As filed with the Securities and Exchange Commission on
, 1996
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(Exact name of Registrant)
COLORADO 63
84-0467907
(State of Incorporation) (Primary Standard (I.R.S.
Employer
Industrial
Identification No.)
Classification Code
Number)
8515 East Orchard Road
Englewood, Colorado 80111
(800) 537-2033
(Address, including zip code, and telephone number,
including
area code, or registrant's principal executive officer)
William T. McCallum
President and Chief Executive Officer
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
(Name and Address of Agent for Service)
Copy to:
James F. Jorden, Esq.
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
Approximate Date of Proposed Public Offering: Upon the effective
date of
this Registration Statement
If any of the securities being registered on this form are to be
offered on
a delayed or continuous basis pursuant to Rule 415 under the
Securities Act
of 1933, check the following: X
If this Form is filed to register additional securities for an
offering
pursuant to Rule 462(b) under the Securities Act, check the
following box and
list the Securities Act registration statement number of the
earlier
effective registration statement for the same offering:
If this Form is a post-effective amendment filed pursuant to Rule
462(c)
under the Securities Act, check the following box and list the
Securities Act
registration statement for the same offering:
If delivery of the prospectus is expected to be made pursuant to
Rule 434,
check the following box:
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED
MAXIMUM
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING PRICE
PER UNIT
Interests in the Guaranteed
Period Fund - a guaranteed * *
interest option under flexible
premium deferred fixed and
variable annuity contract
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE REGISTRATION
FEE
Interests in the Guaranteed
Period Fund - a guaranteed
interest option under $ $
flexible premium deferred
fixed and variable annuity contract
* The maximum aggregate offering price is estimated solely for the
purpose of
determining the registration fee. The amount being registered and
the
proposed maximum offering price per unit are not applicable in that
these
securities are not issued in predetermined amounts of units.
The Registrant hereby amends this registration statement on such
date or
dates as may be necessary to delay its effective date until the
Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in
accordance with
Section 8(a) of the Securities Act of 1933 or until the
registration
statement shall become effective on such date as the Commission
acting
pursuant to said Section 8(a) may determine.
Cross Reference Sheet
Showing Location in Prospectus
and Statement of Additional Information
As Required by Form S-1
FORM S-1 PROSPECTUS
CAPTION ITEM
1. Forepart of Registration Statement
and Outside Front Cover Page Cover Page
2. Inside Front and Outside Cover Page;
Back Cover Pages Table of Contents
3. Summary Information, Risk Factors Key Features of
and Ratio of Earnings the Annuity;
to Fixed Charges Great-West Life
&
Annuity Insurance
Company
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Distribution of
the Contracts
9. Description of Securities The Guarantee
Period Fund; The
Market Value
Adjustment
10. Interest of Named Experts Legal Matters;
and Counsel Experts
11. Information with Respect Selected
Financial
to the Registrant Data; Legal
Proceedings;
Financial
Statements
12. Disclosure of Commission, Distribution of
Position on Indemnification the Contracts
for Securities Act Liabilities
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL
NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
SCHWAB ANNUITY
A FLEXIBLE PREMIUM DEFERRED FIXED AND VARIABLE ANNUITY
Distributed by
CHARLES SCHWAB & CO., INC.
_____________________________________________
Issued by
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
This prospectus describes interests under a flexible premium
deferred
annuity contract, The Schwab Annuity (the
"Contract"). The Contract is issued either on a group basis or as
individual contracts by Great-West Life & Annuity Insurance Company
("the Company"). Participation in a group contract will be
accounted
for by the issuance of a certificate showing an interest under the
group contract. The certificate and the individual contract are
hereafter both referred to as the "Contract."
Your investment in the Contract may be allocated among nineteen
Investment Divisions of the Variable Annuity-1 Series Account
("Series Account") and the available Guarantee Periods under the
Guarantee Period Fund. The Investment Divisions invest in various
mutual funds (open-end investment companies) offered by fund
families
such as Federated, INVESCO, Janus, Lexington, Alger, Schwab Funds,
Stein Roe, Strong, Montgomery, Twentieth Century and Van Eck. You
also have the option of allocating some or all of your investment
in
the Contract to the Guarantee Period Fund which allows you to
select
one or more Guarantee Periods, each of which offers you a specified
interest rate for a specified period. There may be a market value
adjustment on the amounts withdrawn from the Guarantee Period Fund.
The minimum initial investment is $5,000 ($2,000 if an IRA) or
$1,000
if made under an Automatic Contribution Plan ("ACP"). The minimum
subsequent Contribution is $500 (or $100 per month if made under an
ACP).
There are no other sales charges, redemption, surrender or
withdrawal
charges. The Contract provides a Free Look Period of 10 days from
your receipt of the Contract (or longer, if required by state law),
during which time you may cancel your investment in the Contract.
During the Free Look Period, all Contributions allocated to an
Investment Division will be allocated first to the Schwab Money
Market Investment Division and will remain there until the next
Transaction Date following the end of the Free Look Period plus
five
calendar days. Contributions to the Guarantee Period Fund will be
allocated immediately into the specified Guarantee Period(s).
Your Variable Account Value will increase or decrease based on the
investment performance of the options you select. You bear the
entire investment risk under the Contract prior to the annuity
commencement date for all amounts in your Variable Sub Accounts.
While there is a guaranteed death benefit, there is no guaranteed
or
minimum Variable Account Value on amounts allocated to Investment
Divisions. Therefore, the Annuity Account Value you receive could
be
less than the total amount of your Contributions.
Amounts allocated to the Guarantee Period Fund may be subject to a
Market Value Adjustment which could result in receipt of less than
your Contributions if you surrender, Transfer, make a partial
withdrawal, apply amounts to purchase an annuity or take a
distribution upon the death of the Owner or Annuitant before a
Guarantee Period Maturity Date. Whether such a result actually
occurs depends on the timing of the transaction, the amount of the
Market Value Adjustment and the interest rate credited. The
interest
rate in subsequent Guarantee Periods may be more or less than the
rate of a previous Guarantee Period.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSIONS PASSED UPON THE ACCURACY OR ADEQUACY OF THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE
INFORMATION
OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERS CONTAINED IN THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
PLEASE
READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
Prospectus Dated ______________, 1996
The Contracts are not deposits of, or guaranteed or endorsed by any
bank, nor is the Contract federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other
government agency. The Contracts involve certain investment risks,
including possible loss of principal.
To Place Orders and for Account Information: Contact the Schwab
Annuity Service Center at 800-838-0650 or P.O. Box 7785, San
Francisco, California 94120-9420.
About This Prospectus: This Prospectus concisely presents important
information you should have before investing in the Contract.
Please
read it carefully and retain it for future reference. You can find
more detailed information pertaining to the Contract in the
Statement
of Additional Information dated _____________, 1996 (as may be
amended from time to time), and filed with the Securities and
Exchange Commission. The Statement of Additional Information is
incorporated by reference into this Prospectus, and may be obtained
without charge by contacting the Schwab Annuity Service Center at
800-838-0650 or P.O. Box 7785 San Francisco, California 94120-9420.
TABLE OF CONTENTS
Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .iv
KEY FEATURES OF THE ANNUITY . . . . . . . . . . . . . . . . . . .
1
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AND THE SERIES ACCOUNT . . . . . . . . . . . . . . . .
7
THE ELIGIBLE FUNDS. . . . . . . . . . . . . . . . . . . . . . . .
