 583,285 $ 858,094 $1,441,379 ---------------------------------------------------------------------------------- STATEMENT OF OPERATIONS AND CHANGES IN SURPLUS: Premiums written $ 428,153 $ 191,119 $ 619,272 ---------------------------------------------------------------------------------- Premiums earned - (12,069) (12,069) Losses incurred - (18,163) (18,163) Commission expense 178,859 48,141 227,000 Change in nonadmitted assets - (63,422) (63,422) Other - (252) (252) ---------------------------------------------------------------------------------- TOTAL CHANGE IN SURPLUS $(178,859) $(105,721) $ (284,580) ---------------------------------------------------------------------------------- NET IMPACT $(358,177) $(294,959) $ (653,136) ---------------------------------------------------------------------------------- Cash $ - $ 129,807 $ 129,807 Bonds - 35,446 35,446 Settlement of intercompany pooling balances 358,177 129,706 487,883 ---------------------------------------------------------------------------------- NET CONSIDERATION RECEIVED $ 358,177 $ 294,959 $ 653,136 ----------------------------------------------------------------------------------
Distribution of Affiliate -------------------------------------------------------------------------------- In September 2013, the Association distributed shares of AEHL, cash and bonds to its members. The following details the distribution components received by the former Admitted Pool members from the Association: --------------------------------------------------------------------------------
----------------------------------------------------------- NATIONAL AMERICAN NEW DECEMBER 31, 2013 UNION HOME HAMPSHIRE TOTAL ----------------------------------------------------------- AEHL Shares $433,879 $394,435 $473,322 $1,301,636 Cash 269,354 416,559 118,623 804,536 Bonds - - 73,489 73,489
-------------------------------------------------------------------------------- 43 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Immediately following the receipt of this distribution, all of the AEHL shares received by New Hampshire, National Union and The Company were distributed by way of dividend and return of capital to AIG PC US. The former Admitted Pool members shared the Association interest (and the resulting AEHL consideration) in accordance with their pool participation percentages. The following table shows the impact of the contributions and distributions related to this transaction on each of the former Admitted Pool members:
------------------------------------------------------------------------------------------------------------------ NATIONAL AMERICAN NEW DECEMBER 31, 2013 UNION HOME HAMPSHIRE C&I ISOP APCC TOTAL ------------------------------------------------------------------------------------------------------------------ Change in: Total Assets $(293,810) $(239,450) $ 11,789 $(138,454) $ 18,430 $ 18,430 $(623,065) Total Liabilities - 22,288 287,681 - - - 309,969 Statement of Operations and Changes in Surplus: - - - - - - - Net Income 368,415 349,025 48,476 106,646 48,476 48,476 969,514 Unrealized gains/(losses) (228,347) (216,328) (30,046) (66,100) (30,046) (30,046) (600,913) Dividends paid (198,716) (394,435) (142,233) (179,000) - - (914,384) Return of capital (235,162) - (152,089) - - - (387,251) ------------------------------------------------------------------------------------------------------------------ TOTAL SURPLUS: $(293,810) $(261,738) $(275,892) $(138,454) $ 18,430 $ 18,430 $(933,034) ------------------------------------------------------------------------------------------------------------------
Branch Conversions For the 2013 reporting period, the following foreign branches that were previously reported as part of the Association were converted to locally domiciled insurance companies or branches of regional insurers. Accordingly, their direct operations are no longer reported as part of the Association:
------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 2013 EFFECTIVE DATE BRANCH NAME TRANSFEREE ENTITY ------------------------------------------------------------------------------------------------ 12/1/2012 Jamaica Branch of American Home Chartis Jamaica Insurance Company Limited 12/1/2012 Panama Branch of National Union AIG Seguros Panama, S.A. (fka Chartis Seguros Panama, S.A.) 3/1/2013 Honduras Branch of American Home AIG Seguros Guatemala, S.A. (fka Chartis Seguros Guantemala) 6/1/2013 Papua New Guinea Branch of American AIG PNG Limited Home ------------------------------------------------------------------------------------------------
On the effective date of the 2013 conversions, the former Admitted Pool's allocation of these branches total assets and liabilities were $21,743 and $18,432 respectively. These balances were previously reported as Equities in Pools and Associations. -------------------------------------------------------------------------------- 44 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- E. Amounts Due to or from Related Parties -------------------------------------------------------------------------------- At December 31, 2014 and 2013, the Company reported the following receivables/payables balances from/to its Ultimate Parent, subsidiaries and affiliates (excluding reinsurance transactions). Intercompany agreements have defined settlement terms and related receivables are reported as nonadmitted if balances due remain outstanding more than ninety days past the due date as specified in the agreement.
--------------------------------------------------------------------- COMPANY 2014 2013 --------------------------------------------------------------------- Balances with National Union $ 135 $13,504 Balances with other member pool companies 574 55 Balances with other affiliates 28 4,027 --------------------------------------------------------------------- Receivable from parent, subsidiaries and affiliates $ 737 $17,586 --------------------------------------------------------------------- Balances with National Union $188,731 $ - Balances with other member pool companies 83 - Balances with other affiliates 61,518 16,642 --------------------------------------------------------------------- Payable to parent, subsidiaries and affiliates $250,332 $16,642 ---------------------------------------------------------------------
Federal and foreign income taxes receivable/(payable) under the Tax Sharing Agreement at December 31, 2014 and 2013 were $(4,811) and $(2,818), respectively. The Company did not change its methods of establishing terms regarding any transactions with its affiliates during the years ended December 31, 2014 and 2013. F. Capital Maintenance Agreements -------------------------------------------------------------------------------- AIG generally manages capital with its non-life insurance companies through internal, Board-approved policies and guidelines. AIG was party to a consolidated capital maintenance agreement ("CMA") with AIG PC and certain of its domestic non-life Insurance companies as of December 31, 2014. Among other things, the CMA provided that AIG would maintain the total adjusted capital of these non-life insurance companies, measured as a group (the "Fleet"), at or above the specified minimum percentage of the Fleet's projected total authorized control level RBC at a minimum percentage of 300 percent. As a result of AIG, AIG PC and these domestic non- life insurance companies' views as to the sufficiency of managing capital through internal, Board-approved policies and guidelines, it was agreed amongst the parties to terminate this CMA effective February 19, 2015. The state insurance department regulators were notified of such agreement. G. Guarantees or Contingencies for Related Parties -------------------------------------------------------------------------------- The Company has issued guarantees whereby it unconditionally and irrevocably guarantees all present and future obligations and liabilities arising from the policies of insurance issued by certain insurers who, as of the guarantee issue date, were members of the AIG holding company group. The guarantees were provided in order to secure or maintain the guaranteed companies' rating status issued by certain rating agencies, as disclosed in Note 10. H. Management, Service Contract and Cost Sharing Arrangements -------------------------------------------------------------------------------- As an affiliated company of AIG, the Company utilizes centralized services from AIG. The Company is allocated a charge for these services, based on the amount of incremental expense associated with operating the Company as a separate legal entity. The amount of expense allocated to the Company each period was determined based on an analysis of services provided. The following table summarizes the allocated expense from AIG related entities that exceeded one-half of one percent of the Company's admitted assets during 2014 and 2013:
------------------------------------------------------------ AFFILIATES 2014 2013 2012 ------------------------------------------------------------ AIG Global Claims Services, Inc. $265,397 $270,723 $241,398 AIG PC Global Services, Inc. 152,804 134,150 39,741 ------------------------------------------------------------ TOTAL $418,201 $404,873 $281,139 ------------------------------------------------------------
In 2014 and 2013 management service costs included severance expenses pertaining to an AIG-wide initiative to centralize work streams into lower cost locations and create a more streamlined organization. -------------------------------------------------------------------------------- 45 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- As of December 31, 2014 and 2013, short-term investments included amounts invested in the AIG Managed Money Market Fund of $282,664 and $305,575, respectively. 7. REINSURANCE -------------------------------------------------------------------------------- In the ordinary course of business, the Company may use both treaty and facultative reinsurance to minimize its net loss exposure to a) any single catastrophic loss event; b) to an accumulation of losses from a number of smaller events; or c) to provide greater risk diversification. In addition, the Company may assume reinsurance from other insurance companies. Based on the terms of the reinsurance contracts, a portion of expected IBNR losses will be recoverable in accordance with terms of the reinsurance protection purchased. This determination is necessarily based on the estimate of IBNR and accordingly, is subject to the same uncertainties as the estimate of IBNR. Ceded amounts related to paid and unpaid losses and loss expenses with respect to these reinsurance agreements are generally substantially collateralized. The Company remains liable to the extent that the reinsurers do not meet their obligation under the reinsurance contracts after any collateral is exhausted, and as such, the financial condition of the reinsurers is regularly evaluated and monitored for concentration of credit risk. The following table presents direct, assumed reinsurance and ceded reinsurance written and earned for the year ended December 31, 2014, 2013 and 2012:
-------------------------------------------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 2014 2013 2012 ---------------------------------------------------------------------------------- WRITTEN EARNED WRITTEN EARNED WRITTEN EARNED -------------------------------------------------------------------------------------------------------------------- Direct Premiums $ (211,371) $ 171,624 $ 928,608 $1,005,255 $1,192,441 $1,276,901 Reinsurance premiums assumed: Affiliates 7,798,864 7,460,072 7,001,709 6,771,303 6,737,056 6,840,322 Non-affiliates 134,025 128,937 198,363 189,579 164,020 147,946 -------------------------------------------------------------------------------------------------------------------- GROSS PREMIUMS 7,721,518 7,760,633 8,128,680 7,966,137 8,093,517 8,265,169 -------------------------------------------------------------------------------------------------------------------- Reinsurance premiums ceded: Affiliates 763,633 713,378 883,552 1,242,338 1,459,199 1,391,378 Non-affiliates 1,458,472 1,454,350 1,392,708 1,297,174 1,429,927 1,516,102 -------------------------------------------------------------------------------------------------------------------- NET PREMIUMS $5,499,413 $5,592,905 $5,852,420 $5,426,625 $5,204,391 $5,357,689 -------------------------------------------------------------------------------------------------------------------- 2014 Direct Written Premiums includes the impact of ($726,095) reserve transfer due to the Japan Branch Conversion. --------------------------------------------------------------------------------------------------------------------
As of December 31, 2014 and 2013, and for the years then ended, the Company's unearned premium reserves, paid losses and LAE, and reserves for losses and LAE (including IBNR), have been reduced for reinsurance ceded as follows:
------------------------------------------------------ UNEARNED PAID RESERVES FOR PREMIUM LOSSES AND LOSSES RESERVES LAE AND LAE ------------------------------------------------------ DECEMBER 31, 2014: AFFILIATES $516,995 $114,919 $ 9,593,610 NON-AFFILIATES 457,698 289,870 2,954,258 ------------------------------------------------------ TOTAL $974,693 $404,789 $12,547,868 ------------------------------------------------------ DECEMBER 31, 2013: Affiliates $515,958 $111,061 $ 8,399,417 Non-affiliates 453,567 332,092 3,126,356 ------------------------------------------------------ Total $969,525 $443,153 $11,525,773 ------------------------------------------------------
-------------------------------------------------------------------------------- 46 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- A. Reinsurance Return Commission -------------------------------------------------------------------------------- The maximum amount of return commission which would have been due to reinsurers if all of the Company's reinsurance had been cancelled as of December 31, 2014 and 2013 with the return of the unearned premium reserve is as follows:
------------------------------------------------------------------------------------------------------------------------ ASSUMED REINSURANCE CEDED REINSURANCE NET --------------------------------- --------------------------------- -------------------------------- PREMIUM RESERVE COMMISSION EQUITY PREMIUM RESERVE COMMISSION EQUITY PREMIUM RESERVE COMMISSION EQUITY ------------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 2014 AFFILIATES $3,731,362 $502,953 $516,995 $ 72,838 $3,214,366 $430,114 ALL OTHER 95,835 12,918 457,698 64,484 (361,863) (51,566) ------------------------------------------------------------------------------------------------------------------------ TOTAL $3,827,197 $515,871 $974,693 $137,322 $2,852,503 $378,548 ------------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 2013 Affiliates $3,392,845 $515,261 $515,958 $ 81,974 $2,876,887 $433,287 All Other 90,762 13,784 453,567 72,061 (362,805) (58,278) ------------------------------------------------------------------------------------------------------------------------ TOTAL $3,483,607 $529,045 $969,525 $154,035 $2,514,082 $375,009 ------------------------------------------------------------------------------------------------------------------------
B. Unsecured Reinsurance Recoverable -------------------------------------------------------------------------------- Individual reinsurers with unsecured balances in excess of 3 percent of policyholders' surplus at December 31, 2014 and 2013 are as follows:
----------------------------------------------------------------- REINSURER 2014 2013 ----------------------------------------------------------------- Affiliates: Combined Pool $8,281,349 $ 6,817,334 Eaglestone Reinsurance Company 820,561 721,588 AIU Insurance Company, Ltd. - Japan 13,207 - Other affiliates 14,271 294,269 ----------------------------------------------------------------- TOTAL AFFILIATES $9,129,388 $ 7,833,191 ----------------------------------------------------------------- Swiss Reinsurance America Corp 352,014 246,246 Transatlantic Reinsurance Company 234,143 247,096 Munich Reinsurance Company - 209,140 Hannover Ruckversicherungs Se - 162,325 Other - 2,710,763 ----------------------------------------------------------------- TOTAL NON-AFFILIATES 586,157 3,575,570 ----------------------------------------------------------------- TOTAL AFFILIATES AND NON-AFFILIATES $9,715,545 $11,408,761 -----------------------------------------------------------------
C. Reinsurance Recoverable in Dispute -------------------------------------------------------------------------------- At December 31, 2014 and 2013, the aggregate of all disputed items did not exceed 10 percent of capital and surplus and there were no amounts in dispute for any single reinsurer that exceeded 5 percent of capital and surplus. The total reinsurance recoverable balances in dispute are $133,254 and $106,456 as of December 31, 2014 and 2013, respectively. -------------------------------------------------------------------------------- 47 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- 8. INCOME TAXES -------------------------------------------------------------------------------- At December 31, 2014, the Company had gross deferred tax assets ("DTA") of $1,461,633. Management believes that it is more likely than not that these assets will be realized in the foreseeable future therefore the Company has not recorded a valuation allowance against its deferred tax asset. Tax planning strategies had no impact on the determination of the net admitted DTA. The components of the Company's net deferred tax assets/liabilities ("DTA"/"DTL") as of December 31, 2014 and 2013 are as follows:
------------------------------------------------------------------------------------------------ 12/31/2014 12/31/2013 CHANGE ------------------------------------------------------------------------------------------------ ORDINARY CAPITAL TOTAL ORDINARY CAPITAL TOTAL ORDINARY CAPITAL TOTAL ---------------------------------------------------------------------------------------------------------------------- Gross DTA $1,336,702 $ 124,961 $1,461,663 $1,632,278 $155,688 $1,787,966 $(295,576) $(30,727) $(326,303) Statutory Valuation Allowance - - - - - - - - - ---------------------------------------------------------------------------------------------------------------------- Adjusted Gross DTA 1,336,702 124,961 1,461,663 1,632,278 155,688 1,787,966 (295,576) (30,727) (326,303) Nonadmitted DTA 177,901 - 177,901 737,369 - 737,369 (559,468) - (559,468) ---------------------------------------------------------------------------------------------------------------------- Subtotal Admitted DTA 1,158,801 124,961 1,283,762 894,909 155,688 1,050,597 263,892 (30,727) 233,165 DTL 231,280 258,113 489,393 206,310 204,422 410,732 24,970 53,691 78,661 ---------------------------------------------------------------------------------------------------------------------- Net Admitted DTA/(Net DTL) $ 927,521 $(133,152) $ 794,369 $ 688,599 $(48,734) $ 639,865 $ 238,922 $(84,418) $ 154,504 ----------------------------------------------------------------------------------------------------------------------
