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As filed with the SEC on June 30, 2005 |
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Registration No. 333-117572 |
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SECURITIES AND EXCHANGE COMMISSION |
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Washington, D. C. 20549 |
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FORM N-6 |
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |
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Pre-Effective Amendment No. |
[X] |
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Post-Effective Amendment No. 1 |
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REGISTRATION STATEMENT UNDER THE INVESTMENT |
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COMPANY ACT OF 1940 |
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Amendment No. 4 |
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EMPIRE FIDELITY INVESTMENTS VARIABLE LIFE ACCOUNT A |
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(Exact name of registrant) |
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EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY |
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(Name of depositor) |
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200 Liberty Street, One World Financial Center |
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New York, New York 10281 |
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(Address of depositor's principal executive offices) |
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Depositor's telephone number: (800) 544-8888 |
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_________________________________________________ |
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Clare S. Richer |
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President |
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Empire Fidelity Investments Life Insurance Company |
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82 Devonshire Street, V12A |
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Boston, Massachusetts 02109 |
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(Name and address of agent for service) |
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___________________________________________________________ |
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Copy to: |
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MICHAEL BERENSON |
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MORGAN, LEWIS & BOCKIUS LLP |
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1111 Pennsylvania Avenue, N.W. |
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Washington, D.C. 20004 |
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It is proposed that this filing will become effective (check appropriate space): |
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immediately upon filing pursuant to paragraph (b) of rule 485 |
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on July 1, 2005, pursuant to paragraph (b) (1) (iii) of rule 485 |
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60 days after filing pursuant to paragraph (a) (1) of rule 485 |
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on ______, pursuant to paragraph (a) (1) of rule 485 |
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75 days after filing pursuant to paragraph (a) (2) of rule 485 |
Page _ of _ |
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on , pursuant to paragraph (a) (2) of rule 485 |
Exhibit Index Appears on Page __ |
Title of Securities Being Registered: Interests in Flexible Premium Variable Universal Life Insurance Policy and Flexible Premium Survivorship Variable Universal Life Insurance Policy
Empire Fidelity Investments Variable Life Account A
Prospectus for:
Lifetime Reserves
Flexible Premium Variable Universal Life Insurance
Policy
and
Lifetime Reserves
Flexible Premium Survivorship Variable Universal
Life Insurance Policy
Issued by
Empire Fidelity Investments Life Insurance Company
<R>Dated July 1, 2005</R>
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Please read this prospectus and keep it for future reference. It is not valid unless accompanied by a current prospectus for the Money Market Investment Option or for all available Investment Options.
The Policies are available only in New York. This prospectus does not constitute an offering in any jurisdiction in which such offering may not be lawfully made. No person is authorized to make any representations in connection with this offering other than those contained in the prospectus.
<R>Investment Company Act of 1940 File no. 811-21604
EVUL-pro-0605
1.803603.102</R>
Prospectus Contents
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Summary of the Benefits and Risks of the Policies |
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Benefit Summary |
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Risk Summary |
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Risk/Benefit Summary: Fee Tables |
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General Description of Policy |
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Purchasing a Policy |
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Free Look Period |
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Selecting and Changing the Beneficiary |
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Death of Owner |
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Transferring Ownership and Assigning Policy Rights |
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Other Benefits and Riders |
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Premiums, Policy Account Values and Investment Option Values |
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Death Benefit and Insurance Proceeds |
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Extended Maturity |
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Facts About the Insurance Company, Variable Account, Investment Options and Fixed Account |
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<R>Empire Fidelity Investments Life Insurance Company </R> |
<R><Click Here></R> |
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The Variable Account |
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Investment Options and Funds |
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Voting Rights |
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Resolving Material Conflicts |
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Changes in Investment Options |
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The Fixed Account |
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Making Exchanges Among Investment Options and Fixed Account |
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Dollar Cost Averaging |
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Automatic Rebalancing |
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Special Fixed Account Election Rights |
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More About the Policy and the Variable Account |
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Charges and Deductions |
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Surrenders and Partial Withdrawals |
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<R>Signature Guarantee or Customer Authentication </R> |
<R><Click Here></R> |
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Loans |
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Policy Lapse and Reinstatement |
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Tax Considerations |
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Legal Proceedings |
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Financial Statements |
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Glossary |
EVUL
Summary of the Benefits and Risks of the Policies
This summary describes the important features of the Lifetime Reserves variable universal life insurance policy ("Single Life Policy") and survivorship variable universal life insurance policy ("Survivorship Life Policy") offered by Empire Fidelity Investments Life Insurance Company ("we" or "EFILI"). The features of each Policy are the same, unless we specify differences in this prospectus. A glossary defining capitalized terms is included in the back of the prospectus. Please read the entire prospectus for important details.
We will pay Insurance Proceeds to the named Beneficiaries: upon the death of the single insured person ("Insured") under the Single Life Policy; or upon the death of the last survivor of the two insured persons ("Insureds") under the Survivorship Life Policy.
You, as the Policy's Owner(s), pay the Premiums and name the Beneficiaries. You may designate yourself as Insured, or in appropriate situations, designate another person or persons as Insured(s).
<R>The Policy also allows you, the Owner(s), to seek long-term asset growth on a tax-deferred basis by investing in one or more of the forty-four Investment Options and/or in the Fixed Account. Your investment in the Policy is reflected in a Policy Account Value, and the Policy gives you access to your Policy Account Value in several ways.</R>
To purchase a Policy, you first complete an application form ("Application") and provide information about the Insured(s). We will evaluate our risk and, if approved, assign the Insured(s) to an Underwriting Class. You will also need to make an initial Premium payment.
After the Policy is issued, you are not required to pay Premiums according to any particular schedule. You will, however, need to make enough Premium payments to avoid Lapse (termination of the Policy without value). You may greatly increase the risk of Lapse if you do not regularly pay sufficient Premiums.
Free Look Period. When you receive your Policy, the free look period begins. This period is currently ten (10) days, unless the Policy is a replacement of another life insurance policy, in which case the period is sixty (60) days. You may return the Policy during this period and receive a refund of your premium paid, unless the Policy is a replacement of another policy you owned. If the Policy is a replacement, upon return of the Policy within the free look period, we will refund the value of your Premium payments adjusted for the investment performance of the Investment Options you selected as of the date we receive your returned Policy.
Use of Premiums. Generally, we credit Premium payments, less applicable State Tax Charges, to your Policy Account Value, and allocate them to the Investment Options and the Fixed Account according to your instructions.
No-Lapse Guarantee. Your Policy will specify your Planned Annual Premium. Your Policy will not Lapse during your Policy's No-Lapse Guarantee Period if, on each monthly Policy Processing Day, your total Premium payments, less any Loans, Partial Withdrawals and outstanding interest and charges, are at least as much as if you had paid 1/12 of the Planned Annual Premium each month. The No-Lapse Guarantee period of a Single Life Policy is 10 (ten) years if the Insured's Issue Age is 70 or less; for other Single Life Policies and for all Survivorship Life Policies, this period is 5 (five) years.
DEATH BENEFIT AND INSURANCE PROCEEDS
We will pay Insurance Proceeds based on the Death Benefit to the named Beneficiaries: (a) upon satisfactory proof of death of the Insured while a Single Life Policy is in force; or (b) upon satisfactory proof of death of the last surviving Insured while a Survivorship Life Policy is in force.
Insurance Proceeds. The Insurance Proceeds will be the Death Benefit, less any Loan Balance and any Monthly Deductions due but unpaid at death.
Death Benefit Options. You will select a Face Amount, and choose between two Death Benefit options under the Policy. Under Death Benefit Option A, the Death Benefit is generally the fixed Face Amount you select. Increases in the Policy Account Value in an Option A Policy will normally decrease the insurance company's Net Amount at Risk, on which the Cost of Insurance charges are based. For the same reason, decreases in the Policy Account Value will increase the Net Amount at Risk and increase your Cost of Insurance charges.
Under Death Benefit Option B, the Death Benefit is generally the sum of the fixed Face Amount you choose and the Policy Account Value. The Option B Death Benefit generally varies with the Policy Account Value.
EVUL
You will also choose one of two tax tests to be applied to your Policy, so that the Policy can be treated as life insurance under Federal tax law. In some circumstances, these tests may increase the Death Benefit and Cost of Insurance under Option A or Option B.
Extended Maturity. If an Insured is alive when the Policy reaches its Extended Maturity date, the Death Benefit will be converted to, and thereafter be defined as, the Policy Account Value. No new Premiums will be accepted, but the Owner retains other rights under the Policy as described in "Extended Maturity" below. The Extended Maturity date is: for a Single Life Policy, the Policy Anniversary nearest the Insured's 100th birthday; for a Survivorship Life Policy, the Policy Anniversary nearest the 100th anniversary of the younger Insured's date of birth, even if the younger Insured is not the surviving Insured. Insurance Proceeds immediately after the Extended Maturity date may be far less than before that date.
POLICY ACCOUNT VALUE AND CASH SURRENDER VALUE
Policy Account Value is the total value of your accounts in the Investment Options, the Fixed Account and the Loan Collateral Account. Cash Surrender Value is the Policy Account Value, less any Loan Balance (which includes accrued interest).
Policy Account Value and Cash Surrender Value may vary from day to day, depending on the investment performance of the Investment Options you choose, interest we credit to the Fixed Account, transactions you request, Loan interest and collateralization, and periodic charges.
- Investment Options
You may direct your Net Premiums to one or more of forty-four Investment Options of Empire Fidelity Investments Variable Life Account A (the "Variable Account"). Each Investment Option invests exclusively in one of the mutual funds ("Funds") described in "The Funds" below. The Funds are managed by Fidelity Management & Research Company ("FMR"), Geode Capital Management, LLC ("Geode"), Morgan Stanley Asset Management ("Morgan Stanley"), and Credit Suisse Asset Management, LLC ("Credit Suisse"). Each Fund has its own investment objectives, policies and risks, as described in its separate Fund prospectus. Except for the Fidelity VIP Money Market Fund, each Fund is intended as a long-term investment and varies daily in price.
- Fixed Account
You may currently allocate funds to the Fixed Account, a part of our general account that earns interest at fixed rates. We may restrict the Fixed Account's availability from time to time. We guarantee that amounts allocated to the Fixed Account will earn interest daily at an annual rate that will never be less than the guaranteed rate stated in your Policy Schedule. The fixed rate will be reset periodically. Any Funds in the Fixed Account do not fluctuate with the investment performance of our general account or of the Investment Options.
- Exchanges
You may currently transfer or "exchange" money among the Investment Options without charge. We reserve the right to charge if you exchange on more than twelve days during a calendar year. You may currently make one transfer per Policy Year from the Variable Account to the Fixed Account, but the total of such transfer plus any Premium payment amounts allocated to the Fixed Account during that Policy Year may not exceed $20,000. Additional Exchange policies and restrictions are described in detail in "Exchanges Among Investment Options."
SURRENDERS AND PARTIAL WITHDRAWALS
At any time while the Policy is in force, you may make a request to Surrender your Policy or to take a Partial Withdrawal of $500 or more. Upon Surrender, we will send you the Cash Surrender Value of the Policy, and the Policy will terminate. A Partial Withdrawal will reduce the Policy Account Value, Cash Surrender Value and the Death Benefit. There are no fees imposed upon Surrenders or Partial Withdrawals.
After the first Policy Year, you may borrow money from EFILI using the Policy Account Value as collateral for the Loan. At the time we lend you the money, we will transfer an equivalent amount from your Policy Account Value into a Loan Collateral Account as collateral. We will charge you 6% per year on outstanding Loan Balances. The Loan Collateral Account earns 4% per year in the first ten Policy Years, and 5.75% per year thereafter.
You may repay Loans at any time and on any schedule while the Policy is in force.
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ADDITIONAL BENEFITS AND RIDERS
For additional charges, and subject to underwriting, you may add these optional benefits to a Single Life Policy: (a) Children's Term Rider; and/or (b) either Total Disability Premium Payment Rider or Total Disability Waiver of Monthly Deductions Rider.
For additional charges, and subject to underwriting, you may add the Total Disability Premium Payment Rider, on one or both Insureds, to a Survivorship Life Policy. An Estate Protection Rider may also be added to the Survivorship Life Policy, subject to underwriting.
Investment Options. This Policy is designed for Death Benefit protection and long term asset growth. This Policy is not a short-term savings vehicle. You bear the risk that the investment performance of any Investment Options you select will be unfavorable and that the Policy Account Value will decrease. You could lose everything you invest. A comprehensive discussion of the risks of each underlying Fund may be found in the Fund's prospectus.
Fixed Account. We credit Premiums you allocate to the Fixed Account with interest at a fixed rate. You bear the risk that the rate may decrease, although it will never be lower than the guaranteed rate stated in your Policy Schedule. In addition, because the Fixed Account interest rate is set for as long as 15 months, during periods of rising general interest rates you may earn less competitive rates in the Fixed Account than in variable or shorter-term instruments. Finally, the Fixed Account is subject to our claims-paying ability.
If your Cash Surrender Value is not enough to pay the monthly deduction and other charges, your Policy will be in Default. The Cash Surrender Value may decline for several reasons, including negative investment performance, the Policy's regular monthly charges, and any Partial Withdrawals or Loans you take out. We will notify you of any Default and explain that your Policy will lapse, that is, terminate without value, unless you make sufficient Premium payments during the 61-day Grace Period. You may reinstate a lapsed Policy if you meet certain requirements.
As with any life insurance Policy, the Death Benefit guarantees, Rider guarantees and Fixed Account obligations depend on our ability to make payments. You are encouraged to review our financial statements, which are updated annually and available upon request in the Statement of Additional Information ("SAI").
We believe, but do not guarantee, that the Policy should be considered a life insurance Policy under Federal tax law. This means that, if you do not take out a Loan, Partial Withdrawal or Surrender, you should not be deemed to have received any distributions or income from the Policy for Federal tax purposes. Moreover, the Beneficiaries should be able to exclude the Insurance Proceeds from their gross incomes, and generally should not have to pay income tax on these proceeds. Estate taxes may, however, apply. In the event the Policy were determined not to be a life insurance Policy for Federal tax purposes, however, you may be considered to be in constructive receipt of Policy Account Value, with uncertain tax consequences, and the Insurance Proceeds may be treated as taxable income to the Beneficiary.
Distributions from the Policy may be treated in two ways. If you pay Premiums in excess of certain tax guidelines, the Policy may be treated as a Modified Endowment Contract ("MEC") under Federal tax laws. If a Policy is treated as a MEC, then distributions from Surrenders, Partial Withdrawals and Loans will be taxable as ordinary income to the extent there are earnings in the Policy, and taxable amounts withdrawn prior to the Owner's age 59 1/2 may also be subject to a 10 percent IRS penalty. If the Policy is not a MEC, these distributions generally will be treated first as a return of basis or investment in the Policy and then as taxable income, and generally will not be subject to the 10 percent IRS penalty.
Existing tax laws that benefit this Policy may be changed at any time.
You should consult a qualified tax adviser for assistance in all Policy-related tax matters. See "Federal Tax Considerations."
EVUL
Partial Withdrawals increase the risk of Lapse and reduce the Policy Account Value, Cash Surrender Value and Insurance Proceeds.
Partial Withdrawals may also result in adverse tax consequences. You should consult a qualified tax adviser for assistance in all Policy-related tax matters. See "Federal Tax Considerations."
A Policy Loan may reduce benefits, increase costs, and increase the risk of lapse.
First, if you take a Policy Loan, we will transfer the Loan amount from the Investment Options and Fixed Account, into the Loan Collateral Account. This reduces the Cash Surrender Value and Insurance Proceeds while the Loan is outstanding.
Second, a Policy Loan, whether or not repaid, will affect Policy Account Value and Cash Surrender Value over time, because the amounts held in the Loan Collateral Account will not participate in the Investment Options or Fixed Account while the Loan is outstanding.
Third, you will pay interest on Loan balances while the Loan is outstanding.
Fourth, a Policy Loan increases the risk of Lapse by reducing the Cash Surrender Value while the Loan is outstanding.
Policy Loans may also result in adverse tax consequences. You should consult a qualified tax adviser for assistance in all Policy-related tax matters. See "Federal Tax Considerations."
RISK/BENEFIT SUMMARY: FEE TABLES
The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Policy. The first table describes the fees and expenses that you will pay at the time that you buy the Policy, surrender the Policy, or transfer assets between the Funds.
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WHEN CHARGE IS DEDUCTED |
AMOUNT DEDUCTED |
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Premium and other State Taxes1 |
Upon any Premium payment |
1.5% to 2.34% |
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Sales Charges (Loads) |
N/A |
None |
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Surrender/Withdrawal Charges |
N/A |
None |
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Exchange Fees2 |
Upon Investment Option exchanges above 12 per year |
Up to $20 (Not currently charged)
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Funds' Short-Term Redemption Fee3 |
Upon redemptions from Funds within 60 days after purchase (including Exchanges) |
1% of amount redeemed |
1 Premium and other state taxes are subject to change in the event of a change in applicable state tax rates. We currently deduct only state taxes, and not local taxes. We may begin charging for local taxes in the future, but will only do so after providing written notice to Owners. See "State Tax Charge," below.
2 You may generally make Investment Option Exchanges on up to 12 business days per calendar year free of charge.
3 Investments in the Fidelity VIP sector funds, Fidelity VIP International Capital Appreciation Portfolio and Fidelity VIP Overseas Portfolio exchanged or withdrawn in less than 60 days will be assessed a 1% redemption fee by the Fund, which is retained by the Fund.
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The following table describes the fees and expenses that you will pay periodically during the time that you own a Single Life Policy, not including the underlying Funds' fees and expenses.
4 The Cost of Insurance and Disability Rider costs vary based on individual characteristics. The Cost of Insurance charge or other charges shown in the table may not be representative of the charge that a particular Owner will pay. For more information about the particular Cost of Insurance or other charges that may apply to your specific situation, please call 1-888-343-5433. "Net Amount at Risk" is the Death Benefit less the Policy Account Value, and reflects the insurance company's financial risk in the event of the Insured's death. See "Charges and Deductions."
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The following table describes the fees and expenses that you will pay periodically during the time that you own a Survivorship Life Policy, not including the underlying Funds' fees and expenses.
5 The Cost of Insurance and Disability Rider costs vary based on individual characteristics. The Cost of Insurance charge or other charge shown in the table may not be representative of the charge that a particular Owner will pay. For more information about the particular Cost of Insurance or other charges that may apply to your specific situation, please call 1-888-343-5433. "Net Amount at Risk" is the Death Benefit less the Policy Account Value, and reflects the insurance company's financial risk in the event of the Insured's death. See "Charges and Deductions."
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The next item shows the current minimum and maximum total annual operating expenses charged by the Funds that you may pay periodically during the time you own the Policy. These expenses are deducted from Fund assets, and include management fees and all other expenses. Fund operating expenses are subject to change. More detail concerning each Fund's fees and expenses is contained in the prospectus for each Fund.
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Maximum |
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FUNDS' TOTAL ANNUAL OPERATING EXPENSES (as a percentage of assets) |
0.10% |
2.42% |
General Description of Policy
The Policy belongs to you, the Owner(s) named in the Application or in a later valid assignment or transfer. While any Insured is living, the Owner(s) may exercise all of the rights and options described in the Policy.
A Policy may be jointly owned only by a married couple, or by two unmarried individuals to the extent state law requires recognition of their joint ownership. If there are two Owners, both Owners must act together to change Beneficiaries, change the Death Benefit, or to request payment transactions, such as Surrenders, Partial Withdrawals and Loans. Either Owner may exercise other Policy rights, consistent with our then-current procedures.
We offer these Policies only in New York. To purchase a Policy, you must submit a completed Application to us at our Home Office. The minimum initial Face Amount is $250,000 for a Single Life Policy and $500,000 for a Survivorship Life Policy. The Single Life Policy is available if the Insured is between the Issue Ages of 0-85, and the Survivorship Life Policy is available only if both Insureds are between the Issue Ages of 21-90. We may permit exceptions to these rules in some cases.
We must receive evidence of insurability, usually including a medical examination of each named Insured, that satisfies our underwriting standards before we will issue a Policy. If any proposed Owner is not also an Insured, we may also require evidence that the proposed Owner and/or the Beneficiaries have insurable interests, consistent with applicable law, in the life of each Insured. We reserve the right to modify our underwriting requirements at any time, and to reject an Application for any reason permitted by law.
Insurance coverage under the Policy will take effect on the Policy Date stated in your Policy, provided all of the following three conditions are met: (1) when we issue the Policy to you, each proposed Insured is alive and in the same condition of health as described in the Application, (2) the Minimum Initial Premium has been paid (see "Minimum Initial Premium" below), and (3) the Application and any other forms we require have been completed and returned to our Service Center. The printed Policy, together with the Application and other materials you may submit, and any Riders, endorsements or amendments attached to the Policy will constitute the entire Policy. Only the President, Secretary or Assistant Secretary of EFILI will have the power to change the Policy or waive any Policy provision on our behalf.
We may in our discretion issue a Conditional Receipt prior to issuance of a Single Life Policy, if permitted under New York law. Any Premiums paid prior to issuance will be held in a non-interest bearing suspense account during the underwriting process. If the Insured dies before we issue a Single Life Policy, our liability is limited to the Premium payment amount evidenced by the Conditional Receipt unless all conditions therein are met. We will, however, pay the Insurance Proceeds in the event of the death of the Insured prior to issuance of a Single Life Policy, if, and only if: (a) we receive evidence of the Insured's insurability as of the date of the Application that is acceptable to us; and (b) this evidence shows that the Insured qualified for our Standard Underwriting Class or a higher class when the Conditional Receipt was issued.
The law of New York state provides you with the right to cancel the purchase of your Policy for a limited period of time. The period is ten (10) days from the day you receive your Policy, unless the Policy is a replacement of another life insurance policy, in which case the period is sixty (60) days. We assume it will take five days from the day we mail the Policy until you receive it.
The length of the free look period may also be different depending on the source of funds, the age of the purchaser, or for some other reason.
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If the Policy is NOT a replacement of another policy you owned, during the free look period, all net premiums will be placed in the Fidelity VIP Money Market Fund. At the close of the Valuation Day in which this period expires, we will transfer your money to the Funds and/or to the Fixed Account as you specify in the Application process or in any later instructions you give us. If you cancel the Policy during the Free Look Period, we will refund your Premium payments without adjustment for investment performance.
If the Policy is a replacement of another policy you owned, during the free look period all net premiums will be immediately invested in the Investment Options you choose. If you cancel the Policy during the Free Look Period, we will refund the value of your Premium payments adjusted for the investment performance of the Investment Options you selected as of the date we receive your returned Policy.
To cancel the purchase of your Policy, return it to our Service Center before the end of the free look period, together with a written cancellation request. You may not do this by telephone, fax or through the Internet. A free-looked Policy will be considered void from the beginning.
SELECTING AND CHANGING THE BENEFICIARY
The Beneficiaries are those persons properly shown in the Company's records as being Beneficiaries on the date of death of the Insured for a Single Life Policy, and the date of death of the last surviving Insured for a Survivorship Life Policy. The Beneficiaries will receive the Insurance Proceeds after the death of all Insured(s). You name Beneficiaries initially in the Application. You may change Beneficiaries in accordance with our procedures at any time while an Insured is alive, as described below.
You may designate Beneficiaries as Primary and Contingent. These designations are described below. You may also request alternate forms of Beneficiary designation, subject to our acceptance. We reserve the right to reject any Beneficiary designation we deem to be not administrable.