8
THE GUARANTEE PERIOD FUND . . . . . . . . . . . . . . . . . . . .12
THE MARKET VALUE ADJUSTMENT . . . . . . . . . . . . . . . . . . .15
APPLICATION AND CONTRIBUTIONS . . . . . . . . . . . . . . . . . 16
ANNUITY ACCOUNT VALUE . . . . . . . . . . . . . . . . . . . . . .17
TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
CASH WITHDRAWALS. . . . . . . . . . . . . . . . . . . . . . . . .21
TELEPHONE TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . .22
DEATH BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . .22
CHARGES AND DEDUCTIONS. . . . . . . . . . . . . . . . . . . . . .25
PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . .27
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . .31
ASSIGNMENTS OR PLEDGES. . . . . . . . . . . . . . . . . . . . . .36
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . .36
DISTRIBUTION OF THE CONTRACTS . . . . . . . . . . . . . . . . . .37
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . .38
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 44
RIGHTS RESERVED BY THE COMPANY. . . . . . . . . . . . . . . . . .45
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . .45
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . .45
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . .46
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . F-1
___________________________________________________________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER,
SALESPERSON, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON.
___________________________________________________________________
The Contract is not available in all states.
___________________________________________________________________
DEFINITIONS
___________________________________________________________________
Accumulation Period - The period between the Effective Date and the
Payment Commencement Date.
Annuitant - The person named in the application upon whose life the
payment of an annuity is based and who will receive annuity
payments.
If a Contingent Annuitant is named, then the Annuitant will be
considered the Primary Annuitant. While the Annuitant is living
and
at least 30 days prior to the annuity commencement date, the Owner
may, by Request, change the Annuitant.
Annuity Account - An account established by the Company in the name
of the Owner that reflects all account activity under this
Contract.
Annuity Account Value - The sum of the Variable and Fixed Sub-
Accounts credited to the Owner under the Annuity Account; less
Transfers, partial withdrawals, amounts applied to an annuity
option,
periodic withdrawals, charges deducted under the Contract and, less
Premium Tax, if any.
Annuity Payment Period - The period beginning on the annuity
commencement date and continuing until all annuity payments have
been
made under the Contract.
Annuity Unit - An accounting measure used to determine the dollar
value of any variable annuity payment after the first annuity
payment
is made.
Automatic Contribution Plan ("ACP") - A plan which allows for
automatic periodic Contributions. The Contribution amount will be
withdrawn from a designated pre-authorized account and
automatically
credited to the Annuity Account.
Beneficiary - The person(s) designated by the Owner, in the
application, or as subsequently changed by the Owner by Request, to
receive any death benefit which may become payable under the terms
of
the Contract. If the surviving spouse of an Owner is the surviving
Joint Owner, the surviving spouse will become the Beneficiary upon
such Owner's death and may elect to take the death benefit, if any,
or elect to continue the Contract in force.
Company - Great-West Life & Annuity Insurance Company, the issuer
of
this annuity, located at 8515 East Orchard Road, Englewood,
Colorado
80111.
Contingent Annuitant - The person named in the application, unless
later changed by the Owner by Request while the Annuitant is alive
and before annuity payments have commenced, who becomes the
Annuitant
when the Primary Annuitant dies. No new Contingent Annuitant may
be
designated after the death of the Primary Annuitant.
Contributions - Purchase amounts received under the Contract and
allocated to the Fixed or Variable Sub-Account(s) prior to any
Premium Tax or other deductions.
Effective Date - The date on which the first Contribution is
credited
to the Annuity Account.
Eligible Fund - A registered management investment company, or
portfolio thereof, in which the assets of the Series Account may be
invested.
Fixed Sub-Accounts - The subdivision(s) of the Owner's Annuity
Account reflecting the value of Contributions made to a fixed
interest investment option available under the Contract and any
Fixed
Sub-Account Riders.
Guarantee Period - One of the periods of time available in the
Guarantee Period Fund during which the Company will credit a stated
rate of interest. The Company may stop offering any term at any
time
for new Contributions. Amounts allocated to one or more Guaranteed
Periods may be subject to a Market Value Adjustment.
Guarantee Period Fund - A Fixed Sub-Account in which amounts
allocated will be credited a stated rate of interest for the
applicable Guarantee Period(s).
Guarantee Period Maturity Date - The last day of any Guarantee
Period.
Guaranteed Interest Rate - The minimum interest rate applicable to
each Fixed Sub-Account equal to an annual effective rate in effect
at
the time the Contribution is made and as reflected in written
confirmation of the Contribution. This is the minimum rate allowed
by law and is subject to change in accordance with changes in
applicable law.
Individual Retirement Annuity (IRA) - An annuity contract used in
a
retirement savings program that is intended to satisfy the
requirements of Section 408 of the Internal Revenue Code of 1986,
as
amended.
Investment Division - A division of the Series Account containing
the
shares of an Eligible Fund. There is an Investment Division for
each
Eligible Fund.
Market Value Adjustment - An adjustment which may be made to
amounts
paid out before the Guarantee Period Maturity Date due to
surrenders,
partial withdrawals, Transfers, amounts applied to the periodic
withdrawal option or to purchase an annuity, and distributions
resulting from death of the Owner or Annuitant, as applicable. The
Market Value Adjustment may increase or decrease the amount payable
on one of the above-described distributions. A negative adjustment
may result in an effective interest rate lower than the applicable
Guaranteed Interest Rate and the value of the Contribution(s)
allocated to the Guarantee Period being less than the
Contribution(s)
made. The Market Value Adjustment is detailed on page 15.
Non-Qualified Annuity Contract - An annuity contract which is not
intended to be part of a qualified retirement plan and is not
intended to satisfy the requirements of Section 408 of the Internal
Revenue Code of 1986, as amended.
Owner (Joint Owner) or You - The person(s), while the Annuitant is
living, named in the Contract Data Page who is entitled to exercise
all rights and privileges under the Contract. Joint Owners must be
husband and wife as of the date the Contract is issued. The
Annuitant will be the Owner unless otherwise indicated in the
application. If a Contract is purchased as an IRA, the Owner and
the
Annuitant must be the same individual and no Joint Owner may be
named. Any reference to Owner in the singular tense shall include
the plural, and vice versa, as applicable.
Payment Commencement Date - The date on which annuity payments or
periodic withdrawals commence under a payment option. The Payment
Commencement Date must be at least one year after the Effective
Date
of the Contract. If a Payment Commencement Date is not shown on
the
Contract Data Page, annuity payments will commence on the first day
of the month of the Annuitant's 91st birthday. The Payment
Commencement Date may be changed by the Owner within 60 days prior
to
commencement of annuity payments or it may be changed by the
Beneficiary upon the death of the Owner. If this is an IRA,
payments
which satisfy the minimum distribution requirements of the Internal
Revenue Code of 1986, as amended, must begin no later than the
Owner's attainment of age 70.
Premium Tax - The amount of tax, if any, charged by a state or
other
governmental authority.
Request - Any written, telephoned, or computerized instruction in
a
form satisfactory to the Company and received at the Schwab Annuity
Service Center (or other annuity service center subsequently named)
from the Owner or the Owner's designee (as specified in a form
acceptable to the Company) or the Beneficiary (as applicable) as
required by any provision of the Contract or as required by the
Company. All Requests are subject to any action taken or payment
made by the Company before it was processed.
Schwab Annuity Service Center - P.O. Box 7785, San Francisco,
California 94120-9420, telephone 800-838-0650.
Series Account - The segregated account established by the Company
under Colorado law and registered as an unit investment trust under
the Investment Company Act of 1940, as amended.
Simplified Employee Pension - An individual retirement annuity
(IRA)
which may accept contributions from one or more employers under a
retirement savings program intended to satisfy the requirements of
Section 408(k) of the Internal Revenue Code of 1986, as amended.
Surrender Value - The Annuity Account Value with a Market Value
Adjustment, if applicable, on the effective date of the surrender,
less Premium Tax, if any.
Transaction Date - The date on which any Contribution or Request
from
the Owner will be processed by the Company at the Schwab Annuity
Service Center. Contributions and Requests received after 4:00
p.m.