The following table shows the summary of the calculation for the net admitted DTA as of December 31, 2014 and 2013:
--------------------------------------------------------------------------------------------------------------------------------- 12/31/2014 12/31/2013 CHANGE --------------------------------------------------------------------------------------------- ORDINARY CAPITAL TOTAL ORDINARY CAPITAL TOTAL ORDINARY CAPITAL TOTAL --------------------------------------------------------------------------------------------------------------------------------- Carried back losses that reverse in subsequent three calendar years $ - $ - $ - $ - $ - $ - $ - $ - $ - Adjusted gross DTAs realizable within 36 months or 15 percent of statutory surplus (the lesser of 1 and 2 below) 794,369 - 794,369 667,773 - 667,773 126,596 - 126,596 1. Adjusted gross DTAs realizable within 36 months 794,369 - 794,369 1,060,737 - 1,060,737 (266,368) - (266,368) 2. 15 percent of statutory surplus - - 968,030 - - 667,773 - - 300,257 Adjusted gross DTAs that can be offset against DTLs 364,432 124,961 489,393 227,136 155,688 382,824 137,296 (30,727) 106,569 --------------------------------------------------------------------------------------------------------------------------------- Total DTA admitted as the result of application of SSAP 101 $1,158,801 124,961 1,283,762 $ 894,909 $155,688 $1,050,597 $ 263,892 $(30,727) $ 233,165 ---------------------------------------------------------------------------------------------------------------------------------
----------------------- 2014 2013 ----------------------- Ratio Percentage Used To Determine Recovery Period And Threshold Limitation Amount 394% 307% Amount Of Adjusted Capital And Surplus Used To Determine Recovery Period And Threshold Limitation in (2) above. $6,453,535 $4,451,821
The following table shows the components of the current income tax expense (benefit) for the periods listed:
----------------------------------------------------------------------- CURRENT INCOME TAX 2014 2013 CHANGE ----------------------------------------------------------------------- Federal income tax $(31,781) $(36,464) $ 4,683 Foreign income tax 8,740 10,320 (1,580) ----------------------------------------------------------------------- Subtotal (23,041) (26,144) 3,103 ----------------------------------------------------------------------- Federal income tax on net capital gains 53,044 37,062 15,982 ----------------------------------------------------------------------- Federal and foreign income taxes incurred $ 30,003 $ 10,918 $19,085 -----------------------------------------------------------------------
-------------------------------------------------------------------------------- 48 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The following table shows the components of the DTA split between ordinary and capital DTA as of December 31, 2014 and 2013:
------------------------------------------------------------------------- 2014 2013 CHANGE ------------------------------------------------------------------------- ORDINARY Discounting of unpaid losses $ 330,284 $ 319,135 $ 11,149 Nonadmitted assets 91,762 151,137 (59,375) Unearned premium reserve 207,839 214,763 (6,924) Bad debt expense 28,536 42,360 (13,824) Goodwill & deferred revenue - 23,704 (23,704) Net operating loss carry forward 344,479 546,670 (202,191) Foreign tax credit carry forward 55,869 53,974 1,895 Deferred tax on foreign operations 928 867 61 Investments 238,147 211,583 26,564 Deferred loss on branch conversions 458 458 - Intangibles - 15,915 (15,915) Other temporary difference 38,400 51,712 (13,312) ------------------------------------------------------------------------- Subtotal 1,336,702 1,632,278 (295,576) ------------------------------------------------------------------------- Statutory valuation allowance adjustment - - - Nonadmitted 177,901 737,369 (559,468) ------------------------------------------------------------------------- ADMITTED ORDINARY DEFERRED TAX ASSETS $1,158,801 $ 894,909 $ 263,892 ------------------------------------------------------------------------- CAPITAL Investments $ 113,785 $ 150,894 $ (37,109) Unrealized capital losses 10,268 3,886 6,382 Deferred loss on branch conversions 538 538 - Other temporary difference 370 370 - ------------------------------------------------------------------------- Subtotal 124,961 155,688 (30,727) ------------------------------------------------------------------------- Statutory valuation allowance adjustment - - - Nonadmitted - - - ------------------------------------------------------------------------- ADMITTED CAPITAL DEFERRED TAX ASSETS 124,961 155,688 (30,727) ------------------------------------------------------------------------- ADMITTED DEFERRED TAX ASSETS $1,283,762 $1,050,597 $ 233,165 -------------------------------------------------------------------------
The following table shows the components of the DTL split between ordinary and capital DTL as of December 31, 2014 and 2013:
-------------------------------------------------------------------- 2014 2013 CHANGE -------------------------------------------------------------------- Ordinary Investments $211,216 $191,255 $ 19,961 Other temporary differences 20,064 15,056 5,008 -------------------------------------------------------------------- Subtotal 231,280 206,311 24,969 -------------------------------------------------------------------- Capital Investments $107,639 $ 40,660 $ 66,979 Unrealized capital gains 150,374 135,753 14,621 Other temporary differences 100 28,008 (27,908) -------------------------------------------------------------------- Subtotal 258,113 204,421 53,692 -------------------------------------------------------------------- Deferred tax liabilities 489,393 410,732 78,661 -------------------------------------------------------------------- Net deferred tax assets/liabilities $794,369 $639,865 $154,504 --------------------------------------------------------------------
-------------------------------------------------------------------------------- 49 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The change in net deferred tax assets is comprised of the following:
----------------------------------------------------------------------------------------------- 2014 2013 CHANGE ----------------------------------------------------------------------------------------------- Adjusted gross deferred tax assets $1,461,663 $1,787,966 $(326,303) Total deferred tax liabilities (489,393) (410,732) (78,661) ----------------------------------------------------------------------------------------------- Net deferred tax assets/ (liabilities) 972,270 1,377,234 (404,964) Deferred tax assets/(liabilities) - SSAP 3 (6,195) Deferred tax assets/(liabilities) - unrealized (8,239) ----------------------------------------------------------------------------------------------- Total change in net deferred tax $(390,530) ----------------------------------------------------------------------------------------------- Change in deferred tax - current year (304,459) Change in deferred tax - current year - other surplus items (86,071) ----------------------------------------------------------------------------------------------- Change in deferred tax - current year - total $(390,530) -----------------------------------------------------------------------------------------------
The following table shows the components of opening surplus adjustments upon current and deferred taxes for the year ended December 31, 2014
------------------------------------------------------------- CURRENT DEFERRED TOTAL ------------------------------------------------------------- SSAP 3 impact: SSAP 3 - general items $1,459 $(6,195) $(4,736) SSAP 3 - unrealized gain/loss - 4 4 ------------------------------------------------------------- Subtotal impact to admitted assets 1,459 (6,191) (4,732) SSAP 3 - nonadmitted impact - 10,748 10,748 ------------------------------------------------------------- Total SSAP 3 impact $1,459 $ 4,557 $ 6,016 -------------------------------------------------------------
-------------------------------------------------------------------------------- 50 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The provision for federal and foreign income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The following table presents a reconciliation of such differences in arriving at total taxes related to the Company for the years ended December 31, 2014, 2013 and 2012:
------------------------------------------------------------------------------------------------------------------------ 2014 2013 2012 -------------------- -------------------- -------------------- DESCRIPTION AMOUNT TAX EFFECT AMOUNT TAX EFFECT AMOUNT TAX EFFECT ------------------------------------------------------------------------------------------------------------------------ Net Income Before Federal Income Taxes and Capital Gains Taxes $ 838,233 $293,382 $ 713,908 $ 249,868 $ 302,637 $105,923 Book to Tax Adjustments: Tax Exempt Income (171,222) (59,928) (202,777) (70,972) (212,356) (74,325) Dividend Received Deduction (978) (342) (438) (153) (622) (218) Subpart F Income, Gross-Up & Foreign Tax Credits - 443 (428,635) (87,051) 63,904 (2,445) Transfer Pricing (30,638) (10,723) - - - - Stock Options And Other Compensation 19,747 6,911 14,354 5,024 9,756 3,415 Non-Deductible Penalties 345 121 348 122 90 31 Change in Nonadmitted Assets 164,915 57,720 (86,943) (30,430) 42,101 14,735 Change in Tax Position - (230) - 599 - (549) Return to Provision - 2,525 - (2,844) - (4,319) Reversal of Book/Tax Difference on Share Distribution 119,438 41,803 - - - - Branch Incorporation & Conversion - - (497) (174) (1,005) (352) Other 7,945 2,780 18,066 6,322 - - ------------------------------------------------------------------------------------------------------------------------ Total Book to Tax Adjustments 109,552 41,080 (686,522) (179,557) (98,132) (64,027) ------------------------------------------------------------------------------------------------------------------------ Total Tax $ 947,785 $334,462 $ 27,386 $ 70,311 $ 204,505 $ 41,896 ------------------------------------------------------------------------------------------------------------------------ Federal and Foreign Income Taxes Incurred - (23,041) - (26,144) - (31,163) Federal Income Tax on Net Capital Gains - 53,044 - 37,062 - 48,295 Change in Net Deferred Income Taxes - 390,530 - 27,917 - 22,439 Less: Change in Deferred Tax--Other Surplus Items - (86,071) - 31,476 - 2,325 ------------------------------------------------------------------------------------------------------------------------ Total Tax $ - $334,462 $ - $ 70,311 $ - $ 41,896
For the year ended December 31, 2014, the table above includes $41,803 of tax effected adjustments reflecting the different treatment for book and tax purposes of the distribution of the AHJ's assets and liabilities as detailed in Note 6.
OPERATING LOSS AND TAX CREDIT CARRY FORWARDS At December 31, 2014, the Company had net operating loss carry forwards originating during the years 2010 to 2012 and expiring through 2032 of: $984,226 At December 31, 2014, the Company had no capital loss carry forwards. $ - At December 31, 2014, the Company had no AMT credit carry forwards. $ - At December 31, 2014, the Company had foreign tax credits originating during the years 2009 to 2014 and expiring through 2024 of: $ 55,869
There were no deposits reported as admitted assets under Section 6603 of the Internal Revenue Service (IRS) Code as of December 31, 2014. The Company does not believe that the liability related to any federal or foreign tax loss contingencies will significantly change within the next 12 months. A reasonable estimate of such change cannot be made at this time. As of December 31, 2014, the Company recorded gross receivables related to tax return errors and omissions in the amount of $16,424, all of which were nonadmitted. As of December 31, 2014, there were no liabilities related to uncertain tax positions. The U.S is the only major tax jurisdiction of the Company, and as of December 31, 2014, the tax years from 2000 to 2013 remain open. -------------------------------------------------------------------------------- 51 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The following table lists those companies that form part of the 2014 AIG consolidated federal income tax return: --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------ COMPANY COMPANY COMPANY COMPANY COMPANY ------------------------------------------------------------------------------------------------------------------------------ A.I. Credit Consumer AIG Financial Products AIG Specialty Aircraft 32A-810 Inc. Aircraft 74B-27602 Inc. Discount Company Corp. Insurance Company A.I. Credit Corp. AIG Financial AIG Spring Ridge I, Aircraft 32A-987 Inc. Aircraft 74B-29375 Inc. Securities Corp. Inc. AeroTurbine, Inc. AIG Funding, Inc. AIG Trading Group Inc. Aircraft 32A-993, Inc. Aircraft 75B-26276 Inc. AGC Life Insurance AIG G5, Inc. AIG Travel Assist, Inc. Aircraft 33A-132, Inc. Aircraft 75B-28833 Inc. Company Agency Management AIG Global Asset AIG Travel Insurance Aircraft 33A-272 Inc. Aircraft 75B-28834 Inc. Corporation Management Holdings Agency, Inc. Corp. AH SubGP 1384 AIG Global Claims AIG Warranty Services Aircraft 33A-358 Inc. Aircraft 75B-28836 Inc. Woodglen, LLC Services, Inc. of Florida, Inc. AH SubGP 1470 AIG Global Real Estate AIG Warranty Services, Aircraft 33A-364 Inc. Aircraft 76B-26261 Inc. Palmetto, LLC Investment Corp. Inc. AH SubGP 1548 Walnut, AIG Global Services, AIG WarrantyGuard, Aircraft 34A-152 Inc. Aircraft 76B-26327 Inc. LLC Inc. Inc. AH SubGP 1597 AIG Insurance AIG.COM, Inc. Aircraft 34A-216 Inc. Aircraft 76B-26329 Inc. Broadmoor, LLC Management Services, Inc. AH SubGP 1600 Rainer, AIG International Inc. AIG-FP Capital Aircraft 34A-395 Inc. Aircraft 76B-27597 Inc. LLC Funding Corp. AH SubGP 1631 AIG Kirkwood, Inc. AIG-FP Capital Aircraft 34A-48 Inc. Aircraft 76B-27600 Inc. Broadway, LLC Preservation Corp. AH SubGP 1694 Sonoma, AIG Life Holdings, Inc. AIG-FP Matched Aircraft 34A-93 Inc. Aircraft 76B-27613 Inc. LLC Funding Corp. AH SubGP 479 Sunrise, AIG Life of Bermuda, AIG-FP Pinestead Aircraft 73B-25374 Inc. Aircraft 76B-27615 Inc. LLC Ltd. Holdings Corp. AH SubGP 835 AIG Lodging AIGGRE 6037 Investor Aircraft 73B-25375 Inc. Aircraft 76B-28132 Inc. Whispering, LLC Opportunities, Inc. LLC AH SubGP GAG Gandolf, AIG Markets, Inc. AIGGRE DC Ballpark Aircraft 73B-26315 Inc. Aircraft 76B-28206 Inc. LLC Investor, LLC AH SubGP MDL, LLC AIG Matched Funding AIGGRE Hill7 Investor Aircraft 73B-26317 Inc. Aircraft 77B-29404 Inc. Corp. LLC AICCO, INC.(DE) AIG North America, AIGGRE Lane Field Aircraft 73B-26323 Inc. Aircraft 77B-29908 Inc. Inc. Investor LLC AIG Advisor Group, Inc. AIG Offshore Systems AIGGRE Market Street Aircraft 73B-28249 Inc. Aircraft 77B-32717 Inc. Services, Inc. II LLC AIG Aerospace AIG PC European Aircraft 32A-1658 Inc. Aircraft 73B-28252 Inc. Aircraft 77B-32723 Inc. Adjustment Services, Inc. Insurance Investments Inc. AIG Aerospace Insurance AIG PC Global Aircraft 32A-1695 Inc. Aircraft 73B-30036 Inc. Aircraft A330 143 Inc. Services, Inc. Services, Inc. AIG Assurance Company AIG Portfolio Solutions Aircraft 32A-1905 Inc. Aircraft 73B-30645 Inc. Aircraft A330 72 Inc. LLC AIG Capital Corporation AIG Procurement Aircraft 32A-1946 Inc. Aircraft 73B-30646 Inc. Aircraft A330 98 Inc. Services, Inc. AIG Central Europe & AIG Property Casualty Aircraft 32A-2024 Inc. Aircraft 73B-30661 Inc. Aircraft Andros Inc. CIS Insurance Holdings Company Corporat AIG Claims, Inc. AIG Property Casualty Aircraft 32A-2594 Inc. Aircraft 73B-30671 Inc. Aircraft B757 29377 Inc. Inc. AIG Commercial AIG Property Casualty Aircraft 32A-2731 Inc. Aircraft 73B-30730 Inc. Aircraft B757 29382 Equipment Finance, Inc. Insurance Agency, Inc. Inc. AIG Consumer Finance AIG Property Casualty Aircraft 32A-3147 Inc. Aircraft 73B-31127 Inc. Aircraft B767 29388 Group, Inc. International, LLC Inc. AIG Credit (Europe) AIG Property Casualty Aircraft 32A-3148 Inc. Aircraft 73B-32796 Inc. Aircraft Lotus Inc. Corporation U.S., Inc. AIG Credit Corp. AIG Real Estate Aircraft 32A-579 Inc. Aircraft 73B-32841 Inc. Aircraft SPC-12, Inc. Investment & Management Co. (P.R.), Inc. AIG Direct Insurance AIG Realty, Inc. Aircraft 32A-585 Inc. Aircraft 73B-33220 Inc. Aircraft SPC-14, Inc. Services, Inc. AIG Employee Services, AIG Relocation, Inc. Aircraft 32A-645 Inc. Aircraft 73B-38821 Inc. Aircraft SPC-3, Inc. Inc. AIG Equipment Finance AIG S1, Inc. Aircraft 32A-726 Inc. Aircraft 73B-41794 Inc. Aircraft SPC-4, Inc. Holdings, Inc. AIG FCOE, Inc. AIG Securities Lending Aircraft 32A-760 Inc. Aircraft 73B-41796 Inc. Aircraft SPC-8, Inc. Corp. (fka AIG Glbl Sec Lend) AIG Federal Savings AIG Shared Services Aircraft 32A-775 Inc. Aircraft 73B-41806 Inc. Aircraft SPC-9, Inc. Bank Corporation AIG Financial Advisor AIG Shared Services Aircraft 32A-782 Inc. Aircraft 73B-41815 Inc. AIU Insurance Services, Inc. Corporation-- Company Management Service