You can designate several Primary or several Contingent Beneficiaries. The Primary Beneficiaries that survive all Insured(s) share in any Insurance Proceeds. Shares will be equal, unless you provide otherwise in the Application or in a written notice received in good order at our Service Center while an Insured is alive.
If no Primary Beneficiary survives all Insured(s), then the surviving Contingent Beneficiaries will share the Insurance Proceeds. Each Contingent Beneficiary will receive an equal share of the Insurance Proceeds, unless you have instructed us otherwise in the Application or in a written notice received in good order at our Service Center while an Insured is alive. No Contingent Beneficiary will receive any Insurance Proceeds unless all of the Primary Beneficiaries die before the death of the last surviving Insured.
If you designate Beneficiary shares, your instructions must specify each share as a whole number percentage. If the total does not equal 100% for the class receiving payment (Primary or Contingent), each Beneficiary's share will be determined by using a fraction, the numerator of which is the stated percentage for the Beneficiary, and the denominator of which is the total of the percentages for the Beneficiaries who will receive payment.
If all named Beneficiaries die before the death of the last surviving Insured, we will pay the Insurance Proceeds to any surviving Owner(s). If no Beneficiary or Owner survives, we will pay the estate of the last surviving Owner. If no Beneficiary survives both the Insureds, the Insureds are joint Owners and there is no sufficient evidence that the Insureds have died other than simultaneously, we will pay the estate of the Insured named second on the Policy application. The Owner(s) may control this outcome by naming one or both Insureds as beneficiaries, and/or by specifying the order in which the Insureds appear on the Policy application.
The consent of each irrevocable Beneficiary, if any, is needed to exercise any Policy rights except changing the amount or timing of Premiums, reinstating the Policy, changing Premium allocations, and exchanging among Investment Options and the Fixed Account.
You can change any Beneficiary, other than an irrevocable Beneficiary, while an Insured is alive by providing us with written notice, in a form acceptable to us. We reserve the right to reject any Beneficiary designation that we deem to be not administrable, and may in our discretion require evidence that the proposed Beneficiary has an insurable interest, consistent with applicable law, in the life of each Insured. Any Beneficiary change is effective as of the date that your written notice was signed, provided that the notice is in good order. We are not, however, liable or otherwise responsible for any payment or other actions we take consistent with valid Beneficiary designations we have on file at the time of the payment or action.
A Beneficiary generally may not pledge, commute, or otherwise encumber or transfer payments under the Policy before they are due.
If you, the Owner, are not an Insured and if you die while an Insured is still alive, ownership of the Policy will generally pass to your estate. If you are the Insured under a Single Life Policy or the second Insured to die under a Survivorship Life Policy, we will pay Insurance Proceeds upon your death as described below under "Death Benefit."
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TRANSFERRING OWNERSHIP AND ASSIGNING POLICY RIGHTS
Any Owner may request to transfer his or her ownership interest of the Policy to a new Owner by providing a written notice to us at any time while an Insured is alive. If you transfer ownership, your ownership rights terminate and the new Owner will succeed to all of your rights under the Policy. Transferring ownership does not change the Beneficiary, and all such transfers are subject to any outstanding Policy Loan.
You may also request to assign specific Policy rights to a creditor as collateral for a new or pre-existing obligation. Such an assignment does not cause a change of ownership, but your ownership rights and the interests of any Beneficiary will be subject to the assignment. Assignments of rights are subject to any outstanding Policy Loan. We may require the written consent of a collateral assignee to exercise certain Policy rights, such as Surrenders, withdrawals and Loans.
We may in our discretion require evidence that any proposed transferee or assignee has an insurable interest, consistent with applicable law, in the life of the Insured, and we may refuse a request for a transfer of ownership or for an assignment for any reason as permitted or required by law.
With respect to ownership transfers or assignments of Policy rights, we are not:
- bound by any ownership transfer or assignment unless and until we receive a written notice of the transfer or assignment in good order at our Service Center;
- responsible for the validity of any ownership transfer or assignment or determining the extent of an assignee's interest;
- liable for any payment we make before we receive written notice of the transfer or assignment at our Service Center; or
- bound by an ownership transfer to more than one person, except for transfers to married couples and to unmarried individuals where required by law.
Transferring ownership of the Policy or assigning Policy rights may have tax consequences. See "Tax Treatment." You should consult a qualified tax adviser before making any transfer or assignment.
PLEASE NOTE: "Riders" are separate forms that can be added to your Policy, usually for additional costs, to provide additional insurance benefits that do not vary with your Policy's value. You must generally apply for Rider coverage when you apply for the Policy itself. We may decline or limit Rider coverage in accordance with our underwriting standards or for any reason permitted by law.
The Rider descriptions below are summaries only; you should review the Rider forms themselves for more complete terms and conditions.
1. SINGLE LIFE POLICY RIDERS
- Children's Term Rider. This Rider provides $10,000 term life insurance coverage on each of the Insured's children named in the Application and on each child later born to or adopted by the Insured. Coverage initially applies to each child over 14 days and under 18 years old while the Rider is in effect, and terminates on the earlier of the Insured's age 65 or as each child turns age 25. You can apply for this Rider at the time of Application for the Policy or at the birth or legal adoption of the first child of the Insured. See the Rider for complete details of the coverage.
- Total Disability Riders. You can purchase one of two total disability Riders, in connection with your initial Policy application, as long as the Insured is at least 18 and under 65 when the Policy is issued.
Total Disability Premium Payment Rider. This Rider provides that during periods of the Insured's total disability, as defined in the Rider, we will pay a Disability Benefit Amount, of up to the lesser of the one-twelfth (1/12) of the Planned Annual Premium or $2,500 per month, as a Premium to this Policy on each monthly Policy Processing Day while total disability continues and other requirements are met.
Total Disability Waiver of Monthly Deductions Rider. This Rider provides that during periods of the Insured's total disability, as defined in the Rider, Monthly Deductions under this Policy will be waived while total disability continues and other requirements are met.
Limitations On Both Total Disability Riders. If the Insured's total disability begins at age 65 or later, no benefits will be paid. If the total disability begins on or after the Insured's age 63 but before 65, benefits may continue for up to two years. If the total disability begins on or after the Insured's age 60 but before 63, benefits may continue until up to age 65. If the total disability begins before the Insured's age 60, the benefits will continue as long as the Insured remains totally disabled. You can only elect one of the two Total Disability Riders. We reserve the right to require evidence of the disability before making payment under these Riders, and on an ongoing basis while disability continues. See the Rider(s) for complete details of the coverage.
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2. SURVIVORSHIP LIFE POLICY RIDERS
- Total Disability Premium Payment Rider(s). This Rider can be purchased for either or both Insureds in connection with your initial Policy application. It provides that during periods of the covered Insured(s)' total disability, as defined in the Rider, we will pay a Disability Benefit Amount of up to the lesser of one-twelfth (1/12) of the Planned Annual Premium or $2500, as a Premium to this Policy on each monthly Policy Processing Day while total disability continues and other requirements are met. If the Insured's total disability begins at age 65 or later, no benefits will be paid. If the total disability begins on or after the Insured's age 63 but before 65, benefits may continue for up to two years. If the total disability begins on or after the Insured's age 60 but before 63, benefits may continue until up to age 65. If the total disability begins before the Insured's age 60, the benefits will continue as long as the Insured remains totally disabled. We reserve the right to require evidence of the disability before making payment under this Rider, and on an ongoing basis while disability continues. See the Rider(s) for complete details of the coverage.
- Estate Protection Rider. This Rider provides a limited additional term life insurance benefit in the event that both Insureds die during the first four (4) Policy Years. You may apply for this Rider in connection with your initial Policy application. See the Rider for complete details of the coverage.
PREMIUMS, POLICY ACCOUNT VALUES AND INVESTMENT OPTION VALUES
The Policy is a flexible premium Policy. This means that, subject to certain requirements described below, you may decide when to make Premium payments and in what amounts.
- Minimum Initial Premium
You must make a Minimum Initial Premium in order for coverage to take effect. Your Minimum Initial Premium amount will be at least: the Planned Annual Premium if you have selected an annual payment schedule; one-half the Planned Annual Premium if you have selected a semi-annual payment schedule; or one-sixth of the Planned Annual Premium (two month's worth), if you have elected a monthly payment schedule using automatic electronic funds transfer (EFT). We calculate the Minimum Initial Premium based on several factors, including your choice of Face Amount, the Insured's age, sex and underwriting classification, and, for a Survirorship Life Policy, by Rider selected.
- Subsequent Premium Payments
After you pay the first Premium, you can pay subsequent Premiums at any time. Each subsequent Premium payment must be at least $50.
When the Policy is issued, we will provide you with a planned premium payment schedule reflecting your choice of an annual or semiannual payment schedule, or a monthly payment schedule if you make payments under our EFT (electronic funds transfer) program. You may select a monthly EFT payment schedule of $100 or more for us to automatically deduct Premiums from your bank account, or from your eligible Fidelity mutual fund or brokerage account.
You are not required to pay Premiums according to the planned premium payment schedule. It is your responsibility, however, to pay enough Premiums to avoid Lapse of the Policy. For additional information, please see "Lapse and Reinstatement" and "No-Lapse Guarantee," below.
We have the right to limit or refund any Premium or portion of a Premium, or to request additional written instructions if, in our opinion, (1) the Premium would disqualify the Policy as a life insurance contract under the Internal Revenue Code (see "Federal Tax Considerations"); or (2) the Premium would make your Policy a MEC under the Internal Revenue Code (see "Federal Tax Considerations"); or (3) the Premium would increase the Net Amount at Risk, unless you provide us with satisfactory evidence of each Insured's insurability. This could occur if the Death Benefit is based on the Policy Account Value times the applicable Internal Revenue Code factor. See "Death Benefit" below.
If you have an outstanding Policy Loan, you should instruct us whether to credit your payments either as Premium payments or as Loan repayments. (See "Policy Loans.") Finally, you may not pay any Premiums after the Policy's Extended Maturity date, although you may make Loan repayments after that date. (See "Extended Maturity.")
- Method of Payment
You may pay for the Premiums with a personal check drawn on a U.S. bank subject to our approval. We reserve the right to refuse a personal check for any reason. You may also make Premium payments by moving money from your Fidelity mutual fund or brokerage account, or under our EFT program. You may also request that we accept proceeds from another life insurance contract in a transaction that qualifies as a tax-free exchange under Section 1035 of the Internal Revenue Code. However, if we agree to process a requested 1035 exchange, we are responsible only for actions we take and are specifically not responsible for the performance of the transferring insurance company, for the timing of the transfer or for any adverse tax consequences.
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- Purchase Payments Made with Returned Checks or Unfunded Electronic Funds Transfers
If you make a Premium payment with a check that is returned to us unpaid due to insufficient funds or for any other reason, or if your Premium payment is made by an electronic funds transfer that is later reversed due to lack of funds in the bank account from which the transfer was made or for any other reason, we will: (1) reverse the transaction; and (2) if the reversal results in a loss of more than one thousand dollars ($1,000.00) to us, redeem a sufficient number of Investment Option units at the then-current unit values to provide us with an amount equal to the loss. Money will be taken proportionately from all of the Investment Options and the Fixed Account in which you are invested.
If you do not have sufficient value in your Cash Surrender Value, we may take legal action against you to recover any remaining losses we have incurred.
Any redemption we make under this provision may result in a taxable event to you, just as for any other withdrawal.
- Allocating Premiums Among Investment Options and Fixed Account
You choose how to allocate your Premium payments among the Investment Options and the Fixed Account, and the percentage to be allocated to each. These options are described below, under "Investment Options and Funds" and "The Fixed Account."
For the initial Premium payment, you choose the allocation on the Application or otherwise in writing before the Policy is issued. During the Free Look Period, Premiums will be credited as described in the "Free Look Period" above. After the Free Look Period, additional Net Premiums allocated to the Investment Options will be credited to your Policy based on the next computed value of an Investment Option unit following receipt of your payment at the Service Center. Net Premiums allocated to the Fixed Account will be credited under your Policy as of the date the payment is received at our Service Center.
For subsequent Premium payments, you may send allocation instructions to our Service Center in accordance with our then-current procedures. We do not accept instructions by fax or electronic mail. If you make a subsequent Premium payment and do not give us allocation instructions for it, we will allocate it among the Investment Options and the Fixed Account in accordance with your most recent allocation instructions. Any allocation instructions will be effective upon receipt in good order at our Service Center, and will apply only to Premium payments received on or after that date.
Instructions may be expressed in dollars or in percentages. All instructions must be in whole numbers, not decimals or fractions. If you give us instructions that are unclear or incomplete, your Premium payment and any future Premium payments will be allocated to the Money Market Investment Option until we receive instructions that are clear and complete. Instructions may be unclear or incomplete if percentage allocations do not total 100% or for some other reason. In the case of incomplete or unclear instructions, we will not be responsible for changes in unit values or for lost market opportunities.
If you pay Premium payments monthly by electronic funds transfer, you will not be able to allocate any of those payments to the Fixed Account.
You may generally not allocate more than $20,000 (including transfers) to the Fixed Account during any one Policy Year. You may not allocate more than 25% of any Premium payment to the Fixed Account and you may not make more than one transfer to the Fixed Account during any one Policy Year. We may discontinue the availability of the Fixed Account for transfers from the Investment Options, or for Premium payments, at any time. These limits may vary in certain states; please review your Policy for specific terms.
You should verify the accuracy of your transaction confirmations and statements immediately after you receive them. If you find a discrepancy with regard to a particular transaction, you should notify the Service Center promptly. We will not be responsible for losses due to unit value changes unless you notify us within ten calendar days from the first time we mail a confirmation or statement with details of the transaction.
2. POLICY ACCOUNT VALUES AND INVESTMENT OPTION VALUES
The Policy Account Value is the starting point for calculating values under a Policy. The Policy Account Value:
- equals the sum of a Policy's Fixed Account value, all Investment Option values, and Loan Collateral Account value;
- is determined on each Valuation Day after the Policy becomes effective; and
- has no guaranteed minimum amount and may be more or less than Premiums paid.
The Cash Surrender Value is the Policy Account Value, less any Loan Balance (which includes accrued interest).
For each Investment Option to which you allocate Premiums, the Investment Option value is equal to the number of Investment Option units held by the Policy multiplied by the Investment Option's unit value at the end of each Valuation Day. Your Policy's number of units in any Investment Option is the sum of all units purchased with Premium payments or Exchanges, minus the sum of all units redeemed as a result of transactions you have requested (including Exchanges, withdrawals, Surrenders or Loans) and units we have redeemed for Policy charges or to pay Policy benefits.
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The value of each Investment Option's accumulation units will be calculated as of the close of business (normally 4:00 p.m. Eastern Time) on each day that there is trading on the New York Stock Exchange ("Valuation Day") and on which the Funds calculate prices. The unit value changes on each Valuation Day based on the Total Return of the Investment Option. The Total Return reflects the investment performance of the Fund in which the Investment Option invests and is net of the asset charges to the Investment Option. Shares of the Funds are valued at their net asset values as described in the Funds' prospectuses. Any dividends or capital gains distributions from a Fund are reinvested in that Fund. For further information as to the days on which the funds will calculate prices, please see the accompanying fund prospectuses.
The Policy is "non-participating," meaning there are no dividends. Investment results of the Investment Options are reflected in the Policy Account Value and certain other Policy features.
The investment performance of the Investment Options and underlying Funds, Policy expenses and deduction of charges will affect your Policy Account Value and Cash Surrender Value, and may also affect the amount of your Death Benefit. You bear the entire investment risk for amounts you allocate to the Investment Options. You should periodically review your allocation strategy in light of market conditions and your overall financial objectives.
DEATH BENEFIT AND INSURANCE PROCEEDS
We will pay Insurance Proceeds based on a Death Benefit to the named Beneficiaries: (a) upon satisfactory proof of death of the Insured while a Single Life Policy is in force; or (b) upon satisfactory proof of death of the last surviving Insured (that is, after both Insureds have died) while a Survivorship Life Policy is in force. If all named Beneficiaries die before the Insured, or the last surviving Insured in a Survivorship Life Policy, we will pay the Insurance Proceeds to any surviving Owner(s); if no Owner survives, to the estate of the last surviving Owner.
We will make payment in a lump sum, unless you have agreed with us to a different method of payment. Please contact our Service Center for customer service concerning payment options.
The Insurance Proceeds equal:
- the Death Benefit (described below); minus
- any unpaid monthly charges; minus
- any Loan Balances, including any accrued but unpaid interest.
We calculate the Death Benefit and Insurance Proceeds as of the Valuation Day on or next following: the date of the Insured's death for a Single Life Policy; the date of death of the last surviving Insured for a Survivorship Life Policy. We will transfer the amounts allocated to Investment Options to the Money Market Investment Option upon receipt of notice of such Insured's death, while we review or process a death claim. We will also pay interest on Insurance Proceeds to the extent required by applicable state law.
Once we have received due proof of the Insured's death that is acceptable to us, we will ordinarily pay the Insurance Proceeds to the Beneficiaries within 15 days. These payments may be delayed in the event that we exercise our right to seek additional evidence, see "Policy Validity" below, or in the event of difficulty locating a Beneficiary or determining the correct Beneficiaries.
Upon the payment of Insurance Proceeds, and any additional benefits then due under a Policy Rider, the Policy and all Riders will terminate, except that a Children's Term Rider will continue in force until its termination as described in the Rider.
- SETTING THE DEATH BENEFIT AT PURCHASE
When you apply for a Policy, you will need to make three decisions in order to set the Death Benefit:
(1) Select a Face Amount of insurance coverage.
(2) Choose Death Benefit Option A or Option B, which determines how the Policy Account Value will affect the Death Benefit.
(3) Choose the tax test we will apply to assure that your Policy is considered life insurance under the Internal Revenue Code.
You can request a hypothetical illustration that shows how each of these decisions affects the benefits of the Policy. You may wish to consult a financial planning or tax professional for additional advice.
Face Amount. The Face Amount sets a minimum level for the Death Benefit. You should pick a Face Amount that satisfies your need for insurance and that you can afford.
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Death Benefit Options. This Policy provides two Death Benefit Options: Option A and Option B.
Under Option A, the Death Benefit is the greater of:
(1) the Face Amount; or (2) the minimum death benefit under the tax test you select.
Under Option B, the Death Benefit is the greater of:
(1) the Face Amount plus the Policy Account Value; or (2) the minimum death benefit under the tax test you select.
Under either option, the Death Benefit is reset to equal the Policy Account Value on the Extended Maturity date. See "Extended Maturity" below.
If you are comfortable with a fixed Face Amount of insurance coverage and prefer that increases, if any, in Policy Account Value reduce insurance costs, you can choose Option A. Cost of Insurance charges are based on a Policy's Net Amount at Risk, which is the difference between Death Benefit and Policy Account Value. Under Option A, increases in Policy Account Value generally reduce the Net Amount at Risk, while decreases in Policy Account Value generally increase the Net Amount at Risk.
If you prefer to have increases in Policy Account Value, due to Premium payments and/or favorable investment performance, reflected in a variable Death Benefit, you can choose Option B. If you choose Option B and your Policy Account Value increases, it will be reflected in an increased Death Benefit; if, however, your Policy Account Value declines, your Death Benefit will decrease. Policy Account Value may decline due to adverse investment experience and/or Policy charges and deductions, if not offset by Premium payments.
The amount of the Death Benefit may vary with the Policy Account Value:
(1) Under Option A, the Death Benefit will vary with the Policy Account Value only when the applicable tax test requires that the Death Benefit exceed the Face Amount. This may occur when the Policy Account Value is large in relation to the Death Benefit. (See "Tax Test" below.) The Death Benefit will also vary after the Extended Maturity date. See "Extended Maturity" below.
(2) Under Option B, the Death Benefit will always vary with the Policy Account Value.
Tax Test. In order to be treated as life insurance under Federal tax law, the Policy's Death Benefit must meet or exceed the minimum requirements of either the Guideline Premium Test or the Cash Value Accumulation Test. These tests generally impact the Death Benefit when an Owner has a relatively large Policy Account Value in relation to the Face Amount.
You will be asked to specify on your Policy Application whether you choose the Guideline Premium Test (GPT) or the Cash Value Accumulation Test (CVAT), except that if the Insured on a Single Life Policy is 75 years old or more on the Policy Issue Date, the CVAT will automatically apply. The GPT generally gives Owners the ability to minimize insurance costs by maintaining a lower Net Amount at Risk over the life of the Policy. (The Net Amount at Risk is the difference between the Death Benefit and the Policy Account Value, and is the basis for monthly Cost of Insurance charges.) The CVAT, on the other hand, enables an Owner to pay in a greater amount of Premium in the early years of the Policy. Once the Policy is issued, you cannot change the tax test. You should consult a qualified tax advisor regarding your choice of tax tests.
Under the GPT, a Policy's Death Benefit will not be less than the Policy Account Value times the corridor factor under the Code. The corridor factors, which require that the Death Benefit be greater than the Policy Account Value by a percentage that decreases over time, are shown in the Table of Death Benefit Factors in your Policy and in the SAI. They are summarized below, based on the Insured's age or, for Survivorship Life Policies, the younger Insured's age, at the start of each Policy Year (for attained ages not shown, percentages decline pro rata each year):
|
Insured's Attained Age |
GPT Corridor Factor |
Insured's Attained Age |
GPT Corridor Factor |
|
40 and under |
250% |
60 |
130% |
|
45 |
215% |
65 |
120% |
|
50 |
185% |
70 |
115% |
|
55 |
150% |
75 through 90 |
105% |
|
|
|
95 through 99 |
100% |
Under the CVAT, the Death Benefit will not be less than: (a) 1000 times the Policy Account Value, divided by (b) the Net Single Premium Factor per $1,000 of Death Benefit. The net single premium factors vary based on each Insured's sex, underwriting class, age at Issue and Policy Year, and are shown in your Policy.
- CHANGING THE DEATH BENEFIT AFTER PURCHASE
After the first Policy Year and while the Policy is in force, you may make a written request to change the Face Amount or the Death Benefit option or both. Any such change may affect the Net Amount at Risk over time, which would affect the monthly Cost of Insurance charge. We reserve the right to discontinue allowing such changes.
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We generally do not permit more than one such change in any 12 month period, and we do not permit changes while benefits are being paid under any Disability Rider. We reserve the right to reject any change that may, in our opinion, result in your Policy being disqualified as a life insurance contract under Section 7702 of the Internal Revenue Code. We also reserve the right to require additional written instructions from you in the event that the requested change may, in our opinion, make your policy a MEC under the Internal Revenue Code. A change of Face Amount or Death Benefit option may have unfavorable tax consequences. You should consult a qualified tax adviser before making any change to the Face Amount or the Death Benefit.
In order to request a change of your Face Amount or Death Benefit option, you must submit a written request. If you request an increase in Face Amount or a change in Death Benefit option which, in our opinion, increases our insurance risk, you must also provide additional evidence of the Insured's insurability, as well as any additional paperwork we may require, to our Service Center. The effective date of any requested change in your Death Benefit will be the next monthly Policy Processing Day following the date when we approve your request for a change. A Death Benefit option change has the effect of amending your Policy terms, and we will send you new Policy schedule pages to reflect this change.
Increasing the Face Amount. You may request an increase in the Face Amount by submitting a written Application and providing evidence of insurability satisfactory to us at our Service Center.
- The minimum increase is $50,000.