EST/EDT will be deemed to have been received on the next business
day. Requests will be processed and the Variable Account Value
will
be determined on each day that the New York Stock Exchange is open
for trading.
Transfer - The moving of money from among the Investment
Division(s)
and the Guaranteed Period Fund.
Variable Account Value - The sum of the values of the Variable Sub-
Accounts credited to the Owner under the Annuity Account.
Variable Sub-Accounts - The sub-division(s) of the Owner's Annuity
Account containing the value credited to the Owner under the
Annuity
Account from an Investment Division.
We, our, us, or GWL&A: Great-West Life & Annuity Insurance
Company.
KEY FEATURES OF THE ANNUITY
The Contract currently allows you to invest in your choice of
nineteen different Investment Divisions offered by eleven different
mutual fund investment advisers. You can also invest in the
Guarantee Period Fund. Your Annuity Account Value allocated to an
Investment Division will vary with the investment performance of
the
Investment Division you select. You bear the entire investment
risk
for all amounts invested in the Investment Division(s). Your
Annuity
Account Value could be less than the total amount of your
Contributions.
Who should invest. The Contract is designed for investors who are
seeking long-term tax deferred asset accumulation with a wide range
of investment options. The Contract can be used for retirement or
other long-term investment purposes. The deferral of income taxes
is
particularly attractive to investors in high federal and state tax
brackets who have already fully taken advantage of their ability to
make IRA contributions or "pre-tax" contributions to their employer
sponsored retirement or savings plans.
A Wide Range of Variable Investment Choices. The Contract gives
you
an opportunity to select among nineteen different Investment
Divisions. Each Investment Division invests in shares of an
Eligible
Fund. The Eligible Funds cover a wide range of investment
objectives
as follows:
Investment Objective Eligible Funds
Aggressive Growth Janus Aspen Aggressive
Growth
Portfolio
SteinRoe Capital Appreciation
Fund
Strong Discovery Fund II
Alger American Small
Capitalization Portfolio
Growth Janus Aspen Growth
Portfolio
Alger American Growth Fund
TCI Growth
Montgomery Growth Fund
Growth & Income Federated Equity Growth and
Income Fund
INVESCO VIF-Industrial Income
Portfolio
Balanced/Asset Allocation INVESCO VIF-Total
Return
Portfolio
Gold/Natural Resources Van Eck Gold and Natural
Resources Fund
International Lexington Emerging Markets
Fund
TCI International
Janus Aspen Worldwide Growth
Portfolio
Montgomery International Small
Cap
Fund
High Yield Bond INVESCO VIF-High Yield
Portfolio
Government Bond Federated U.S. Government
Bond Fund
Money Market Schwab Money Market
Portfolio
The distinct investment objectives and policies for each Eligible
Fund are more fully described in their individual fund prospectuses
which are available from the Schwab Annuity Service Center, P.O.
Box
7785, San Francisco, California 94120-9420, or via telephone at 1-
800-838-0650.
The Guarantee Period Fund. The Contract also gives you an
opportunity to allocate your Contributions and to transfer your
Annuity Account Value to the Guarantee Period Fund. This Fixed
Sub-
Account option is comprised of Guarantee Periods, each of which has
its own stated rate of interest and its own maturity date. The
stated rate of interest for the Guarantee Period will depend on the
date the Guarantee Period is established and the duration of the
Guarantee Period you select from among those available. The rates
declared are subject to a minimum (Guaranteed Interest Rate), but
the
Company may declare higher rates (the stated rate of interest).
The
Guaranteed Interest Rate will be disclosed in the written
confirmation. The stated rate of interest will not be less than
the
Guaranteed Interest Rate and will also be disclosed in the written
confirmation. Amounts withdrawn or transferred from a Guarantee
Period prior to the Guarantee Period Maturity Date may be subject
to
a Market Value Adjustment. (See "Market Value Adjustment," page
15.)
How to Invest. You must complete a Contract application form in
order to invest in the Contract and you must either have sufficient
funds available in your Schwab account or pay by check. The
minimum
initial investment is $5,000 (or $2,000 if in an IRA). Subsequent
investments must be at least $500. The minimum initial investment
may be reduced to $1,000 should the Owner agree to make additional
$100 per month minimum recurring deposits through an ACP.
Free Look Period. The Contract provides for a Free Look Period
which
allows you to cancel your investment generally within 10 days of
your
receipt of the Contract. You can cancel the Contract during the
Free
Look Period by delivering or mailing the Contract to the Schwab
Annuity Service Center. The cancellation is not effective unless
we
receive the notice before the end of the Free Look Period. If the
Contract is returned, the Contract will be void from the start and
the Annuity Account Value will be refunded. These procedures may
vary where required by state law. (See "Application and
Contributions," page 16.)
Allocation of the Initial Investment. Any initial Contribution
allocated to an Investment Division (other than certain 1035
exchanges (see "Application and Contributions," page 16) will be
allocated to the Schwab Money Market Portfolio until the next
Transaction Date following the end of the Free Look Period plus
five
calendar days. At that time, the Variable Account Value will be
allocated to the Investment Divisions in accordance with your
instructions. (See "Annuity Account Value," page 17.) Your
initial
investment in the Guarantee Period Fund will be immediately
allocated
to the Guarantee Period(s) specified in the application.
Charges and Deductions Under the Contract. The Contract is a "no
load" variable annuity and, as such, imposes no sales charges,
redemption or withdrawal charges.
There is a Mortality and Expense Risk Charge at an effective annual
rate of 0.85% of the value of the net assets in the Variable
Account.
A Contract Maintenance Charge of $25 will be deducted from your
Annuity Account Value. There will be a transfer fee of $10 for
each
Transfer in excess of ten Transfers per calendar year. (See
"Charges
and Deductions," page 25.)
Depending on your state of residence, we may deduct a charge for
Premium Tax from purchase payments or amounts withdrawn or at the
Payment Commencement Date. (See "Charges and Deductions," page
25.)
The Market Value Adjustment may increase or decrease the value of
a
Guarantee Period if the Guarantee Period is broken prior to the
Guarantee Period Maturity Date. A negative adjustment may result
in
an effective interest rate lower than the stated rate of interest
for
the Guarantee Period and the Guaranteed Interest Rate and the value
of the Guarantee Period being less than Contribution(s). (See
"Market Value Adjustment," page 15).
Switching Investments. You may switch Contributions among the
Investment Divisions or Guarantee Period Fund as often as you like
with no immediate tax consequences. You may make a Transfer
Request
to the Schwab Annuity Service Center. A transfer fee may apply.
(See "Charges and Deductions," page 25.) Amounts Transferred out
of
a Guarantee Period prior to the Guarantee Period Maturity Date may
be
subject to a Market Value Adjustment. (See "Market Value
Adjustment," page 15.)
Full and Partial Withdrawals. You may withdraw all or part of your
Annuity Account Value before the earlier of the annuity
commencement
date you selected or the Annuitant's or Owner's death. Withdrawals
may be taxable and if made prior to age 59 1/2 may be subject to a
10% penalty tax. Withdrawals of amounts allocated to a Guarantee
Period prior to the Guarantee Period Maturity Date may be subject
to
Market Value Adjustment. (See "Market Value Adjustment," page
15.)
The minimum partial withdrawal prior to the Market Value Adjustment
is $500. There is no limit on the number of withdrawals made. The
Company may delay payment of withdrawals from your Variable Sub-
Accounts by up to 7 days and may delay withdrawals from the
Guarantee
Period Fund by up to 6 months. (See "Cash Withdrawals," page 21.)
Annuity Options. Beginning on the first day of the month
immediately
following the annuity commencement date you select, you may receive
annuity payments on a fixed or variable basis. (The default date
is
the first day of the month that the Annuitant attains age 91.) A
wide range of annuity options are available to provide flexibility
in
choosing an annuity payment schedule that meets your particular
needs. These annuity options include alternatives designed to
provide payments for life (for either a single or joint life), with
or without a guaranteed minimum number of payments. (See "Payment
Options," page 27.)