-------------------------------------------------------------------------------- 52 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) --------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------- COMPANY COMPANY COMPANY COMPANY COMPANY ---------------------------------------------------------------------------------------------------------------------------- Akita, Inc. Delos Aircraft Inc. Interlease Aircraft SA Investment Group, United Guaranty Trading Corporation Inc. Mortgage Insurance Company of North Carolina AM Holdings LLC Design Professionals Interlease Management SAAHP GP Corp. United Guaranty Association Risk Corporation Partners Insurance Purchasing Group, Inc. Company Ambler Holding Corp. DIL/SAHP Corp. International Lease SAFG Retirement United Guaranty Finance Corporation Services, Inc. Residential Insurance Company American Athletic Club, DirectDME, Inc. Intrepid Security, Inc. SagePoint Financial, United Guaranty Inc. Inc. (fka AIG Fin Residential Insurance Advisors) Company of North Carolina American General Eaglestone Reinsurance Iris Energy Holding LP SAI Deferred United Guaranty Annuity Service Company (FMLY Iris Energy Compensation Services, Inc. Corporation Hold Corp.) Holdings, Inc. American General Eastgreen, Inc. Klementine Holdings, SCSP Corp. VALIC Financial Assignment Corporation Inc. Advisors, Inc. American General Euclid Aircraft, Inc. Klementine Leasing, Service Net Solutions VALIC Retirement Assignment Corporation Inc. of Florida, LLC Services Company of New York American General F 2000, Inc. Knickerbocker Service Net Warranty, Vision2020 Wealth Bancassurance Services, Corporation LLC Management Corp. Inc. American General Center FALCON-116 (UTAH) Lexington Insurance Sierra US Leasing, Inc. Webatuck Corp. Trust Company American General Financial Service Livetravel, Inc. Spicer Energy LLC Western National Insurance Agency, Inc. Corporation Marketing Group, Inc. American General First Mortgage Macori, Inc. [Texas] Spicer Holding Corp. Whitney US Leasing, International, Inc. Insurance Company Inc. American General Fleet Solutions Maksin Management States Aircraft, Inc. Woodbury Financial Investment Management Holdings Inc. Corporation Services, Inc. Corporation American General Realty Flying Fortress Inc. Medical Excess SubGen NT, Inc. Investment Corporation Insurance Services, Inc. American Home Flying Fortress MG Reinsurance SunAmerica Affordable Assurance Company Investments Inc. Limited Housing Partners, Inc. American International Flying Fortress US MIP Mezzanine, LLC SunAmerica Capital Facilities Management, Leasing Inc. Services, Inc. Inc. American International Forest SAHP Corp. MIP PE Holdings, LLC SunAmerica Fund Group, Inc. Services, Inc. American International FQA, LLC Morefar Marketing, Inc. SunAmerica Retirement Realty Corp. Markets, Inc. American International FSC Agency, Inc. Mt. Mansfield Team Classic Golf Reinsurance Company, Company, Inc. Services, Inc. Ltd. Apollo Aircraft Inc. FSC Securities National Union Fire Temescal Aircraft Inc. Corporation Insurance Company of Pittsburgh, Pa. Applewood Funding Corp. G4.00.01 US7004P2 National Union Fire The Gulf Agency, Inc. Insurance Company of Vermont Barnegat Funding Corp. Global Loss Prevention, New England Sports, The Insurance Inc. Recreation & Company of the State of Entertainment RPG, Pennsylvania Inc. CABREA, Inc. Grand Savannah SAHP New Hampshire The Variable Annuity Corp. Insurance Company Life Insurance Company Charleston Bay SAHP Grand Staircase Aircraft New Hampshire Top Aircraft, Inc. Corp. Inc. Insurance Services, Inc. Charmlee Aircraft Inc. Granite State Insurance Park Topanga Aircraft Travel Guard Group, Company Inc. Inc. Chartis Bonfire Health Direct, Inc. Pearce & Pearce, Inc. Travel Guard Corporation Worldwide, Inc. Chartis Excess Limited Hyperion Aircraft Pelican 35302, Inc. UG Corporation Financing Inc. Chartis Iraq, Inc. Hyperion Aircraft Inc. Pine Street Brokers UG Shared Services, Corp. Inc. Chartis Latin America ILFC Aviation Pine Street Real Estate United Guaranty Investments, LLC Consulting, Inc. Holdings Corp. Commercial Insurance Company of North Carolina Chartis Libya, Inc. ILFC Dover, Inc. Prairie SAHP Corp. United Guaranty Corporation Chartis Memsa Holdings, ILFC Holdings, Inc. Risk Specialists United Guaranty Credit Inc. Companies Insurance Insurance Company Agency, Inc. Commerce and Industry ILFC Volare, Inc. Risk Specialists United Guaranty Insurance Company Companies, Inc. Insurance Company
-------------------------------------------------------------------------------- 53 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- 9. CAPITAL AND SURPLUS, DIVIDEND RESTRICTIONS AND QUASI-REORGANIZATIONS -------------------------------------------------------------------------------- A. Common Stock -------------------------------------------------------------------------------- In 2014 the Company increased the par value of its common stock from $11.5065 per share to $17.00 per share at the time it received $1,302,500 in capital from its immediate parent. As a result of this transaction, American Home's common capital stock was increased by $9,312 and its gross paid in and contributed surplus was increased by $1,293,187. The transaction was approved by American Home's board of directors and NY DFS. Refer to Note 6A for more details on the Pooling Restructure Transaction. B. Dividend Restrictions -------------------------------------------------------------------------------- Under New York law, the Company may pay cash dividends only from Unassigned surplus determined on a statutory basis. New York domiciled companies are restricted (on the basis of the lower of 10 percent of statutory earned surplus, adjusted for special surplus items, as of December 31, 2014, or 100 percent of adjusted net investment income for the preceding thirty-six month period ended December 31, 2014) as to the amount of dividends they may declare or pay in any twelve-month period without the prior approval of the NY DFS. The maximum dividend amount the Company can pay in 2015 is $724,524 without the prior approval of the NY DFS. Other than the limitations above, there are no restrictions placed on the portion of Company profits that may be paid as ordinary dividends to the stockholder. The Company has agreed to provide advance notice to the NY DFS of (i) any proposed transactions between the Company and AIG or an AIG affiliate not in the ordinary course of business, and (ii) any proposed dividend declarations or distributions. The Company paid the following dividends during 2014 and 2013:
----------------------------------------------------------------------------------- 2014 STATE APPROVAL ------------------------------- ----------------------- DATE PAID AMOUNT TYPE OF DIVIDEND REQUIRED OBTAINED ----------------------------------------------------------------------------------- 4/1/2014 $ 233,554 EXTRAORDINARY YES YES 12/19/2014 150,000 EXTRAORDINARY YES YES ----------------------------------------------------------------------------------- TOTAL $ 383,554 ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- 2013 STATE APPROVAL ------------------------------- ----------------------- DATE PAID AMOUNT TYPE OF DIVIDEND REQUIRED OBTAINED ----------------------------------------------------------------------------------- Various $ 524 Ordinary No Not required 3/19/2013 77,000 Ordinary No Not required 4/1/2013 23,000 Ordinary No Not required 5/13/2013 180,000 Ordinary No Not required 9/1/2013 394,435 Extraordinary Yes Yes 9/6/2013 220,000 Ordinary Yes Yes 9/30/2013 320,000 Extraordinary Yes Yes ----------------------------------------------------------------------------------- TOTAL $1,214,959 -----------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 54 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- C. Capital & Surplus -------------------------------------------------------------------------------- Changes in balances of special surplus funds are due to adjustments in the amounts of reserves transferred under retroactive reinsurance agreements and when cash recoveries exceed the consideration paid. The portion of Unassigned surplus at December 31, 2014 and 2013 represented or reduced by each item below is as follows:
------------------------------------------------------------------------------------------ AS ADJUSTED* YEARS ENDED DECEMBER 31, 2014 2013 2013 ------------------------------------------------------------------------------------------ Unrealized gains and losses (net of taxes) $ 191,706 $ 237,471 $ 27,943 Nonadmitted asset values (412,681) (1,143,851) (1,167,295) Provision for reinsurance (60,702) (57,751) (57,751) * As Adjusted includes SSAP 3 prior year adjustments
The Company exceeded minimum RBC requirements at both December 31, 2014 and 2013. With the approval of the NY DFS, American Home executed a quasi-reorganization effective March 31, 2012; which restated Gross Paid-in and Contributed Surplus to Unassigned surplus. The impact of the quasi reorganization is as follows:
--------------------------------------------------------------------------------------- Change in Gross Paid-in and Contributed Surplus Change in Unassigned surplus --------------------------------------------------------------------------------------- 2012 $(1,000,000) $1,000,000 ---------------------------------------------------------------------------------------
10.CONTINGENCIES -------------------------------------------------------------------------------- A. Legal Proceedings -------------------------------------------------------------------------------- The Company is involved in various legal proceedings incident to the operation of its business. Such proceedings include claims litigation in the normal course of business involving disputed interpretations of policy coverage. Other proceedings in the normal course of business include allegations of underwriting errors or omissions, bad faith in the handling of insurance claims, employment claims, regulatory activity, and disputes relating to the Company's business ventures and investments. Other legal proceedings include the following: Workers' Compensation Residual Market Assessment: In April 2007, the National Association of Insurance Commissioners (NAIC) formed a Settlement Review Working Group, directed by the State of Indiana, to review the Workers' Compensation Residual Market Assessment portion of the settlement between AIG, the Office of the New York Attorney General, and the New York State Department of Insurance. In late 2007, the Settlement Review Working Group, under the direction of Indiana, Minnesota and Rhode Island, recommended that a multi-state targeted market conduct examination focusing on workers' compensation insurance be commenced under the direction of the NAIC's Market Analysis Working Group. AIG was informed of the multi-state targeted market conduct examination in January 2008. The lead states in the multi-state examination were Delaware, Florida, Indiana, Massachusetts, Minnesota, New York, Pennsylvania and Rhode Island. All other states (and the District of Columbia) agreed to participate in the multi-state examination. The examination focused on legacy issues related to certain AIG entities' writing and reporting of workers compensation insurance between 1985 and 1996. -------------------------------------------------------------------------------- 55 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- On December 17, 2010, AIG and the lead states reached an agreement to settle all regulatory liabilities arising out of the subjects of the multistate examination. This regulatory settlement agreement, which was agreed to by all 50 states and the District of Columbia, included, among other terms, (i) AIG's payment of $100 million in regulatory fines and penalties; (ii) AIG's payment of $46.5 million in outstanding premium taxes and assessments; (iii) AIG's agreement to enter into a compliance plan describing agreed-upon specific steps and standards for evaluating AIG's ongoing compliance with state regulations governing the setting of workers' compensation insurance premium rates and the reporting of workers compensation premiums; and (iv) AIG's agreement to pay up to $150 million in contingent fines in the event that AIG fails to comply substantially with the compliance plan requirements. In furtherance of the compliance plan, the agreement provided for a monitoring period from May 29, 2012 to May 29, 2014 leading up to a compliance plan examination. After the close of the monitoring period, as part of preparation for the actual conduct of the compliance plan examination, on or about October 1, 2014, AIG and the lead states agreed upon corrective action plans to address particular issues identified during the monitoring period. The compliance plan examination is ongoing. There can be no assurance that the result of the compliance plan examination will not result in a fine, have a material adverse effect on AIG's ongoing operations or lead to civil litigation. Accident and Health: In connection with the previously disclosed multi-state examination of certain accident and health products, including travel products, issued by National Union, AIG PC, on behalf of itself, National Union, and certain of AIG PC's insurance and non-insurance companies (collectively, the parties) entered into a Regulatory Settlement Agreement with regulators from 50 U.S. jurisdictions effective November 29, 2012. Under the agreement, and without admitting any liability for the issues raised in the examination, the parties (i) paid a civil penalty of $50 million, (ii) entered into a corrective action plan describing agreed-upon specific steps and standards for evaluating the parties' ongoing compliance with laws and regulations governing the issues identified in the examination, and (iii) agreed to pay a contingent fine in the event that the parties fail to satisfy certain terms of the corrective action plan. National Union and other AIG companies are also currently subject to civil litigation relating to the conduct of their accident and health business, and may be subject to additional litigation relating to the conduct of such business from time to time in the ordinary course. There can be no assurance that any regulatory action resulting from the issues identified will not have a material adverse effect on AIG's ongoing operations of the business subject to the agreement, or on similar business written by other AIG carriers. Caremark Litigation: AIG, National Union Fire Insurance Company of Pittsburgh, Pa. and AIG Specialty Insurance Company (f/k/a American International Specialty Lines Insurance Company) (collectively, the "AIG Defendants") have been named defendants in two putative class actions in state court in Alabama that arise out of the 1999 settlement of class and derivative litigation involving Caremark Rx, Inc. ("Caremark"). The plaintiffs in the second-filed action intervened in the first-filed action, and the second-filed action was dismissed. An excess policy issued by a subsidiary of AIG with respect to the 1999 litigation was expressly stated to be without limit of liability. In the current actions, plaintiffs allege that the judge approving the 1999 settlement was misled as to the extent of available insurance coverage and would not have approved the settlement had he known of the existence and/or unlimited nature of the excess policy. They further allege that AIG, its subsidiaries, and Caremark are liable for fraud and suppression for misrepresenting and/or concealing the nature and extent of coverage. The complaints filed by the plaintiffs and the intervenors request compensatory damages for the 1999 class in the amount of $3.2 billion, plus punitive damages. The AIG Defendants deny the allegations of fraud and suppression, assert that information concerning the excess policy was publicly disclosed months prior to the approval of the settlement, that the claims are barred by the statute of limitations, and that the statute cannot be tolled in light of the public disclosure of the excess coverage. The plaintiffs and intervenors, in turn, have asserted that the disclosure was insufficient to inform them of the nature of the coverage and did not start the running of the statute of limitations. On August 15, 2012, the trial court entered an order granting plaintiffs' motion for class certification, and on September 12, 2014, the Alabama Supreme Court affirmed that order. AIG and the other defendants petitioned for rehearing of that decision and that petition was denied on February 27, 2015. The matter will return to the trial court for general discovery (which has not yet commenced) and adjudication of the merits. The Company is unable to reasonably estimate the possible loss or range of losses, if any, arising from the litigation. Other Proceedings: AIG is also subject to various legal proceedings which have been disclosed in AIG's periodic filings under the Securities Exchange Act of 1934, as amended, in which the Company is not named as a party, but whose outcome may nonetheless adversely affect the Company's financial position or results of operation. -------------------------------------------------------------------------------- 56 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- Except as may have been otherwise noted above with respect to specific matters, the Company cannot predict the outcome of the matters described above, reasonably estimate the potential costs related to these matters, or determine whether other AIG subsidiaries, including the Company, would have exposure to proceedings in which they are not named parties by virtue of their participation in an intercompany pooling arrangement. In the opinion of management, except as may have been otherwise noted above with respect to specific matters, the Company's ultimate liability for the matters referred to above is not likely to have a material adverse effect on the Company's financial position, although it is possible that the effect would be material to the Company's results of operations for an individual reporting period. B. Leases -------------------------------------------------------------------------------- Lease expenses are allocated to the Company based upon the percentage of space occupied with the final share of cost based upon its percentage participation in the Combined Pool. C. Other Commitments -------------------------------------------------------------------------------- As part of its hedge fund, private equity and real estate equity portfolio investments, as of December 31, 2014, the Company may be called upon for additional capital investments of up to $416,690. The Company may also be called upon for an additional $7,046 in connection with guarantees related to its real estate equity investments. In connection with its inter-company reinsurance program with AIG South Africa Limited, the Company contracted with The Standard Bank of South Africa Limited to issue a standby letter of credit to AIG South Africa Limited that secures the Company's reinsurance payment obligations up to ZAR 1,200,000 (USD equivalent of $103,712). The Company agreed to reimburse the bank for any amounts paid by the bank under the stand by letter of credit. As of December 31, 2014 and 2013, the product warranty liability balance for the Company was $17,180 and $64,837, respectively. D. Guarantees -------------------------------------------------------------------------------- The Company has issued guarantees whereby it unconditionally and irrevocably guaranteed all present and future obligations and liabilities arising from the policies of insurance issued by certain insurers who, as of the guarantee issue date, were members of the AIG holding company group. The guarantees were provided in order to secure or maintain the guaranteed companies' rating status issued by certain rating agencies. The Company would be required to perform under the guarantee in the event that a guaranteed entity failed to make payments due under policies of insurance issued during the period of the guarantee. The Company has not been required to perform under any of the guarantees. The Company remains contingently liable for all policyholder obligations associated with insurance policies issued by the guaranteed entity during the period in which the guarantee was in force. Each guaranteed entity has reported total assets in excess of its liabilities and the majority have invested assets in excess of their direct (prior to reinsurance) policyholder liabilities. Additionally, the Company is party to an agreement with AIG whereby AIG has agreed to make any payments due under the guarantees in the Company's place and stead. Furthermore, for any former affiliate that has been sold, the purchaser has provided the Company with hold harmless agreements relative to the guarantee of the divested affiliate. Accordingly, management believes that the likelihood of payment under any of the guarantees is remote. -------------------------------------------------------------------------------- 57 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- The following schedule sets forth the effective and termination dates (agreements with guarantees in run off), of each guarantee, the amount of direct policyholder obligations guaranteed, the invested assets and policyholder surplus for each guaranteed entity as of December 31, 2014:
POLICYHOLDER ESTIMATED POLICYHOLDERS' DATE OBLIGATIONS @ INVESTED ASSETS LOSS @ SURPLUS GUARANTEED COMPANY DATE ISSUED TERMINATED 12/31/2014 @ 12/31/2014 12/31/2014 12/31/2014 --------------------------------------------------------------------------------------------------------------------------- 21st Century Advantage Insurance Company (f/k/a AIG Advantage Insurance Company ) * 12/15/1997 8/31/2009 $ 1,582 $ 28,476 $- $ 28,356 21st Century North America Insurance Company (f/k/a American International Insurance Company ) * 11/5/1997 8/31/2009 29,694 557,442 - 545,022 21st Century Pinnacle Insurance Company (f/k/a American International Insurance Company of New Jersey) * 12/15/1997 8/31/2009 3,307 42,131 - 41,401 21st Century Superior Insurance Company (f/k/a American International Insurance Company of California, Inc.) * 12/15/1997 8/31/2009 25 30,237 - 29,891 AIG Edison Life Insurance Company (f/k/a GE Edison Life Insurance Company) ** 8/29/2003 3/31/2011 7,733,081 82,426,475 - 2,328,737 American General Life and Accident Insurance Company +++ 3/3/2003 9/30/2010 7,853,922 158,565,284 - 9,166,744 American General Life Insurance Company 3/3/2003 12/29/2006 31,229,198 158,565,284 - 9,166,744 American International Assurance Company (Australia) Limited # 11/1/2002 10/31/2010 443,000 1,799,000 - 574,000 Chartis Europe, S.A. (f/k/a AIG Europe, S.A.) ++++ 9/15/1998 12/31/2012 4,513,447 13,807,304 - 5,406,154 Chartis Seguros Mexico SA (f/k/a AIG Mexico Seguros Interamericana, S.A. de C.V.) ## 12/15/1997 - 211,808 115,107 - 82,537 Chartis UK (f/k/a Landmark Insurance Company, Limited (UK)) ++++ 3/2/1998 11/30/2007 407,944 13,807,304 - 5,406,154 Farmers Insurance Hawaii (f/k/a AIG Hawaii Insurance Company, Inc.) * 11/5/1997 8/31/2009 5,250 88,474 - 83,869 Lloyd's Syndicate 1414 (Ascot Corporate Name) 1/20/2005 10/31/2007 25,143 653,453 - 107,332 SunAmerica Annuity and Life Assurance Company (Anchor National Life Insurance Company) +++ 1/4/1999 12/29/2006 12,391,218 158,565,284 - 9,166,744 SunAmerica Life Insurance Company +++ 1/4/1999 12/29/2006 6,117,702 158,565,284 - 9,166,744 The United States Life Insurance Company in the City of New York 3/3/2003 4/30/2010 4,527,366 27,459,735 - 2,008,834 The Variable Annuity Life Insurance Company 3/3/2003 12/29/2006 49,279,673 76,393,389 - 3,618,076 --------------------------------------------------------------------------------------------------------------------------- TOTAL $124,773,361 $851,469,661 $- $56,927,338 ---------------------------------------------------------------------------------------------------------------------------
* The guaranteed company was formerly part of AIG's Personal Auto Group and was sold on July 1, 2009 to Farmers Group, Inc., a subsidiary of Zurich Financial Services Group ("ZFSG"), n/k/a Zurich Insurance Company Limited. As part of the sale, ZFSG issued a hold harmless agreement to the Company with respect to its obligations under this guarantee. ** AIG Edison Life Insurance Company ("Edison") was sold by AIG to Prudential Financial, Inc. ("PFI") on February 1, 2011.As part of the sale, PFI provided the Company with a hold harmless agreement with respect to its obligations under this guarantee. Edison merged into Gibraltar Life Insurance Co., Ltd. ("GLIC") on January 1, 2012. The policyholder obligations disclosed represent those of the guaranteed entity as of December 31, 2014. Invested assets and policyholders' surplus disclosed represent the amount reported by GLIC as of December 31, 2014. +++ The guaranteed companies were formerly a subsidiary of AIG. In previous years, AIA provided the direct policyholders obligations as of each year end. However, starting in 2014, AIA declined to provide financial information relative to these guarantees. The financial information reflects amounts as of December 31, 2012, at which time the guaranteed entities had invested assets in excess of direct policyholders' obligations and were in a positive surplus position. The guaranteed policyholder obligations will decline as the policies expire. Additionally, the guaranteed entities have an insurer financial strength rating for 2014 of "AA-" from Standard & Poor's. -------------------------------------------------------------------------------- 58 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- ++++ The policyholder obligations, invested assets and policyholders' surplus disclosed represents those of the guaranteed entity as of September 30, 2014. # The guaranteed company merged into American General Life Insurance Company effective December 31, 2012. The policyholder obligations disclosed represent those of the guaranteed entity. Invested assets and policyholders' surplus disclosed represent the amount reported by American General Life Insurance Company as of December 31, 2014. ## The guaranteed companies merged into AIG Europe Limited (AEL) (f/k/a Chartis Europe Limited) effective December 1, 2012.The policyholder obligations disclosed represent those of the guaranteed entity as of November 30, 2013. Invested assets and policyholders' surplus disclosed represents the amount reported by AEL as November 30, 2014. E. Joint and Several Liabilities -------------------------------------------------------------------------------- AIU and American Home are jointly and severally obligated to policyholders of their former Japan branches, in connection with transfers of the business of those Japan branches to Japan-domiciled affiliates in 2013 and 2014, respectively. Under the terms of the transfer agreement, the Japan affiliates are financially responsible for 100% of the obligations associated with such policies, and the Company's management expects such affiliates to satisfy their obligation. The Company carries no reserves with respect to any contingent liabilities, if the affiliates would fail to satisfy the obligations. As of December 31, 2014, the Japanese affiliates carried $102,312 of loss reserves in respect of such policies. If the Japan affiliates were to fail to satisfy their obligations, the Company's share of the aggregate exposure under the pooling agreement is $74,184. Each member of the Combined Pool is also jointly and severally obligated to the other pool members, in proportion to their pool share, in the event any other pool member fails. 11.OTHER SIGNIFICANT MATTERS -------------------------------------------------------------------------------- A. Other Assets -------------------------------------------------------------------------------- As of December 31, 2014 and 2013, other admitted assets as reported in the accompanying Statements of Admitted Assets were comprised of the following balances:
------------------------------------------------------- OTHER ADMITTED ASSETS 2014 2013 ------------------------------------------------------- Deposit accounting assets 9,297 16,971 Guaranty funds receivable on deposit 6,348 7,047 Loss funds on deposit 40,208 51,570 Other assets 85,008 74,395 ------------------------------------------------------- TOTAL OTHER ADMITTED ASSETS $140,861 $149,983 -------------------------------------------------------
-------------------------------------------------------------------------------- 59 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- B. Other Liabilities -------------------------------------------------------------------------------- As of December 31, 2014 and 2013, other liabilities as reported in the accompanying Statements of Liabilities, Capital and Surplus were comprised of the following balances:
---------------------------------------------------------------------------------- OTHER LIABILITIES 2014 2013 ---------------------------------------------------------------------------------- Accounts payable $ 4,050 $ 43,367 Accrued retrospective premiums 27,445 44,075 Advance premiums - 5,147 Amounts withheld or retained by company for account of others 2,951 3,797 Deferred commission earnings 32,996 25,900 Deposit accounting liabilities 63,649 91,911 Deposit accounting liabilities-funds held - 2,015 Liability for pension and severance pay - 15,254 Policyholder funds on deposit - 14,735 Remittances and items not allocated 13,575 25,287 Retroactive reinsurance payable 164 158 Retroactive reinsurance reserves-ceded (9,564) (9,259) Servicing carrier liability 3,477 4,962 Escrow funds (NICO) 34,511 29,946 Other accrued liabilities 195,842 241,819 ---------------------------------------------------------------------------------- TOTAL OTHER LIABILITIES $369,096 $539,114 ----------------------------------------------------------------------------------
C. Other (Expense) Income -------------------------------------------------------------------------------- For the years ended December 31, 2014, 2013 and 2012, other (expense) income as reported in the accompanying Statements of Operations and Changes in Capital and Surplus were comprised of the following balances:
------------------------------------------------------------------------------ OTHER (EXPENSE) INCOME 2014 2013 2012 ------------------------------------------------------------------------------ Other income $ 18,654 $ 22,740 $ 43,336 Fee income on deposit programs 3,893 7,089 6,641 Equities and deposits in pools and associations 6,180 (5) 39 Interest expense on reinsurance program (39,522) (38,802) (39,541) Foreign exchange gain (loss) - 153 225 ------------------------------------------------------------------------------ TOTAL OTHER (EXPENSE) INCOME $(10,795) $ (8,825) $ 10,700 ------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 60 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. AMERICAN HOME ASSURANCE COMPANY Statutory Basis Financial Statements (DOLLARS IN THOUSANDS) -------------------------------------------------------------------------------- D. Non- Cash items -------------------------------------------------------------------------------- For the years ended December 31, 2014, 2013 and 2012, the amounts reported in the Statements of Cash Flow are net of the following non-cash items:
-------------------------------------------------------------------------------------------------- NON-CASH TRANSACTIONS 2014 2013 2012 -------------------------------------------------------------------------------------------------- CAPITAL CONTRIBUTION FROM PARENT: Tax Sharing Agreement $ 21,494 $ - $ 52,613 Pooling Restructure Transaction 1,301,890 - - Other - - 1,637 DIVIDENDS TO PARENT: Securities (233,553) - (48,411) Other - (395,483) (18,716) LOSS PORTFOLIO TRANSFER: Premiums collected - (220,140) 8,083 Benefit and loss related payments 68,784 (592,647) 58,384 Funds held (75,782) - (66,467) Securities - 35,446 - Other 6,998 777,341 - POOLING RESTRUCTURE TRANSACTION: Premiums collected 562,004 - - Miscellaneous expense (income) 51,134 - - Benefit and loss related payments 1,091,450 - - Commission and other expense paid 284,095 - - Net deposit on deposit-type contracts and other insurance (12,835) - - Other (1,975,848) - - JAPAN BRANCH TRANSFER: Premiums collected (391,829) - - Net investment income 2,002 - - Benefit and loss related payments (135,804) - - Commission and other expense paid (26,283) - - Securities 794,089 - - Other (8,622) - - --------------------------------------------------------------------------------------------------
12.SUBSEQUENT EVENTS -------------------------------------------------------------------------------- Subsequent events have been considered through April 28, 2015 for these Financial Statements issued on April 28, 2015. Type I - Recognized Subsequent Events: None Type II - Nonrecognized Subsequent Events: During 2015, NYDFS approved an extraordinary dividend declaration of $600,000. The dividends were paid on February 2, 2015. On April 1, 2015, the Company issued a promissory note with a face amount of $121,697 to AIU in relation to the purchase of AIG China. AIU distributed the promissory note within the AIG group of companies, and eventually the promissory note was received by the Company as a capital contribution. -------------------------------------------------------------------------------- 61 NOTES TO FINANCIAL STATEMENTS - As of December 31, 2014 and 2013 and for years ended December 31, 2014, 2013 and 2012. PART C: OTHER INFORMATION ITEM 26. EXHIBITS (a) Board of Directors Resolution. (1) Resolutions of Board of Directors of American General Life Insurance Company authorizing the establishment of Separate Account VL-R. (1) (b) Custodian Agreements. Inapplicable. (c) Underwriting Contracts. (1) Distribution Agreement between American General Life Insurance Company and American General Equity Services Corporation, effective October 1, 2002. (22) (2) Form of Selling Group Agreement. (23) (3) Schedule of Commissions (Incorporated by reference from the text included under the heading "Distribution of the Policies" in the Statement of Additional Information that is filed as part of this amended Registration Statement). (d) Contracts. (1) Specimen form of the "Platinum Investor(R) III" Flexible Premium Variable Life Insurance Policy (Policy Form No. 00600). (24) (2) Specimen form of Extension of Maturity Date Rider, Accumulation Value version (Maturity Extension Rider), Form No. 99110. (37) (3) Specimen form of Extension of Maturity Date Rider, Death Benefit version (Maturity Extension Rider), Form No. 99111. (37) (4) Form of Accidental Death Benefit Rider, Form No. 82012. (38) (5) Form of Children's Insurance Benefit Rider, Term Life Insurance, Form No. 82410. (38) (6) Form of Term Life Insurance Benefit Rider, Providing Annually Renewable Term Insurance (Spouse Term Rider), Form No. 88390. (38) (7) Form of Terminal Illness Accelerated Benefit Rider (Terminal Illness Rider), Form No. 91401. (38) (8) Form of Waiver of Monthly Deduction Rider, Form No. 82001. (38) C-1 (e) Applications. (1) Specimen form of Life Insurance Application - Part A, Form No. AGLC 100565-2003. (35) (2) Specimen form of Life Insurance Application - Part B, Form No. AGLC 100566-2003. (21) (3) Specimen form of Variable Universal Life Insurance Supplemental Application, Form No. AGLC 0198-00 Rev0406. (39) (4) Specimen form of Service Request Form, Form No. AGLC0223 Rev0614. (Filed herewith) (5) Form of Assignment Form, Form No. AGLC0205 Rev0113. (50) (6) Form of Electronic Funds Authorization Form, Form No. AGLC0220 Rev0113. (50) (7) Form of Name and Address Change Form, Form No. AGLC0222 Rev0113. (50) (8) Form of Change of Ownership Form, Form No. AGLC0013 Rev0113. (50) (9) Form of Change of Beneficiary Form, Form No. AGLC0108 Rev0113. (50) (10) Specimen form of Limited Temporary Life Insurance Agreement, Form No. AGLC101431-2011 Rev0113. (50) (11) Specimen form of Limited Temporary Life Insurance Agreement Receipt, Form No. AGLC101432-2011 Rev0113. (50) (12) Form of Reinstatement Application for Life Insurance Form, Form No. AGLC 100440-2011 Rev0113. (50) (13) Form of In-Force Change Application Form, Form No. AGLC100386-2011 Rev0113. (50) (14) Form of Service Request Form, Form No. AGLC0107 Rev0113. (50) (15) Form of HIPPA Authorization - New Business and Inforce Operations, Form No. AGLC100633 Rev0113. (50) (f) Depositor's Certificate of Incorporation and By-Laws. New Bylaws will come. (1) Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective December 31, 1991. (2) C-2 (2) Amendment to the Amended and Restated Articles of Incorporation of American General Life Insurance Company, effective July 13, 1995. (5) (3) By-Laws of American General Life Insurance Company, restated as of June 8, 2005. (3) (g) Reinsurance Contracts. (1) Form of Reinsurance Agreement between American General Life Insurance Company and General & Cologne Life Re of America. (41) (2) Form of Reinsurance Agreement between American General Life Insurance Company and Munich American Reassurance Company. (41) (3) Form of Reinsurance Agreement between American General Life Insurance Company and RGA Reinsurance Company. (41) (4) Form of Reinsurance Agreement between American General Life Insurance Company and Swiss Re Life & Health America, Inc. (41) (5) Automatic and Facultative Reinsurance Agreement between American General Life Insurance Company and Generali USA Life Reinsurance Company. (53) (h) Participation Agreements. (1)(a) Form of Participation Agreement by and Among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated. (6) (1)(b) Form of Amendment Four to Participation Agreement by and among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated. (16) (1)(c) Form of Amendment Six to Participation Agreement by and among AIM Variable Insurance Funds, Inc., A I M Distributors, Inc., American General Life Insurance Company, on Behalf of Itself and its Separate Accounts, and American General Securities Incorporated. (25) (1)(d) Form of Amendment No. 14 to Participation Agreement by and among AIM Variable Insurance Funds, Invesco Aim Distributors, Inc., American General Life Insurance Company and American General Equity Services Corporation, effective April 30, 2010. (48) C-3 (2)(a) Form of Participation