- We will require that, on the effective date of an increase, and taking the increase into account, the Cash Surrender Value be at least equal to the monthly charges then due.
- An increase will be effective on the next Policy Processing Day following the date we approve the change, provided that an Insured is living on that date.
- The total Net Amount at Risk will be affected, which will increase the monthly Cost of Insurance charges.
- Each increase in Face Amount will have its own Underwriting Class and Cost of Insurance Rates as determined at the time of the increase.
- We reserve the right to limit increases in the Face Amount to one increase in any twelve (12) month period.
Decreasing the Face Amount. You may request a decrease in the Face Amount by submitting a written request to decrease the Face Amount, but you may not decrease the Face Amount below the applicable minimum initial Face Amount (generally $250,000 for a Single Life Policy and $500,000 for a Survivorship Life Policy). See "Purchasing a Policy" above.
- The minimum decrease is $25,000.
- Any decrease will be effective on the next Policy Processing Day following the date we approve your request.
- To apply the decrease, we will first reduce any increases in the Face Amount, starting with the most recent. Then we will reduce the initial Face Amount.
A decrease in Face Amount generally will decrease the Net Amount at Risk, on which the Cost of Insurance charges are based. For purposes of determining the Cost of Insurance charge, any decrease in Face Amount will first be used to reduce the most recent increase, then the next most recent increases in succession, and finally the initial Face Amount. However, if a decrease in Face Amount moves a Single Life Policy into a lower Cost of Insurance band, (for example, from $1.1 million to $900,000) then the Cost of Insurance Rate applied to the Policy's Net Amount at Risk may increase. See "Cost of Insurance" below.
Changing Death Benefit from Option A to Option B. In order for us to approve a change from Option A to Option B:
- The Policy must be in force;
- The current Face Amount must be greater than the minimum Death Benefit required by Section 7702 of the Internal Revenue Code; and
- The change must not reduce the Face Amount below the minimum Face Amount we require to issue a Policy.
If we approve a request from Option A to Option B, the following will occur:
- We first decrease the Face Amount (beginning with the most recent increase, then the next most recent increases in succession, and finally the initial Face Amount) by the Policy Account Value;
- The Death Benefit will not change on the effective date of the change, but thereafter the Death Benefit will vary daily with changes in Policy Account Value;
- The Face Amount will be the Net Amount at Risk and will generally remain level after the change. This means there may be a relative increase in the Cost of Insurance charges, which are based in part on Net Amount at Risk, as the Insured ages, because increases in Policy Account Value, if any, will not reduce the Net Amount at Risk;
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- If you also request that the Face Amount stay the same after the change, the change will increase the Net Amount at Risk and the Monthly Deduction applied to your Policy Account Value.
|
Example: |
|
|
|
|
Change Death Benefit |
Option A |
Calculation: |
Option B |
|
Face Amount |
$ 300,000 |
-$ 50,000 |
$ 250,000 |
|
Policy Account Value |
$ 50,000 |
|
$ 50,000 |
|
Death Benefit |
$ 300,000 |
|
$ 300,000 |
Changing Death Benefit from Option B to Option A. In order for us to approve a change from Option B to Option A, the Policy must be in force.
If we approve a request from Option B to Option A, the Face Amount will be increased by the Policy Account Value on the effective date of the change.
|
Example: |
|
|
|
|
Change Death Benefit |
Option B |
Calculation: |
Option A |
|
Face Amount |
$ 250,000 |
+$ 50,000 |
$ 300,000 |
|
Policy Account Value |
$ 50,000 |
|
$ 50,000 |
|
Death Benefit |
$ 300,000 |
|
$ 300,000 |
- POLICY VALIDITY
Contestability and Suicide provisions are subject to requirements of state law. You should review your Policy for the specific terms.
Except for Policy Lapse, we will not contest the validity of a Policy after it has been in force during the Insured's life, or the lifetime of the last surviving Insured for a Survivorship Life Policy, for two years continuously from the Issue Date. Similarly, we will not contest the validity of a Death Benefit change requiring underwriting after such change has been in force during the Insured's life, or the lifetime of the last surviving Insured for a Survivorship Life Policy, for two years. If we wish to contest the validity of a Survivorship Life Policy based on a material misrepresentation concerning the first Insured to die, we will notify you within 12 months after we have received proof of that Insured's death.
If a Policy, or a change in Death Benefit requiring underwriting, has been in force less than two years, we can contest the validity of the Policy or Death Benefit change on the grounds of any misrepresentation of a material fact in the applicable Policy, reinstatement or Death Benefit change application.
We reserve the right to obtain evidence of the fact, manner and cause of death of any Insured, including the first Insured to die under a Survivorship Life Policy. You and your Beneficiaries agree to provide us with reasonably timely notice of the death of each Insured, including the first Insured to die in the case of a Survivorship Life Policy, so that our rights are not prejudiced by delay.
Under a Single Life Policy, if the Insured dies by suicide within two years after the Issue Date, the Policy will terminate. Under a Survivorship Life Policy, if both Insureds or the last surviving Insured die(s) by suicide within two years after the Issue Date, the Policy will terminate. If a Policy terminates due to a suicide as described in this paragraph, our liability will be limited to the premiums paid for the Policy, less loans and withdrawals.
Under a Survivorship Life Policy, if one Insured dies by suicide within two years after the Issue Date and the surviving Insured was insurable as of the Issue Date, we will reissue the Policy as a single-life variable universal life policy on the life of the last surviving Insured. The reissued Policy will have the same attributes as this Policy, except that (a) the guaranteed and current cost of insurance charges will be based solely on the underwriting classification of the surviving Insured and will be significantly higher than the survivorship policy; (b) a Total Disability Premium Payment rider naming the surviving Insured as a Covered Insured, if attached to the survivorship policy, will be reissued with the surviving Insured as the sole Covered Insured, and the Company will assess the rider charges applicable only to the surviving Insured; and (c) all other riders, including a Total Disability Premium Payment rider naming the deceased Insured as a Covered Insured, and accompanying rider charges will terminate, because they are not available with the single life policy. If one Insured dies by suicide within two years after the Issue Date and the surviving Insured was not insurable as of the Issue Date, the Policy will terminate and our liability will be limited to the premiums paid for the Policy less withdrawals and outstanding loans.
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If an Insured dies by suicide within two years after a change in Death Benefit requiring underwriting, our liability will be limited to the Insurance Proceeds that would have been payable if the change had not taken effect, plus any additional Cost of Insurance charges taken as a result of the change.
If the age or sex of an Insured is misstated in the Policy Application, the following will occur:
- if we discover the misstatement while any Insured is living, we will retroactively adjust the Policy Account Value and the Cash Surrender Value to reflect the Monthly Charges that would have applied if the Policy had correctly stated the age and sex of each Insured;
- if we discover the misstatement after the death of the Insured, we will change the Net Amount at Risk, as well as any Death Benefit payable under any Riders, to reflect the Net Amount at Risk by the ratio of the incorrect Cost of Insurance Rate to the Correct Cost of Insurance Rate (i.e. that which would apply to the Insured's correct age and sex). This change will affect the Face Amount, Death Benefit and Insurance Proceeds.
Any modifications or waiver of our rights under a Policy are valid only if they are in writing and signed by the President, Secretary, or Assistant Secretary of EFILI. We may modify the Policy to the extent necessary or appropriate to conform to applicable law, to assure continued qualification of the Policy as a life insurance Policy under Federal tax laws, or to reflect a change in the operation of the Variable Account. We will send you an endorsement to the Policy to reflect any such modifications.
A Single Life Policy Extended Maturity begins on the Policy Anniversary nearest the Insured's 100th birthday. A Survivorship Life Policy Extended Maturity begins on the Policy Anniversary nearest the 100th anniversary of the younger Insured's date of birth, even if the younger Insured is not the surviving Insured. At this time:
- we will discontinue Monthly Deductions;
- the Death Benefit will be converted to, and thereafter be defined as, the Policy Account Value, without regard to the Face Amount or Death Benefit option chosen;
- we will not accept any new Premiums or make new or additional Policy Loans;
- any Policy Loans will continue in place and interest will continue to accrue unless and until the Loans are repaid; and
- the Owner retains all other rights under the Policy, including the right to make exchanges among Investment Options and to take Partial Withdrawals.
PLEASE NOTE: The Policy may not qualify as life insurance after the Insured's age 100, and may be subject to adverse tax consequences. You should consult a qualified tax adviser before choosing to continue the Policy after the Insured's age 100.
Facts About the Insurance Company, Variable Account, Investment Options
and Fixed Account
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
Empire Fidelity Investments Life Insurance Company ("we" or "EFILI") issues the Policy, and is obligated to pay all amounts promised under the Policy. EFILI's financial statements appear in the SAI. Our principal executive offices are located at 200 Liberty Street, One World Financial Center, New York, NY 10281.
Empire Fidelity Investments Variable Life Account A ("Variable Account") is a separate investment account of EFILI, and was established on July 25, 2002. It is used to support the variable universal life policies described herein. The Variable Account is registered with the Securities and Exchange Commission ("SEC") as a unit investment trust under the Investment Company Act of 1940, as amended ("1940 Act"). The Variable Account's financial statements appear in the SAI. The Variable Account is divided into subaccounts ("Investment Options").
Income, gains, and losses credited to, or charged against, an Investment Option reflect the Investment Option's own investment performance and not the investment performance of our other assets. Income, gains and losses, whether or not realized, from assets allocated to the Variable Account shall, in accordance with the applicable agreement or agreements, be credited to or charged against such account without regard to other income, gains or losses of EFILI. We are the legal owner of the assets in the Variable Account. As required by law, however, the assets of the Variable Account are kept separate from our general account assets and from any other separate accounts we may have, and may not be charged with liabilities from any other business we conduct. If and to the extent so provided in the applicable agreements, the assets in the Variable Account shall not be chargeable with liabilities arising out of any other business of the Company. The assets in the Variable Account will always be at least equal to the reserves and other liabilities of the Variable Account. If the assets exceed the required reserves and other liabilities, we may transfer the excess to our general account. We are obligated to pay all amounts promised under the Policy.
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There are currently forty-four Investment Options in the Variable Account. Each Investment Option invests exclusively in a single Fund. Each Fund is part of a trust that is registered with the SEC as an open-end management investment company under the 1940 Act. This registration does not involve supervision of the management or investment practices or policies of the Funds by the SEC. Each Fund's assets are held separate from the assets of the other Funds, and each Fund has investment objectives and policies that are different from those of the other Funds. Thus, each Fund operates as a separate investment fund, and the income and losses of one Fund have no effect on the investment performance of any other Fund.
The following table describes the Funds' investment objective and lists each Fund's investment adviser or principal sub-adviser. This information is just a summary for each underlying Fund. There is, of course, no assurance that any Fund will meet its investment objective. You should read the Fund's prospectus for more information about that particular Fund.
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|
Fund |
Investment Objective |
Investment Adviser or any Sub-Adviser |
|
FIDELITY |
|
|
|
<R>VIP Overseas</R> |
<R>Seeks long-term growth of capital</R> |
<R>Fidelity Management & Research Company</R> |
|
VIP International Capital Appreciation |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Dynamic Capital Appreciation |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Real Estate |
Seeks above-average incoem and long-term capital growth, consistent with reasonable investment risk. The fund seeks to provide a yield that exceeds the composite yield of the S&P 500 |
Fidelity Management & Research Company |
|
VIP Strategic Income |
Seeks a high level of current income. The fund may also seek capital appreciation |
Fidelity Management & Research Company |
|
<R>VIP Freedom Income</R> |
<R>Seeks high total return with a secondary objective of principal preservation</R> |
<R>Fidelity Management & Research Company</R> |
|
<R>VIP Freedom 2005</R> |
<R>Seeks high total return with a secondary objective of principal preservation as the fund approaches its target date and beyond</R> |
<R>Fidelity Management & Research Company</R> |
|
<R>VIP Freedom 2010</R> |
<R>Seeks high total return with a secondary objective of principal preservation as the fund approaches its target date and beyond</R> |
<R>Fidelity Management & Research Company</R> |
|
<R>VIP Freedom 2015</R> |
<R>Seeks high total return with a secondary objective of principal preservation as the fund approaches its target date and beyond</R> |
<R>Fidelity Management & Research Company</R> |
|
<R>VIP Freedom 2020</R> |
<R>Seeks high total return with a secondary objective of principal preservation as the fund approaches its target date and beyond</R> |
<R>Fidelity Management & Research Company</R> |
|
<R>VIP Freedom 2025</R> |
<R>Seeks high total return with a secondary objective of principal preservation as the fund approaches its target date and beyond</R> |
<R>Fidelity Management & Research Company</R> |
|
<R>VIP Freedom 2030</R> |
<R>Seeks high total return with a secondary objective of principal preservation as the fund approaches its target date and beyond</R> |
<R>Fidelity Management & Research Company</R> |
|
VIP High Income |
Seeks a high level of current income, while also considering growth of capital |
Fidelity Management & Research Company |
|
VIP Aggressive Growth |
Seeks captial appreciation |
Fidelity Management & Research Company |
|
VIP Growth Stock |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Value |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Value Leaders |
Seeks captial appreciation |
Fidelity Management & Research Company |
|
VIP Money Market |
Seeks high level of current income consistent with the preservation of capital and liquidity |
Fidelity Management & Research Company |
|
VIP Equity-Income |
Seeks reasonable income while also considering capital appreciation |
Fidelity Management & Research Company |
|
VIP Growth |
Seeks to achieve capital appreciation |
Fidelity Management & Research Company |
|
VIP Value Strategies |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Asset ManagerSM |
Seeks high total return with reduced risk over the long term by allocating its assets among stocks, bonds, and short-term instruments |
Fidelity Management & Research Company |
|
VIP Investment Grade Bond |
Seeks high level of current income as is consistent with the preservation of capital |
Fidelity Management & Research Company |
|
VIP Index 500 |
Seeks investment results that correspond to the total return of common stocks publicly traded in the United States, as represented by the S&P 500, while keeping transaction costs and other expenses low |
Deutsche Asset Management, Inc. |
|
VIP Asset Manager: Growthยฎ |
Seeks to maximize total return over the long term by allocating its assets among stocks, bonds, short-term instruments, and other investments |
Fidelity Management & Research Company |
|
VIP Contrafundยฎ |
Seeks long-term capital appreciation |
Fidelity Management & Research Company |
|
VIP Growth & Income |
Seeks high total return through a combination of current income and capital appreciation |
Fidelity Management & Research Company |
|
VIP Growth Opportunities |
Seeks to provide capital growth |
Fidelity Management & Research Company |
|
VIP Balanced |
Seeks both income and capital growth |
Fidelity Management & Research Company |
|
VIP Mid Cap |
Seeks long-term growth of capital |
Fidelity Management & Research Company |
|
VIP Consumer Industries |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Cyclical Industries |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Financial Services |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Health Care |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Natural Resources |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Technology |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
VIP Telecommunications & Utilities Growth |
Seeks capital appreciation |
Fidelity Management & Research Company |
|
MORGAN STANLEY |
|
|
|
Emerging Markets Debt |
Seeks high total return by investing primarily in fixed income securities of government and government-related issuers and, to a lesser extent, of corporate issuers in emerging market countries |
Morgan Stanley Asset Management |
|
Emerging Markets Equity |
Seeks long-term capital appreciation by investing primarily in growth-oriented equity securities of issuers in emerging market countries |
Morgan Stanley Asset Management |
|
Global Value Equity |
Seeks long-term capital appreciation by investing primarily in equity securities of issuers throughout the world including U.S. issuers |
Morgan Stanley Asset Management |
|
International Magnum |
Seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers domiciled in EAFE countries |
Morgan Stanley Asset Management |
|
CREDIT SUISSE |
|
|
|
<R>Asset International Focus</R> |
<R>Seeks long-term capital appreciation by investing in equity securities of issuers from at least three foreign countries</R> |
<R>Credit Suisse Asset Management, LLC</R> |
|
Global Small Cap* |
Seeks long-term growth of capital by investing in equity securities of small companies from at least three countries, including U.S. |
Credit Suisse Asset Management, LLC |
|
Small Cap Growth |
Seeks capital growth by investing in equity securities of small U.S. growth companies |
Credit Suisse Asset Management, LLC |
Important You will find more complete information about the Funds, including the risks associated with each Fund, in their respective prospectuses. You should read them in conjunction with this prospectus. You can obtain a prospectus for any underlying Fund by calling 1-888-FIDLIFE (1-888-343-5433).
* Formerly known as Global Post-Venture Capital.
We currently vote shares of the Funds owned by the Variable Account according to your instructions. However, if the 1940 Act or any related regulations or interpretations should change, and we decide that we are permitted to vote the shares of the Funds in our own right, we may decide to do so.
We calculate the number of shares that you may instruct us to vote by dividing your Policy Account Value in an Investment Option by the net asset value of one share of the corresponding Fund. Fractional votes are counted. We reserve the right to modify the manner in which we calculate the weight to be given to your voting instructions where such a change is necessary to comply with then current Federal regulations or interpretations of those regulations.
We will determine the number of shares you can instruct us to vote 90 days or less before the applicable Fund shareholder meeting. At least 14 days before the meeting we will send you material by mail for providing us with your voting instructions.
If we do not receive your voting instructions in time, we will vote the shares in the same proportion as the instructions we receive from other Owners. We will also vote in the same proportionate manner any shares we hold in the Variable Account that are not attributable to Owners.
Under certain circumstances, we may be required by state regulatory authorities to disregard voting instructions. This may happen if following such instructions would change the sub-classification or investment objectives of a Fund, or result in the approval or disapproval of an investment advisory contract.
Under Federal regulations, we may also disregard instructions to vote for Owner-initiated changes in investment policies or the investment adviser if we disapprove of the proposed changes. We would disapprove a proposed change only if it were contrary to state law, prohibited by state regulatory authorities, or if we decided that the change would result in overly speculative or unsound investments. If we ever disregard voting instructions, we will include a summary of our actions in the next semiannual report.
The Fidelity Funds are available to separate accounts of insurance companies offering variable annuity contracts and variable life insurance policies issued by other insurance companies, as well as to our Variable Account and other separate accounts we may establish. The other Funds may be offered to qualified plans as well as to insurance company separate accounts.
Although we do not anticipate any disadvantages due to these arrangements, there is a possibility that a material conflict could arise between the interest of the Variable Account and one or more of the other separate accounts or qualified plans that hold shares of the Funds. A conflict may occur due to a change in law affecting the operations of variable life and variable annuity separate accounts, differences in the voting instructions of our Owners and those of other insurance companies, or for some other reason. In the event of a conflict, we will take any steps necessary to protect our Owners and their Beneficiaries.
We may make additional Investment Options available to you from time to time. These Investment Options will invest in mutual funds that we find suitable for the Policies.
We also have the right to eliminate Investment Options, to combine two or more Investment Options, or to substitute a new mutual fund for the mutual fund in which an Investment Option invests.
A substitution may become necessary if, in our judgment, a Fund no longer suits the purposes of the Policies. This may happen due to a change in laws or regulations, a change in a Fund's investment objectives or restrictions, because the Fund is no longer available for investment, or for some other reason. We would obtain any required SEC and other approvals before making such a substitution.
EVUL
We also reserve the right to operate the Variable Account as a management investment company under the 1940 Act or any other form permitted by law or to deregister the Variable Account under such Act in the event such registration is no longer required.
Because of exemptive and exclusionary provisions, we have not registered interests in the Fixed Account under the Securities Act of 1933, nor have we registered our general account as an investment company under the 1940 Act. Interests in the Fixed Account are generally not subject to the provisions of those laws, and EFILI has been advised that the staff of the Securities and Exchange Commission has not reviewed the disclosures in this prospectus relating to the Fixed Account. Disclosures regarding the Fixed Account and our general account may, however, be subject to certain generally applicable provisions of the Federal securities laws relating to the accuracy and completeness of statements made in prospectuses.
The Fixed Account is a portion of our general account. You may allocate a portion of your Premium payments or transfer a part of your Policy Account Value to the Fixed Account. The value of your interest in the Fixed Account does not fluctuate with the investment experience of our general account or the investment experience of the Investment Options.
We guarantee that money held in the Fixed Account will accrue interest daily at an annual rate that will never be less than the guaranteed rate stated in your Policy Schedule.
When you allocate money to the Fixed Account, we assign an interest rate to that amount. The rate will be guaranteed for a period of time. The length of that period will depend on when you allocate the amount to the Fixed Account.
When the initial guaranteed period ends, we will assign a new rate to that amount, and the new rate will be guaranteed for a period of at least one year. At the end of each guaranteed period we will set a new rate, each time for a period of at least one year.
Different rates may apply to different amounts in the Fixed Account. The rate for a given amount will depend on when that amount was first allocated to the Fixed Account. Also, the interest rate we apply to any particular amount will vary from time to time.
We reserve the right to limit or discontinue at any time the availability of the Fixed Account, both for transfers from the Funds and for Premium payments. If you attempt to allocate any portion of a Premium payment to the Fixed Account in excess of permitted amounts, we will place any excess in the Money Market Investment Option.
Currently, Exchange or allocation of premium payment to the General Account is limited to not more than 25% of the Policy value or 25% of the Premium payment, and total exchanges and premiums allocated to the General Account may not exceed $20,000 during any one Policy year. One exchange per policy year is permitted from the Separate Account to the General Account. Exchanges from the General Account are subject to the following limitations: You may make one exchange out of the General Account during each Policy year. An Exchange or allocation of purchase payment into the General Account is not permitted during the 12 months following an Exchange out of or withdrawal from the General Account. Different rules apply to the Special Fixed Account Election Rights, described below.
MAKING EXCHANGES AMONG INVESTMENT OPTIONS AND FIXED ACCOUNT
In general, you may make transfers of money ("Exchanges") among the Investment Options and/or the Fixed Account by sending us instructions in writing with your original signature or by calling us. We do not accept instructions by fax, electronic mail or via the internet, or instructions that are not in good order under our then-current procedures.
We do not currently impose any charges when you make Exchanges but we reserve the right to impose a charge of up to twenty dollars ($20.00) per Exchange if you make Exchanges on more than twelve days during a calendar year. Certain Funds do, however, impose a short-term redemption fee. See "Certain Funds Impose a Short-Term Redemption Fee" below.
Making excessive Exchanges can disrupt the ability of a Fund to achieve its investment objective and increase the Fund's expenses. We reserve the right to limit the number of days on which you can make Exchanges, but you will always be able to make Exchanges on at least five days each Policy Year and we may limit the number of Exchanges permitted. We may also require you to submit your Exchanges by mail.
Your request to make an Exchange may be expressed in terms of dollars, such as a request to move $5,000 from one Investment Option to another. You may also request a percentage reallocation among Investment Options. Percentage requests must be made in whole numbers. You cannot move less than $250 from any Investment Option except that if you have less than $250 in an Investment Option you may move the entire amount.
EVUL
- Making Exchanges by Telephone
Currently you may make Exchanges by telephone up to 18 days in each calendar year. You may make Exchanges on additional days only by a letter to our Service Center.
We reserve the right to revise or terminate your ability to make Exchanges by telephone. We also reserve the right to limit the amount of any telephone Exchange or to reject any telephone Exchange.
We will not be responsible for any losses resulting from unauthorized telephone Exchanges if we follow reasonable procedures designed to verify the identity of the caller. We may record telephone calls. You should verify the accuracy of your Exchanges by checking the confirmations and statements we send to you as soon as you receive them. Notify the Service Center immediately if you find any discrepancies. We will not be responsible for losses resulting from unit value changes unless you notify us within ten calendar days from the first time we mail a confirmation or statement containing details of the transaction.