Death Benefit. The amount of the death benefit, if payable before
annuity payments commence, will be the greater of (a) the Annuity
Account Value with a Market Value Adjustment, if applicable, as of
the date a Request for payment is received, less Premium Tax, if
any;
or (b) the sum of Contributions paid, less partial withdrawals and
Periodic Withdrawals, less charges deducted under the Contract, if
any, less Premium Tax, if any. (See "Death Benefit," page 22.)
Customer Service. Schwab's professional representatives are
available toll-free to assist you. If you have any questions about
your Contract, please telephone the Schwab Annuity Service Center
(800-838-0650) or write to the Schwab Annuity Service Center at
P.O.
Box 7785, San Francisco, California 94120-9420. All inquiries
should
include the Contract number and the Owner's name. As a Contract
Owner you will receive periodic statements confirming any
transactions relating to your Contract, as well as a quarterly
statement and an annual report.
VARIABLE ANNUITY FEE TABLE
The purpose of this table and the examples that follow is to
assist you in understanding the various costs and expenses that you
will bear directly or indirectly when investing in the Contract.
The
table and examples reflect expenses related to the Investment
Divisions as well as of the Eligible Funds. The table assumes that
the entire Annuity Account Value is allocated to one or more
Investment Division. The information set forth should be
considered
together with the narrative provided under the heading "Charges and
Deductions," page 25 of this Prospectus, and with the Funds'
prospectuses. In addition to the expenses listed below, Premium
Tax
may be applicable.
Contract Owner Transaction Expenses
Sales Load None
Surrender Fee None
Transfer Fee (First 10 Per Year) None
Contract Maintenance Charge $25.00
Investment Division Annual Expenses1
(as a percentage of average Variable
Account assets)
Mortality and Expense Risk Charge 0.85%
Administrative Expense Charge 0.00%
Other Fees and Expenses
of the Variable Account 0.00%
Total Investment Division
Annual Expenses 0.85%
Eligible Fund Annual Expenses (1)
(as a percentage of Eligible Fund net assets, after expenses
reimbursements)
Total
Management Other
Eligible
Fees Expenses Fund
Expenses
Portfolio
Alger American Growth Portfolio
Alger American Small
Capitalization Portfolio
Federated Equity Growth and Income Fund
Federated U.S. Government Bond Fund
INVESCO VIF-High Yield Portfolio
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
Janus Aspen Aggressive
Growth Fund Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide
Growth Fund Portfolio
Lexington Emerging Markets Fund
Montgomery Growth Fund
Montgomery International
Small-Cap Fund
Schwab Money Market Portfolio
SteinRoe Capital Appreciation Fund
Strong Discovery Fund II
TCI Growth
TCI International
Van Eck Gold and Natural Resources Fund
_________________________________
(1) The figures given above reflect the amounts actually deducted
from the Eligible Funds during ----. From time to time, an
Eligible
Fund's investment adviser, in its sole discretion, may waive all or
part of its fees and/or voluntarily assume certain expenses. For
a
more complete description of the Eligible Funds' fees and expenses,
see the Eligible Funds' prospectuses. As of the date of this
Prospectus, certain fees are being waived or expenses are being
assumed, in each case on a voluntary basis. Without such waivers
or
reimbursements, the total Eligible Fund annual expenses that would
have been incurred for the last completed fiscal year would be:
- -----
% for Federated Equity Growth & Income Fund; -----% for Federated
U.S. Government Bond Fund; -----% for INVESCO VIF-High Yield
Portfolio; -----% for INVESCO VIF-industrial Income Portfolio;
- -----%
for INVESCO VIF-Total Return Portfolio; -----% for Janus Aspen
Aggressive Growth; -----% for Janus Aspen Growth Portfolio; -----%
for Janus Aspen Worldwide Growth; -----% for Lexington Emerging
Markets Fund; and -----% for Schwab Money Market Portfolio. See
the
Eligible Funds' prospectuses for a discussion of fee waiver and
expense reimbursements.
Examples(1)
If you retain, annuitize, or surrender the Contract at the end of
the
applicable time period, you would pay the following fees and
expenses
on a $1,000 investment, assuming a 5% annual return on assets:
Investment Divisions 1 Year 3 Years
Alger American Growth Portfolio
Alger American Small
Capitalization Portfolio
Federated Equity Growth and Income Fund
Federated U.S. Government Bond Fund
INVESCO VIF-High Yield Portfolio
INVESCO VIF-Industrial Income Portfolio
INVESCO VIF-Total Return Portfolio
Janus Aspen Aggressive
Growth Fund Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide
Growth Fund Portfolio
Lexington Emerging Markets Fund
Montgomery Growth Fund
Montgomery International
Small-Cap Fund
Schwab Money Market Portfolio
SteinRoe Capital Appreciation Fund
Strong Discovery Fund II
TCI Growth
TCI International
Van Eck Gold and Natural Resources Fund
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN
THOSE SHOWN, SUBJECT TO THE GUARANTEES IN THE CONTRACT.
These examples assume that no premium taxes have been assessed
(although premium taxes may be
applicable - see "Premium Tax," page 26).
(1) The Eligible Fund Annual Expenses and these examples are based
on
data provided by the Eligible Funds. The Company has no reason to
doubt the accuracy or completeness of that data, but the Company
has
not verified the Eligible Funds' figures. In preparing the
Eligible
Fund Expense table and the Examples above, the Company has relied
on
the figures provided by the Eligible Funds.
___________________________________________________________________
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
AND THE VARIABLE ACCOUNT
___________________________________________________________________
Great-West Life & Annuity Insurance Company ("GWL&A")
The Company is a stock life insurance company originally
organized under the laws of the state of Kansas as the National
Interment Association. Its name was changed to Ranger National
Life
Insurance Company in 1963 and to Insuramerica Corporation prior to
changing to its current name in 1982. In September of 1990, GWL&A
redomesticated and is now organized under the laws of the state of
Colorado.
GWL&A is authorized to engage in the sale of life insurance,
accident and health insurance and annuities. It is qualified to do
business in the District of Columbia, Puerto Rico and 49 states in
the United States.
GWL&A is a wholly-owned subsidiary of The Great-West Life
Assurance Company. The Great-West Life Assurance Company is a
subsidiary of Great-West Lifeco Inc., a holding company.
Great-West
Lifeco Inc. is in turn a subsidiary of Power Financial Corporation
of
Canada, a financial services company. Power Corporation of Canada,
a holding and management company, has voting control of Power
Financial Corporation of Canada. Mr. Paul Desmarais, through a
group
of private holding companies, which he controls has voting control
of
Power Corporation of Canada.
The Series Account
The Variable Annuity-1 Series Account ("Series Account") was
established by the Company as a separate account under the laws of
the State of Colorado on July 24, 1995. The Series Account is
registered with the Securities and Exchange Commission
("Commission") under the Investment Company Act of 1940, as amended
("1940 Act"), as a unit investment trust. The Series Account meets
the definition of a separate account under the federal securities
laws. However, such registration does not involve supervision of
the management of the Series Account or the Company by the
Commission.
The Company does not guarantee the investment performance of
the Series Account. The portion of the Annuity Account Value
attributable to the Series Account and the amount of variable
annuity payments depend on the investment performance of the
Eligible Funds. Thus, the Contract Owner bears the full investment
risk for all Contributions allocated to the Series Account.
The Series Account is administered and accounted for as part
of the general business of the Company; but the income, capital
gains, or capital losses of each Investment Division are credited
to or charged against the assets held in that Investment Division
in accordance with the terms of the Contract, without regard to
other income, capital gains or capital losses of any other
Investment Division or arising out of any other business the
Company may conduct. Under Colorado law, the assets of the Series
Account are not chargeable with liabilities arising out of any
other business the Company may conduct. Nevertheless, all
obligations arising under the Contracts are generally corporate
obligations of the Company.