Agreement by and among The Alger American Fund, American General Life Insurance Company and Fred Alger & Company, Incorporated. (28) (3)(a) Form of Shareholder Services Agreement by and between American General Life Insurance Company and American Century Investment Management, Inc. (14) (3)(b) Form of Amendment No. 2 to Shareholder Services Agreement by and between American General Life Insurance Company and American Century Investment Management, Inc. and American Century Investment Services, Inc. (30) (4)(a) Form of Participation Agreement Between American General Life Insurance Company, Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. (6) (4)(b) Amendment One to Participation Agreement by and among American General Life Insurance Company, Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. dated December 1, 1998. (7) (4)(c) Form of Fourth Amendment to Participation Agreement dated June 1, 2009 between American General Life Insurance Company, each of Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc., and Dreyfus Investment Portfolios effective October 1, 2007. (43) (5)(a) Amended and Restated Participation Agreement among Variable Insurance Products Funds, Fidelity Distributors Corporation and American General Life Insurance Company of Delaware dated April 27, 2012. (50) (6)(a) Form of Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Equity Services Corporation, Franklin Templeton Variable Insurance Products Trust and Franklin Templeton Distributors, Inc., dated as of October 1, 2002. (12) (6)(b) Form of Amendment No. 5 to Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Equity Services Corporation, Franklin Templeton Variable Insurance Products Trust and Franklin Templeton Distributors, Inc. (44) C-4 (6)(c) Form of Amendment No. 6 to Amended and Restated Participation Agreement by and among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., SunAmerica Capital Services, Inc. and American General Life Insurance Company. (53) (7)(a) Form of Participation Agreement by and between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co. and American General Life Insurance Company. (29) (8)(a) Form of Fund Participation Agreement by and between American General Life Insurance Company and Janus Aspen Series. (17) (9)(a) Form of Fund Participation Agreement by and between American General Life Insurance Company, JPMorgan Insurance Trust, JPMorgan Investment Advisors Inc., J.P. Morgan Investment Management Inc. and JPMorgan Funds Management, Inc. effective as of April 24, 2009. (46) (10)(a) Form of Participation Agreement Among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (6) (10)(b) Form of Amendment Five to Participation Agreement by and among MFS Variable Insurance Trust, American General Life Insurance Company and Massachusetts Financial Services Company. (17) (10)(c) Form of Letter Agreement between Massachusetts Financial Services, MFS Variable Insurance Trust and American General Life Insurance Company, dated December 19, 2005. (41) (11)(a) Participation Agreement by and among Morgan Stanley Universal Funds, Inc., Morgan Stanley Asset Management Inc., Miller Anderson & Sherrerd LLP., Van Kampen American Capital Distributors, Inc., American General Life Insurance Company and American General Securities Incorporated. (8) (11)(b) Amendment Number 1 to Participation Agreement by and among Morgan Stanley Universal Funds, Inc., Morgan Stanley Asset Management Inc., Miller Anderson & Sherrerd LLP, Van Kampen American Capital Distributors, Inc., American General Life Insurance Company and American General Securities Incorporated. (10) (11)(c) Form of Amendment Seven to Participation Agreement among Morgan Stanley Universal Funds, Inc., Van Kampen American Capital Distributors, Inc., Morgan Stanley Asset Management Inc., Miller C-5 Anderson & Sherrerd LLP, American General Life Insurance Company and American General Securities Incorporated. (16) (11)(d) Form of Amendment Ten to Participation Agreement among Morgan Stanley Universal Funds, Inc., Van Kampen American Capital Distributors, Inc., Morgan Stanley Asset Management Inc., Miller Anderson & Sherrerd LLP, American General Life Insurance Company and American General Distributors, Inc. (26) (12)(a) Sales Agreement by and between American General Life Insurance Company, Neuberger & Berman Advisors Management Trust and Neuberger & Berman Management Incorporated. (14) (12)(b) Form of Assignment and Modification Agreement to Fund Participation Agreement (formerly known as Sales Agreement) by and between Neuberger & Berman Management Incorporated and American General Life Insurance Company. (14) (12)(c) Form of Amendment to Fund Participation Agreement by and between Neuberger Berman Management Inc., Neuberger Berman Advisers Management Trust and American General Life Insurance Company. (40) (13)(a) Form of Participation Agreement by and among American General Life Insurance Company, Oppenheimer Variable Account Funds, and OppenheimerFunds, Inc. (19) (13)(b) Form of Amendment No. 1 to Participation Agreement by and among American General Life Insurance Company, Oppenheimer Variable Account Funds, and OppenheimerFunds, Inc. (34) (14)(a) Form of Participation Agreement by and between American General Life Insurance Company, PIMCO Variable Insurance Trust and PIMCO Funds Distributor LLC. (17) (14)(b) Form of Amendment No. 1 to Participation Agreement by and between American General Life Insurance Company, PIMCO Variable Insurance Trust and PIMCO Funds Distributor LLC. (36) (14)(c) Form of Novation of and Amendment to Participation Agreement by and among Allianz Global Investors Distributors LLC, PIMCO Investments LLC, PIMCO Variable Insurance Trust, The United States Life Insurance Company in the City of New York, as successor to American International Life Assurance Company of New York, American General Life Insurance Company and American General Life Insurance Company of Delaware. (49) C-6 (15)(a) Form of Participation Agreement by and Among Pioneer Variable Contracts Trust, American General Life Insurance Company, on its own Behalf and on Behalf of Each of the Segregated Asset Accounts, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. (12) (15)(b) Form of Amendment No. 1 to Participation Agreement by and Among Pioneer Variable Contracts Trust, American General Life Insurance Company, on its own Behalf and on Behalf of Each of the Segregated Asset Accounts, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. (36) (15)(c) Form of Amendment No. 4 to Participation Agreement by and Among Pioneer Variable Contracts Trust, American General Life Insurance Company, on its own Behalf and on Behalf of Each of the Segregated Asset Accounts, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. (44) (16)(a) Form of Participation Agreement Among Putnam Variable Trust, Putnam Mutual Funds Corp., and American General Life Insurance Company. (6) (16)(b) Form of Amendment No. 3 to Participation Agreement Among Putnam Variable Trust, Putnam Mutual Funds Corp., and American General Life Insurance Company dated October 1, 2007. (44) (17)(a) Form of Participation Agreement by and between SunAmerica Series Trust and American General Life Insurance Company. (18) (17)(b) Form of Addendum to Fund Participation Agreement For Class A Shares by and between SunAmerica Series Trust and American General Life Insurance Company. (31) (17)(c) Form of Amendment to Participation Agreement by and between SunAmerica Series Trust and American General Life Insurance Company, dated July 2, 2003. (32) (18)(a) Form of Participation Agreement by and between The Variable Annuity Life Insurance Company, American General Series Portfolio Company, American General Securities Incorporated and American General Life Insurance Company. (9) (18)(b) Amendment One to Participation Agreement by and between The Variable Annuity Life Insurance Company, American General Series Portfolio Company, American General Securities Incorporated and American General Life Insurance Company dated as of July 21, 1998. (7) C-7 (18)(c) Form of Amendment Two to Participation Agreement by and between The Variable Annuity Life Insurance Company, American General Series Portfolio Company, American General Securities Incorporated and American General Life Insurance Company. (17) (18)(d) Form of Amendment Three to Participation Agreement by and between The Variable Annuity Life Insurance Company, American General Series Portfolio Company, American General Securities Incorporated and American General Life Insurance Company. (16) (18)(e) Form of Amendment Ninth to Participation Agreement by and between The Variable Annuity Life Insurance Company, AIG Retirement Company I (formerly VALIC Company I), American General Equity Services Corporation and American General Life Insurance Company. (47) (18)(f) Form of Amendment Eleventh to Participation Agreement by and among American General Life Insurance Company, American General Equity Services Corporation, VALIC Company I (formerly AIG Retirement Company I) and The Variable Annuity Life Insurance Company effective as of May 1, 2009. (46) (18)(g) Form of Twelfth Amendment to Participation Agreement among American General Life Insurance Company, American General Equity Services Corporation, VALIC Company I and The Variable Annuity Life Insurance Company. (48) (19)(a) Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen American Capital Life Investment Trust, Van Kampen American Capital Asset Management, Inc., and Van Kampen American Capital Distributors, Inc. (8) (19)(b) Amendment One to Amended and Restated Participation Agreement by and among American General Life Insurance Company, American General Securities Incorporated, Van Kampen American Capital Life Investment Trust, Van Kampen American Capital Asset Management, Inc., and Van Kampen American Capital Distributors, Inc. (7) (19)(c) Form of Amendment Six to Amended and Restated Participation Agreement among Van Kampen Life Investment Trust, Van Kampen Funds Inc., Van Kampen Asset Management, Inc., American General Life Insurance Company and American General Securities Incorporated. (16) (19)(d) Form of Amendment Nine to Amended and Restated Participation Agreement among Van Kampen Life Investment Trust, Van Kampen C-8 Funds Inc., Van Kampen Asset Management, Inc., American General Life Insurance Company and American General Distributors, Inc. (26) (20)(a) Form of Participation Agreement by and between Vanguard Variable Insurance Funds, The Vanguard Group, Inc., Vanguard Marketing Corporation and American General Life Insurance Company. (17) (20)(b) Form of Amendment to Participation Agreement by and between Vanguard Variable Insurance Funds, The Vanguard Group, Inc., Vanguard Marketing Corporation and American General Life Insurance Company. (30) (20)(c) Form of Seventh Amendment to Participation Agreement by and among Vanguard Variable Insurance Funds, The Vanguard Group, Inc., Vanguard Marketing Corporation and American General Life Insurance Company. (53) (21)(a) Form of Administrative Services Agreement between American General Life Insurance Company and fund distributor. (5) (22)(a) Form of Amended and Restated Administrative Services Agreement between American General Life Insurance Company and A I M Advisors, Inc. (30) (23)(a) Form of Service Agreement Class O between Fred Alger Management, Inc. and American General Life Insurance Company. (28) (24)(a) Administrative Services Agreement dated as of August 11, 1998, between American General Life Insurance Company and The Dreyfus Corporation. (4) (24)(b) Amendment to Administrative Services Agreement dated as of August 11, 1998, between American General Life Insurance Company and The Dreyfus Corporation effective as of December 1, 1998. (4) (24)(c) Form of Amendment No. 3 to Administrative Services Agreement dated as of August 11, 1998, between American General Life Insurance Company and The Dreyfus Corporation effective as of October 1, 2007. (43) (25)(a) Form of Amended and Restated Service Contract among Fidelity Variable Insurance Products Funds, American General Life Insurance Company, American General Life Insurance Company of Delaware and The United States Life Insurance Company in the City of New York effective May 1, 2012. (51) C-9 (26)(a) Form of Service Agreement by and between Fidelity Investments Institutional Operations Company, Inc. and American General Life Insurance Company. (17) (27)(a) Form of Administrative Services Agreement by and among American General Life Insurance Company and Franklin Templeton Services, Inc., dated as of July 1, 1999. (11) (27)(b) Form of Amendment to Administrative Services Agreement by and among American General Life Insurance Company and Franklin Templeton Services, LLC, effective November 1, 2001. (20) (27)(c) Form of Amendment No. 3 to Administrative Services Agreement by and among American General Life Insurance Company and Franklin Templeton Services, LLC, dated as of July 30, 2004. (12) (28)(a) Form of Administrative Services Agreement by and between Goldman, Sachs & Co. and American General Life Insurance Company. (29) (29)(a) Form of Distribution and Shareholder Services Agreement by and between Janus Distributors, Inc. and American General Life Insurance Company. (17) (30)(a) Form of Indemnification Letter Agreement by and between J.P. Morgan Investment Management Inc. and American General Life Insurance Company. (30) (31)(a) Form of Administrative Services Agreement between American General Life Insurance Company, Miller Anderson & Sherrard LLP and Morgan Stanley Dean Witter Investment Management Inc. (13) (32)(a) Form of Administrative Services Agreement by and between American General Life Insurance Company and Neuberger & Berman Management Incorporated. (14) (33)(a) Form of Administrative Services Agreement by and among American General Life Insurance Company and OppenheimerFunds, Inc. (19) (33)(b) Form of Amendment No. 1 to Administrative Services Agreement by and among American General Life Insurance Company and OppenheimerFunds, Inc. (34) (34)(a) Form of Services Agreement by and between American General Life Insurance Company and Pacific Investment Management Company LLC. (17) C-10 (34)(b) Form of Amendment No. 1 to Services Agreement by and between American General Life Insurance Company and Pacific Investment Management Company LLC. (45) (35)(a) Form of PIMCO Variable Insurance Trust Services Agreement by and between American General Life Insurance Company and PIMCO Variable Insurance Trust. (17) (36)(a) Form of Marketing and Administrative Services Support Agreement by and between Putnam Retail Management Limited Partnership and American General Life Insurance Company. (34) (37)(a) Form of Administrative Services Agreement by and between SunAmerica Asset Management Corp. and American General Life Insurance Company. (18) (38)(a) Form of Administrative Services Agreement between Van Kampen Asset Management Inc. and American General Life Insurance Company dated January 1, 2000 (19) (38)(b) Form of Amendment No. 1 to Administrative Services Agreement between Van Kampen Asset Management Inc. and American General Life Insurance Company, dated November 1, 2001. (27) (39)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between AIM and American General Life Insurance Company. (41) (40)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Alger and American General Life Insurance Company. (41) (41)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between American Century and American General Life Insurance Company. (41) (42)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Dreyfus and American General Life Insurance Company. (41) (43)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Fidelity and American General Life Insurance Company. (41) (44)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Franklin Templeton and American General Life Insurance Company. (41) (45)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Goldman Sachs and American General Life Insurance Company. (42) C-11 (46)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Janus and American General Life Insurance Company. (41) (47)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between JPMorgan Insurance Trust and American General Life Insurance Company. (46) (48)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between MFS and American General Life Insurance Company. (41) (49)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Neuberger Berman and American General Life Insurance Company. (41) (50)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Oppenheimer and American General Life Insurance Company. (41) (51)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between PIMCO and American General Life Insurance Company. (41) (52)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Pioneer and American General Life Insurance Company. (41) (53)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Putnam and American General Life Insurance Company. (41) (54)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between SunAmerica and American General Life Insurance Company. (41) (55)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between UIF Morgan Stanley and American General Life Insurance Company. (42) (56)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between VALIC and American General Life Insurance Company. ((41) (57)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Van Kampen and American General Life Insurance Company. (41) (58)(a) Form of SEC Rule 22c-2 Information Sharing Agreement between Vanguard and American General Life Insurance Company. (41) (i) Administrative Contracts. (1)(a) Form of Service and Expense Agreement dated February 1, 1974, between American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company. (15) C-12 (1)(b) Form of Addendum No. 1 to Service and Expense Agreement dated February 1, 1974, between American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company, dated May 21, 1975. (15) (1)(c) Form of Addendum No. 2 to Service and Expense Agreement dated February 1, 1974, between American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company, dated September 23, 1975. (15) (1)(d) Form of Addendum No. 24 to Service and Expense Agreement dated February 1, 1974, between American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company, dated December 30, 1998. (15) (1)(e) Form of Addendum No. 28 to Service and Expense Agreement dated February 1, 1974, among American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company and American General Life Companies, effective January 1, 2002. (15) (1)(f) Form of Addendum No. 30 to Service and Expense Agreement dated February 1, 1974, among American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company