- Use of Market Timing Services
Some Owners desire to use firms or individuals who engage in market timing. Market timing services usually obtain authorization from Owners to make Exchanges among the Investment Options on the basis of perceived market trends. Large Exchanges resulting from market timing activity may disrupt the management of the Funds and become a detriment to other Owners of variable life insurance policies or variable annuity contracts who allocate money to the Funds.
To protect Owners not using market timing services, we reserve the right to reject Exchanges communicated to us by anyone acting under a power of attorney on behalf of more than one person. We also reserve the right to reject Exchange instructions we receive from a market timing firm or other third party that any Owner has authorized to make multiple Exchanges. We will exercise these rights only if we believe that doing so will prevent harm to other Owners of variable life insurance policies or variable annuity contracts. In the event we reject an Exchange without a prior warning, we will promptly notify the party requesting the Exchange of the rejection by telephone, in writing or in the manner the request was made.
- Short-Term Trading Risk
Frequent Exchanges among Investment Options by Owners can reduce the long-term returns of the underlying mutual funds. The reduced returns could adversely affect the Owners, annuitants, Insureds or Beneficiaries of any variable annuity or variable life insurance contract issued by any insurance company with respect to values allocated to the underlying fund. Frequent Exchanges may reduce the mutual fund's performance by increasing costs paid by the Fund (such as brokerage commissions); they can disrupt portfolio management strategies; and they can have the effect of diluting the value of the shares of long term shareholders in cases in which fluctuations in markets are not fully priced into the Fund's net asset value.
The insurance-dedicated mutual funds available through the Investment Options are also available in products issued by other insurance companies. These Funds carry a significant risk that short-term trading may go undetected. The Funds themselves generally cannot detect individual Owner Exchange activity, because they are owned primarily by insurance company separate accounts that aggregate Exchange orders from Owners of individual Policies. Accordingly, the Funds are dependent in large part on the rights, ability and willingness of all participating insurance companies to detect and deter short-term trading by Owners.
As outlined below, EFILI has adopted policies regarding frequent trading, but can provide no assurance that other insurance companies using the same mutual funds have adopted comparable procedures. There is also the risk that these policies and procedures concerning short-term trading will prove ineffective in whole or in part to detect or prevent frequent trading. Please review the mutual funds' prospectuses for specific information about the Funds' short-term trading policies and risks.
- EFILI Policies Regarding Frequent Trading
EFILI does not authorize market timing. EFILI has adopted policies and procedures designed to discourage frequent trading (i.e. frequent transfers or Exchanges) as described below. If requested by the underlying mutual funds, EFILI will consider additional steps to discourage frequent trading of shares of those Funds, not inconsistent with the policies and procedures described below.
Owners who engage in frequent trading may be subject to temporary or permanent restrictions as described below on future purchases or Exchanges in a Fund, and potentially in all Fidelity Funds. Further, Owners who have engaged in frequent trading in other Fidelity Funds - or in Other Funds - may be subject to temporary or permanent restrictions on purchases or Exchanges in those Funds. EFILI may alter its policies, in any manner not inconsistent with the terms of the Policy, at any time without notice to Owners.
Although there is no minimum holding period and Owners can make withdrawals or Exchanges out of any Investment Option at any time, Owners may ordinarily comply with EFILI's policies regarding frequent trading by allowing 90 days to pass after each purchase or allocation into an Investment Option before they withdraw or exchange out of that Investment Option.
EVUL
In addition, each underlying mutual fund reserves the right to reject the Variable Account's entire purchase or Exchange transaction at any time, which would make EFILI unable to execute Owner purchase, withdrawal or Exchange transactions involving that Fund on that trading day. EFILI's policies and procedures are separate and independent from any policies and procedures of the underlying mutual funds, and do not guarantee that the mutual funds will not reject Variable Account orders.
Frequent Trading Monitoring and Restriction Procedures. EFILI has adopted policies and procedures related to Exchanges among Investment Options that are set out below. Frequent trading activity is measured by the number of roundtrip transactions by an Owner. A roundtrip transaction occurs when an Owner makes an allocation or Exchange into an Investment Option followed by a withdrawal or Exchange out of the same Investment Option within 30 days. Owners are limited to one roundtrip transaction per Investment Option within any rolling 90 day period, subject to an overall limit of four roundtrip transactions in the Policy over a rolling 12 month period.
Owners with two or more roundtrip transactions in one Investment Option within a rolling 90 day period will be blocked from making additional allocations or exchanges into that Investment Option, through any means, for 85 days.
In addition, Owners who complete a fourth (or higher) roundtrip transaction, at least two of which are completed on different business days, within any rolling 12 month period, will have a U.S. Mail-Only Trade Restriction imposed on all contracts/policies issued by EFILI or its affiliate, that they own. This rule will apply even if the four or more roundtrips occur in two or more different Investment Options. This restriction will stay in effect for 12 months. If the owner makes another round trip in a contract that is currently subject to a U.S. Mail-Only Trade Restriction, then the U.S. Mail-Only Trade Restriction period (12 months) is re-started and all purchase transactions will be permanently blocked in the violated Investment Option across all contracts with common ownership.
EFILI further reserves the right to reject specific transactions or impose restrictions as described above in respect of any Policy owned or controlled commonly with a Policy subject to the above restrictions, or in respect to any Policy owned or controlled commonly by a person who is the subject of a complex-wide block by the Fidelity Funds.
Exceptions. EFILI has approved the following exceptions to the frequent trading policy:
(1) Transactions in the Money Market Investment Option;
(2) Transactions of $1,000 or less will not count toward the roundtrip limits (both ends of the roundtrip must exceed this threshold);
(3) Dollar cost averaging, automatic rebalancing and automatic premium payment programs via electronic funds transfer ("ETF") will not count toward an Investment option's roundtrip limits;
(4) EFILI may suspend the frequent trading policy and make exceptions to the policy for transactions made during periods of severe market turbulence or national emergency. There is no assurance that EFILI will do so or that, if it does so, the underlying mutual funds will make any necessary exceptions to their frequent trading policies.
No other exceptions will be allowed. The Frequent Trading procedures will be applied consistently to all Owners.
- Effective Date of Exchanges Among Investment Options
Any redemption from an Investment Option that is part of an Exchange among Investment Options will be effected as of the end of the Valuation Day in which we receive the request at our Service Center. Generally the purchase of Investment Option units in other Investment Options with the proceeds of the redemption will occur at the same time. However, if your exchange involves (1) moving from an Investment Option ("Source") that invests in an equity Fund that is in an illiquid position due to substantial redemptions or Exchanges that require it to sell portfolio securities in order to make funds available, and (2) moving to an Investment Option ("Target") that invests in a Money Market Fund that accrues dividends on a daily basis and requires federal funds before accepting a purchase order, then there may be a delay in crediting the amount that is moving to the new Investment Option. The delay will last until the Source Investment Option obtains liquidity, or for seven days, whichever is shorter. During this period, the amount to be transferred from the Source Investment Option will remain as a fixed obligation of the Source Investment Option and will not participate in the investment results of either the Source or the Target Investment Option.
- Exchanges To and From the Fixed Account
There is no additional charge for Exchanges to or from the Fixed Account. You can make Exchanges to and from the Fixed Account only in accordance with our then current procedures for such Exchanges and only with our consent. We may discontinue the availability of the Fixed Account for Exchanges from the Investment Options or for Premium payments at any time. We also reserve the right to limit the frequency and amount of Premiums allocated to, and Exchanges into, the Fixed Account.
You may currently make one transfer per Policy Year from the Variable Account to the Fixed Account. However, for one year following your last Exchange out of the Fixed Account, you may not (1) exchange any portion of your Policy Account Value from the Investment Options to the Fixed Account, or (2) allocate any portion of any Premium payment to the Fixed Account. You may generally not allocate more than $20,000 (including exchanges) to the Fixed Account during any one Policy Year. You may not allocate more than 25% of your Policy Account Value to the Fixed Account and you may not make more than one transfer to the Fixed Account during any one Policy Year. If you attempt to make an Exchange into the Fixed Account in excess of permitted amounts, we may reject the entire Exchange. You may make one exchange out of the General Account during each Policy year. Different rules apply to the Special Fixed Account Election Rights, described below.
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The minimum dollar amount you may Exchange from any Investment Option to the Fixed Account is $250, unless you have less than $250 in an Investment Option. Then you may exchange the entire amount from the Investment Option to the Fixed Account. We will determine in our sole discretion the maximum amount that you can exchange from the Fixed Account.
If you pay Premiums monthly by electronic funds transfer, you will not be able to allocate any of those payments to the Fixed Account.
When you withdraw or exchange amounts out of the Fixed Account, the amounts that have been credited to the Fixed Account for the shortest time are withdrawn first. At the end of each annual renewal interest Guarantee Period after the Policy Issue Date, we will set the amount that may be exchanged into or out of "The Fixed Account" for the next year, provided that these amounts will not be less than the minimum specified above.
Dollar Cost Averaging allows you to make automatic monthly Exchanges at no charge from either the Money Market Investment Option or the Investment Grade Bond Investment Option (the "Source Option"), but not both, to the other Investment Options you select (the "Destination Options"). You may not, however, select your Source Option or the Money Market Investment Option as Destination Options. Each month you must move at least $250 to each Destination Option then in effect. You may change your Source Option or your Destination Options at any time, by calling us or by sending written notice to our Service Center. Dollar Cost Averaging transactions do not count toward the Policy's limits on the number of Exchanges.
You may select any day of the month from the 1st to the 28th as the day your Dollar Cost Averaging transactions will take place each month. If the New York Stock Exchange is not open on the scheduled day in a particular month, the Exchange will take place on the next day the New York Stock Exchange is open for trading.
If your balance in the Source Option on a transfer date is less than the amount to be transferred to the Destination Option(s), we will transfer all the money in the Source Option to the Destination Options proportionately, and your participation in the program will automatically terminate.
You may cancel Dollar Cost Averaging at any time by calling us or sending written notice to the Service Center.
You may not use Dollar Cost Averaging to transfer money to the Fixed Account. You cannot use Dollar Cost Averaging at the same time that you use Automatic Rebalancing, which is described immediately below. We reserve the right to modify or terminate Dollar Cost Averaging.
You can use Automatic Rebalancing at no charge to help you maintain your specified allocation mix among the Investment Options. You direct us to readjust your allocations on a quarterly, semi-annual or annual basis to return to the allocations you select on the Automatic Rebalancing instruction form. Automatic Rebalancing transactions do not count toward the Policy's limits on the number of Exchanges.
You choose one day of the month from the 1st to the 28th for Automatic Rebalancing. If the New York Stock Exchange is not open on the scheduled day in a particular month, the Exchange will take place on the next day the New York Stock Exchange is open for trading.
Automatic Rebalancing will continue until you notify us to cancel it. We reserve the right to modify or terminate Automatic Rebalancing. You may not use Automatic Rebalancing at the same time you use Dollar Cost Averaging, which is described immediately above.
Please note that monthly Automatic Rebalancing may result in a short-term redemption fee imposed by certain of the Funds. For more details about this fee, including a list of the Funds that impose it, please see "Certain Portfolios Impose a Short-Term Redemption Fee" below.
SPECIAL FIXED ACCOUNT ELECTION RIGHTS
1. Fixed Account Transfer Option
During the first eighteen (18) months after the Issue Date, you may make a one-time election to allocate the entire Cash Surrender Value (less any Fund redemption fees and/or any Exchange fees the Owner may incur) and all subsequent premium payments exclusively to the Fixed Account for the duration of the Policy. To make this election, all Owners must complete and execute the Company's Fixed Account Transfer Option Election form.
EVUL
If you make this election:
- All amounts allocated to the Investment Options at the time of the election will be Exchanged into the Fixed Account, using each Investment Option's net unit value next calculated after the Company receives the Owner's election form in good order. The Policy's limits on Exchanges into the Fixed Account will not apply to this initial Exchange.
- After the initial Exchange, all premium payments and Loan repayments will be automatically allocated to the Fixed Account.
- Subsequent premium payments into the Fixed Account will be limited to the lesser of $100,000 per Policy Year or any limit otherwise imposed under the terms of the Policy.
- Except as stated above, all terms and conditions of the Policy will remain in effect.
- You may elect to cancel your election of this option, after the second Policy Anniversary, by allocating new premium payments to the Investment Options or making an Exchange into the Investment Options. If you cancel, all terms and conditions of the Policy excluding this option will apply, and any subsequent deposits into the Fixed Account must comply with the then-existing Fixed Account rules and all Fixed Account policy provisions, either of which may prohibit any further deposits into the Fixed Account.
2. Fixed Account Single Exchange Option
At any time while the Policy is in force, you may make a one-time election to allocate the entire Cash Surrender Value (less any Fund redemption fees and/or any Exchange fees the Owner may incur) of the Policy to the Fixed Account, and to give up the right to make any further premium payments. To make this election, all Owners must complete and execute the Company's Fixed Account Single Exchange Option Election form.
If you make this election:
- All amounts allocated to the Investment Options at the time of the election will be Exchanged into the Fixed Account, using each Investment Option's net unit value next calculated after the Company receives the Owner's election form in good order. The Policy's limits on Exchanges into the Fixed Account will not apply to this initial Exchange.
- You will not be allowed to make any further premium payments.
- You will not be allowed to cancel or change your election of this option.
- The Monthly Deduction will continue to be assessed until the earliest of the following events: the death of the Insured; the Extended Maturity Date; or the Policy's Lapse.
Except as stated above, all terms and conditions of the Policy will remain in effect.
More About the Policy and the Variable Account
The Policy is subject to several types of charges and deductions, which will affect the Policy Account Value, Cash Surrender Value and the risk of Lapse, and may affect the Death Benefit.
1. SALES OR SURRENDER CHARGES. We do not deduct a sales charge from Premium payments, nor a Surrender charge upon Surrenders or Partial Withdrawals.
2. STATE TAX CHARGE. We deduct a tax charge from each Premium payment to pay applicable state premium and other taxes. We do not currently deduct any taxes assessed by municipalities or other governmental entities, but we have the contractual right to do so if we provide you with advance written notice. Taxes applicable to EFILI change from time to time under state law.
We credit the amount remaining after deduction of these taxes (the "Net Premium") to your Policy Account Value according to your allocation instructions.
3. MONTHLY DEDUCTION. We make a deduction from the Cash Surrender Value as of each monthly Policy Processing Day to compensate us for administrative expenses and for the Policy's insurance coverage. You may instruct us to take these deductions from the Money Market Investment Option (but not from the Fixed Account), or from all Investment Options and the Fixed Account on a pro rata basis, based on the proportion of the Cash Surrender Value then allocated to each Investment Option and to the Fixed Account as of each Policy Processing Day. You may change these instructions by giving written notice to us at our Service Center. If you do not provide us with written instructions, or if we cannot make a Monthly Deduction per your instructions, we will take the Monthly Deductions from the Investment Options and Fixed Account based on the proportion then allocated to each Investment Option and to the Fixed Account as of each Policy Processing Day.
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The monthly deduction has 4 components: the monthly Cost of Insurance charge; the monthly Policy charge; the monthly unit charge (Survivorship Life Policies only); and charges for Riders you select (as specified in the applicable Riders).
- Cost of Insurance. We assess a monthly Cost of Insurance charge to compensate us for providing the Death Benefit. Because this charge depends on a number of variables (Issue Age, sex, Underwriting Class, Policy Year and Face Amount), it varies from Policy to Policy and from Policy Processing Day to Policy Processing Day. Your Policy Schedule indicates the guaranteed maximum Cost of Insurance Rates applicable to your Policy.
The Cost of Insurance charge is equal to the Net Amount at Risk for your Policy on the Policy Processing Day, times the applicable monthly Cost of Insurance Rate.
Net Amount at Risk. The Net Amount at Risk is equal to the Death Benefit minus the Policy Account Value (before deduction of the Cost of Insurance; after deduction of all other components of the monthly deduction) on each monthly Policy Processing Day, regardless of your choice of Death Benefit. Under either Death Benefit Option, a Face Amount increase or decrease will increase or decrease the Net Amount at Risk. In addition, under Death Benefit Option A, the Net Amount at Risk generally increases when the Policy Account Value decreases, and decreases when the Policy Account Value increases. Therefore, the Net Amount at Risk is affected by any factor that affects the Policy Account Value, including investment performance, Premium payments, Policy charges, and withdrawals. Under Death Benefit Option B, the Net Amount at Risk is generally the same as the Face Amount and not affected by changes in Policy Account Value. However, under either Death Benefit Option, while your Policy' Death Benefit is determined by the tax test, both the Death Benefit and the Net Amount at Risk will generally increase or decrease based on increases or decreases of the Policy Account Value.
We calculate the Net Amount at Risk separately for the initial Face Amount and for any increases in Face Amount. If we approve an increase in your Policy's Face Amount, then a different Underwriting Class (and a different Cost of Insurance Rate) may apply to the amount of the increase, based on each Insured's circumstances at the time of the increase. In order to determine the Net Amount at Risk for each coverage layer, we first calculate your Policy's total Net Amount at Risk. This total Net Amount at Risk includes any increase to the Death Benefit due to the requirements of your Policy's tax test. The total Net Amount at Risk is then allocated among the coverage layers, up to each coverage layer's Face Amount, in the reverse order in which the coverage layers were added to the Policy. Any remaining Net Amount at Risk will be allocated to the initial Face Amount layer, even if that Net Amount at Risk is greater than the initial Face Amount.
Cost of Insurance Rates. We base the Cost of Insurance Rates on each Insured's Issue Age, sex (or unisex rate), Underwriting Class, number of full years the insurance has been in force and, for a Single Life Policy, the Face Amount. The actual monthly Cost of Insurance Rates are based on, among other things, our expectations as to future mortality and expense experience. We may increase or decrease these rates from time to time, but the rates will never be greater than the guaranteed Cost of Insurance Rates stated in your Policy. These guaranteed rates are based on: the 1980 Commissioner's Standard Ordinary Mortality Table, except that we may adjust the table rates in order to offer flat guaranteed rates during the first ten (10) Policy Years; and each Insured's age nearest birthday, sex (except where unisex rates are required), and smoker/nonsmoker status. Any change in the Cost of Insurance Rates will be on a uniform basis for all Insureds of the same Issue Age, sex, Underwriting Class, and number of full years insurance has been in force.
A Single Life Policy's Cost of Insurance Rate also depends in part on the Face Amount. We have three different Cost of Insurance "bands" applicable to Face Amounts of: 1) under $500,000, 2) $500,000 to $999,999, and 3) $1 million or above. Higher bands have lower Cost of Insurance rates. If you make a Policy change that reduces your Single Life Policy's Face Amount into a different Cost of Insurance band (i.e. reduction from $1.1 million to $900,000) then we may change your Cost of Insurance Rate to the appropriate rate for the new Face Amount.
Underwriting Class. When you apply for a Policy, we will place each Insured in an Underwriting Class based on our underwriting process. We currently place Insureds into preferred classes, standard classes and non-standard classes with extra ratings, and smoker/nonsmoker status.
If all other factors are equal, the Cost of Insurance Rates will generally be lower for preferred classes than standard classes, and lower for standard classes than nonstandard classes. A Nonsmoking Insured will generally incur lower Cost of Insurance rates than an Insured in the same Underwriting Class who is classified as a smoker. For Insureds under age 18, we have one set of rates; we do not have separate smoker and nonsmoker status, or separate preferred and standard Underwriting Classes. An Insured child who reaches age 18 will be classified as a standard smoker unless and until the Insured provides satisfactory evidence of non-smoker status and/or evidence that they qualify for our preferred Underwriting Class.
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- Monthly Policy Charge. The $5.00 monthly charge compensates us for some of our ordinary administrative expenses, such as recordkeeping, processing Death Benefit claims and Policy changes, preparing and mailing reports, and overhead costs. This charge will not be increased during the life of the Policy.
- Monthly Unit Charge (Survivorship Life Policy Only). We deduct a monthly unit charge, expressed as an amount per $1,000 of the Policy's Face Amount, for the first three Policy Years and for the three years (36 monthly Policy Processing Days) following a Face Amount increase. This charge compensates us for a portion of the additional underwriting and issue costs associated with a Survivorship Life Policy. The unit charge per $1,000 of Face Amount will never be greater than the rate set forth in the Policy Schedule.
- Charges for Optional Riders. Riders offering supplemental benefits are also available under the Single Life Policy and the Survivorship Life Policy. See "Other Benefits" above. We deduct any monthly charges for these Riders from the Cash Surrender Value as part of the Monthly Deduction. Rider charges are described in the "Periodic Charges" table for each Policy, above.
Changes in Face Amount. We do not charge a transaction fee for any increases or decreases in your Policy's Face Amount. However, increases in Face Amount will generally increase the Policy's Net Amount at Risk and the monthly Cost of Insurance charges. See "Changing the Face Amount" above.
4. MORTALITY AND EXPENSE RISK CHARGE. We assess a daily charge against the Policy's assets that are invested in the Investment Options of the Variable Account (but not the Fixed Account) to compensate us for certain mortality and expense risks we assume. The mortality risk is that Policy Insureds will live for a shorter time on average than we project, requiring us to make larger or earlier payments than we project. The expense risk is that our costs of issuing and administering the Policies will be greater than we can collect through other charges. We deduct a daily charge at an annual rate of 1.00% of the average daily net assets of your Policy in the Variable Account during the first twenty (20) Policy Years. The mortality and expense risk charge rate will then be reduced to an annual rate of 0.40% of the average daily net assets of your Policy in the Variable Account in the twenty-first (21st) Policy Year and beyond. These rates are guaranteed not to increase.
If this charge does not cover our actual costs, we absorb the loss. Conversely, if the charge is more than the actual costs, the excess can be used to cover our administrative or distribution costs, or added to our surplus.
5. EXCHANGE CHARGE. We do not currently impose any charges when you exchange among Investment Options or the Fixed Account, but we reserve the right to impose a charge of up to twenty dollars ($20.00) per exchange if you exchange on more than twelve days during a calendar year. We would deduct the Exchange charge from the amount being exchanged.
6. <R>CERTAIN FUNDS IMPOSE A SHORT-TERM REDEMPTION FEE. Nine Investment Options invest in Funds that impose a short-term redemption fee. Any short-term redemption fees that you pay are retained by the Funds, not by EFILI, and are part of the Fund's assets. The nine Funds that impose this fee are: Fidelity VIP Consumer Industries Portfolio, Fidelity VIP Cyclical Industries Portfolio, Fidelity VIP Financial Services Portfolio, Fidelity VIP Health Care Portfolio, Fidelity VIP International Capital Appreciation Portfolio, Fidelity VIP Natural Resources Portfolio, Fidelity VIP Overseas Portfolio, Fidelity VIP Technology Portfolio, and Fidelity VIP Telecommunications & Utilities Growth Portfolio.</R>
If you redeem an interest in one of these Investment Options that you have held for less than 60 days, the amount redeemed will be subject to a 1% short-term redemption fee. For this purpose, interests held longest will be treated as being redeemed first and interests held shortest as being redeemed last.
Redemption from a particular Investment Option occurs when you withdraw money from your Policy from that Investment Option or exchange from that Investment Option to another Investment Option. The fee will apply to all redemptions you request. The fee applies both to one-time transactions and to periodic transactions, such as redemptions made under Automatic Rebalancing and Dollar Cost Averaging programs. The fee will not apply to redemptions we make for the purpose of collecting the Monthly Deduction.