The Series Account currently has nineteen Investment Divisions
available for allocation of Contributions. If, in the future, the
Company determines that marketing needs and investment conditions
warrant, it may establish additional Investment Divisions which
will be made available to Owners to the extent and on a basis to be
determined by the Company, (See "Addition, Deletion, or
Substitution," page 12). Each Investment Division invests in
shares of an Eligible Fund, each having a specific investment
objective.
___________________________________________________________________
THE ELIGIBLE FUNDS
___________________________________________________________________
The Eligible Funds described below are offered exclusively for
use as funding vehicles for insurance products and, consequently,
are not publicly available mutual funds. Each Eligible Fund has
separate investment objectives and policies. As a result, each
Eligible Fund operates as a separate investment portfolio and the
investment performance of one Eligible Fund has no effect on the
investment performance of any other Eligible Fund. See the
Eligible Funds' prospectuses for more information.
The Alger American Fund
Alger American Small Capitalization Portfolio: Seeks long-term
capital appreciation by investing at least 65% of its total
assets, except during temporary defensive periods, in equity
securities of companies that, at the time of purchase, have
total market capitalization within the range of companies
included in the Russell 2000 Growth Index, updated quarterly.
The Russell 2000 Growth Index is designed to track the
performance of small capitalization companies with market
capitalizations which range from $ million to $ billion.
The Portfolio may invest up to 35% of its total assets in
equity securities of companies that, at the time of purchase,
have total market capitalization outside the range of
companies included in the Russell 2000 Growth Index and in
excess of that amount (up to 100% of its assets) during
temporary defensive periods.
Alger American Growth Portfolio: Seeks long-term capital
appreciation by investment of at least 65% of its assets,
except during temporary defensive periods, in equity
securities of companies that, at the time of purchase of the
securities, have total market capitalization of $1 billion or
greater. The Portfolio may invest up to 35% of its total
assets in equity securities of companies that, at the time of
purchase, have total market capitalization of less than $1
billion and in excess of that amount (up to 100% of its
assets) during temporary defensive periods.
Federated Investors Insurance Management Series
Federated Equity Growth and Income Portfolio: Seeks to achieve
long-term growth of capital as a primary objective and seeks
to provide income as a secondary objective through investment
of at least 65 % of its total assets (under normal
circumstances) in common stocks of "blue chip" companies.
Federated U.S. Government Bond Portfolio: Seeks to provide
current income through investment of at least 65% of its total
assets in securities which are primary or direct obligations
of the U.S. government or its agencies or instrumentalities or
which are guaranteed as to principal and interest by the U.S.
government, its agencies, or instrumentalities and in certain
collateralized mortgage obligations, and repurchase
agreements.
INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Industrial Income Portfolio: Seeks the best
possible current income while following sound investment
practices. Capital growth potential is an additional, but
secondary, consideration in the selection of portfolio
securities. The Industrial Income Portfolio seeks to achieve
its investment objective by investing in securities which will
provide a relatively high yield and stable return and which,
over a period of years, also may provide capital appreciation.
INVESCO VIF-Total Return Portfolio: Seeks a high total return
on investment through capital appreciation and current income.
The Total Return Portfolio seeks to achieve its investment
objective by investing in a combination of equity securities
(consisting of common stocks and, to a lesser degree,
securities convertible into common stock) and fixed income
securities.
INVESCO VIF-High Yield Portfolio: Seeks a high level of
current income by investing substantially all of its assets in
lower rated bonds and other debt securities and in preferred
stock. These bonds and other securities are sometimes
referred to as "junk bonds." The High Yield Portfolio pursues
its investment objective through investment in a variety of
long-term, intermediate-term, and short-term bonds. Potential
capital appreciation is a factor in the selection of
investments, but is secondary to the Portfolio's primary
objective.
Janus Aspen Series
Janus Aspen Aggressive Growth Portfolio: Seeks long-term
growth of capital in a manner consistent with the preservation
of capital. The Portfolio normally invests at least 50% of
its equity assets in securities issued by medium-sized
companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S&P
MidCap 400 Index (the "MidCap Index"). Companies whose
capitalization falls outside this range after the Portfolio's
initial purchase continue to be considered medium-sized
companies for the purpose of this policy. As of December 29,
1995, the MidCap Index included companies with capitalizations
between approximately $118 million to $7.5 billion. The range
of the MidCap Index is expected to change on a regular basis.
Subject to the above policy, the Portfolio may also invest in
smaller or larger issuers.
Janus Aspen Growth Portfolio: Seeks long-term growth of
capital in a manner consistent with the preservation of
capital. The Portfolio pursues its objective by investing in
common stocks of companies of any size. This Portfolio
generally invests in larger, more established issuers.
Janus Aspen Worldwide Growth Portfolio: Seeks long-term growth
of capital in a manner consistent with the preservation of
capital. The Portfolio pursues its objective primarily
through investments in common stocks of foreign and domestic
issuers. The Portfolio has the flexibility to invest on a
worldwide basis in companies and organizations of any size,
regardless of country of organization or place of principal
business activity. The Portfolio normally invests in issuers
from at least five different countries, including the United
States; however, it may at times invest in fewer than five
countries or even a single country.
Lexington Emerging Markets Fund, Inc.
Lexington Emerging Markets Fund: Seeks long term growth of
capital primarily through investment in equity securities of
companies domiciled in, or doing business in emerging
countries and emerging markets. For purposes of its
investment objective, the Fund considers emerging country
equity securities to be any country whose economy and market
the World Bank or United Nations considers to be emerging or
developing. The Fund may also invest in equity securities and
equivalents traded in any market of companies that derive 50%
or more of their total revenue from either goods or services
produced in such emerging countries or markets or sales made
in such countries.
Montgomery Variable Series
Montgomery Growth Fund: Seeks capital appreciation by
investing at least 65% of its total assets (under normal
conditions) in the equity securities of domestic corporations.
In addition to capital appreciation, this Fund emphasizes
value. While the Fund emphasizes investments in common stock,
it also invests in other types of equity securities (including
options on equity securities, warrants and futures contracts
on equity securities). The Fund may invest up to 35% of its
total assets in debt securities rated within the three highest
grades of S&P, Moody's or Fitch, or unrated debt securities
deemed to be of comparable quality by its portfolio manager
using guidelines approved by the Board of Trustees.
Montgomery International Small Cap Fund: Seeks capital
appreciation by investing at least 65% of its total assets
(under normal conditions) in equity securities of companies
outside the United States having total market capitalizations
of less than $1 billion, sound fundamental values and
potential for long-term growth at a reasonable price. The
Fund generally invests the remaining 35% of its total assets
in a similar manner but may invest those assets in companies
having market capitalizations of $1 billion or more, or in
debt securities, including up to 5% of its total assets in
debt securities rated below investment grade.
Schwab Annuity Portfolios
Schwab Money Market Portfolio: Seeks maximum current income
consistent with liquidity and stability of capital. It seeks
to achieve its objective by investing in short-term money
market instruments. This Portfolio is neither insured nor
guaranteed by the United States Government and there can be no
assurance that it will be able to maintain a stable net asset
value of $1.00 per share.
SteinRoe Variable Investment Trust
SteinRoe Capital Appreciation Fund: Seeks capital growth by
investing primarily in common stocks, convertible securities,
and other securities selected for prospective capital growth.
Strong Discovery Fund II, Inc.
Strong Discovery Fund II: Seeks capital growth by investing in
a diversified portfolio of securities that the Fund's
investment adviser believes represent attractive growth
opportunities. The Fund normally emphasizes equity
investments, although it has the flexibility to invest in any
security the Fund's investment adviser believes has the
potential for capital appreciation.