and American General Life Companies, LLC, effective January 1, 2002. (15) (1)(g) Form of Addendum No. 32 to Service and Expense Agreement dated February 1, 1974, among American International Group, Inc. and various affiliate subsidiaries, including American General Life Insurance Company, American General Life Companies, LLC and American General Equity Services Corporation, effective May 1, 2004. (31) (j) Other Material Contracts. (1) General Guarantee Agreement from American Home Assurance Company on behalf of American General Life Insurance Company. (3) (2) Notice of Termination of Guarantee as Published in the Wall Street Journal on November 24, 2006. (38) (3) Amended and Restated Unconditional Capital Maintenance Agreement between American International Group, Inc. and American General Life Insurance Company. (53) C-13 (k) Legal Opinions. (1) Opinion and Consent of Pauletta P. Cohn, General Counsel, Life Insurance Operations of American General Life Companies. (24) (2) Opinion and Consent of Sullivan & Cromwell LLP, Counsel to American Home Assurance Company. (33) (l) Actuarial Opinion. (1) Opinion and Consent of American General Life Insurance Company's actuary. (24) (m) Calculation. None (n) Other Opinions. (1) Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP. (Filed herewith) (o) Omitted Financial Statements. None (p) Initial Capital Agreements. None (q) Redeemability Exemption. (1) Description of American General Life Insurance Company's Issuance, Transfer and Redemption Procedures for the Variable Universal Life Insurance Policies Pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940 as of May 1, 2013. (50) (r) Powers of Attorney. (1) Power of Attorney with respect to Registration Statements and Amendments thereto signed by the directors and, where applicable, officers of American Home Assurance Company. (54) (2) Power of Attorney with respect to Registration Statements and Amendments thereto signed by the directors and, where applicable, officers of American General Life Insurance Company. (53) (3) Power of Attorney with respect to Registration Statements and Amendments thereto signed by the directors and, where applicable, officers of American General Life Insurance Company. (Filed herewith) C-14 -------- (1) Incorporated by reference to initial filing of Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R filed on December 18, 1997. (2) Incorporated by reference to initial filing of Form N-4 Registration Statement (File No. 033-43390) of American General Life Insurance Company Separate Account D filed on October 16, 1991. (3) Incorporated by reference to Post-Effective Amendment No. 11 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on August 12, 2005. (4) Incorporated by reference to initial filing of Form N-4 Registration Statement (File No. 333-70667) of American General Life Insurance Company Separate Account D filed on January 15, 1999. (5) Incorporated by reference to Pre-Effective Amendment No. 3 to Form S-6 Registration Statement (File No. 333-53909) of American General Life Insurance Company Separate Account VL-R filed on August 19, 1998. (6) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R filed on March 23, 1998. (7) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-70667) of American General Life Insurance Company Separate Account D filed on March 18, 1999. (8) Incorporated by reference to Post-Effective Amendment No. 12 to Form N-4 Registration Statement (File No. 033-43390) of American General Life Insurance Company Separate Account D filed on April 30, 1997. (9) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-40637) of American General Life Insurance Company Separate Account D filed on February 12, 1998. (10) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-80191) of American General Life Insurance Company Separate Account VL-R filed on August 25, 1999. C-15 (11) Incorporated by reference to Post-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-87307) of American General Life Insurance Company Separate Account VL-R filed on October 10, 2000. (12) Incorporated by reference to Post-Effective Amendment No. 7 to Form N-6 Registration Statement (File No. 333-80191) of American General Life Insurance Company Separate Account VL-R filed on December 2, 2004. (13) Incorporated by reference to Post-Effective Amendment No. 18 to Form N-4 Registration Statement (File No. 033-43390) of American General Life Insurance Company Separate Account D filed on April 12, 2000. (14) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-89897) of American General Life Insurance Company Separate Account VL-R filed on January 21, 2000. (15) Incorporated by reference to Post-Effective Amendment No. 8 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on May 3, 2004. (16) Incorporated by reference to Post-Effective Amendment No. 4 to Form S-6 Registration Statement (File No. 333-42567) of American General Life Insurance Company Separate Account VL-R filed on October 11, 2000. (17) Incorporated by reference to Post-Effective Amendment No. 2 to Form S-6 Registration Statement (File No. 333-80191) of American General Life Insurance Company Separate Account VL-R filed on September 20, 2000. (18) Incorporated by reference to Post-Effective Amendment No. 2 to Form S-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on April 24, 2002. (19) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-87307) of American General Life Insurance Company Separate Account VL-R filed on January 20, 2000. (20) Incorporated by reference to Post-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on December 3, 2001. (21) Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-109613) of American General Life Insurance Company Separate Account VL-R filed on October 10, 2003. C-16 (22) Incorporated by reference to Post-Effective Amendment No. 7 to Form N-4 Registration Statement (File No. 333-40637) of American General Life Insurance Company Separate Account D filed on November 8, 2002. (23) Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-102299) of American General Life Insurance Company Separate Account VUL-2 filed on December 31, 2002. (24) Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on October 26, 2000. (25) Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-103361) of American General Life Insurance Company Separate Account VL-R filed on February 21, 2003. (26) Incorporated by reference to Post-Effective Amendment No. 3 to Form N-6 Registration Statement (File No. 333-65170) of American General Life Insurance Company Separate Account VL-R filed on January 23, 2003. (27) Incorporated by reference to Post-Effective Amendment No. 4 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on February 10, 2003. (28) Incorporated by reference to Post-Effective Amendment No. 6 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on April 30, 2003. (29) Incorporated by reference to Post-Effective Amendment No. 7 to Form N-6 Registration Statement (File No. 333-90787) of American General Life Insurance Company Separate Account VL-R filed on December 19, 2003. (30) Incorporated by reference to Post-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-118318) of American General Life Insurance Company Separate Account VL-R filed on May 2, 2005. (31) Incorporated by reference to Post-Effective Amendment No. 9 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on December 3, 2004. (32) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4 Registration Statement (File No. 333-109206) of American General Life Insurance Company Separate Account D filed on December 17, 2003. C-17 (33) Incorporated by reference to Post-Effective Amendment No. 12 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on October 24, 2005. (34) Incorporated by reference to Post-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-129552) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2006. (35) Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-129552) of American General Life Insurance Company Separate Account VL-R filed on November 8, 2005. (36) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-129552) of American General Life Insurance Company Separate Account VL-R filed on March 30, 2006. (37) Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-118318) of American General Life Insurance Company Separate Account VL-R filed on August 18, 2004. (38) Incorporated by reference to Post-Effective Amendment No. 6 to Form N-6 Registration Statement (File No. 333-118318) of American General Life Insurance Company Separate Account VL-R filed on December 12, 2006. (39) Incorporated by reference to Post-Effective Amendment No. 14 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2006. (40) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-137817) of American General Life Insurance Company Separate Account VL-R filed on December 14, 2006. (41) Incorporated by reference to Post-Effective Amendment No. 7 to Form N-6 Registration Statement (File No. 333-118318) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2007. (42) Incorporated by reference to Post-Effective Amendment No. 16 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2007. (43) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-144594) of American General Life Insurance Company Separate Account VL-R filed on October 2, 2007. C-18 (44) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-153068) of American General Life Insurance Company Separate Account VL-R filed on December 3, 2008. (45) Incorporated by reference to Post-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-151576) of American General Life Insurance Company Separate Account VL-R filed on May 1, 2009. (46) Incorporated by reference to Post-Effective Amendment No. 2 to Form N-6 Registration Statement (File No. 333-151576) of American General Life Insurance Company Separate Account VL-R filed on May 3, 2010. (47) Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-6 Registration Statement (File No. 333-151576) of American General Life Insurance Company Separate Account VL-R filed on August 28, 2008. (48) Incorporated by reference to Post-Effective Amendment No. 3 to Form N-6 Registration Statement (File No. 333-151576) of American General Life Insurance Company Separate Account VL-R filed on May 2, 2011. (49) Incorporated by reference to Post-Effective Amendment No. 4 to Form N-6 Registration Statement (File No. 333-151576) of American General Life Insurance Company Separate Account VL-R filed on April 30, 2012. (50) Incorporated by reference to Post-Effective Amendment No. 5 to Form N-6 RegistrationStatement (File No. 333-151576) of American General Life Insurance Company Separate Account VL-R filed on April 30, 2013. (51) Incorporated by reference to initial filing of Form N-6 Registration Statement (File No. 333-185761) of American General Life Insurance Company Separate Account II filed on December 31, 2012. (52) Incorporated by reference to Post-Effective Amendment No. 22 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on April 30, 2013. (53) Incorporated by reference to Post-Effective Amendment No. 6 to Form N-6 Registration Statement (File No. 333-151576) of American General Life Insurance Company Separate Account VL-R filed on April 30, 2014. (54) Incorporated by reference to Post-Effective Amendment No. 23 to Form N-6 Registration Statement (File No. 333-43264) of American General Life Insurance Company Separate Account VL-R filed on April 30, 2014. C-19 ITEM 27. DIRECTORS AND OFFICERS OF THE DEPOSITOR The directors and principal officers of the Company are set forth below. The business address of each officer and director is 2919 Allen Parkway, Houston, Texas 77019, unless otherwise noted. NAMES POSITIONS AND OFFICES HELD WITH DEPOSITOR Robert S. Schimek (5) Director, Chairman, President Kevin T. Hogan (5) Director, Chief Executive Officer Jana W. Greer (3) Director, President, Individual Retirement Jonathan J. Novak (2) Director, President, Institutional Markets Curtis W. Olson (1) Director, President, Group Benefits Mary Jane B. Fortin Director, Executive Vice President, Chief Financial Officer and Vice Chairman Thomas J. Diemer Director, Senior Vice President and Chief Risk Officer Deborah A. Gero (2) Director, Senior Vice President and Chief Investment Officer Stephen A. Maginn (2) Director, Senior Vice President and Chief Distribution Officer Jeffrey M. Farber (5) Director John Q. Doyle (5) Director Charles H. Shamieh (5) Director, President, Life, Disability and Health Robert J. Scheinerman Executive Vice President, Individual Retirement Jesus C. Zaragoza Senior Vice President and Life Controller Michael P. Harwood Director, Senior Vice President, Chief Actuary and Corporate Illustration Actuary Randall W. Epright Senior Vice President and Chief Information Officer Christine A. Nixon (2) Senior Vice President and Chief Legal Officer Tim W. Still Senior Vice President and Chief Operations Officer Yoav Tamir (3) Senior Vice President, Market Risk Management Kyle L. Jennings Senior Vice President and Chief Compliance Officer Sai P. Raman (6) Senior Vice President, Institutional Markets Craig A. Buck (10) Senior Vice President, Capital Management Timothy M. Heslin Senior Vice President, Head of Global Life Sciences Rodney E. Rishel Senior Vice President, Head of US Life and Disability David S. Jorgensen Vice President and Controller Gloria Beissinger Vice President and Treasurer Charles E. Beam (4) Vice President and Assistant Controller Jim A. Coppedge Vice President and Assistant Secretary Mallary L. Reznik (2) Vice President, General Counsel and Assistant Secretary Julie Cotton Hearne Vice President and Secretary John B. Deremo (4) Vice President, Distribution Gavin D. Friedman (2) Vice President and Litigation Officer Leo W. Grace Vice President, Product Filing Tracey E. Harris Vice President, Product Filing T. Clay Spires Vice President and Tax Officer C-20 Michael E. Treske (3) Vice President, Distribution Frank Kophamel Vice President and Appointed Actuary Katherine L. Stoner Vice President, 38a-1 Compliance Officer Christina M. Haley (3) Vice President Marla S. Campagna (7) Vice President Mary M. Newitt (3) Vice President Manda Ghaferi (2) Vice President Keith C. Honig (7) Vice President Stewart P. Polakov (3) Vice President Douglas S. Tymins (7) Vice President Jennifer P. Powell Anti-Money Laundering and Office of Foreign Asset Control Officer David J. Kumatz (4) Assistant Secretary Virginia N. Puzon (2) Assistant Secretary Cris Thomas Assistant Secretary Rosemary Foster Assistant Secretary Barry A. Hopkins (4) Assistant Tax Officer Grace D. Harvey Illustration Actuary Laszlo Kulin (9) Investment Tax Officer Alireza Vaseghi (9) Managing Director and Chief Operating Officer, Institutional Markets Melissa H. Cozart Privacy Officer (1) 3600 Route 66, Neptune, NJ 07753 (2) 1999 Avenue of the Stars, Los Angeles, CA 90067 (3) 21650 Oxnard Street, Woodland Hills, CA 91367 (4) 2000 American General Way, Brentwood, TN 37027 (5) 175 Water Street, New York, NY 10038 (6) 50 Danbury Road, Wilton, CT 06897 (7) 777 S. Figueroa St, Los Angeles, CA 90017 (8) 1690 New Britain Avenue, Farmington, CT 06032 (9) 80 Pine Street, New York, NY 10005 (10) 1650 Market Street, Philadelphia, PA 19139 ITEM 28. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR THE REGISTRANT The Depositor is an indirect wholly-owned subsidiary of American International Group, Inc. An organizational chart for American International Group, Inc. can be found as Exhibit 21 in American International Group, Inc.'s Form 10-K, SEC file Number 001-08787, accession number 0000005272-15-000002, filed February 20, 2015. Exhibit 21 is incorporated herein by reference. The Registrant is a separate account of American General Life Insurance Company (Depositor). C-21 ITEM 29. INDEMNIFICATION Insofar as indemnification for liability arising under the Securities Act of 1933 ("Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. AMERICAN GENERAL LIFE INSURANCE COMPANY To the full extent authorized by law, the corporation shall indemnify any person made, or threatened to be made, a party to an action or proceeding, whether criminal or civil, by reason of the fact that he, his testator or intestate is or was a director or officer of the corporation or serves or served in any capacity in any other corporation at the request of the corporation. Nothing contained herein shall affect any rights to indemnification to which corporate personnel other than directors and officers may be entitled by contract or otherwise under law. ITEM 30. PRINCIPAL UNDERWRITERS (a) Other Activity. Registrant's principal underwriter, AIG Capital Services, Inc., also acts as principal underwriter for the following investment companies: AMERICAN GENERAL LIFE INSURANCE COMPANY Variable Separate Account Variable Annuity Account One Variable Annuity Account Two Variable Annuity Account Four Variable Annuity Account Five Variable Annuity Account Seven Variable Annuity Account Nine Separate Account A Separate Account D Separate Account I Separate Account II Separate Account VA-1 Separate Account VA-2 Separate Account VUL Separate Account VUL-2 AG Separate Account A C-22 THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK FS Variable Separate Account FS Variable Annuity Account One FS Variable Annuity Account Two FS Variable Annuity Account Five Separate Account USL VA-R Separate Account USL VL-R Separate Account USL A Separate Account USL B THE VARIABLE ANNUITY LIFE INSURANCE COMPANY Separate Account A (b)Management. The following information is provided for each director and officer of the principal underwriter.
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH UNDERWRITER BUSINESS ADDRESS* AIG CAPITAL SERVICES, INC. ------------------ -------------------------------------- Peter A. Harbeck Director James T. Nichols Director, President and Chief Executive Officer Rebecca Snider Chief Compliance Officer Frank Curran Vice President, Controller, Financial Operation Officer, Chief Financial Officer and Treasurer Stephen A. Maginn(2) Director, Senior Vice President Michael E. Treske(1) Chief Distribution Officer, Mutual Funds and Variable Annuities John T. Genoy Vice President Mallary L. Reznik(2) Vice President Christine A. Nixon(2) Secretary Virginia N. Puzon(2) Assistant Secretary
*Unless otherwise indicated, the principal business address of AIG Capital Services, Inc. and of each of the above individuals is Harborside Financial Center, 3200 Plaza 5, Jersey City, NJ 07311. (1)Principal business address is 21650 Oxnard Street, Suite 750, Woodland Hills, CA 91367-4901. (2)Principal business address is 1999 Avenue of the Stars, Los Angeles, CA 90067-6121. C-23 (c) Compensation From the Registrant.