Here are two examples to help you understand the application of the fee.
Example 1: On Day One, you purchase 100 units of an Investment Option that invests in a Fund that imposes the redemption fee. On Day 58, you redeem 50 units from the Investment Option. The value of those 50 units at the time of Exchange is $500.
The fee applies to the entire amount exchanged. The fee is $5 (1% of $500).
Example 2: On Day One, you purchase 100 units of an Investment Option that invests in a Fund that imposes the redemption fee. On Day 50 you purchase an additional 50 units of the same Investment Option. On Day 65 you redeem 125 units of that Investment Option at $10 each.
The first step is to determine which units are redeemed. Using the first in, first out rule, all 100 units purchased on Day One are redeemed, and 25 of the 50 units purchased on Day 50 are redeemed. The 100 units purchased on Day One are not subject to the redemption fee because they have been held for 60 days or longer, but the 25 units purchased on Day 50 are subject to the fee because they have been held for less than 60 days. The value of the units subject to the redemption fee is $250 (25 units at $10 per unit). The redemption fee is $2.50 (1% of $250).
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7. FUND EXPENSES. The value of the net assets of each Investment Option reflects the management fees and other expenses incurred by the corresponding Fund in which the Investment Option invests. For more information on the fees and expenses, please refer to the Fund prospectuses and the "Funds' Annual Operating Expenses" table included in the summary of this prospectus.
8. REDUCTION IN CHARGES. The Policy is available for purchase by individuals, corporations and other entities. We may reduce or waive certain charges where the size or nature of such sales results in savings to us with respect to sales, underwriting, administrative, or other costs. We also may reduce or waive charges on Policies sold to employees, officers, directors or agents of EFILI or its affiliates, and to their immediate family members. Eligibility for these reductions and the amount of reductions will be determined by a number of factors, including the number of lives to be insured, the total Premiums expected to be paid, total assets under management for the Owner, the nature of the relationship among the insured individuals, the purpose for which the Policies are being purchased, expected persistency of these individual Policies, and any other circumstances which EFILI believes to be relevant to the expected reduction of its expenses. Some of these reductions may be guaranteed and others may be subject to modification, on a uniform case basis. Reductions in charges will not be unfairly discriminatory to any Owners. The Company may modify from time to time, on a uniform basis, both the amounts of reductions and the criteria for qualification.
9. COMPENSATION FOR SERVICES. EFILI or its insurance agency affiliate receives annual compensation of up to 0.40% of assets allocated to the underlying mutual funds, for customer service, distribution and recordkeeping services with respect to those assets. This compensation is received from the Funds' advisers or their affiliates. These payments are not Policy changes, and do not increase the Fund or Policy charges described in this section or in the Fee Table.
SURRENDERS AND PARTIAL WITHDRAWALS
You may surrender your Policy at any time while any Insured is alive and the Policy is in force. We will send you the Cash Surrender Value less any required tax withholding, any applicable Fund short-term redemption fee, and any outstanding charges. You must send written instructions to our Service Center to initiate a surrender, and we may require that you return your Policy. Your Policy will terminate on the date we receive your Surrender request in good order at our Service Center.
You may also make Partial Withdrawals of $500 or more from the Cash Surrender Value while any Insured is alive and the Policy is in force. You may not make a Partial Withdrawal that would reduce your Cash Surrender Value to less than $2,500.
If you do not specify where we should take the money for a Partial Withdrawal, we will take it proportionately from all the Investment Options and from the Fixed Account. You may, in the alternative, specify the dollar amounts or percentages to be withdrawn from each Investment Option (but not the Fixed Account), provided that the Partial Withdrawal amount is less than the total you have in all the Investment Options. If you request a Partial Withdrawal in an amount that is more than the total you have in all the Investment Options, you may instruct us to withdraw all the money you have in the Investment Options and the rest from the Fixed Account.
You may request Partial Withdrawals by sending us a letter or calling us at the Service Center. Withdrawals by telephone are limited as follows: (1) no withdrawal may be for more than $100,000; (2) total telephone withdrawals in a seven day period cannot total more than $100,000; and (3) if we have recorded an address change for an Owner during the past 15 days, the limits in (1) and (2) become $10,000. We reserve the right to change telephone withdrawal requirements or limitations.
For jointly owned Policies, all checks will be made payable to both Owners. You may have the money transferred to your bank account, or to a Fidelity mutual fund or brokerage account. All Owners must also appear as owners of the bank account, mutual fund or brokerage account.
We will normally pay you the amount of any Surrender or Partial Withdrawal, less any taxes withheld, any applicable Fund short-term redemption fee and any outstanding charges, within seven days after we receive the Surrender or Partial Withdrawal request in good order at the Service Center. We may, however, delay payment if (a) the disposal or valuation of the assets in an Investment Option is not reasonably practicable because the New York Stock Exchange is closed for other than a regular holiday or weekend, trading is restricted by the SEC, or the SEC declares that an emergency exists; or (b) the SEC by order permits the postponement of payment to protect our Owners.
In addition, we reserve the right to delay payment of any Partial Withdrawal or Surrender from the Fixed Account for not more than six months. If payment from the Fixed Account is delayed more than 30 days, we will credit interest from the date of the withdrawal request at a rate not less than 1.0% per year compounded annually or, if greater, the rate required by applicable law.
EFFECT OF SURRENDERS AND PARTIAL WITHDRAWALS
- A surrender will take effect and the Policy will terminate on the date we receive your request in good order at our Service Center.
- Once you surrender your Policy, all coverage and other benefits under it cease and cannot be reinstated.
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- A Partial Withdrawal reduces the Cash Surrender Value, and can affect the Face Amount, Death Benefit, and the Net Amount at Risk (which is used to calculate the Cost of Insurance charge).
- If Death Benefit Option A is in effect, we will reduce the Face Amount by the amount of the Partial Withdrawal. For purposes of determining the Cost of Insurance charge, any decrease will first be used to reduce the most recent increase in Face Amount, then the next most recent increases, and finally the initial Face Amount. However, if a decrease in Face Amount moves a Single Life Policy into a lower Cost of Insurance band, (for example, from $1.1 million to $900,000) then the Cost of Insurance Rate applied to that Policy's Net Amount at Risk may increase.
- If Death Benefit Option B is in effect, a Partial Withdrawal will not affect the Face Amount, but the Death Benefit will be reduced in the same amount as the Policy Account Value.
- You may not make a Partial Withdrawal if, or to the extent that, the Partial Withdrawal would reduce the Face Amount below the minimum Face Amount we require in order to issue a Policy, generally $250,000 for a Single Life Policy and $500,000 for a Survivorship Life Policy. See "Purchasing a Policy" above.
- In order to operate the Policy as a life insurance policy under federal tax law, the Company reserves the right to reject a request for a Partial Withdrawal if, in the Company's opinion, the withdrawal would cause the policy to fail to qualify as life insurance under federal tax law. The Company will promptly notify the Owner of any such action. The Company will always honor an Owner's request for a full Surrender, or any partial withdrawal that does not cause the Policy to fail to qualify as life insurance.
- Partial Withdrawals may increase your risk of Lapse. Both Surrenders and Partial Withdrawals may have unfavorable tax consequences. You should consult a qualified tax adviser before making a Surrender or Partial Withdrawal. See "Policy Lapse and Reinstatement" and "Federal Tax Considerations."
SIGNATURE GUARANTEE OR CUSTOMER AUTHENTICATION
Certain requests may require a signature guarantee or a customer authentication. A signature guarantee or a customer authentication is designed to protect you and EFILI from fraud.
Your request must be in writing and may require a signature guarantee if any of the following situations apply:
(1) Loss of account ownership.
(2) Any other circumstances where we deem it necessary for your protection.
You should be able to obtain a signature guarantee from a bank, broker/dealer, credit union (if authorized under state law), securities exchange or association, clearing agency, or savings association. A notary public cannot provide a signature guarantee. A customer authentication can be obtained only at a Fidelity Investments Investors Center.
After the first Policy Year, while any Insured is alive and the Policy is in force, you may submit a request to borrow money from us using the Policy as the only collateral for the Loan. We normally pay you the Loan proceeds within seven (7) days after we receive a Loan request in good order. We may postpone payment of Loans under certain conditions, as described in "Surrenders and Partial Withdrawals."
- The minimum Loan you may take is $500.
- The maximum Loan you may take is up to 90% of your Policy Account Value.
- If you have a Policy Loan outstanding, you may take an additional Loan so long as the total of all your Policy Loans does not exceed 90% of the Policy Account Value, including outstanding Policy Loan indebtedness.
- If you have another life insurance policy with an outstanding loan and wish to transfer that policy's proceeds into this Policy under Section 1035 of the Internal Revenue Code, we may permit you to carry over the Loan Balance even during the first Policy Year. You may not, however, request any new Loan proceeds during the first Policy Year.
- We will not extend new or additional Policy Loans after the Extended Maturity Date.
1. LOAN BALANCE AND LOAN COLLATERAL ACCOUNT. After your Loan application is approved, we will take three steps as of the close of business on the next Valuation Day:
- We will send you the initial Loan amount requested from our general account.
- We will set up an account to record the amount you owe, the "Loan Balance." Initially, of course, the Loan Balance is equal to the initial Loan amount we have sent you.
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- Finally, to secure the Loan, we will transfer a net amount equal to the initial Loan Balance out of your Investment Options and Fixed Account and into a Loan Collateral Account that we hold as collateral. You may specify that we redeem this amount from specific Investment Options; but if you specify an Investment Option that invests in a Fund that charges a short-term redemption fee, we will increase the amount redeemed so that after payment of any applicable redemption fee, the amount transferred into the Loan Collateral Account will equal the Loan Balance. Otherwise, we will transfer the Loan amount on a pro rata basis from all of your Investment Options and the Fixed Account based on the proportion of the Cash Surrender Value then allocated to each Investment Option and to the Fixed Account on the date of the transaction. These amounts will remain in the Loan Collateral Account until you repay the Loan.
- If we have approved your request to transfer proceeds to this Policy from another policy subject to an outstanding Loan, your initial Loan Balance and Loan Collateral Account will be the outstanding Loan Balance you owed under the prior policy, and we will pay no new Loan proceeds to you.
The amounts held in the Loan Collateral Account are part of your Policy Account Value. While you have an outstanding loan balance, the Cash Surrender Value will be the Policy Account Value (including the Loan Collateral Account balance) less the Loan Balance including accrued but unpaid interest.
As long as the Loan is outstanding, we will continue to hold an amount as collateral for the Loan in the Loan Collateral Account. This amount is not affected by the investment performance of the Investment Options and will not be credited with the interest rates accruing on the Fixed Account. Amounts held in the Loan Collateral Account will accrue Loan interest and affect the Policy Account Value, even after the Loan is repaid, because these amounts will miss the opportunity to participate in the investment performance of the Investment Options while the Loan is outstanding.
2. INTEREST PROCESSING. We charge you interest at a six percent (6%) annual rate on your Loan Balance. This rate will not be adjusted. Interest will be accrued and compounded (that is, become part of the Loan Balance) on each monthly Policy Processing Day.
Amounts in the Loan Collateral Account earn interest at an annual rate guaranteed not to be lower than four percent (4%) before the tenth (10th) Policy anniversary, and 5.75% thereafter. Loan interest is credited to the Loan Collateral Account on each monthly Policy Processing Day.
Loan interest capitalizes annually on the Policy Anniversary date, or when you take out a new Loan or make a repayment. Two things happen simultaneously when Loan interest capitalizes. First, the interest we have credited on the Loan Collateral Account is exchanged into the Investment Options and the Fixed Account in accordance with your then-current Premium allocation instructions. Second, we transfer an amount equal to the interest accrued upon your Loan Balance since the last Loan interest capitalization from your Cash Surrender Value to the Loan Collateral Account. We will obtain this amount by making redemptions from the Money Market Investment Option, or on a pro-rata basis from your balances in all Investment Options and the Fixed Account, based on your then-current Monthly Deduction instructions. (See "Monthly Deduction.")
3. REPAYMENT. You may repay all or part of your indebtedness at any time while any Insured is alive and the Policy is in force. Upon each Loan repayment, we will allocate an amount equal to the Loan repayment (but not more than the Loan Balance) from the Loan Collateral Account back to the Investment Options and/or Fixed Account according to your then-current new Premium allocation instructions and our Premium allocation procedures. (See "Allocating Premiums Among Investment Options and Fixed Account.") We will treat any repayment in excess of the Loan Balance as a Premium payment.
While your Loan is outstanding, we will credit payments we receive as Premium payments or Loan repayments in accordance with your written instructions. If we do not receive written instructions, we will assume that any payments you make are Premium payments.
Making Premium payments while a Loan is outstanding will increase your short-term costs of owning a Policy. Loan repayments, unlike Premium payments, are not subject to the state tax charge and will reduce net interest charges. Accordingly, while you have a Loan outstanding, you should provide written instructions about whether you want us to treat each payment as a Loan repayment or a Premium payment.
4. EFFECT OF LOANS ON POLICY ACCOUNT VALUES AND INSURANCE PROCEEDS.
- The amount of the Loan Balance, including unpaid principal and any accrued and unpaid interest, reduces the Cash Surrender Value and the Insurance Proceeds payable on the Insured's death.
- Amounts transferred as collateral to the Loan Collateral Account do not participate in the investment performance of the Investment Options, or earn Fixed Account interest, as long as the Loan is outstanding. Moreover, the interest we charge on your Loan Balance is greater than the interest earned on the Loan Collateral Account. This may limit your opportunity for asset growth over the long term.
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- Repaying a Loan causes the Insurance Proceeds and the Cash Surrender Value to increase by the amount of the repayment.
- If your indebtedness causes the Cash Surrender Value on a Policy Processing Day to be less than the Monthly Deduction due, and the No-Lapse Guarantee no longer applies, your Policy will go into Default and enter a Grace Period. See "Policy Lapse and Reinstatement." If the Default is not remedied before the end of the Grace Period, the Policy will lapse and we will repossess the collateral held in the Loan Collateral Account and use it to reduce or eliminate the Loan Balance.
- Policy Loans may increase your risk of lapse and may have unfavorable tax consequences. You should consult a qualified tax adviser before taking a policy Loan. See "Policy Lapse and Reinstatement" and "Federal Tax Considerations."
POLICY LAPSE AND REINSTATEMENT
A Policy will go into Default if, on a monthly Policy Processing Day, the Cash Surrender Value is insufficient to pay the amount of the Monthly Deduction and the No-Lapse Guarantee no longer applies to the Policy. Therefore, a Policy could lapse eventually if its Cash Surrender Value is not sufficient to cover Policy charges.
We will notify you in writing within 30 days of any Default and will allow you a Grace Period of 61 days from the date of the written notice, in which you may make a Premium payment sufficient to bring the Policy out of Default. The required payment will be the accumulated deficiencies plus three (3) months' Monthly Deductions.
If we do not receive the required payment by the end of the Grace Period, the Policy will lapse: that is, terminate with no value. If there is a Policy Loan, we will repossess the collateral held in the Loan Collateral Account and use it to reduce or eliminate the Loan Balance. In addition, a Policy Lapse may have unfavorable tax consequences. See "Federal Tax Considerations."
1. DEATH DURING GRACE PERIOD. If the Insured under a Single Life Policy, or the last surviving Insured under a Survivorship Life Policy, should die during the Grace Period, the Cash Surrender Value used in the calculation of the Death Benefit will be the Cash Surrender Value as of the Policy Processing Day on which the Policy went into Default.
2. NO-LAPSE GUARANTEE. As long as your Policy satisfies the No-Lapse Guarantee Cumulative Premium Test, we guarantee that the Policy will not go into Default during the No-Lapse Guarantee Period, even if adverse investment experience or other factors should cause the Cash Surrender Value to fall to zero or below. The No-Lapse Guarantee applies to all Underwriting Classes. The No-Lapse Guarantee Period for a Single Life Policy is the first ten (10) Policy Years, if the Issue Age of the Insured is 70 or less; or the first five (5) Policy Years, if the Issue Age of the Insured is 71 or more. The No-Lapse Guarantee Period for a Survivorship Life Policy is the first five (5) Policy Years. After the end of the No-Lapse Guarantee Period, this guarantee no longer applies. If you make a material change to your Policy, such as an increase or decrease in the Face Amount, the Premium payments necessary to maintain this guarantee may increase or decrease.
Because this guarantee prevents Lapse during the No-Lapse Guarantee Period, it is possible for your Cash Surrender Value to decline below zero. In this case, unless you repay the negative balance before the end of the No-Lapse Guarantee Period, your Policy will lapse after the end of that period. Before the end of the No-Lapse Guarantee Period, however, a negative Cash Surrender Value will not increase the base on which Cost of Insurance Rates are applied to an amount in excess of the Death Benefit, and will not reduce the Insurance Proceeds payable.
If your Policy does not satisfy the No-Lapse Guaranteed Premium Test, the No-Lapse Guarantee will terminate and cannot be reinstated. Termination of the No-Lapse Guarantee may occur even if the Policy remains in force.
No-Lapse Guarantee Cumulative Premium Test. At the time you purchase your Policy, we will provide you with a Planned Premium Payment Schedule. The No-Lapse Guarantee Cumulative Premium Test is satisfied if, on each monthly Policy Processing Day, the sum of all Premiums paid to date, less any Loans and withdrawals taken and any charges or interest then due, is equal to or exceeds the sum of the payments that would have been made through that date if the Planned Annual Premium had been paid in timely equal monthly installments prior to each Policy Processing Day. If you fail the Cumulative Premium Test and fail to make the necessary payments during the NLG Grace Period (defined below), you will not be able to reinstate this guarantee.
Notice; NLG Grace Period. The annual statement for your Policy will indicate whether the No-Lapse Guarantee is still in effect. In addition, if your Policy fails the No-Lapse Guarantee Cumulative Premium Test on a monthly Policy Processing Day, we will send you a letter indicating that you have a grace period of thirty (30) days from the day your Policy failed the test, in which to pay premiums sufficient to make up the shortfall.
Important: If your Policy fails the No-Lapse Guarantee Cumulative Premium Test and you fail to make the necessary payment before the end of the grace period, the guarantee will no longer apply and there is no way to reinstate the guarantee. If the Policy still has a sufficient Cash Surrender Value, however, it will remain in force despite the loss of the No-Lapse Guarantee.
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3. POLICY REINSTATEMENT. An Owner may, by making a written request, reinstate a Policy which has terminated after going into Default at any time within the three-year period following the date of termination subject to the following conditions:
- Evidence of each Insured's insurability, satisfactory to us, is provided to us; and
- A payment equal to the amount that was required to bring the Policy out of Default immediately prior to termination, plus an amount equal to the applicable Monthly Deduction for the next three (3) months, must be paid to us.
If reinstatement is approved, the effective date of reinstatement will be the later of the date we approve the Owner's request or the date we receive the required payment at our Service Center.
A reinstated Policy:
- Has the same Policy Date as the Policy when originally issued;
- May have higher Cost of Insurance Rates if the Insured is in a different Underwriting Class and/or a different age group at the time of reinstatement;
- Will NOT have a No-Lapse Guarantee;
- Reflects the reduction or elimination of any previous Policy Loans due to the previous Lapse; and
- Has a Policy Account Value and Cash Surrender Value equal to the premium paid, net of premium taxes withheld, less the amount that was required to bring the Policy out of Default immediately prior to termination.
The following summary provides a general description of the Federal income tax considerations associated with the Policy and does not purport to be complete or to cover all situations. This discussion is not intended as tax advice. Counsel or other competent tax advisers should be consulted for more complete information. This discussion is based on EFILI's understanding of the present Federal income tax laws as they are currently interpreted by the Internal Revenue Service (the "IRS"). No representation is made as to the likelihood of continuation of the present Federal income tax laws or of the current interpretations by the IRS.
- Tax Status of the Policy
To qualify as a life insurance contract for federal income tax purposes, the Policy must meet the definition of a life insurance contract which is set forth in Section 7702 of the Internal Revenue Code. The manner in which Section 7702 should be applied to certain features of the Policy offered in this prospectus is not directly addressed by Section 7702 or any guidance issued to date under Section 7702. Nevertheless, EFILI believes that the Policy will meet the Section 7702 definition of a life insurance contract. In the absence of final regulations or other pertinent interpretations of Section 7702, however, there is necessarily some uncertainty as to whether a Policy will meet the statutory life insurance contract definition. If a Policy were determined not to be a life insurance contract for purposes of Section 7702, such contract would not provide most of the tax advantages normally provided by a life insurance contract.
If it is subsequently determined that a Policy does not satisfy Section 7702, we may take whatever steps are appropriate and reasonable to comply with Section 7702. For these reasons, we reserve the right to restrict Policy transactions as necessary to attempt to qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Internal Revenue Code requires that the investments of each subaccount of the separate account must be "adequately diversified" in accordance with Treasury regulations in order for the Policy to qualify as a life insurance contract under Section 7702 of the Internal Revenue Code (discussed above). The separate account, through the Funds, intends to comply with the diversification requirements prescribed in Treas. Reg. ยง 1.817-5, which affect how the Funds' assets are to be invested. EFILI believes that the separate account will thus meet the diversification requirement, and EFILI will monitor continued compliance with this requirement.
The IRS has stated in published rulings that a variable contract owner will be considered the owner of separate account assets if the Policy Owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets. In circumstances where the variable Policy Owner is considered the Owner of separate account assets, income and gain from the assets would be includable in the variable Policy Owner's gross income. The Treasury Department indicated in 1986 that, in regulations or revenue rulings under Section 817(d) (relating to the definition of a variable contract), it would provide guidance on the extent to which Policy Owners may direct their investments to particular subaccounts without being treated as Owners of the underlying shares. No such regulations or revenue rulings have been issued to date. It is possible that when regulations or rulings are issued, the Policies may need to be modified to comply with them.
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- IRC Qualification
For a Policy to be treated as a life insurance contract under the Internal Revenue Code, it must pass one of two tests - a Cash Value Accumulation Test or a guideline premium/cash value corridor test. At the time of issuance of the Policy, you choose which test you want to be applied. It may not be changed thereafter.
- Cash Value Accumulation Test (CVAT). Under the terms of the Policy, the Policy Account Value may not at any time exceed the net single premium cost (at any such time) for the benefits promised under the Policy. If the Insured under a Single Life Policy is 75 years old or more on the Policy Date, the CVAT will automatically apply.
- Guideline Premium Test (GPT). The Policy must at all times satisfy a guideline premium requirement and a cash value corridor requirement. Under the guideline premium requirement, the sum of the Premiums paid under the Policy may not at any time exceed the greater of the guideline single premium or the sum of the guideline level premiums, for the benefits promised under the Policy. Under the cash value corridor requirement, the Death Benefit at any time must be equal to or greater than the applicable percentage of Policy Account Value specified in the Code.
The CVAT does not limit the amount of Premiums that may be paid under the Policy. If you desire to pay Premiums in excess of those permitted under the GPT, you should consider electing to have your Policy qualify under the CVAT. However, any Premium that would increase the Net Amount at Risk is subject to evidence of insurability satisfactory to us. Required increases in the minimum Death Benefit due to growth in the Policy Account Value will generally be greater under the CVAT than under the GPT.
The GPT limits the amount of Premium that may be paid under the Policy. If you do not desire to pay Premiums in excess of those permitted under GPT limitations, you should consider electing to have your Policy qualify under the GPT.
The following discussion assumes that the Policy qualifies as a life insurance contract for Federal income tax purposes.