TCI Portfolios, Inc.
TCI Growth: Seeks capital growth by investing in common
stocks (including securities convertible into common stocks
and other equity equivalents) and other securities that meet
certain fundamental and technical standards of selection and
have, in the opinion of the investment manager, better-than-
average potential for appreciation. The Portfolio's investment
manager intends to stay fully invested in such securities,
regardless of the movement of stock prices generally.
TCI International: Seeks capital growth by investing primarily
in an internationally diversified portfolio of securities of
foreign companies that meet certain fundamental and technical
standards of selection and have, in the opinion of the
investment manager, potential for capital appreciation. The
Portfolio will invest primarily in common stocks (defined to
include depository receipts for common stock and other equity
equivalents) of such companies. Investment in securities for
foreign issues typically involves a greater degree of risk
than an investment in domestic securities.
Van Eck Worldwide Insurance Trust
Van Eck Gold and Natural Resources Fund: Seeks long-term
capital appreciation by investing in equity and debt
securities of companies engaged in the exploration,
development, production and distribution of gold and other
natural resources, such as strategic and other metals,
minerals, forest products, oil, natural gas and coal. Current
income is not an investment objective.
The two Alger American Funds are advised by Alger Management
of New York, New York. The two Federated Investors Insurance
Management Services Portfolios are advised by Federated Advisers of
Pittsburgh, Pennsylvania. The three INVESCO Variable Investment
Funds, Inc., Portfolios are advised by INVESCO Funds Group, Inc.,
of Denver, Colorado. The three Janus Aspen Series Portfolios are
advised by Janus Capital Corporation of Denver, Colorado. The
Lexington Emerging Markets Fund is advised by Lexington Management
Corporation of Saddle Brook, New Jersey. The two Montgomery
Variable Series Funds are advised by Montgomery Asset Management,
L.P. of San Francisco, California. The Schwab Money Market
Portfolio is advised by Charles Schwab Investment Management, Inc.,
of San Francisco, California. The SteinRoe Capital Appreciation
Fund is advised by Stein Roe & Farnham Incorporated of Chicago,
Illinois. Strong Discovery Fund II is advised by Strong/Corneliuson
Capital Management, Inc. of Milwaukee, Wisconsin. The two TCI
Portfolios, Inc., are advised by Investors Research Corporation of
Kansas City, Missouri, advisers to the Twentieth Century family of
mutual funds. The Van Eck Gold and Natural Resources Fund is
advised by Van Eck Associates Corporation of New York, New York.
***
Meeting investment objectives depends on various factors,
including, but not limited to, how well the Eligible Fund managers
anticipate changing economic and market conditions. THERE IS NO
ASSURANCE THAT ANY OF THESE ELIGIBLE FUNDS WILL ACHIEVE THEIR
STATED OBJECTIVES.
The Contracts are not deposits of, or guaranteed or endorsed
by, any bank, nor is the Contract federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any
other government agency. The Contracts involve certain investment
risks, including possible loss of principal.
Each Eligible Fund is registered with the Commission as an
open-end management investment company or portfolio thereof. The
Commission does not supervise the management or the investment
practices and policies of any of the Eligible Funds.
Since some of the Eligible Funds are available to registered
separate accounts of other insurance companies offering variable
annuity and variable life products, there is a possibility that a
material conflict may arise between the interests of the Series
Account and one or more other separate accounts investing in the
Eligible Funds. In the event of a material conflict, the affected
insurance companies are required to take any necessary steps to
resolve the matter, including stopping their separate accounts from
investing in the Eligible Funds. See the Eligible Funds'
prospectuses for more details.
Additional information concerning the investment objectives
and policies of all of the Eligible Funds and the investment
advisory services and administrative services and charges can be
found in the current prospectuses for the Eligible Funds, which can
be obtained by calling the Schwab Annuity Service Center at 800-
838-0650, or by writing to Schwab Annuity Service Center, P.O. Box
7785, San Francisco, California 94120-9420. The Eligible Funds'
prospectuses should be read carefully before any decision is made
concerning the allocation of Contributions to, or Transfers among,
the Investment Divisions.
Addition, Deletion, or Substitution
The Company does not control the Eligible Funds and cannot
guarantee that any of the Eligible Funds will always be available
for allocation of Contributions or Transfers. The Company retains
the right to make changes in the Series Account and in its
investments. Currently, Schwab must approve certain changes.
GWL&A and Schwab reserve the right to eliminate the shares of
any Eligible Fund held by an Investment Division and to substitute
shares of another Eligible Fund or of another investment company,
for the shares of any Eligible Fund, if the shares of the Eligible
Fund are no longer available for investment or if, in our judgment,
investment in any Eligible Fund would be inappropriate in view of
the purposes of the Series Account. To the extent required by the
1940 Act, a substitution of shares attributable to the Owner's
interest in an Investment Division will not be made without prior
notice to the Owners and the prior approval of the Commission.
Nothing contained herein shall prevent the Series Account from
purchasing other securities for other series or classes of variable
annuity policies, or from effecting an exchange between series or
classes of variable policies on the basis of Requests made by you.
New Investment Divisions may be established when, in our
discretion, marketing, tax, investment or other conditions so
warrant. Any new Investment Divisions will be made available to
Owners on a basis to be determined by us. Each additional
Investment Division will purchase shares in a Eligible Fund or in
another mutual fund or investment vehicle. We may also eliminate
one or more Investment Divisions if, in our sole discretion,
marketing, tax, investment or other conditions so warrant. In the
event any Investment Division is eliminated, we will notify the
Owners and request a re-allocation of the amounts invested in the
eliminated Investment Division.
In the event of any such substitution or change, we may make
such changes to your Contract as may be necessary or appropriate to
reflect such substitution or change. Furthermore, if deemed to be
in the best interests of persons having voting rights under the
Contracts, the Series Account may be operated as a management
company under the 1940 Act or any other form permitted by law, may
be de-registered under such Act in the event such registration is
no longer required, or may be combined with one or more other
separate accounts. Such changes will be made in compliance with
applicable law.
___________________________________________________________________
THE GUARANTEE PERIOD FUND
___________________________________________________________________
Guarantee Period Fund
Amounts allocated to the Guarantee Period Fund under the
Contract will be deposited to, and accounted for, in a non-unitized
separate account established by the Company under Section 10-7-401,
et. seq. of the Colorado Insurance Code and, accordingly, are not
part of the Series Account. A non-unitized separate account is a
separate account in which the Owner does not participate in the
performance of the assets through unit values. Therefore, Owners
allocating Contributions do not receive a unit ownership of assets
accounted for in this separate account. The assets accrue solely
to the benefit of the Company and any gain or loss in the separate
account is borne entirely by the Company. For amounts allocated to
the Guarantee Period Fund, Owners will receive the Contract
guarantees made by the Company.
Contributions allocated to or amounts transferred to the
Guarantee Period Fund will establish a new Guarantee Period of a
duration selected by the Owner from those currently being offered
by the Company. Every Guarantee Period offered by the Company will
have a duration of at least one year. Contributions allocated to
the Guarantee Period Fund will be credited on the Transaction Date.
Each Guarantee Period will have its own stated rate of
interest and Guarantee Period Maturity Date. The stated rate of
interest applicable to a Guarantee Period will depend on the date
the Guarantee Period is established and the duration chosen by the
Owner.
As of the date of this Prospectus, Guarantee Periods with
annual durations of 1 to 10 years are offered. The Guarantee
Periods may be changed in the future; however, any such
modification will not have an impact on any Guarantee Period then
in effect.