NET UNDERWRITING COMPENSATION ON EVENTS NAME OF PRINCIPAL DISCOUNTS AND OCCASIONING THE DEDUCTION BROKERAGE OTHER UNDERWRITER COMMISSIONS OF A DEFERRED SALES LOAD COMMISSIONS COMPENSATION AIG Capital Services, Inc. 0 0 0 0
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-1 through 31a-3 thereunder, are maintained and in the custody of American General Life Insurance Company at its principal executive office located at 2727-A Allen Parkway, Houston, Texas 77019-2191 or at American General Life Insurance Company's Administrative Office located at 2727-A Allen Parkway, Houston, Texas 77019-2191. ITEM 32. MANAGEMENT SERVICES Not applicable. ITEM 33. FEE REPRESENTATION American General Life Insurance Company hereby represents that the fees and charges deducted under the Policy, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and risks assumed by American General Life Insurance Company. UNDERTAKINGS OF THE DEPOSITOR During any time there are insurance obligations outstanding and covered by the guarantee issued by American Home Assurance Company ("American Home Guarantee Period"), filed as an exhibit to this Registration Statement (the "American Home Guarantee"), the Depositor hereby undertakes to provide notice to policy owners covered by the American Home Guarantee promptly after the happening of significant events related to the American Home Guarantee. These significant events include: (i) termination of the American Home Guarantee that has a material adverse effect on the policy owner's rights under the American Home Guarantee; (ii) a default under the American Home Guarantee that has a material adverse effect on the policy owner's rights under the American Home Guarantee; or (iii) the insolvency of American Home Assurance Company ("American Home"). Depositor hereby undertakes during the American Home Guarantee Period to cause Registrant to file post-effective amendments to this Registration Statement as frequently as is necessary to ensure that the current annual audited statutory financial statements of American Home in the Registration Statement are updated to be as of a date not more than 16 months prior to the effective date of this Registration Statement, and to cause Registrant to include as an exhibit to C-24 this Registration Statement the consent of the independent registered public accounting firm of American Home regarding such financial statements. During the American Home Guarantee Period, the Depositor hereby undertakes to include in the prospectuses to policy owners, an offer to supply the annual audited statutory financial statements of American Home, free of charge upon a policy owner's request. As of December 29, 2006 at 4:00 p.m. Eastern time (the "Point of Termination"), the American Home Guarantee was terminated for prospectively issued Policies. The American Home Guarantee will not cover any Policies with a date of issue later than the Point of Termination. The American Home 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. C-25 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, American General Life Insurance Company Separate Account VL-R, certifies that it meets all the requirements for effectiveness of this amended Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this amended Registration Statement to be signed on its behalf, by the undersigned, duly authorized, in the City of Houston, and State of Texas on this 27th day of April, 2015. AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT VL-R (Registrant) BY: AMERICAN GENERAL LIFE INSURANCE COMPANY (On behalf of the Registrant and itself) BY: /s/ MARY JANE B. FORTIN ---------------------------------------- MARY JANE B. FORTIN EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed below by the following persons, on behalf of the Depositor and Registrant, in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- *ROBERT S. SCHIMEK Director, Chairman, President April 27, 2015 ----------------------- ROBERT S. SCHIMEK *THOMAS J. DIEMER Director, Senior Vice President and April 27, 2015 ----------------------- Chief Risk Officer THOMAS J. DIEMER *JOHN Q. DOYLE Director April 27, 2015 ----------------------- JOHN Q. DOYLE *JEFFREY M. FARBER Director April 27, 2015 ----------------------- JEFFREY M. FARBER /s/ MARY JANE B. FORTIN Director, Vice Chairman, Executive April 27, 2015 ----------------------- Vice President and Chief Financial MARY JANE B. FORTIN Officer *DEBORAH A. GERO Director, Senior Vice President and April 27, 2015 ----------------------- Chief Investment Officer DEBORAH A. GERO *JANA W. GREER Director and President - Individual April 27, 2015 ----------------------- Retirement JANA W. GREER *MICHAEL P. HARWOOD Director, Senior Vice President, April 27, 2015 ----------------------- Chief Actuary, Corporate Illustration MICHAEL P. HARWOOD Actuary *KEVIN T. HOGAN Director and Chief Executive Officer April 27, 2015 ----------------------- KEVIN T. HOGAN *STEPHEN A. MAGINN Director, Senior Vice President and April 27, 2015 ----------------------- Chief Distribution Officer STEPHEN A. MAGINN *JONATHAN J. NOVAK Director and President - April 27, 2015 ----------------------- Institutional Markets JONATHAN J. NOVAK *CURTIS W. OLSON Director and President - Group April 27, 2015 ----------------------- Benefits CURTIS W. OLSON *CHARLES S. SHAMIEH Director, President, Life, Disability April 27, 2015 ----------------------- and Health CHARLES S. SHAMIEH *DAVID JORGENSEN Vice President and Controller April 27, 2015 ----------------------- DAVID JORGENSEN /s/ MANDA GHAFERI Attorney-in-Fact April 27, 2015 ----------------------- *MANDA GHAFERI SIGNATURES American Home Assurance Company has caused this amended Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of New York, and State of New York on the 27th day of April, 2015. AMERICAN HOME ASSURANCE COMPANY BY: /s/ LAWRENCE J. MOLONEY ------------------------------ LAWRENCE J. MOLONEY STATUTORY CONTROLLER AND VICE PRESIDENT This amended Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- *ALEXANDER R. BAUGH Director April 27, 2015 ---------------------- ALEXANDER R. BAUGH *JAMES BRACKEN Director April 27, 2015 ---------------------- JAMES BRACKEN *TIMOTHY D. CARTER Director April 27, 2015 ---------------------- TIMOTHY D. CARTER *JOSEPH D. COOK Director, Senior Vice President April 27, 2015 ---------------------- and Chief Financial Officer JOSEPH D. COOK *JOHN Q. DOYLE Director April 27, 2015 ---------------------- JOHN Q. DOYLE *JEFFREY M. FARBER Director April 27, 2015 ---------------------- JEFFREY M. FARBER Director April 27, 2015 ---------------------- STEPHEN J. GRABEK Director April 27, 2015 ---------------------- KIMBERLY M. HANNA *KEVIN T. HOGAN Director April 27, 2015 ---------------------- KEVIN T. HOGAN *RALPH W. MUCERINO Director April 27, 2015 ---------------------- RALPH W. MUCERINO Director April 27, 2015 ---------------------- ALESSANDREA QUANE *ROBERT S. SCHIMEK Director, President and Chief April 27, 2015 ---------------------- Executive Officer ROBERT S. SCHIMEK *CHRISTOPHER L. SPARRO Director April 27, 2015 ---------------------- CHRISTOPHER L. SPARRO *BY: /s/ JOSEPH D. COOK --------------------------------------- JOSEPH D. COOK ATTORNEY-IN-FACT (Exhibit to the Registration Statement) EXHIBIT INDEX ITEM 26. EXHIBITS (e)(4) Specimen form of Service Request Form, Form No. AGLC0223 Rev0614. (n)(1) Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP. (r)(3) Power of Attorney with respect to Registration Statements and Amendments thereto signed by the directors and, where applicable, officers of American General Life Insurance Company. E-1 EX-99.(E)(4) 2 d885142dex99e4.txt SERVICE REQUEST FORM, FORM NO. AGLC0223 REV0614 Exhibit (e)(4) SERVICE REQUEST PLATINUM Investor(R) III AMERICAN GENERAL LIFE PLATINUM INVESTOR(R) III - FIXED OPTION MFS(R) Variable Insurance Trust . Division 301 - AGL Declared Fixed Interest Account . Division 284 - MFS(R) VIT Core Equity PLATINUM INVESTOR(R) III - VARIABLE DIVISIONS . Division 282 - MFS(R) VIT Growth The Alger Portfolios . Division 285 - MFS(R) VIT New Discovery . Division 314 - Alger Capital Appreciation . Division 283 - MFS(R) VIT Research . Division 313 - Alger Mid Cap Growth Neuberger Berman Advisers Management Trust American Century(R) Variable Portfolios, Inc. . Division 286 - AMT Mid Cap Growth . Division 262 - VP Value Oppenheimer Variable Account Funds Dreyfus Investment Portfolios . Division 310 - Oppenheimer Capital Income . Division 273 - MidCap Stock . Division 311 - Oppenheimer Global Dreyfus Variable Investment Fund PIMCO Variable Insurance Trust . Division 272 - Opportunistic Small Cap . Division 429 - PIMCO . Division 271 - Quality Bond CommodityRealReturn Strategy Fidelity Variable Insurance Products . Division 288 - PIMCO Real Return . Division 277 - VIP Asset Manager . Division 287 - PIMCO Short-Term . Division 276 - VIP Contrafund(R) . Division 289 - PIMCO Total Return . Division 274 - VIP Equity-Income Pioneer Variable Contracts Trust . Division 425 - VIP Freedom 2020 . Division 422 - Pioneer Fund VCT . Division 426 - VIP Freedom 2025 . Division 428 - Pioneer Mid Cap Value VCT . Division 427 - VIP Freedom 2030 . Division 423 - Pioneer Select Mid Cap Growth VCT . Division 275 - VIP Growth Putnam Variable Trust . Division 308 - VIP Mid Cap . Division 290 - Putnam VT Diversified Income Franklin Templeton Variable Insurance Products Trust . Division 291 - Putnam VT Growth and Income . Division 309 - Franklin Small Cap Value VIP . Division 292 - Putnam VT International Value . Division 302 - Franklin U.S. Government Securities VIP SunAmerica Series Trust . Division 303 - Franklin Mutual Shares VIP . Division 307 - ST Aggressive Growth . Division 304 - Templeton Foreign VIP . Division 306 - ST Balanced Goldman Sachs Variable Insurance Trust The Universal Institutional Funds, Inc. . Division 421 - Goldman Sachs Strategic Growth . Division 295 - Growth Invesco Variable Insurance Funds VALIC Company I . Division 424 - Invesco V.I. Core Equity . Division 263 - International Equities Index . Division 305 - Invesco V.I. Growth and Income . Division 264 - Mid Cap Index . Division 410 - Invesco V.I. High Yield . Division 265 - Money Market I . Division 260 - Invesco V.I. International Growth . Division 266 - Nasdaq-100(R) Index Janus Aspen Series . Division 269 - Science & Technology . Division 280 - Enterprise . Division 268 - Small Cap Index . Division 279 - Global Research . Division 267 - Stock Index . Division 278 - Overseas Vanguard Variable Insurance Fund JPMorgan Insurance Trust . Division 297 - VIF High Yield Bond . Division 927 - JPMorgan Mid Cap Value . Division 298 - VIF REIT Index . Division 281 - JPMorgan Small Cap Core AGLC0223 Rev1204 Rev0614
[LOGO OF AIG] VARIABLE UNIVERSAL LIFE INSURANCE SERVICE REQUEST COMPLETE AND RETURN THIS REQUEST TO: Variable Universal Life Operations AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL") P.O. Box 9318 . Amarillo TX 79105-9318 (800) 340-2765 or Hearing Impaired (TDD) (888) 436-5256 . Fax: (713) 620-6653 [ ] POLICY 1. POLICY #: ___________________________ Insured: ______________________________________________________ IDENTIFICATION COMPLETE THIS Address: ________________________________________________________________________ New Address (yes) (no) SECTION FOR ALL REQUESTS. Primary Owner (If other than an insured): ______________________________________________ Address: ________________________________________________________________________ New Address (yes) (no) Primary Owner's S.S. No. or Tax I.D. No.__________________ Phone Number: ( ) __________ - ___________ Joint Owner (If applicable): __________________________________________________________ Address: ________________________________________________________________________ New Address (yes) (no) ------------------------------------------------------------------------------------------------------------------------------------ [ ] NAME CHANGE 2. Change Name Of: (Circle One) Insured Owner Payor Beneficiary Complete this section if the name Change Name From: (First, Middle, Last) Change Name To: (First, Middle, Last) of one of the Insured, Owner, ____________________________________________________ _____________________________________________________ Payor or Beneficiary has changed. (Please Reason for Change: (Circle One) Marriage Divorce Correction Other (Attach copy of legal proof) note, this does not change the Insured, Owner, Payor or Beneficiary designation). ------------------------------------------------------------------------------------------------------------------------------------ [ ] CHANGE IN 3. INVESTMENT DIVISION PREM % DED % INVESTMENT DIVISION PREM % DED % ALLOCATION (301) AGL Declared Fixed MFS(R) Variable Insurance Trust PERCENTAGES Interest Account ______ ______ (284) MFS(R) VIT Core Equity* ______ ______ The Alger Portfolios (282) MFS(R) VIT Growth* ______ ______ Use this section to (314) Alger Capital Appreciation ______ ______ (285) MFS(R) VIT New Discovery ______ ______ indicate how (313) Alger Mid Cap Growth ______ ______ (283) MFS(R) VIT Research ______ ______ premiums or monthly American Century(R) Variable Neuberger Berman Advisers deductions are to be Portfolios, Inc. Management Trust allocated. Total (262) VP Value ______ ______ (286) AMT Mid Cap Growth ______ ______ allocation in each Dreyfus Investment Portfolios Oppenheimer Variable Account Funds column must equal (273) MidCap Stock* ______ ______ (310) Oppenheimer Capital Income ______ ______ 100%; whole numbers Dreyfus Variable Investment Fund (311) Oppenheimer Global ______ ______ only. (272) Opportunistic Small Cap* ______ ______ PIMCO Variable Insurance Trust (271) Quality Bond* ______ ______ (429) PIMCO ______ ______ * These investment Fidelity Variable Insurance CommodityRealReturn Strategy options are Products (288) PIMCO Real Return ______ ______ available only for (277) VIP Asset Manager ______ ______ (287) PIMCO Short-Term ______ ______ owners whose (276) VIP Contrafund(R) ______ ______ (289) PIMCO Total Return ______ ______ policies were (274) VIP Equity-Income ______ ______ Pioneer Variable Contracts Trust effective before (425) VIP Freedom 2020 ______ ______ (422) Pioneer Fund VCT** ______ ______ 5/1/06. (426) VIP Freedom 2025 ______ ______ (428) Pioneer Mid Cap Value VCT ______ ______ (427) VIP Freedom 2030 ______ ______ (423) Pioneer Select Mid Cap ** These investment (275) VIP Growth ______ ______ Growth VCT** ______ ______ options are (308) VIP Mid Cap ______ ______ Putnam Variable Trust available only for Franklin Templeton Variable (290) Putnam VT Diversified Income ______ ______ owners who had Insurance Products Trust (291) Putnam VT Growth and Income* ______ ______ Accumulation Value (309) Franklin Small Cap Value VIP ______ ______ (292) Putnam VT International Value ______ ______ invested in such (302) Franklin U.S. Government ______ ______ SunAmerica Series Trust fund or portfolio on Securities VIP (307) ST Aggressive Growth ______ ______ 12/10/04. (303) Franklin Mutual Shares VIP ______ ______ (306) ST Balanced ______ ______ (304) Templeton Foreign VIP ______ ______ The Universal Institutional Funds, *** These investment Goldman Sachs Variable Insurance Inc. options are not Trust (295) Growth* ______ ______ available for any (421) Goldman Sachs NA ______ VALIC Company I purpose except to Strategic Growth*** (263) International Equities Index ______ ______ transfer Invesco Variable Insurance Funds (264) Mid Cap Index ______ ______ Accumulation Value (424) Invesco V.I. Core Equity* ______ ______ (265) Money Market I ______ ______ to other investment (305) Invesco V.I. Growth and (266) Nasdaq-100(R) Index ______ ______ options. Income ______ ______ (269) Science & Technology ______ ______ (410) Invesco V.I. High Yield* ______ ______ (268) Small Cap Index ______ ______ (260) Invesco V.I. International (267) Stock Index ______ ______ Growth ______ ______ Vanguard Variable Insurance Fund Janus Aspen Series (297) VIF High Yield Bond ______ ______ (280) Enterprise ______ ______ (298) VIF REIT Index ______ ______ (279) Global Research* ______ ______ Other: ____________________________ ______ ______ (278) Overseas ______ ______ 100% 100% JPMorgan Insurance Trust (927) JPMorgan Mid Cap Value*** NA ______ (281) JPMorgan Small Cap Core ______ ______ AGLC0223 Rev1204 Page 2 of 5 Rev0614
[ ] MODE OF 4. Indicate frequency and premium amount desired: $_________ Annual $_________ Semi-Annual $________ Quarterly PREMIUM PAYMENT/BILLING $_________ Monthly (Bank Draft Only) METHOD CHANGE Use this section to Indicate billing method desired: ______ Direct Bill _______ Pre-Authorized Bank Draft change the billing (attach a Bank Draft Authorization Form and "Void" frequency and/or Check) method of premium payment. Note, Start Date: ______/ ______/ ________ however, that AGL will not bill you on a direct monthly basis. Refer to your policy and its related prospectus for further information concerning minimum premiums and billing options. ------------------------------------------------------------------------------------------------------------------------------------ [ ] LOST POLICY 5. I/we hereby certify that the policy of insurance for the listed policy has been __ LOST __ DESTROYED __ OTHER. CERTIFICATE Complete this Unless I/we have directed cancellation of the policy, I/we request that a: section if applying for a Certificate of ______Certificate of Insurance at no charge Insurance or duplicate policy to ______Full duplicate policy at a charge of $25 replace a lost or misplaced policy. be issued to me/us. If the original policy is located, I/we will return the Certificate or duplicate policy to If a full duplicate AGL for cancellation. policy is being requested, a check or money order for $25 payable to AGL must be submitted with this request. ------------------------------------------------------------------------------------------------------------------------------------ [ ] DOLLAR COST 6. Day of the month for transfers____________ (Choose a day of the month between 1-28) AVERAGING (DCA) Frequency of transfers:______ Monthly ______ Quarterly ______ Semi-Annually ______ Annually ($5,000 MINIMUM DCA to be made from the following investment option:__________________________________ BEGINNING Transfer: $________________________($100 minimum, whole dollars only) ACCUMULATION VALUE) An amount can be The Alger Portfolios MFS(R) Variable Insurance Trust systematically (314) Alger Capital Appreciation $________ (284) MFS(R) VIT Core Equity* $________ transferred from any (313) Alger Mid Cap Growth $________ (282) MFS(R) VIT Growth* $________ one investment American Century(R) Variable Portfolios, Inc. (285) MFS(R) VIT New Discovery $________ option and directed (262) VP Value $________ (283) MFS(R) VIT Research $________ to one or more of Dreyfus Investment Portfolios Neuberger Berman Advisers the investment (273) MidCap Stock* $________ Management Trust options below. The Dreyfus Variable Investment Fund (286) AMT Mid Cap Growth $________ AGL Declared Fixed (272) Opportunistic Small Cap* $________ Oppenheimer Variable Account Funds Interest Account is (271) Quality Bond* $________ (310) Oppenheimer Capital Income $________ not available for Fidelity Variable Insurance Products (311) Oppenheimer Global $________ DCA. Please refer to (277) VIP Asset Manager $________ PIMCO Variable Insurance Trust the prospectus for (276) VIP Contrafund(R) $________ (429) PIMCO more information on (274) VIP Equity-Income $________ CommodityRealReturn Strategy $________ the DCA option. (425) VIP Freedom 2020 $________ (288) PIMCO Real Return $________ NOTE: DCA is not (426) VIP Freedom 2025 $________ (287) PIMCO Short-Term $________ available if the (427) VIP Freedom 2030 $________ (289) PIMCO Total Return $________ Automatic (275) VIP Growth $________ Pioneer Variable Contracts Trust Rebalancing option (308) VIP Mid Cap $________ (422) Pioneer Fund VCT** $________ has been chosen. Franklin Templeton Variable Insurance (428) Pioneer Mid Cap Value VCT $________ Products Trust (423) Pioneer Select Mid Cap Growth VCT** $________ * These investment (309) Franklin Small Cap Value VIP $________ Putnam Variable Trust options are (302) Franklin U.S. Government (290) Putnam VT Diversified Income $________ available only for Securities VIP $________ (291) Putnam VT Growth and Income* $________ owners whose (303) Franklin Mutual Shares VIP $________ (292) Putnam VT International Value $________ policies were (304) Templeton Foreign VIP $________ SunAmerica Series Trust effective before Invesco Variable Insurance Funds (307) ST Aggressive Growth $________ 5/1/06. (424) Invesco V.I. Core Equity* $________ (306) ST Balanced $________ (305) Invesco V.I. Growth and Income $________ The Universal Institutional Funds, Inc. ** These investment (410) Invesco V.I. High Yield* $________ (295) Growth* $________ options are (260) Invesco V.I. International Growth $________ VALIC Company I available only for Janus Aspen Series (263) International Equities Index $________ owners who had (280) Enterprise $________ (264) Mid Cap Index $________ Accumulation Value (279) Global Research* $________ (265) Money Market I $________ invested in such (278) Overseas $________ (266) Nasdaq-100(R) Index $________ fund or portfolio on JPMorgan Insurance Trust (269) Science & Technology $________ 12/10/04. (281) JPMorgan Small Cap Core $________ (268) Small Cap Index $________ (267) Stock Index $________ ______ INITIAL HERE TO REVOKE DCA ELECTION. Vanguard Variable Insurance Fund (297) VIF High Yield Bond $________ (298) VIF REIT Index $________ Other: $________ AGLC0223 Rev1204 Page 3 of 5 Rev0614