We believe that the Insurance Proceeds under the Policy will be excludable from the gross income of the Beneficiary and that you will not be taxed on increases in the Policy's Account Value during the life of the Insured, or in the case of Survivorship Life Policy, the life of the second of the two Insureds.
- Modified Endowment Contracts
The Internal Revenue Code establishes a class of life insurance contracts designated as "modified endowment contracts" ("MECs"), which applies to Policies entered into or materially changed after June 20, 1988.
Due to the Policy's flexibility, classification as a MEC will depend on the individual circumstances of each Policy. In general, a Policy will be a MEC if the accumulated Premiums paid at any time during the first seven Policy Years exceeds the sum of the net level premiums which would have been paid on or before such time if the Policy provided for paid-up future benefits after the payment of seven level annual Premiums. We have the right to limit or refund any Premium or portion of a Premium, or to request additional written instructions if, in our opinion, the Premium would cause your Policy to become a MEC.
All Policies that we issue to the same Owner during any calendar year, which are treated as MECs, are treated as one MEC for purposes of determining the amount includable in gross income under Section 72(e) of the Code.
The rules relating to whether a Policy will be treated as a MEC are complex and make it impracticable to adequately describe in the limited confines of this summary. Therefore, you may wish to consult with a competent adviser to determine whether a Policy transaction will cause the Policy to be treated as a MEC.
- Distributions from Policies Classified as Modified Endowment Contracts
Policies classified as a MEC will be subject to the following tax rules. First, all distributions, including distributions upon Surrender and Partial Withdrawals from such a Policy are treated as ordinary income subject to tax up to the amount equal to the excess (if any) of the Policy Account Value immediately before the distribution over the investment in the Policy (described below) at such time. Second, Loans taken from or secured by, such a Policy are treated as distributions from such a Policy and taxed accordingly. Past due Loan interest that is added to the Loan amount will be treated as a Loan. Third, a 10 percent additional income tax is imposed on the portion of any distribution from, or Loan taken from or secured by, such a Policy that is included in income except where the distribution or Loan is made on or after the owner attains age 59 1/2, is attributable to the Owner's becoming totally and permanently disabled, or is part of a series of substantially equal periodic payments for the life (or life expectancy) of the Owner or the joint lives (or joint life expectancies) of the Owner and the Owner's Beneficiary.
Once a Policy becomes a MEC, it is always treated as a MEC. MEC status may be particularly burdensome for Owners who intend to take Loans or Partial Withdrawals, such as employers that intend to fund employee benefits.
- Distributions from Policies Not Classified as Modified Endowment Contracts
Distributions from a Policy that is not a MEC, are generally treated as first recovering the investment in the Policy (described below) and then, only after the return of all such investment in the Policy, as distributing taxable income.
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Loans from, or secured by, a Policy that is not a MEC are not treated as distributions. Instead, such Loans are treated as indebtedness of the Owner.
Finally, neither distributions (including distributions upon Surrender) nor Loans from, or secured by, a Policy that is not a MEC are subject to the 10 percent additional tax.
- Policy Loan Interest
Generally, personal interest paid on a Loan under a Policy which is owned by an individual is not deductible. In addition, interest on any Loan under a Policy owned by a taxpayer and covering the life of any individual will generally not be tax deductible. The deduction of interest on Policy Loans may also be subject to the restrictions of Section 264 of the Code. An Owner should consult a qualified tax adviser before deducting any interest paid in respect of a Policy Loan.
- Investment in the Policy
Investment in the Policy means: (i) the aggregate amount of any Premiums or other consideration paid for a Policy, minus (ii) the aggregate amount received under the Policy which is excluded from gross income of the Owner (except that the amount of any Loan from, or secured by, a Policy that is a MEC, to the extent such amount is excluded from gross income, will be disregarded), plus (iii) the amount of any Loan from, or secured by, a Policy that is a MEC to the extent that such amount is included in the gross income of the Owner.
- Policy Lapse
If a Policy lapses in part due to Loans or Partial Withdrawals taken by the Owner, then gains in the Policy may be immediately taxable.
- Other Tax Considerations
The tax consequences of continuing the Policy after the Extended Maturity date are not clear. Consult your qualified tax adviser if you intend to do so.
The transfer or assignment of the Policy or the designation of a Beneficiary may have Federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate and generation-skipping transfer taxes. For example, the transfer of the Policy to, or the designation as Beneficiary of, or the payment of proceeds to, a person who is assigned to a generation which is two or more generations below the generation of the Owner, may have generation skipping transfer tax considerations under Section 2601 of the Code.
The individual situation of each Owner or Beneficiary will determine the extent, if any, to which Federal, state and local transfer taxes may be imposed. Consult with your qualified tax adviser for specific information in connection with these taxes.
No litigation is pending that would have a material effect on us or the Variable Account.
Our financial statements appear in the SAI.
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Application: A form or set of forms that must be completed and signed by a prospective Owner and each Insured before we can issue a Policy.
Beneficiary: The person or persons designated in the Application or the most recent Beneficiary designation in our files, to whom Insurance Proceeds are paid.
Cash Surrender Value: The Policy Account Value (the total value of your accounts in the Investment Options, in the Fixed Account, and the Loan Collateral Account), less any Loan Balance (which includes accrued interest).
Cash Value Accumulation Test: One of two tests prescribed in Section 7702 of the Internal Revenue Code that defines whether an insurance contract qualifies to be treated as a life insurance policy for Federal tax purposes. Both this test and the Guideline Premium Test establish requirements for how much the Death Benefit amount must exceed the Policy Account Value through the life of the Policy. See the SAI and your Policy for more information.
Conditional Receipt: A receipt evidencing our receipt of a Premium payment before we issue a Single Life Policy. A Conditional Receipt is not an insurance Policy.
Cost of Insurance: A monthly charge we assess to compensate us for underwriting the Death Benefit. It is the product of your Policy's Cost of Insurance Rate times its Net Amount at Risk on your Policy's monthly Policy Processing Day. It varies from Policy to Policy and from month to month. Your Policy Schedule indicates the guaranteed Cost of Insurance Rates applicable to your Policy.
Cost of Insurance Rate: This rate is used to calculate the monthly Cost of Insurance charge. It depends on a number of factors that are unique to your Policy, including each Insured's Issue Age, sex and Underwriting Class, as well as the Policy Year and, for a Single Life Policy, the Face Amount.
Death Benefit: The gross amount, before deduction of Loan Balances and outstanding charges, that we agree to pay the Beneficiary upon receipt of proof of the death of the Insured in a Single Life Policy, or the death of last surviving Insured in a Survivorship Life Policy. The Death Benefit is based upon your choice of Death Benefit Option A or B, your choice of Face Amount and in some cases on the Policy Account Value and choice of tax test.
Default: A Policy goes into Default if its Cash Surrender Value is too low to pay the Monthly Deduction amount and if the No-Lapse Guarantee no longer applies. Following a Default, the Owner has a 61-day Grace Period in which to make a Premium payment sufficient to cure the Default.
EFILI ("we"): Empire Fidelity Investments Life Insurance Company, the issuer of the Policy.
EFT: Electronic Funds Transfer. You can make Premium payments by authorizing us to automatically deduct a specified amount monthly from your bank account.
Exchange: A transaction in which amounts allocated to one Investment Option and/or the Fixed Account are redeemed and invested in a different Investment Option and/or the Fixed Account, at the Owner's request.
Extended Maturity: The period after the Policy Anniversary nearest the Insured's 100th birthday for a Single Life Policy, and after the Policy Anniversary nearest the 100th anniversary of the younger Insured's date of birth, even if the younger Insured is not the surviving Insured, for a Survivorship Life Policy. During Extended Maturity, the Death Benefit is changed to equal the Policy Account Value and we do not assess Monthly Deductions. This feature does not apply in Florida. See "Extended Maturity - Florida Residents" for more information.
Face Amount: The dollar amount of insurance selected by the Owner. The Face Amount is a factor in determining the Death Benefit and certain charges.
Fixed Account: A part of our general account. You may allocate a portion of your Net Premium payments or a portion of your Policy Account Value to the Fixed Account. Amounts allocated to the Fixed Account do not fluctuate in value, and earn interest at rates that we declare from time to time. We guarantee that the declared rate will always be at least the guaranteed rate stated in your Policy Schedule.
Free Look Period: The period shown on your Policy's cover page during which you may examine and return the Policy to us at our Service Center and receive a refund.
Fund: A mutual fund in which an Investment Option invests. The Funds are named in this prospectus and described in detail in the Fund prospectuses.
Grace Period: A 61-day period after a Policy first goes into Default, after which the Policy will lapse if the Owner does not make a Premium payment sufficient to cure the Default.
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Guideline Premium Test: One of two tests prescribed in Section 7702 of the Internal Revenue Code that define whether an insurance contract qualifies to be treated as a life insurance Policy for Federal tax purposes. This test defines a limit on the Premiums you can pay into your Policy. Both this test and the Cash Value Accumulation Test establish requirements for how much the Death Benefit amount must exceed the Policy Account Value through the life of the Policy. See the SAI and your Policy for more information.
Home Office: Empire Fidelity Investments Life Insurance Company, 200 Liberty Street, One World Financial Center, New York, NY 10281. For information or transactions regarding your Policy, please contact our Service Center.
Insurance Proceeds: The amount we pay to the Beneficiaries or other persons after we receive satisfactory proof of death of the Insured on a Single Life Policy or both Insureds on a Survivorship Life Policy. It is calculated as the Death Benefit, less any Loan Balance and unpaid Monthly Deductions. Any Rider benefits will be determined and paid in accordance with the terms of the applicable Rider.
Insured: A person whose life is insured by the Policy. In the case of a Single Life Policy, there will be only one Insured. In the case of a Survivorship Life Policy, there will be two Insureds and the Insurance Proceeds will be paid only upon the death of the second Insured to die.
Internal Revenue Code: The U.S. Internal Revenue Code of 1986, as amended.
Investment Option: A subaccount of our Variable Account, which invests all of its net assets in a specific Fund. You may allocate Premium payments into one or more Investment Options, and the value of the amount allocated will change daily with the Fund's investment performance.
Issue Age: The Insured's age on the Insured's birthday nearest the Policy Date.
Issue Date: The date we produce your Policy. It will be stated on your Policy.
Lapse: The termination of a Policy without value. If a Policy goes into Default, because the Cash Surrender Value is too low to cover monthly charges and the No-Lapse Guarantee no longer applies, it will Lapse at the end of a 61-day Grace Period unless the Owner makes a minimum Premium payment. You may reinstate a lapsed Policy, subject to certain conditions.
Loan: A transaction in which you borrow money from us, using the Policy as the only collateral. Interest charges and other terms and conditions are described under "Loans."
Loan Balance: The principal and accrued interest due under all Policy Loans you have taken, as reflected on our records.
Loan Collateral Account: The account to which we transfer funds, from the Investment Options and/or the Fixed Account, as collateral for a Policy Loan.
MEC: A modified endowment contract, as defined under the Internal Revenue Code.
Minimum Initial Premium: The minimum Premium payment needed in order for us to issue a Policy. Your Minimum Initial Premium amount will be at least: the Planned Annual Premium Payment if you have selected an annual payment schedule; one-half the Planned Annual Premium if you have selected a semi-annual payment schedule; or one-sixth of the Planned Annual Premium (two months' worth), if you have elected a monthly payment schedule using automatic electronic funds transfer (EFT).
Monthly Deduction: The amount we deduct from the Cash Surrender Value on each monthly Policy Processing Day. The Monthly Deduction includes the Cost of Insurance charge, the monthly Policy charge, the monthly unit charge for Survivorship Life Policies, and charges for any Riders.
Net Amount at Risk: The Death Benefit minus the Policy Account Value. This figure measures the insurance risk we bear, and is the basis for the Cost of Insurance charge.
Net Premium: The remaining Premium payment amount after we deduct state or local taxes.
No-Lapse Guarantee: A guarantee by us that, as long as your Policy satisfies the No-Lapse Guarantee Cumulative Premium Test as defined in the Policy (see "No-Lapse Guarantee"), the Policy will not Lapse during the No-Lapse Guarantee Period. The No-Lapse Guarantee Period for a Single Life Policy is the first ten (10) Policy Years, if the Issue Age of the Insured is 70 or less; or the first five (5) Policy Years, if the Issue Age of the Insured is 71 or more. The No-Lapse Guarantee Period for a Survivorship Life Policy is the first five (5) Policy Years.
Owner ("you"): The person who holds the rights and duties under the insurance Policy, including the right to designate the Beneficiaries, choose the Death Benefit and Riders, and the responsibility to make Premium payments. The Owner is the person with whom we, the insurance company, make the contract of insurance. A Policy may be jointly owned only by a married couple, or by two unmarried individuals to the extent state law requires recognition of their joint ownership.
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Partial Withdrawal: An Owner's withdrawal of a portion of the Cash Surrender Value.
Planned Annual Premium: An annual Premium amount stated in the Policy Schedule. The Owner is not required to make payments according to this plan to keep the Policy in force. However, a failure to make at least the Planned Annual Premium payments in a timely manner will result in the loss of the No-Lapse Guarantee.
Policy Account Value: The total value of your accounts in the Investment Options, in the Fixed Account, and the Loan Collateral Account. Policy Account Value is the starting point for calculating important values under the Policy, including the Death Benefit and Cash Surrender Value.
Policy Anniversary: The same day and month as the Policy Date in each later year.
Policy Date: The date insurance coverage becomes effective. It will be stated in your Policy Schedule.
Policy Processing Day: The day of each month when we deduct monthly charges from the Cash Surrender Value. It is the same day of every month as the Policy Date.
Policy Schedule: The portion of your Policy that sets forth information specific to your agreement with us, including the Insured(s), Face Amount, tax test and Death Benefit option.
Policy Year: A year that starts on the Policy Date or on a Policy Anniversary.
Premiums: Payments by the Owner to us in order to provide the Policy benefits and fund the Policy Account Value.
Rider: An extra benefit that you can choose to add to the Policy, generally for an additional cost. Each Rider has its own form, that describes its terms, conditions and benefits. If you purchase a Rider, the Rider form will be attached to your Policy.
SEC: The United States Securities and Exchange Commission.
Service Center: The office where we process Policy-related transactions, P.O. Box 724677, Atlanta, GA 31139. We may change this upon advance written notice to you.
Single Life Policy: The Lifetime Reserves Flexible Premium Variable Universal Life Policy offered by this prospectus.
State Tax Charge: A charge we assess on premiums we receive, to pay for applicable state Premium or other taxes.
Surrender: Termination of the Policy at the Owner's request.
Survivorship Life Policy: The Lifetime Reserves Flexible Premium Survivorship Variable Universal Life Policy offered by this prospectus.
Underwriting Class: The risk classification we assign to the Insured or Insureds, based on the Application form and evidence of insurability. The Underwriting Class is a principal factor in determining the Cost of Insurance Rate.
Valuation Day: Any day on which the Funds and Investment Options are priced, generally each day the New York Stock Exchange is open for trading.
Variable Account: Empire Fidelity Investments Variable Life Account A. The Variable Account holds all assets allocated by Owners to the Investment Options, and is maintained separately from our general account.
You: The owner of the Policy. See "Owner" above.
The Statement of Additional Information (SAI) includes additional information about the Variable Account. To request a free copy of the SAI, a free personalized Policy illustration of death benefits, cash surrender values, and cash values, or other information about the Policies, or to make Owner inquiries, please call toll-free 1-888-343-5433.
In addition, information about the Variable Account, including the SAI, can be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 202-942-8090. Reports and other information about the Variable 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 Public Reference Section of the SEC, 450 Fifth Street NW, Washington DC 20549-0102.
Investment Company Act of 1940 File no. 811-21604
EVUL-pro-0605
1.803603.100
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PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(DEPOSITOR)
EMPIRE FIDELITY INVESTMENTS VARIABLE LIFE ACCOUNT A
(REGISTRANT)
STATEMENT OF ADDITIONAL INFORMATION
<R>July 1, 2005</R>
<R>This Statement of Additional Information ("SAI") supplements the information found in the current prospectus for the variable universal life contract ("Contract") offered by Empire Fidelity Investments Life Insurance Company ("EFILI") through its Variable Life Account A (the "Variable Account"). You may obtain a copy of the Prospectus dated July 1, 2005 without charge by calling 1-888-343-5433.</R>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ TOGETHER WITH THE PROSPECTUS FOR THE CONTRACT.
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Table of Contents |
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SAI |
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General Information and History |
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Services |
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Underwriters |
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Performance Data |
2 |
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Independent Accountants |
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Financial Statements |
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Empire Fidelity Investments Life Insurance Company (enclosed) |
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EVUL-ptb-0605
1.803606.102
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
EFILI is a stock life insurance company organized in 1991 and existing under the laws of the State of New York. EFILI is part of Fidelity Investments, a group of companies that provides a variety of financial services and products. EFILI is a wholly-owned subsidiary of Fidelity Investments Life Insurance Company, which is in turn a wholly owned subsidiary of FMR Corp., the parent company of the Fidelity Investments companies. Edward C. Johnson 3d, the Johnson family members, and various key employees of FMR Corp. own the voting common stock of FMR Corp. EFILI's financial statements appear in the Statement of Additional Information. Our principal executive offices are located at 200 Liberty Street, One World Financial Center, New York, NY 10281.
THE VARIABLE ACCOUNT
Empire Fidelity Investments Variable Life Account A ("Variable Account") is a separate investment account of EFILI, and was established on July 25, 2002. It is used to support the variable universal life policy described herein. The Variable Account is registered with the Securities and Exchange Commission ("SEC") as a unit investment trust under the Investment Company Act of 1940, as amended ("1940 Act").
McCamish Systems, LLC, 6425 Powers Ferry Road, 3rd floor, Atlanta, GA, 30339, provides administrative services to EFILI related to Policy application processing, production of Policy documents, administration of Policy transactions, maintenance of Policy files, production of periodic reports, and Variable Account administration.
PricewaterhouseCoopers LLP, is the Variable Account's independent registered public accounting firm. Its business office is located at 125 High Street, Boston, Massachusetts 02110.
The assets of the Variable Account are held by EFILI. The assets of the Variable Account are held apart from our general account assets and any other separate accounts we may establish. We maintain records of all purchases and redemptions of the shares of the Funds held by the variable Subaccounts. We maintain fidelity bond coverage for the acts of our officers and employees.
Fidelity Brokerage Services LLC ("FBS") and Fidelity Insurance Agency, Inc. ("FIA") distribute the Contracts through a continuous offering. FBS is the principal underwriter. Both FBS and FIA are affiliates of us and of FMR Corp., our parent company. Fidelity Distributors Corporation ("FDC") is the distributor of the Fidelity family of funds, including the Fidelity Funds. The principal business address of FBS and FDC is 82 Devonshire Street, Boston, Massachusetts 02109.
We pay FIA first year sales compensation of not more than 35% of first year premium, up to planned premium, plus 3% of the excess of first year premium over planned premium.
No underwriting commissions have been paid to or retained by the principal underwriter related to sales of contracts of the Registrant (Fidelity Investments Life Account A).
The financial statements of the Company as of December 31, 2004 and 2003 and for each of the three years in the period ended December 31, 2004, included in this Statement of Additional Information constituting part of this Registration Statement, have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The principal business address for PricewaterhouseCoopers LLP is 125 High Street, Boston, Massachusetts 02110
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
FINANCIAL STATEMENTS
for the years ended December 31, 2004, 2003 and 2002
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Page(s) |
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Report of Independent Auditors |
1 |
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Balance Sheets |
2 |
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Statements of Income and Comprehensive Income |
3 |
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Statements of Stockholder's Equity |
4 |
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Statements of Cash Flows |
5 |
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Notes to Financial Statements |
6-23 |
Report of Independent Auditors
To the Board of Directors and Stockholder of
Empire Fidelity Investments Life Insurance Company:
In our opinion, the accompanying balance sheets and the related statements of income and comprehensive income, of stockholder's equity and of cash flows present fairly, in all material respects, the financial position of Empire Fidelity Investments Life Insurance Company (the "Company", a wholly-owned ultimate subsidiary of FMR Corp.) at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Notes 2 and 3 to the financial statements, the Company changed its method of accounting for certain nontraditional long-duration contracts in 2004.
/s/ PricewaterhouseCoopers LLP
March 25, 2005
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EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY |
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(A Wholly-Owned Ultimate Subsidiary of FMR Corp.) |
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BALANCE SHEETS |
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(in thousands, except share data) |
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December 31, 2004 and 2003 |
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ASSETS |
2003 |
2002 |
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Investments: |
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Debt securities, available for sale, at fair value |
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$ 77,221 |
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$ 76,911 |
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Total investments |
77,221 |
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76,911 |
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Cash and cash equivalents |
1,587 |
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1,185 |
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Accrued investment income |
1,347 |
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1,315 |
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Deferred policy acquisition costs |
28,386 |
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28,413 |
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Reinsurance deposit and receivables |
63,804 |
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46,947 |
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Other assets |
295 |
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153 |
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Separate account assets |
1,058,075 |
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1,013,577 |
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Total assets |
$ 1,230,715 |
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$ 1,168,501 |
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LIABILITIES |
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Future contract and policy benefits |
$ 54,055 |
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$ 42,086 |
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Contractholder deposit funds |
49,311 |
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46,518 |
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Deferred tax liability |
6,589 |
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7,064 |
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Payable to parent and affiliates |
138 |
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738 |
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Income taxes payable |
71 |
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288 |
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Other liabilities and accrued expenses |
469 |
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375 |
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Separate account liabilities |
1,058,075 |
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1,013,577 |
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Total liabilities |
1,168,708 |
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1,110,646 |
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Commitments and contingencies (Note 11) |
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STOCKHOLDER'S EQUITY |
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Common stock, par value $10 per share - 200,000 shares authorized, issued and outstanding |
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2,000 |
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2,000 |
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Additional paid-in capital |
13,500 |
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13,500 |
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Accumulated other comprehensive income |
1,032 |
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1,767 |
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Retained earnings |
45,475 |
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40,588 |
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Total stockholder's equity |
62,007 |
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57,855 |
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Total liabilities and stockholder's equity |
$ 1,230,715 |
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$ 1,168,501 |
The accompanying notes are an integral part of the consolidated financial statements.