The value of amounts in each Guarantee Period is the Owner's
Contributions, less Premium Tax, if any, in that Guarantee Period,
plus interest earned, less amounts distributed, withdrawn (in whole
or in part), Transferred or applied to an annuity option, periodic
withdrawals, and charges deducted under the Contract. If a
Guarantee Period is broken, a Market Value Adjustment may be
assessed. Any such amount withdrawn or Transferred from a
Guarantee Period will be paid in accordance with the MVA formula
(See "Market Value Adjustment," page 15.)
Investments
The Company intends to invest in assets which, in the
aggregate, have characteristics, especially cash flow patterns,
reasonably related to the characteristics of its liabilities.
Various techniques will be used to achieve the objective of close
aggregate matching of assets and liabilities. The Company will
primarily invest in investment-grade fixed income securities
including:
Securities issued by the U.S. Government or its agencies
or instrumentalities, which issues may or may not be
guaranteed by the U.S. Government.
Debt securities which have an investment grade, at the
time of purchase, within the four highest grades assigned by
Moody's Investment Services, Inc. (Aaa, Aa, A or Baa),
Standard & Poor's Corporation (AA, AA, A or BBB) or any other
nationally recognized rating service.
Other debt instruments, including, but not limited to,
issues of banks or bank holding companies and of corporations,
which obligations, although not rated by Moody's, Standard &
Poor's, or other nationally recognized rating firms, are
deemed by the Company's management to have an investment
quality comparable to securities which may be purchased as
stated above.
Commercial paper, cash or cash equivalents, and other
short-term investments having a maturity of less than one year
which are considered by the Company's management to have
investment quality comparable to securities which may be
purchased as stated above.
In addition, the Company may invest in futures and options.
Financial futures and related options thereon and options on
securities are purchased solely for non-speculative hedging
purposes. The Company may sell a futures contract or purchase a
put option on futures or securities to protect the value of
securities held in or to be sold for the general account or the
non-unitized separate account in the event the securities prices
are anticipated to decline. Similarly, if securities prices are
expected to rise, the Company may purchase a futures contract or a
call option thereon against anticipated positive cash flow or may
purchase options on securities.
WHILE THE FOREGOING GENERALLY DESCRIBES THE INVESTMENT
STRATEGY FOR THE GUARANTEE PERIOD FUND, THE COMPANY IS NOT
OBLIGATED TO INVEST THE ASSETS ATTRIBUTABLE TO THE GUARANTEE PERIOD
FUND ACCORDING TO ANY PARTICULAR STRATEGY, EXCEPT AS MAY BE
REQUIRED BY COLORADO AND OTHER STATE INSURANCE LAWS, NOR WILL THE
STATED RATE OF INTEREST THAT THE COMPANY ESTABLISHES NECESSARILY
RELATE TO THE PERFORMANCE OF THE NON-UNITIZED SEPARATE ACCOUNT.
Subsequent Guarantee Periods
Prior to the date annuity payments commence, you may invest
the value of amounts held in a maturing Guarantee Period in any
Guarantee Period that we offer at that time. On the quarterly
statement issued prior to the end of any Guarantee Period, we will
notify you of the upcoming maturity of a Guarantee Period. THE
GUARANTEE PERIOD AVAILABLE FOR NEW CONTRIBUTIONS MAY BE CHANGED AT
ANY TIME, INCLUDING BETWEEN THE DATE OF NOTIFICATION OF A MATURING
GUARANTEE PERIOD AND THE DATE A SUBSEQUENT GUARANTEE PERIOD BEGINS.
Information regarding the current Guarantee Periods then available
and their stated rate of interest may be obtained by calling the
Schwab Annuity Service Center at:
1-800-838-0650.
If the Company receives no direction from the Contract Owner
by the Guarantee Period Maturity Date, the Company will
automatically allocate the amount from the maturing Guarantee
Period to a Guarantee Period equal in duration to the one just
ended. If at that time, the duration previously chosen is no
longer available, the amount will be allocated to the next shortest
available Guarantee Period duration. Similarly, if no allocation
instructions have been received, but the Guarantee Period equalling
the one then ending is no longer available, the amounts will be
allocated to the next shortest available Guarantee Period. If none
of the above is available, the value of matured Guarantee Periods
will be allocated to the Schwab Money Market Investment Division.
In any event, a Guarantee Period will not renew for a term equal in
duration to the one just ended if the Guarantee Period will mature
after the Payment Commencement Date. No Guarantee Period may
mature later than six months after a Payment Commencement Date.
For example, if a 3-year Guarantee Period matures and the Payment
Commencement Date begins 1 3/4 years from the Guarantee Period
Maturity Date, the matured value will be transferred to a 2-year
Guarantee Period.
Breaking A Guarantee Period
Any Transfer, withdrawal or the selection of an annuity option
prior to the Guarantee Period Maturity Date will be known as
breaking a Guarantee Period. When a Request to break a Guarantee
Period is received, the Guarantee Period that is closest to the
Guarantee Period Maturity Date will be broken first. If a
Guarantee Period is broken, a Market Value Adjustment may be
assessed. The Market Value Adjustment may increase or decrease the
value of the Guarantee Period Transferred or withdrawn. The Market
Value Adjustment may reduce the value of amounts held in a
Guarantee Period below the amount of your Contribution(s) allocated
to that Guarantee Period. (See Market Value Adjustment below.)
Interest Rates
Declared rates are effective annual rates of interest. The
rate is guaranteed throughout the Guarantee Period. FOR GUARANTEE
PERIODS NOT YET IN EFFECT, GWL&A MAY DECLARE INTEREST RATES
DIFFERENT THAN THOSE CURRENTLY IN EFFECT. When a subsequent
Guarantee Period begins, the rate applied will not be less than the
rate then applicable to new Contracts of the same type with the
same Guarantee Period.
The stated rate of interest must be at least equal to the
Guaranteed Interest Rate. The Company may declare higher rates.
The Guaranteed Interest Rate is based on the applicable state
standard non-forfeiture law. Please see Appendix A for the
standard non-forfeiture law rate applicable to the state in which
the Contract was issued.
The determination of the stated rate of interest is influenced
by, but does not necessarily correspond to, interest rates
available on fixed income investments which the Company may acquire
using funds deposited into the Guarantee Period Fund. In addition,
the Company will consider other items in determining the stated
rate of interest including regulatory and tax requirements, sales
commissions and administrative expenses borne by the Company,
general economic trends, and competitive factors.
Market Value Adjustment
Distributions from the amounts allocated to a Guarantee Period
due to a full surrender or partial withdrawal, Transfer,
application of amounts to the periodic withdrawal option or to
purchase an annuity, or distributions resulting from the death of
the Owner or Annuitant prior to a Guarantee Period Maturity Date
will be subject to a Market Value Adjustment ("MVA"). An MVA may
increase or decrease the amount payable on one of the above
described distributions. Amount available for a full surrender,
partial withdrawal or Transfer = amount Requested + MVA. The MVA
is calculated by multiplying the amount Requested by the Market
Value Adjustment Factor ("MVAF").
The MVA reflects the relationship as of the time of its
calculation between (a) the U.S. Treasury Strip ask side yield as
published in the Wall Street Journal on the last business day of
the week prior to the date the stated rate of interest was
established for the Guarantee Period; and (b) the U.S. Treasury
Strip ask side yield as published in the Wall Street Journal on the
last business day of the week prior to the week the Guarantee
Period is broken. There would be a downward adjustment if Treasury
rates at surrender exceed Treasury rates when the Guarantee Period
was created. There would be an upward adjustment if Treasury rates
at the time the Guarantee Period is broken, are lower than when the
Guarantee Period was created. The MVA factor is the same for all
Contracts.