[ ] AUTOMATIC 7. Indicate frequency: ______ Quarterly ______ Semi-Annually ______ Annually REBALANCING (DIVISION NAME OR NUMBER) (DIVISION NAME OR NUMBER) ($5,000 minimum ________% : ___________________________________________ _________% :_________________________________________ accumulation value) ________% : ___________________________________________ _________% :_________________________________________ Use this section to ________% : ___________________________________________ _________% :_________________________________________ apply for or make ________% : ___________________________________________ _________% :_________________________________________ changes to Automatic ________% : ___________________________________________ _________% :_________________________________________ Rebalancing of the ________% : ___________________________________________ _________% :_________________________________________ variable divisions. ________% : ___________________________________________ _________% :_________________________________________ Please refer to the ________% : ___________________________________________ _________% :_________________________________________ prospectus for more ________% : ___________________________________________ _________% :_________________________________________ information on the ________% : ___________________________________________ _________% :_________________________________________ Automatic ________% : ___________________________________________ _________% :_________________________________________ Rebalancing Option. Note: Automatic _________ INITIAL HERE TO REVOKE AUTOMATIC REBALANCING ELECTION. Rebalancing is not available if the Dollar Cost Averaging option has been chosen. See investment option restrictions in Box 3 above. ------------------------------------------------------------------------------------------------------------------------------------ [ ] AUTHORIZATION 8. I (or we, if Joint Owners) hereby authorize AGL to act on telephone instructions or e-service instructions, FOR TRANSACTIONS if elected, to transfer values among the Variable Divisions and AGL Declared Fixed Interest Account and to Complete this change allocations for future premium payments and monthly deductions. section if you are applying for or Initial the designation you prefer: revoking current ______ Policy Owner(s) ONLY -- If Joint Owners, either one acting independently. telephone or e-service ______ Policy Owner(s) OR Agent/Registered Representative who is appointed to represent AGL and the firm privileges. authorized to service my policy. AGL and any persons designated by this authorization will not be responsible for any claim, loss or expense based upon telephone instructions or e-service instructions received and acted on in good faith, including losses due to telephone instructions or e-service communication errors. AGL's liability for erroneous transfers and allocations, unless clearly contrary to instructions received, will be limited to correction of the allocations on a current basis. If an error, objection or other claim arises due to a telephone instruction or e-service instruction, I will notify AGL in writing within five working days from receipt of confirmation of the transaction from AGL. I understand that this authorization is subject to the terms and provisions of my variable universal life insurance policy and its related prospectus. This authorization will remain in effect until my written notice of its revocation is received by AGL in its home office. ______ INITIAL HERE TO REVOKE TELEPHONE PRIVILEGE AUTHORIZATION. ______ INITIAL HERE TO REVOKE E-SERVICE PRIVILEGE AUTHORIZATION. ------------------------------------------------------------------------------------------------------------------------------------ [ ] CORRECT AGE 9. Name of Insured for whom this correction is submitted: ____________________________________ Use this section to correct the age of Correct DOB: ________/________/________ any person covered under this policy. Proof of the correct date of birth must accompany this request. ------------------------------------------------------------------------------------------------------------------------------------ [ ] TRANSFER OF 10. (DIVISION NAME OR NUMBER) (DIVISION NAME OR NUMBER) ACCUMULATED Transfer $_______ or ______% from ____________________________________ to ____________________________________. VALUES Use this section if Transfer $_______ or ______% from ____________________________________ to ____________________________________. you want to transfer money between Transfer $_______ or ______% from ____________________________________ to ____________________________________. divisions. The minimum amount for Transfer $_______ or ______% from ____________________________________ to ____________________________________. transfers is $500.00. Withdrawals Transfer $_______ or ______% from ____________________________________ to ____________________________________. from the AGL Declared Fixed Transfer $_______ or ______% from ____________________________________ to ____________________________________. Interest Account to a Variable Division Transfer $_______ or ______% from ____________________________________ to ____________________________________. may only be made within the 60 days Transfer $_______ or ______% from ____________________________________ to ____________________________________. after a policy anniversary. See Transfer $_______ or ______% from ____________________________________ to ____________________________________. transfer limitations outlined in Transfer $_______ or ______% from ____________________________________ to ____________________________________. prospectus. If a transfer causes the balance in any division to drop below $500, AGL reserves the right to transfer the remaining balance. Amounts to be transferred should be indicated in dollar or percentage amounts, maintaining consistency throughout. See investment option restrictions in Box 3 above. AGLC0223 Rev1204 Page 4 of 5 Rev0614
[ ] REQUEST FOR 11. ________ I request a partial surrender of $ __________or ______% of the net cash surrender value. PARTIAL SURRENDER/ ________ I request a loan in the amount of $ ____________. POLICY LOAN Use this section to ________ I request the maximum loan amount available from my policy. apply for a partial surrender from or Unless you direct otherwise below, proceeds are allocated according to the deduction allocation percentages in policy loan against effect, if available; otherwise they are taken pro-rata from the AGL Declared Fixed Interest Account and policy values. For Variable Divisions in use. detailed information concerning these two _______________________________________________________________________________________________________________ options please refer to your policy and _______________________________________________________________________________________________________________ its related prospectus. If _______________________________________________________________________________________________________________ applying for a partial surrender, be sure to complete the Notice of Withholding section of this Service Request in addition to this section. ------------------------------------------------------------------------------------------------------------------------------------ [ ] NOTICE OF 12. The taxable portion of the distribution you receive from your variable universal life insurance policy is WITHHOLDING subject to federal income tax withholding unless you elect not to have withholding apply. Withholding of state Complete this income tax may also be required by your state of residence. You may elect not to have withholding apply by section if you have checking the appropriate box below. If you elect not to have withholding apply to your distribution or if you applied for a do not have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur partial surrender in penalties under the estimated tax rules, if your withholding and estimated tax are not sufficient. Section 11. Check one: ______ I DO want income tax withheld from this distribution. ______ I DO NOT want income tax withheld from this distribution. IF NO ELECTION IS MADE, WE ARE REQUIRED TO WITHHOLD FEDERAL INCOME TAX (IF APPLICABLE). ------------------------------------------------------------------------------------------------------------------------------------ [ ] ELECTRONIC 13. American General Life Insurance Company ("AGL") is capable of providing contract and investment option DELIVERY prospectuses, supplements, statements of additional information, and reports via e-mail. In order to deliver CONSENT these documents via e-mail, we must obtain your consent to this type of delivery format. This consent authorizes AGL, with respect to AGL's variable universal life insurance policies, to deliver the Complete this following communications via e-mail: section for electronic delivery . Contract prospectuses and supplements of documents. . Investment option prospectuses and supplements . Statements of additional information . Annual and semi-annual investment option reports This consent to delivery by e-mail has no expiration date. You may change or cancel your consent at any time by writing to us at American General Life Insurance Company, P.O. Box 9318, Amarillo, TX 79105-9318, Attn: Policy Owner Services. You may also receive a paper copy of any communication at no additional charge by writing to us at the above address. In order to participate in this delivery method, you must have access to the following: . Browser software, such as Microsoft Internet Explorer, or equivalent . Communication access to the Internet Should you wish to print materials that have been delivered via e-mail, you must also have access to a printer. Materials will be published using Portable Document Format (PDF). In order to view PDF documents, you must have Adobe Acrobat Reader software, which is available for download free-of-charge from http://www.adobe.com/products/acrobat/readstep2.html. We reserve the right to mail paper copies instead of providing electronic delivery. In the event that e-mail delivery is unsuccessful, we will mail paper copies. You must notify us every time you change your e-mail address. Your e-mail address will be used solely for AGL's database management regarding the electronic delivery of the communications listed above. Your e-mail address will not be sold or distributed to third parties. By signing this consent, I acknowledge that I have read and understand all of the above-mentioned terms and conditions of this enrollment. I consent to receive electronic delivery of the documents specified above. _______________________ ___________________________________________________________________________________ Initials of Owner Please provide your e-mail address ------------------------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------------------- [ ] AFFIRMATION/ 14. CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY: (1) THAT THE NUMBER SHOWN ON THIS FORM IS MY CORRECT SIGNATURE TAXPAYER IDENTIFICATION NUMBER AND; (2) THAT I AM NOT SUBJECT TO BACKUP WITHHOLDING UNDER SECTION 3406(A)(1)(C) Complete this OF THE INTERNAL REVENUE CODE. section for ALL requests. THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING. --------------------------------------------------------------------------------------------------------------- Dated at _______________________________ this _________ day of ____________________________, _________________. (City, State) X X ---------------------------------------------------- -------------------------------------------------------- SIGNATURE OF OWNER SIGNATURE OF WITNESS X X ---------------------------------------------------- -------------------------------------------------------- SIGNATURE OF JOINT OWNER SIGNATURE OF WITNESS X X ---------------------------------------------------- -------------------------------------------------------- SIGNATURE OF ASSIGNEE SIGNATURE OF WITNESS AGLC0223 Rev1204 Page 5 of 5 Rev0614
EX-99.(N)(1) 3 d885142dex99n1.txt PRICEWATERHOUSECOOPERS LLP CONSENT Exhibit (n)(1) CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in this Registration Statement on Form N-6 (the "Registration Statement") of our report dated April 27, 2015, relating to the financial statements of Separate Account VL-R, which appears in such Registration Statement. We also consent to the use in this Registration Statement of our report dated April 27, 2015, relating to the consolidated financial statements of American General Life Insurance Company, which appears in such Registration Statement. We also consent to the use in this Registration Statement of our report dated April 28, 2015, relating to the statutory basis financial statements of American Home Assurance Company, which appears in such Registration Statement. We also consent to the reference to us under the heading "Financial Statements" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Houston, Texas April 28, 2015 EX-99.(R)(3) 4 d885142dex99r3.txt AGL POWER OF ATTORNEY Exhibit (r)(3) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below hereby constitutes and appoints MARY JANE B. FORTIN, MALLARY REZNIK, AND MANDA GHAFERI, or each of them, as his true and lawful attorneys-in fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any all capacities, to sign any and all amendments (including pre-and post-effective amendments) to the Registration Statements listed below, for which AMERICAN GENERAL LIFE INSURANCE COMPANY serves as Depositor, and to file the same, with all exhibits thereto, and other documents in connection therewith, as fully to all intents as he might or could do in person, including specifically, but without limiting the generality of the foregoing, to (i) take any action to comply with any rules, regulations or requirements of the Securities and Exchange Commission under the federal securities laws; (ii) make application for and secure any exemptions from the federal securities laws; (iii) register additional annuity contracts under the federal securities laws, if registration is deemed necessary. The undersigned hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their substitutes, shall do or cause to be done by virtue thereof. REGISTRATION STATEMENTS:
----------------------------------------------------------------------------- Registrant Name File Nos. ----------------------------------------------------------------------------- Variable Separate 333-185778 333-185791 333-185838 333-185815 Account................ 333-185780 333-185840 333-185800 333-185816 811-03859................ 333-185784 333-185797 333-185837 333-185788 333-185762 333-185798 333-185831 333-185786 333-185787 333-185799 333-185818 333-185808 333-185775 333-185801 333-185820 333-198223 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Variable Annuity Account 333-185802 One.................... 811-04296................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Variable Annuity Account 333-185821 Two.................... 811-08626................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Variable Annuity Account 333-185803 Four................... 811-08874................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Variable Annuity Account 333-185793 333-185826 333-185814 333-185813 Five................... 333-185804 333-185822 333-185809 811-07727................ 333-185829 333-185824 333-185811 333-185825 333-185828 333-185810 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Variable Annuity Account 333-185790 333-185795 333-185807 333-185832 Seven.................. 333-185794 333-185806 811-09003................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Variable Annuity Account 333-185834 333-185835 333-185841 333-185842 Nine................... 811-21096................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL Separate Account 033-44745 033-44744 A...................... 811-01491................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL Separate Account 333-151576 333-80191 333-129552 333-137817 VL-R................... 333-146948 333-53909 333-109613 333-143072 811-08561................ 333-43264 333-42567 333-90787 333-144594 333-82982 333-103361 333-65170 333-153093 333-89897 333-118318 333-87307 333-153068 333-196172 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL Separate Account 333-102301 VUL.................... 811-05794................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL Separate Account 333-102300 333-102299 VUL-2.................. 811-06366................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL Separate Account 333-185785 333-185839 333-185817 333-185823 I...................... 333-185819 333-185827 333-185836 333-185805 811-05301................ 333-185789 333-185843 333-185796 333-185785 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL Separate Account 333-185830 II..................... 333-185761 333-185812 811-04867................ 333-185833 333-185782 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL AG Separate 333-185844 333-185792 Account A.............. 811-08862................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AG Separate Account D...................... 333-25549 002-49805 333-81703 333-40637 811-02441................ 033-43390 333-109206 333-70667 033-57730 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL Separate Account 333-102302 VA-1................... 811-07781................ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- AGL Separate Account 333-102303 VA-2................... 811-01990................ -----------------------------------------------------------------------------
AGL POA - 1 POWER OF ATTORNEY Signature Title Date /S/ ROBERT S. SCHIMEK Director, Chairman and April 27, 2015 ROBERT S. SCHIMEK President /S/ THOMAS J. DIEMER Director, Senior Vice April 27, 2015 THOMAS J. DIEMER President and Chief Risk Officer /S/ JOHN Q. DOYLE Director April 27, 2015 JOHN Q. DOYLE /S/ JEFFREY M. FARBER Director April 27, 2015 JEFFREY M. FARBER /S/ MARY JANE B. FORTIN Director, Executive Vice April 27, 2015 MARY JANE B. FORTIN President, Chief Financial Officer and Vice Chairman /S/ DEBORAH A. GERO Director, Senior Vice April 27, 2015 DEBORAH A. GERO President and Chief Investment Officer /S/ JANA W. GREER Director and President, April 27, 2015 JANA W. GREER Individual Retirement /S/ MICHAEL P. HARWOOD Director, Senior Vice April 27, 2015 MICHAEL P. HARWOOD President, Chief Actuary and Corporate Illustration Actuary /S/ KEVIN T. HOGAN Director and Chief Executive April 27, 2015 KEVIN T. HOGAN Officer /S/ STEPHEN A. MAGINN Director, Senior Vice April 27, 2015 STEPHEN A. MAGINN President and Chief Distribution Officer /S/ JONATHAN J. NOVAK Director and President, April 27, 2015 JONATHAN J. NOVAK Institutional Markets /S/ CURTIN W. OLSON Director, and President, April 27, 2015 CURTIS W. OLSON Group Benefits /S/ CHARLES S. SHAMIEH Director, and President, April 27, 2015 CHARLES S. SHAMIEH Life, Disability and Health /S/ DAVID S. JORGENSEN Vice President and Controller April 27, 2015 DAVID S. JORGENSEN AGL POA - 2