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EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY |
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(A Wholly-Owned Ultimate Subsidiary of FMR Corp.) |
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STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
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(in thousands) |
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for the years ended December 31, 2004, 2003 and 2002 |
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2004 |
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2003 |
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2002 |
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Revenues: |
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Fees charged to contractholders |
$ 8,507 |
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$ 7,726 |
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$ 8,492 |
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Net investment income |
2,851 |
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2,854 |
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2,387 |
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Interest on reinsurance deposit |
2,776 |
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2,275 |
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1,089 |
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Fund administration fees |
327 |
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344 |
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420 |
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Net realized investment gains (losses) |
304 |
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506 |
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(2) |
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Premiums |
799 |
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693 |
|
553 |
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Total Revenue |
15,564 |
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14,398 |
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12,939 |
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Benefits and expenses: |
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Underwriting, acquisition and insurance expenses (1) |
5,054 |
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3,774 |
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4,820 |
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Contract and policy benefits and expenses |
4,054 |
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3,914 |
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2,848 |
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Total benefits and expenses |
9,108 |
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7,688 |
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7,668 |
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Income before income taxes |
6,456 |
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6,710 |
|
5,271 |
|
|
|
|
|
|
|
|
Income tax expense |
1,592 |
|
1,215 |
|
2,119 |
|
|
|
|
|
|
|
|
Income before cumulative effect of change in |
4,864 |
|
5,495 |
|
3,152 |
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting
principle |
23 |
|
-- |
|
-- |
|
|
|
||||
|
|
|
|
|
|
|
|
Net income |
4,887 |
|
5,495 |
|
3,152 |
|
|
|
|
|
|
|
|
Other comprehensive income, before tax: |
|
|
|
|
|
|
Unrealized (losses) gains on securities: |
|
|
|
|
|
|
Net unrealized holding (losses) gains during the period |
(829) |
|
378 |
|
1,853 |
|
Reclassification adjustment for net realized
(gains) |
|
|
|
|
|
|
(304) |
|
(506) |
|
2 |
|
|
Benefit (provision) for income taxes related to items of other comprehensive income |
|
|
|
|
|
|
398 |
|
192 |
|
(797) |
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax |
(735) |
|
64 |
|
1,058 |
|
|
|
|
|
|
|
|
Comprehensive income |
$ 4,152 |
|
$ 5,559 |
|
$ 4,210 |
|
|
|
|
|
|
|
|
(1) Includes affiliated party transactions (Note 8) |
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
|
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY |
|||||
|
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.) |
|||||
|
|
|
|
|
|
|
|
STATEMENTS OF STOCKHOLDER'S EQUITY |
|||||
|
(in thousands) |
|||||
|
|
|
|
|
|
|
|
for the years ended December 31, 2004, 2003 and 2002 |
|||||
|
|
|||||
|
|
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income |
Retained Earnings |
Total Stockholder's Equity |
|
Balance at December 31, 2001 |
$ 2,000 |
$ 13,500 |
$ 645 |
$ 31,941 |
$ 48,086 |
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
Net income |
-- |
-- |
-- |
3,152 |
3,152 |
|
Other comprehensive income |
-- |
-- |
1,058 |
-- |
1,058 |
|
|
|
|
|
|
|
|
Balance at December 31, 2002 |
2,000 |
13,500 |
1,703 |
35,093 |
52,296 |
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
Net income |
-- |
-- |
-- |
5,495 |
5,495 |
|
Other comprehensive income |
-- |
-- |
64 |
-- |
64 |
|
|
|
|
|
|
|
|
Balance at December 31, 2003 |
2,000 |
13,500 |
1,767 |
40,588 |
57,855 |
|
|
|
|
|
|
|
|
Comprehensive income: |
|
|
|
|
|
|
Net income |
-- |
-- |
-- |
4,887 |
4,887 |
|
Other comprehensive income |
-- |
-- |
(735) |
-- |
(735) |
|
|
|
|
|
|
|
|
Balance at December 31, 2004 |
$ 2,000 |
$ 13,500 |
$ 1,032 |
$ 45,475 |
$ 62,007 |
The accompanying notes are an integral part of the consolidated financial statements.
|
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY |
|||
|
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.) |
|||
|
|
|
|
|
|
STATEMENTS OF CASH FLOWS |
|||
|
(in thousands) |
|||
|
|
|
|
|
|
for the years ended December 31, 2004, 2003 and 2002 |
|||
|
|
|
|
|
|
|
2004 |
2003 |
2002 |
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
Net income |
$ 4,887 |
$ 5,495 |
$ 3,152 |
|
Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
|
|
|
|
Amortization and depreciation |
917 |
743 |
354 |
|
Net realized investment (gains) losses |
(304) |
(506) |
2 |
|
Cumulative effect of change in accounting principle |
(23) |
-- |
-- |
|
(Benefit) provision for deferred taxes |
(91) |
(715) |
1,635 |
|
Change in deferred policy acquisition
costs, net of |
443 |
(1,818) |
(747) |
|
Payments to reinsurers, net |
(12,676) |
(9,563) |
(31,129) |
|
Change in assets and liabilities: |
|
|
|
|
Accrued investment income |
(32) |
(149) |
(386) |
|
Future contract and policy benefits, net |
14,211 |
2,618 |
819 |
|
(Payable to) receivable from parent and affiliates, net |
(600) |
209 |
(142) |
|
Income taxes |
(217) |
758 |
(847) |
|
Other assets and other liabilities, net |
(59) |
(1,095) |
1,133 |
|
|
|
|
|
|
Net cash provided by (used for) operating activities |
6,456 |
(4,023) |
(26,156) |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Purchase of debt securities |
(21,205) |
(31,474) |
(31,982) |
|
Proceeds from sales of debt securities |
16,101 |
15,488 |
7,789 |
|
Proceeds from maturities and calls of debt securities |
2,690 |
4,220 |
3,320 |
|
Capital expenditures |
-- |
-- |
(33) |
|
|
|
|
|
|
Net cash used for investing activities |
(2,414) |
(11,766) |
(20,906) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Deposits credited to variable annuity contracts |
41,205 |
57,003 |
74,734 |
|
Deposits credited to fixed annuity contracts |
4,707 |
11,903 |
17,226 |
|
Net transfers from separate account |
40,106 |
43,311 |
100,698 |
|
Withdrawals from variable annuity contracts |
(85,416) |
(94,112) |
(145,032) |
|
Withdrawals from fixed annuity contracts |
(4,242) |
(2,668) |
(674) |
|
|
|
|
|
|
Net cash (used for) provided by financing activities |
(3,640) |
15,437 |
46,952 |
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
402 |
(352) |
(110) |
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
Beginning of year |
1,185 |
1,537 |
1,647 |
|
|
|
|
|
|
End of year |
$ 1,587 |
$ 1,185 |
$ 1,537 |
The accompanying notes are an integral part of the consolidated financial statements.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS
1. Organization and Nature of Business:
Empire Fidelity Investments Life Insurance Company (the "Company") is a wholly-owned subsidiary of Fidelity Investments Life Insurance Company (FILI), which is a wholly-owned subsidiary of FMR Corp. The Company operates exclusively in the State of New York.
The Company issues variable deferred and immediate annuity contracts. Amounts invested in the fixed option of the contracts are allocated to the general account of the Company. Amounts invested in the variable option of the contracts are allocated to the Variable Annuity Account A, which is a separate account of the Company. The assets of the Variable Annuity Account A are invested in certain portfolios of the Fidelity Variable Insurance Products Fund, the Fidelity Variable Insurance Products Fund II, the Fidelity Variable Insurance Products Fund III, the Fidelity Variable Insurance Products Fund IV, the Universal Institutional Funds, the PBHG Insurance Series Funds, the Strong Variable Insurance Funds and the Credit Suisse Trust Funds, which are reported at the net asset value of such portfolios. Effective January 9, 2004, the Company closed the PBHG Insurance Series Funds and the Strong Variable Insurance Funds to new money.
The Company offers a term life insurance product with level premium paying periods of five, ten, fifteen and twenty years and a fixed immediate annuity product with guaranteed income for life or period certain.
2. Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying financial statements of the Company have been prepared on the basis of accounting principles generally accepted in the United States of America (GAAP).
The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the related amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Investments
Investments in debt securities are classified as available-for-sale and are reported at fair value. Fair values are derived from external market quotations. Debt securities that experience declines in fair value that are other than temporary are considered impaired and are written down to fair value with a corresponding charge to net income. Factors considered in evaluating whether a decline in fair value is other than temporary are whether the decline is substantial, the duration in which the market value has been less than cost, the Company's ability and intent to retain the investment for a period of time sufficient to allow for the anticipated recovery in value, and the financial condition and near-term prospects of the issuer. Unrealized gains or losses on debt securities are reported as a component of
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Summary of Significant Accounting Policies (continued):
other comprehensive income, net of income taxes. The discount or premium on debt securities, excluding loan-backed bonds and structured securities, is amortized using the effective interest method. Prepayment assumptions for loan-backed bonds and structured securities were obtained from broker-dealer survey values. Amortization of loan-backed bonds and structured securities includes anticipated prepayments over the estimated economic life of the security. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments and any resulting adjustment is included in investment income. Such amortization is included in investment income.
Investment income is recognized on the accrual basis. Debt securities that are delinquent are placed on a non-accrual status, and thereafter interest income is recognized when cash payments are received. Realized gains or losses on investments sold are determined by the specific identification method.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity date of three months or less to be cash equivalents. Cash and cash equivalents represent amounts in demand deposit accounts and money market mutual funds and are reported at fair value. Money market mutual funds used to hold cash prior to reinvestment and to meet operating cash requirements were $1,573,000 and $989,000 at December 31, 2004 and 2003, respectively.
Separate Accounts
Separate account assets represent funds held for the exclusive benefit of variable annuity contractholders and are reported at fair value. Since the contractholders receive the full benefit and bear the full risk of the separate account investments, which are comprised of mutual funds, the income and realized and unrealized gains and losses from such investments are offset by an increase or decrease in the amount of liabilities related to the separate account.
Revenue Recognition
Fees charged to contractholders include mortality and expense risk, and administrative charges for variable annuity contractholders. Fund administration fees represent administration fees charged to investment managers. Premiums for term life insurance products are recognized as revenue over the premium-paying period. Interest accretion on the reinsurance deposit related to the fixed income annuity product and the fixed portion of the variable income annuity product is recognized over the remaining term of the underlying contracts.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Summary of Significant Accounting Policies (continued):
Future Contract and Policy Benefits
Future contract and policy benefits include liabilities for the fixed portion of the variable annuity products, variable annuity products with a guaranteed minimum death benefit (GMDB) feature (see Note 3 - Adoption of Statement of Position 03-01), the life contingent fixed income annuity product and life products. Such liabilities are established in amounts adequate to meet the estimated future obligations of policies in force.
Future contract benefits for the variable and fixed annuity products are computed using interest rates ranging from 1% to 7.25% and estimates for mortality. For policies issued in 2003 and prior, the fixed income annuity product is accounted for as contractholder deposits, recognizing the immateriality of the life contingent contracts. The liabilities for future policy benefits for traditional life insurance products are computed using the net level premium reserve method and are based upon estimates as to future investment yield, mortality and withdrawals that include provisions for adverse deviation.
Contractholder Deposit Funds
Contractholder deposit funds consist of annuity deposits received from customers for the fixed income annuity product with no life contingencies and for the fixed portion of the variable income annuity product with minimal life contingencies. Liabilities are equal to the accumulated policy values, which consists of an accumulation of deposit payments plus credited interest, less withdrawals and amounts assessed through the end of the period.
Reinsurance Deposit and Receivables
The Company reinsures certain of its life insurance and annuity product risk with other companies. As a result, when the Company records liabilities that are subject to reinsurance, reinsurance deposits and receivables are recorded. The Company remains contingently liable for claims reinsured. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from similar activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.
Deferred Policy Acquisition Costs
The costs that vary with and are primarily associated with acquiring new and renewal business have been deferred. The costs consist principally of first-year commissions paid to Fidelity Insurance Agency, Inc. in accordance with contractual agreements as described in Note 8 - "Affiliated Company Transactions", and certain insurance expenses for traditional life policy issue and underwriting. These deferred policy acquisition costs ("DAC") are being amortized over the life time of the policy generally estimated as the level term period for the term life insurance product, a 20-year period for the deferred annuity product, and a 30-year period for the variable immediate annuity product.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Summary of Significant Accounting Policies (continued):
The amortization process requires the use of various assumptions, estimates and judgment about the future. The primary assumptions are expenses, investment performance, mortality, and contract cancellations (i.e. lapses, withdrawals and surrenders). These assumptions are reviewed on a regular basis and are generally based on EFILI's past experience, industry studies, and judgments about the future. Finally, analyses are performed periodically to assess whether there are sufficient gross margin or gross profits to amortize the remaining DAC balances.
A significant assumption for the projection of estimated gross profits is the investment return on Separate Account fund balances. The Company assumes a long term return of 9% before fund expenses and other charges. The Company also applies a "Reversion to the Mean" assumption in setting the projected return for the next seven years. The projected return is developed such that the combination of actual and projected return equals the long term return. The Company limits the projected return to no greater than 13% (before fund expenses and other charges) and no less than approximately 5% (before fund expenses and other charges).
DAC for certain products is adjusted for the impact of unrealized gains and losses on investments as if the gains and losses have been realized with a corresponding credit or charge to accumulated other comprehensive income, net of income taxes.
Property and Equipment
Property, equipment, leasehold improvements and computer software are stated at cost less accumulated depreciation or amortization. Depreciation or amortization is provided using the straight-line method over the estimated useful lives of the assets ranging from 3 years to 10 years.
Income Taxes
The Company files a consolidated federal income tax return with FILI. Under a tax sharing agreement, each company is charged or credited its share of taxes as determined on a separate company basis. Tax benefits are credited with respect to taxable losses to the extent such losses are utilized by the consolidated group. Intercompany tax balances are settled within 30 days of the actual tax payment.
The liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the current enacted tax rates.
New Accounting Pronouncements
In July 2003, the American Institute of Certified Public Accountants issued Statement of Position 03-01, "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts" ("SOP 03-01"). SOP 03-01 provides guidance on accounting and reporting by insurance enterprises for certain nontraditional long-duration contracts
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Summary of Significant Accounting Policies (continued):
and for separate accounts. SOP 03-01 is effective for fiscal years beginning after December 15, 2003. The SOP requires the establishment of a liability for contracts that contain death or other insurance benefits using a specified reserve methodology that is different from the methodology that the Company had previously used. The Company adopted SOP 03-01 as of January 1, 2004 and recorded a cumulative effect of a change in accounting principle of $35,000 in the statements of income and comprehensive income.
In March 2004, the Financial Accounting Standards Board's ("FASB") Emerging Issues Task Force reached a consensus regarding the application of guidance for the evaluation of whether an investment is other than temporarily impaired under the requirements of EITF Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its Applications to Certain Investments" ("EITF No. 03-1"). During September 2004, the FASB delayed the effective date for the measurement and recognition guidance under EITF No. 03-1. However, the disclosure requirements, which were effective for fiscal years ending after December 15, 2003, were not deferred. EITF No. 03-1 describes certain quantitative and qualitative disclosures that are required for marketable equity securities covered by Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities" including the aggregate amount of unrealized losses and the aggregate related fair value of investments with unrealized losses, by investment type, as well as the nature of the investment(s), cause of impairment, number of positions held, severity and duration of the impairment. The Company implemented the disclosures required by EITF No. 03-1 beginning with the year ended December 31, 2003.
In December 2003, the FASB issued FASB Interpretation No. 46 (Revised December 2003), "Consolidation of Variable Interest Entities." This standard does not impact the Company's results of operations or financial position.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". This standard does not impact the Company's results of operations or financial position.
Certain prior year balances have been reclassified to conform to the current year presentation.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. Summary of Significant Accounting Policies (continued):
Effective January 1, 2004, the Company adopted SOP 03-01 (see Note 2 - New Accounting Pronouncements) and recorded a cumulative effect of a change in accounting principle of $23,000, net of income taxes. In 2003 and prior, the Company carried a GMDB reserve. Upon adoption, the Company increased its GMDB reserve as SOP 03-01 required the used of a specified reserve methodology which is different than the methodology previously used by the Company.
The following illustrates the components of the benefit (in thousands):
|
Increase in guaranteed minimum death benefit liability |
$ (10) |
|
Change in deferred acquisition cost |
45 |
|
|
35 |
|
|
|
|
Provision for income taxes |
12 |
|
|
|
|
Cumulative effect of change in accounting principle |
$ 23 |
Guaranteed Minimum Death Benefits
The Company issues variable annuity contracts with a GMDB feature. The GMDB feature provides annuity contract holders with a default guarantee that the benefit received at death will be no less than a prescribed minimum amount. Upon death of the annuitant prior to age 85, the death benefit is the greater of the contract value and total premiums, adjusted for withdrawals. For an additional charge, the death benefit is the greater of the default guaranteed death benefit and the highest contract value as of any prior anniversary, prior to age 80, adjusted for any additional payments or withdrawals. The optional rider is no longer offered to new customers, effective January 1, 2003. If the GMDB is higher than the current account value at the time of death, the Company incurs a cost equal to the difference.
The following summarizes the liability for GMDB contracts reflected in the general account in thousands:
|
Balance at January 1, 2004 |
$ 1,288 |
|
Unlocking of benefit ratio |
(105) |
|
Interest on reserve |
76 |
|
Claims paid |
(518) |
|
Accrual of benefit ratio |
309 |
|
Reserves on new issues |
1 |
|
|
|
|
Balance at December 31, 2004 |
$ 1,051 |
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. Adoption of Statement of Position 03-01 (continued):
The reinsurance recoverables associated with GMDB were $961,000 and $1,155,000 at December 31, 2004 and Janauary 1, 2004, respectively.
The following information relates to the reserving methodology and assumptions for developing the GMDB policy benefit liability, which the Company began utilizing upon adoption of SOP 03-01.
* The projection model uses 100 pairs of stochastically generated market return scenarios.
* The mean investment performance assumptions, prior to the consideration of mortality and expense fees, vary from 3.8-11% depending on the underlying fund type.
* The DAC model employs a mean reversion algorithm that looks back to the later of the original issue date or 1997 and compares historical fund returns to the Company's long term estimate.
* The volatility assumption is 20% for equity funds; 8.7% for bond funds; and 0% for money market funds.
* The mortality assumption is 65% of the 1994 Variable Annuity MGDB Mortality Table.
* The lapse rate and partial withdrawal assumptions vary from 2-7% and 1-3%, respectively, depending on contract type and policy duration.
* The discount rate is 6.83%.
The table below represents the account value, net amount at risk and average attained age of underlying contract holders for guarantees in the event of death as of December 31, 2004 and December 31, 2003. The net amount at risk is the death benefit coverage in force or the amount that the Company would have to pay if all contractholders had died as of the specified date, and represents the excess of the guaranteed benefit over the fair value of the underlying investments.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Investments:
The components of net investment income were as follows:
Gross realized gains and losses from the voluntary sales of debt securities were as follows:
There were no realized investment losses as a result of other than temporary impairments for 2004, 2003, and 2002, respectively. There were no debt securities that were non-income producing at December 31, 2004, 2003 and 2002, respectively.
Net unrealized investment gains (losses) on available-for-sale securities carried at fair value, and the related impact on DAC and deferred income taxes as of December 31, were as follows:
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Investments (continued):
Debt securities that have been in a continuous unrealized loss position as of December 31, 2003 were as follows:
The Company evaluates declines in fair values below cost for its investments. Based on the Company's review of the issuers' compliance with the securities' obligations in accordance with their contractual terms, management's intent and ability to hold these securities for a period of time sufficient to allow for any anticipated recovery in market value, as well as the evaluation of the fundamentals of the issuers' financial condition and other objective evidence, the Company believes that declines in the fair values of the securities above were temporary as of December 31, 2004 and 2003.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Investments (continued):
The amortized cost and fair value of debt securities, by type of issuer, were as follows:
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. Investments (continued):
The amortized cost and fair value of debt securities at December 31, 2004, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
At December 31, 2004, and 2003, there were no contractual investment commitments. There are no significant concentrations of debt securities by issuer or by industry, other than U.S. Government corporations and agency securities.
At December 31, 2004, the amortized cost and fair value of a U.S. Treasury security on deposit with the state of New York was $417,000 and $424,000, respectively. At December 31, 2003, the amortized cost and fair value of a U.S. Treasury security on deposit with the state of New York was $402,000 and $448,000, respectively.
5. Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value information about certain financial instruments (insurance contracts, real estate, goodwill and taxes are excluded) for which it is practicable to estimate such values, whether or not these instruments are included in the balance sheet. The fair values presented for certain financial instruments are estimates, which, in many cases, may differ from the amounts which could be realized upon immediate liquidation.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. Fair Value of Financial Instruments (continued):
The estimated carrying amounts and fair values of the financial instruments were as follows:
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
Reinsurance Deposit and Receivables
Fair values for the Company's reinsurance deposits for the fixed portion of the variable annuity contracts in payout and the fixed immediate annuity contracts are estimated using discounted cash flow calculations based on expected current offering interest rates versus contract rates.
Future Contract and Policy Benefits and Contractholder Deposit Funds
Fair values for the Company's liabilities for the fixed portion of the variable annuity contracts in payout and the fixed immediate annuity contracts are estimated using discounted cash flow calculations based on expected current offering interest rates versus contract rates.
Separate Accounts
Assets held in separate accounts are reported in the accompanying balance sheets at fair value. The related liabilities are also reported at fair value in amounts equal to the separate account assets.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. Income Taxes:
The components of the provision for income taxes attributable to operations were as follows:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Life insurance corporations in New York remain subject to the franchise tax. However, for tax years beginning on or after January 1, 2003, in no event may the franchise tax on life insurance corporations, computed prior to the application of tax credits, be less than 1.5% of premiums or more than 2.0% of premiums. Accordingly, state deferred taxes are no longer recorded, as the Company believes that the reversal of temporary differences will have no impact on the state income tax that the Company will pay in the future.
Significant components of the Company's net deferred tax liability were as follows:
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. Income Taxes (continued):
The statute of limitations on the Company's federal income tax returns is open for the taxable years ended December 31, 2003 and thereafter. In management's opinion, adequate tax liabilities have been established for all open years.
Income taxes were 24.7%, 18.1%, and 40.2% of pretax earnings in 2004, 2003 and 2002 respectively. The effective tax rates differed from the federal statutory income tax rate of 35% primarily due to dividends received deductions, foreign tax credits and state taxes.
The Company paid FILI federal and state income taxes of $1,900,000, $1,172,000 and $1,331,000 in 2004, 2003 and 2002, respectively, related to the Company's separate-company basis net operating results for the year. Intercompany tax balances are settled within 30 days of the actual tax payments.
7. Stockholder's Equity and Dividend Restrictions:
Generally, the net assets of the Company available for transfer to FILI are limited to the excess of the Company's net assets, as determined in accordance with statutory accounting practices, over minimum statutory capital requirements; however, payments of such amounts as dividends may be subject to approval by regulatory authorities. Under the Insurance Code of the State of New York, dividends to shareholders are limited to the lesser of the Company's net gain from operations for the year ended on the preceding December 31, or 10% of the Company's surplus held for policyholders as of the preceding December 31, not including realized capital gains. The Superintendent of Insurance must be notified 30 days prior to any declaration of the dividend. No dividends have been paid or declared during 2004, 2003 and 2002, respectively.
The Company prepares its statutory financial statements in accordance with accounting practices prescribed or permitted by the New York State Insurance Department which vary with GAAP in certain respects. Prescribed statutory accounting practices include publications of the National Association of Insurance Commissioners as well as state laws, regulations and general administrative rules. The principal differences with GAAP are that statutory financial statements do not reflect DAC; deferred income taxes are limited; bonds are generally carried at amortized cost; insurance liabilities are presented net of reinsurance assets and future policy benefit liabilities are estimated using different actuarial assumptions. The Company does not rely on the use of any permitted statutory accounting practices.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. Stockholder's Equity and Dividend Restrictions (continued):
Net income and capital stock and surplus as determined in accordance with statutory accounting practices were as follows:
In the New York State Insurance Department First Amendment to Regulation 172, as of January 1, 2002, the State of New York allows the recognition of gross deferred tax assets as admitted assets by insurance companies domiciled in the state of New York. The effect of adoption of the amendment on the Company's statutory surplus was an increase of approximately $609,000 as of January 1, 2002, the result of recording a deferred tax asset.
8. Affiliated Company Transactions:
The Company's insurance contracts are distributed through Fidelity Brokerage Services LLC, Fidelity Insurance Agency, Inc. (FIA), and Fidelity Investments Institutional Services Company, Inc., all of which are affiliated with FMR Corp. The Company has an agreement with FIA under which the Company pays FIA sales compensation of 3% of annuity payments received for its variable deferred and immediate annuity contracts. The Company pays FIA 37.5% of term life insurance first-year premiums. The Company also pays FIA 2.5% of the annuity payments received for its fixed immediate annuity. The Company compensated FIA in the amount of $1,748,000, $2,119,000 and $2,691,000 in 2004, 2003 and 2002, respectively.
The Company has administrative services agreements with FILI and FMR Corp. and its subsidiaries whereby certain administrative and special services are provided for the Company. The Company paid FILI and FMR Corp. and its subsidiaries $2,180,000, $2,230,000 and $2,140,000 in 2004, 2003 and 2002, respectively, for such services. The Company has an agreement with Fidelity Management Trust Company (FMTC) under which FMTC provides investment management and advisory services to the Company. The Company paid FMTC $234,000, $229,000 and $152,000 in 2004, 2003 and 2002, respectively, for such services.
FMR Corp. maintains a noncontributory trusteed defined benefit pension plan covering substantially all eligible Company employees. The benefits earned are based on years of service and the employees' compensation during the last five years of employment. FMR Corp.'s policy for the plan is to fund the maximum amount deductible for income tax purposes, and to charge each subsidiary for its share of such contributions. Pension costs of $87,000, $72,000 and $59,000 were charged to the Company in 2004, 2003 and 2002, respectively.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. Affiliated Company Transactions (continued):
FMR Corp sponsors a trusteed Profit-Sharing Plan and a contributory 401(k) Thrift Plan covering substantially all eligible Company employees. Payments are made to the trustee by FMR Corp. annually for the Profit-Sharing Plan and monthly for the 401(k) Thrift Plan. FMR Corp.'s policy is to fund all costs accrued and to charge each subsidiary for its share of the cost. The cost charged to the Company for these plans amounted to $190,000, $217,000 and $173,000 in 2004, 2003 and 2002, respectively.
The Company participates in various FMR Corp. stock-based compensatory plans. The compensation is based on the change in the net asset value of FMR Corp. common stock, as defined. The aggregate expenses related to these plans charged to the Company were $5,000, $13,000 and $18,000 in 2004, 2003 and 2002, respectively.
9. Underwriting, Acquisition and Insurance Expenses:
Underwriting, acquisition and insurance expenses were as follows:
Amortization of deferred policy acquisition costs is adjusted periodically as estimates of future gross profits are revised to reflect actual experience. In 2004, 2003 and 2002, the Company adjusted amortization by ($479,000), ($2,494,000) and $992,000 respectively, to reflect actual experience for investment performance, persistency and inflation assumptions. This adjustment has been reflected in amortization expense.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. Reinsurance:
The Company retains a maximum coverage per individual life of $25,000 plus 30% of the excess over $25,000 with a maximum initial retention not to exceed $100,000 for its life insurance business. The Company reinsures certain guarantee provisions and mortality on its annuity contracts and portions of annuity income that are fixed. The Company reinsures substantially all of its GMDB provisions for business issued prior to July 1, 2003 with various reinsurers.
The Company has entered into two 100% coinsurance agreements for its fixed guaranteed income annuity product and for the fixed portion of the variable income annuity product with two highly rated reinsurers (rated A or better by Moody's statistical rating agency at December 31, 2004). The Company is subject to concentration of risk with respect to these reinsurance agreements. The receivable from each reinsurer is accounted for as a deposit asset and is recorded in reinsurance deposit and receivables, while the liability related to the underlying annuity contracts is accounted for as a deposit liability and is recorded in contractholder deposit funds. Under these reinsurance agreements, the Company receives a front end ceding expense allowance of 2.5% of premiums and an annual allowance of a percentage of assets ranging from 0.25% to 0.60%. Revenue from the reinsurance agreements and benefit expense from the underlying annuity contracts is recognized over the lives of the underlying contracts.
Financial information related to the two coinsurance agreements for the years ended December 31 was as follows:
The Company's deposit assets under the reinsurance agreement with Principal Life Insurance Company are partially secured by investments held in trust.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
10. Reinsurance (continued):
Additional information on direct business written and reinsurance ceded for the years ended December 31, was as follows:
11. Commitments and Contingencies:
The Company is, from time to time, involved in various legal actions concerning policy benefits and certain other matters. Those actions are considered by the Company in estimating policy reserves and other liabilities. The Company believes that the resolution of those actions should not have a material adverse effect on stockholder's equity or net income.
Item 26. Exhibits
a) Incorporated by reference to the initial filing of this registration statement dated July 20, 2004.
c) Form of Underwriting Contracts are incorporated herein by reference to the Pre-Effective Amendment No. 2 to Registration Statement No. 33-103174 filed on October 31, 2003.
d) Incorporated by reference to the Pre-Effective Amendment No. 2 Registration Statement No. 333-117572 filed on December 22, 2004.
e) Form of Applications are incorporated herein by reference to the Pre-Effective Amendment No. 2 to Registration Statement No. 33-103174 filed on October 31, 2003.
f) Certification of Incorporation and By-laws:
(1) Articles of Domestication of Empire Fidelity Investment Life Insurance Company, are incorporated herein by reference to the initial Registration Statement of the Separate Account (Registration No.33-42376) Post-Effective Amendment No. 5 filed on April 25, 1997.
(2) Amended Bylaws of Empire Fidelity Investments Life Insurance Company, incorporated by reference from post effective amendment No. 5 to Registration Statement No. 33-42376 filed on April 25, 1997.
g) Form of Reinsurance Contracts are incorporated herein by reference to the Pre-Effective Amendment No. 2 to Registration Statement No. 33-103174 filed on October 31, 2003.
h) Participation Agreement among Empire Fidelity Investments Life, Variable Insurance Products Fund and
Fidelity Distributors Corporation are incorporated by reference from Post-effective Amendment No 5. to
Registration Statrement No. 33-42376 filed electronically on April 27, 1997.
Participation Agreement among Empire Fidelity Investments Life, Variable Insurance Products Fund II and
Fidelity Distributors Corporation are incorporated by reference from Post-effective Amendment No 5. to
Registration Statrement No. 33-42376 filed electronically on April 27, 1997.
Participation Agreement among Empire Fidelity Investments Life, Variable Insurance Products Fund III and
Fidelity Distributors Corporation are incorporated by reference from Post-effective Amendment No. 5 to
Registration Statement No. 33-42376 filed electronically on April 27, 1997.
Participation Agreement among Empire Fidelity Investments Life, Variable Insurance Products Fund IV and
Fidelity Distributors Corporation are incorporated by reference from Post-effective Amendment No. 5 to
Registration Statement No. 33-42376 filed electronically on April 27, 1997.
Form of Participation Agreement between Empire Fidelity Investments Life and MORGAN STANLEY
UNIVERSAL FUNDS, INC. (the "Fund"), and MORGAN STANLEY ASSET MANAGEMENT INC. and
MILLER ANDERSON & SHERRERD, LLP (the "Advisers") are incorporated by reference to Post Effective
Amendment 7 on Registration Form 33-42376 filed on August 25, 1997.
Amendment to Participation Agreement between Empire Fidelity Investments Life and The Universal
Institutional Funds, Inc. (formerly, Morgan Stanley Universal Funds, Inc.) (the "Fund") and Morgan Stanley
Investment Management Inc. (formerly, Morgan Stanley Asset Management, Inc.) (the "Adviser") are filed
herein as Exhibit 26(h)(1)
Form of Participation agreement between Empire Fidelity Investments Life and Credit Suisse formerly
Warburg, Pincus Trust, (the "Fund"); Warburg Pincus Counsellors, Inc. (the "Adviser"); and Counsellors
Securities, Inc. are incorporated by reference from Post-Effective Amendment No. 7 to Registration Statement
No. 33-42376 filed April 28, 1998.
Amendment to Participation Agreement between Empire Fidelity Investments Life and Credit Suisse (formerly
Warburg, Pincus Trust, (the "Fund"); Warburg Pincus Counsellors, Inc. (the "Adviser"); and Counsellors
Securities, Inc. are filed herein as Exhibit 26(h)(2).
i) Form of Administrative Contracts are incorporated herein by reference from the Pre-Effective Amendment No. 2 to Registration Statement No. 33-103174 filed on October 31, 2003.
j) Other Material Contracts are incorporated by reference from the Pre-Effective Amendment No. 2 to Registration Statement No. 33-103174 filed on October 31, 2003.
k) Filed herein as Exhibit 26(k)
l) Not Applicable
m) Not Applicable
n) Filed herein as Exhibit 26(n)
o) Incorporated by reference to the Pre-Effective Amendment No. 2 Registration Statement No. 333-117572 filed on December 22, 2004.
p) Not Applicable
q) Incorporated by reference from Pre-Effective Amendment No. 1 to this
registration statement dated December 17, 2004.
Item 27. Directors and Officers of Depositor
Directors of Empire Fidelity Investments Life Insurance Company
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Roy C. Ballentine |
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Director |
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Allan Brandon |
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Director |
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Clare S. Richer |
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Director |
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James C. Curvey |
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Director |
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Albert Francke |
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Director |
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Lena G. Goldberg |
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Director |
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Karen Hammond |
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Director |
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Peter G. Johannsen |
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Director |
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Malcom MacKay |
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Director |
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Rodney R. Rohda |
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Director |
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Floyd L. Smith |
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Director |
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Richard A. Spillane |
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Director |
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David C. Weinstein |
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Director |
The addresses of Roy Ballentine, Albert Francke, Peter Johannsen, Malcolm MacKay, Rodney Rohda, and Floyd L. Smith, are 11 Depot Street, P. O. Box 1860, Wolfboro, New Hampshire 03894; 101 Park Avenue, 35th Floor, New York, New York 10178-0061; One Post Office Square, Boston, Massachusetts 02109; 200 Park Avenue, New York, NY 10166, 97 Gordon Road, Waban, MA 02468; and 4 Peter Cooper Road, # 9G, New York, New York 10010, respectively. The principal business address of Allan Brandon is One World Financial Center, 200 Liberty Street, Tower A, New York, New York 10281. The principal business address of each of the other above persons is 82 Devonshire Street, Boston, Massachusetts 02109.
Executive Officers who are not Directors
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Tai S. Bright |
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Executive Vice President, Sales and Relationship |
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Management |
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Jeffrey D. Schreiber. |
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Executive Vice President, Marketing |
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William Joseph Johnson Jr. |
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Senior Vice President & Actuary |
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Josept L. Kurtzer, Jr. |
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Senior Vice President, Client Services Operations and |
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Finance |
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Edward F. McHugh, Jr. |
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Senior Vice President, Strategic Services |
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David W. Morse |
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Senior Vice President, Client Services |
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Janice M. Drew |
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Vice President, Human Resources |
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David J. Pearlman |
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Vice President, Senior Legal Counsel, and Secretary |
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Joseph F. Hope III |
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Treasurer |
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Mark C. Jensen |
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Assistant Secretary |
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Maryann P. Crews |
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Illustration Actuary |
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Robert J. Egan |
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Appointed Actuary |
The principal business address of each of the other above persons is 82 Devonshire Street, Boston, Massachusetts 02109.
Item 28. Persons Controlled by or Under Common Control with the Depositor or the Registrant.
The depositor, Empire Fidelity Investments Life Insurance Company is 100% owned by Fidelity Investments Life Insurance Company, a Utah Corporation. Fidelity Investments Life Insurance Company is 100% owned by FMR Corp., a Delaware Corporation. FMR Corp. has numerous subsidiaries, including the following financial services providors:
- Fidelity Brokerage Services, LLC, a Delaware Corporation
- Fidelity Distributors Corporation, a Massachusetts Corporation
- Fidelity Employer Services Company, LLC, a Delaware Corporation
- Fidelity Insurance Agency, Inc., a Massachusetts Corporation
- Fidelity Investments Institutional Operations Company, Inc., a Massachusetts
Corporation
- Fidelity Investments Institutional Services Company, Inc., a Massachusetts
Corporation
- Fidelity Management and Research Company, a Massachusetts Corporation (advisor to
the Fidelity Funds including the Variable Insurance Products Funds named in the
prospectus)
Item 29. Indemnification.
FMR Corp. and its subsidiaries own a directors' and officers' liability reimbursement contract (the "Policies"), issued by National Union Fire Insurance Company, that provides coverage for "Loss" (as defined in the Policies) arising from any claim or claims by reason of any breach of duty, neglect, error, misstatement, misleading statement, omission or other act done or wrongfully attempted by a person while he or she is acting in his or her capacity as a director or officer. The coverage is provided to these insureds, including Empire Fidelity Investments Life, to the extent required or permitted by applicable law, common or statutory, or under their respective charters or by-laws, to indemnify directors or officers for Loss arising from the above-described matters. Coverage is also provided to the individual directors or officers for such Loss, for which they shall not be indemnified, subject to relevant contract exclusions. Loss is essentially the legal liability on claims against a director or officer, including damages, judgements, settlements, costs, charges and expenses (excluding salaries of officers or employees) incurred in the defense of actions, suits or proceedings and appeals therefrom.
There are a number of exclusions from coverage. Among the matters excluded are Losses arising as the result of (1) fines or penalties imposed by law or other matters that may be deemed uninsurable under the law pursuant to which the Policy is construed, (2) claims brought about or contributed to by the fraudulent, dishonest, or criminal acts of a director or officer, (3) any claim made against the directors or officers for violation of any of the responsibilities, obligations, or duties imposed upon fiduciaries by the Employee Retirement Income Security Act of 1974 or amendments thereto, (4) professional errors or omissions, and (5) claims for an accounting of profits in fact made from the purchase or sale by a director or officer of any securities of the insured corporations within the meaning of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any state statutory law.
A $100 million limit (policy aggregate limit) and a $500,000 deductible apply to Loss for which the directors and officers are indemnified by Empire Fidelity Investments Life Insurance Company. A $10 million limit (policy aggregate) and a $0 deductible apply to Loss for which the directors and officers are not indemnified by Empire Fidelity Investments Life Insurance Company.
Utah law (Revised Business Corporation Act ยง16-10a-901 et seq.) provides, in substance, that a corporation may indemnify a director, officer, employee or agent against liability if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
The Text of Article XIV of Fidelity's By-Laws, which relates to indemnification of the directors and officers, is as follows:
INDEMNIFICATION OF DIRECTORS, OFFICERS AND PERSONS
ADMINISTERING EMPLOYEE BENEFIT PLANS
Each officer or Director or former officer or Director of the Corporation, and each person who shall, at the Corporation's request, have served as an officer or director of another corporation or as trustee, partner or officer of a trust, partnership or association, and each person who shall, at the Corporation's request, have served in any capacity with respect to any employee benefit plan, whether or not then in office then serving with respect to such employee benefit plan, and the heirs, executors, administrators, successors and assigns of each of them, shall be indemnified by the Corporation against all satisfaction of judgements, in compromise and or as fines or penalties and fees and disbursement of counsel, imposed upon or reasonably incurred by him or them in connection with or arising out of any action, suit or proceeding, by reason of his being or having been such officer, trustee, partner or director, or by reason of any alleged act or omission by him in such capacity or in serving with respect to an employee benefit plan, including the cost of reasonable settlements (other than amounts paid to the Corporation itself) made with a view to curtailment of costs of litigation.
The Corporation shall not, however, indemnify any such person, or his heirs, executors, administrators, successors, or assigns, with respect to any matter as to which his conduct shall be finally adjudged in any such action, suit, or proceedings to constitute willful misconduct or recklessness or to the extent that such matter relates to service with respect to any employee benefit plan, to not be in the best interest of the participants or beneficiaries of such employee benefit plan.
Such indemnification may include payment by the Corporation of expenses incurred in defending any such action, suit, or proceeding in advance of the final disposition thereof, upon receipt of an undertaking by or on behalf of the person indemnified to repay such payment if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation. Such undertaking may be accepted by the corporation without reference to the financial ability of such person to make repayment.
The foregoing rights of indemnification shall not be exclusive of other rights to which any such director, officer, trustee, partner or person serving with respect to an employee benefit plan may be entitled as a matter of law. These indemnity provisions shall be separable, and if any portion thereof shall be finally adjudged to be invalid, such invalidity shall not affect any other portion which can be given effect.
The Board of Directors may purchase and maintain insurance on behalf of any persons who is or was a Director, officer, trustee, partner, employee or other agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, partner, employee or other agent of another corporation, association, trust or partnership, against any liability incurred by him in any such, whether or not the Corporation would have the power to indemnify him against such liability.
Insofar as indemnification for liability arising under the Securities Act of 1933 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 or officer, or controlling persons 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 its is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 30. Principal Underwriters.
a) Fidelity Brokerage Services LLC acts as distributor for other variable life and variable annuity contracts registered by separate accounts of Fidelity Investments Life, and Empire Fidelity Investments Life Insurance Company.
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(b) |
Jeffrey Carney |
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Director |
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Ellyn A. McColgan |
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Director |
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Jeffrey Carney |
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Chief Executive Officer and President |
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Michael J. Sonier |
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Chief Financial Officer and Senior Vice President |
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Gerard McGraw |
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Chief Operating Officer |
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Jay Lanigan |
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Executive Vice President |
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Jamison Mark |
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Vice President, Real Estate |
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Marie McDermott |
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Vice President, Real Estate |
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Dean E. Loveridge |
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Vice President, Risk Operations |
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Roger T. Servison |
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Vice President, Electronic Access Membership |
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Tami Rash |
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Treasurer |
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J. Gregory Wass |
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Assistant Treasurer |
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Jeffrey R. Larsen |
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Secretary and General Counsel |
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Jay Freedman |
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Assistant Secretary |
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Richelle S. Kennedy |
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Assistant Secretary |
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Susan Sturdy |
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Assistant Secretary |
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Norman Ashenkas |
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Compliance Officer |
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Michael Toland |
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Compliance Registered Options Principal |
(c) Commissions and other compensation received by principal underwriter.
No compensation was received by the principal underwriter from the registrant or depositor since this is a new product.
The address for each person named in Item 30 is 82 Devonshire Street, Boston, Massachusetts 02109.
Item 31. Location of Accounts and Records
The records regarding the Account required to be maintained by Section 31(a) of the Investment Company Act of 1940, and Rules 31a-1 to 31a-3 promulgated thereunder, are maintained at Empire Fidelity Investments Life Insurance Company at 200 Liberty Street, One World Financial Center, New York, New York 10281
Item 32. Management Services
Not applicable
Item 33. Fee Representation
Empire Fidelity Investment Life Insurance Company hereby represents that the aggregate charges under the variable
life policy offered by Empire Fidelity Investment Life Insurance Company are reasonable in relation to services
rendered, the expenses expected to be incurred, and the risks assumed by Empire Fidelity Investment Life Insurance
Company.
Item 34. Other
Powers of Attorney
(a) Power of Attorney for Clare S. Richer
Incorporated by reference from Pre-Effective Amendment No. 1 to this
registration statement dated December 17, 2004.
(b) Power of Attorney for Joseph F. Hope III
Incorporated by reference from Post-Effective Amendment No.14 to Registration Statement No. 33-42376 filed on April 25, 2003 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(c) Power of Attorney for Roy C. Ballentine
Incorporated by reference from Post-Effective Amendment No. 3 to
Registration Statement No. 33-54924 filed on April 24, 1996 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(d) Power of Attorney for Allan Brandon
Incorporated by reference from Post-Effective Amendment No.8 to Registration Statement filed on January 19, 1999
(e) Power of Attorney for James C. Curvey
Incorporated by reference from Post-Effective Amendment No. 3 to
Registration Statement No. 33-54924 filed on April 24, 1996 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(f) Power of Attorney for Albert Francke
Incorporated by reference from Post-Effective Amendment No. 10 to
Registration Statement No. 33-54924 filed on April 24, 2001 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(g) Power of Attorney for Lena G. Goldberg
Incorporated by reference from Post-Effective Amendment No. 6 to Registration Statement No. 33-42376 filed on August 29, 1997 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(h) Power of Attorney for Karen Hammond
Incorporated by reference to the initial filing of this registration statement dated July 20, 2004.
(i) Power of Attorney for Peter Johannsen
Incorporated by reference from Post-Effective Amendment No. 3 to
Registration Statement No. 33-54924 filed on April 24, 1996 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(j) Power of Attorney for Malcolm MacKay
Incorporated by reference from Post-Effective Amendment No. 3 to
Registration Statement No. 33-54924 filed on April 24, 1996 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(k) Power of Attorney for Rodney R. Rohda
Incorporated by reference from Post-Effective Amendment No. 3 to
Registration Statement No. 33-54924 filed on April 24, 1996 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(l) Power of Attorney for Floyd L. Smith
Incorporated by reference from Post-Effective Amendment No. 3 to
Registration Statement No. 33-54924 filed on April 24, 1996 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(m) Power of Attorney for Richard A. Spillane
Incorporated by reference from Post-Effective Amendment No. 12 to
Registration Statement No. 33-42376 filed on April 24, 2001 on behalf of Empire Fidelity Investments Variable Annuity Account A.
(n) Power of Attorney for David C. Weinstein
Incorporated by reference from Post-Effective Amendment No. 3 to
Registration Statement No. 33-54924 filed on April 24, 1996 on behalf of Empire Fidelity Investments Variable Annuity Account A.
SIGNATURES
As required by the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, Empire Fidelity Investments Variable Life Account I and Empire Fidelity Investments Life Insurance Company, have duly caused this Post-Effective Amendment No. 1 to the Registration Statement to be signed on their behalf in the city of Boston and the Commonwealth of Massachusetts, on this 30th day of June, 2005.
EMPIRE FIDELITY INVESTMENTS VARIABLE LIFE ACCOUNT A
(Registrant)
By: EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(Depositor)
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By: |
* |
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Attest: |
/s/David J. Pearlman |
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Clare S. Richer |
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David J. Pearlman |
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President |
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Secretary |
As required by the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on this 30th day of June, 2005.
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Signature |
Title |
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/s/Clare S. Richer |
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Clare S. Richer |
President and Director |
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) |
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/s/Joseph F. Hope III |
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) |
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Joseph F. Hope III |
Treasurer |
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) |
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/s/Albert Francke |
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) |
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Albert Francke |
Director |
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/s/Lena G. Goldberg |
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) |
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Lena G. Goldberg |
Director |
) |
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) |
By: |
/s/David J. Pearlman |
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) |
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David J. Pearlman* |
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/s/James C. Curvey |
Director |
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(Attorney-in-Fact) |
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James C. Curvey |
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) |
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) |
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/s/Peter G. Johannsen |
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) |
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Peter G. Johannsen |
Director |
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) |
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/s/Rodney R. Rohda |
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) |
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Rodney R. Rohda |
Director |
) |
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) |
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/s/Malcolm MacKay |
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) |
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Malcolm MacKay |
Director |
) |
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) |
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/s/Richard A. Spillane, Jr. |
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) |
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Richard A. Spillane, Jr. |
Director |
) |
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) |
By: |
/s/David J. Pearlman |
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/s/Allan Brandon |
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) |
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David J. Pearlman* |
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Allan Brandon |
Director |
) |
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(Attorney-in-Fact) |
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/s/Floyd L. Smith |
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) |
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Floyd L. Smith |
Director |
) |
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) |
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/s/David Weinstein |
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) |
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David Weinstein |
Director |
) |
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/s/Karen Hammond |
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) |
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Karen Hammond |
Director |
) |
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