1. The formula used to determine the MVA is:
MVA = (amount applied) X (MVAF)
The Market Value Adjustment Factor (MVAF) is:
MVAF = {[(1 + i)/(1 + j +.10%)] N/12} - 1
where:
a) i is the U.S. Treasury Strip ask side yield as
published in the Wall Street Journal on the last business
day of the week prior to the date the stated rate of
interest was established for the Guarantee Period. The
term of i is measured in years and equals the term of the
Guarantee Period;
b) j is the U.S. Treasury Strip ask side yield as
published in the Wall Street Journal on the last business
day of the week prior to the week the Guarantee Period is
broken. The term of j equals the remaining term to
maturity of the Guarantee Period, rounded up to the
higher number of years; and
c) N is the number of complete months remaining until
maturity.
If i + j differ by less than .10%, the MVA will equal 0. If
N
is less than 6, the MVA will
equal 0.
2. The Market Value Adjustment will apply to any Guarantee Period
six or more months prior to the Guarantee Period Maturity Date in
each of the following situations:
a) Transfer to another Guarantee Period or to an
Investment Division offered under this Contract; or
b) Surrenders, partial withdrawals, annuitization or
Periodic Withdrawals; or
c) A single sum payment upon death of the Owner or
Annuitant.
3. The Market Value Adjustment will not apply to any Guarantee
Period having fewer than six months prior to the Guarantee Period
Maturity Date in each of the following situations:
a) Transfer to an Investment Division offered under
this Contract; or
b) Surrenders, partial withdrawals, annuitization or
Periodic Withdrawals.
c) A single sum payment upon death of the Owner or
Annuitant.
See Appendix B for Illustrations of the MVA.
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APPLICATION AND CONTRIBUTIONS
___________________________________________________________________
Contributions
All Contributions may be paid at the Schwab Annuity Service
Center by a check payable to Great-West Life & Annuity Insurance
Company (the Company) or by transfer to the Company of available
funds from your Schwab account.
The initial Contribution for the Contract must be at least
$5,000 (or $2,000 if for an IRA). Subsequent Contributions must be
at least $500. This minimum initial investment may be reduced to
$1,000, but only if you participate in an Automatic Contribution
Plan and contribute at least $100 per month through a recurring
deposit. A confirmation will be issued to you upon the acceptance
of each Contribution.
Your Contract will be issued and your Contribution generally
will be accepted and credited within two business days after
receipt of an acceptable application and receipt of the initial
Contribution at the Schwab Annuity Service Center. The
Contribution can be paid by check (payable to GWL&A) or by transfer
to GWL&A of available funds or amounts from your account with
Schwab. Acceptance is subject to there being sufficient
information in a form acceptable to us and we reserve the right to
reject any application or Contribution.
The Schwab Annuity Service Center will process your
application and Contributions. If your application is complete and
your initial Contribution is being transferred from funds available
in your Schwab account, then the Contribution will generally be
credited within two business days following receipt of the
application. If your application is incomplete, the Schwab Annuity
Service Center will either complete the application from
information Schwab has on file, or contact you for the additional
information. No transfer of funds will be made from your Schwab
account until your application is complete. The funds will be
credited as Contributions to the Contract when they are
transferred.
If your Contribution is by check, and the application is
complete, Schwab will use its best efforts to credit the
Contribution on the day of receipt, but in all such cases it will
be credited to your Contract within two business days of receipt.
If your application is incomplete, the Schwab Annuity Service
Center will complete the application from information Schwab has on
file or contact you by telephone to obtain the required
information. If your application remains incomplete for five
business days, we will return to you both the check and the
application unless you consent to our retaining the initial
Contribution and crediting it as soon as the requirements are
fulfilled.
A Contract may be returned within ten days after receipt, or
longer where required by law ("Free Look Period"). During the Free
Look Period, all contributions will be processed as follows:
(1) Amounts to be allocated to one or more of the then
available Guarantee Periods will be allocated as
directed, effective upon the Transaction Date.
(2) Amounts the Owner has directed to be allocated to one or
more of the Investment Divisions will first be allocated
to the Schwab Money Market Investment Division until the
next Transaction Date following the end of the Free Look
Period plus five calendar days. On that date, the
Variable Account Value held in the Schwab Money Market
Investment Division will be allocated to the Investment
Divisions selected by the Owner.
(3) During the Free Look Period, you may change the
allocation percentages among the Investment Divisions
and/or your selection of Investment Divisions to which
Contributions will be allocated after the Free Look
Period.
(4) If the Contract is returned, the contract will be void
from the start and the greater of: (a) Contributions
received or (b) the Annuity Account Value less
surrenders, withdrawals and distributions, will be
refunded. Exercising the return privilege requires the
return of the Contract to the Company or to the Schwab
Annuity Service Center.
Amounts the Owner has contributed from a 1035 exchange of the
Schwab Investment Advantage Annuity Contract will be immediately
allocated to the Investment Divisions selected by the Owner. If
the Contract is returned, it will be void from the start and the
greater of: (a) Contributions received or (b) the Annuity Account
Value less surrenders, withdrawals and distributions, will be
refunded.
Additional Contributions may be made at any time prior to the
Payment Commencement Date, as long as the Annuitant is living.
Additional Contributions must be at least $500 or $100 per month if
under an ACP.
Total Contributions may exceed $1,000,000 with our prior
approval.
The Company reserves the right to modify the limitations set
forth in this section.
___________________________________________________________________
ANNUITY ACCOUNT VALUE
___________________________________________________________________
Before the date annuity payments commence, your Annuity
Account Value is the sum of each Variable and Fixed Sub-Account
established under your Contract.
Before the annuity commencement date, the Variable Account
Value is the total dollar amount of all Accumulation Units under
each of your Variable Sub-Accounts. Initially, the value of each
Accumulation Unit was set at $10.00. Each Variable Sub-Account's
value prior to the annuity commencement date is equal to: (a) net
Contributions allocated to the corresponding Investment Division;
plus or minus (b) any increase or decrease in the value of the
assets of the Variable Sub-Account due to investment results; less
(c) the daily Mortality and Expense Risk Charge; less (d)
reductions for the Contract Maintenance Charge deducted on the last
business day of each Contract Year; less (e) any applicable
Transfer Fees; and less (f) any withdrawals or Transfers from the
Variable Sub-Account.
A Valuation Period is the period between successive Valuation
Dates. It begins at the close of the New York Stock Exchange
(generally 4:00 p.m. ET) on each Valuation Date and ends at the
close of the New York Stock Exchange on the next succeeding
Valuation Date. A Valuation Date is each day that the New York
Stock Exchange is open for regular business. The value of an
Investment Division's assets is determined at the end of each
Valuation Date. To determine the value of an asset on a day that
is not a Valuation Date, the value of that asset as of the end of
the previous Valuation Date will be used.
The Variable Account Value is expected to change from
Valuation Period to Valuation Period, reflecting the investment
experience of the selected Investment Division(s) as well as the
deductions for charges.
Contributions which you allocate to an Investment Division are
used to purchase Variable Accumulation Units in the Investment
Division(s) you select. The number of Accumulation Units to be
credited will be determined by dividing the portion of each
Contribution allocated to the Investment Division by the value of
an Accumulation Unit determined at the end of the Valuation Period
during which the Contribution was received. In the case of the
initial Contribution, Accumulation Units for that payment will be
credited to the Variable Account Value (and, except for certain
1035 exchanges), held in the Schwab Money Market Investment
Division until the end of the Free Look Period plus five calendar
days (see "Application and Contributions," page 16). In the case
of any subsequent Contribution, Accumulation Units for that payment
will be credited at the end of the Valuation Period during which we
receive the Contribution. The value of an Accumulation Unit for
each Investment Division for a Valuation Period is established at
the end of each Valuation Period and is calculated by multiplying
the value of that unit at the end of the prior Valuation Period by
the Investment Division's Net Investment Factor for the Valuation
Period.
Unlike a brokerage account, amounts held under a Contract are
not covered by the Securities Investor Protection Corporation
("SIPC") .
___________________________________________________________________
TRANSFERS
___________________________________________________________________
In General
Prior to the Payment Commencement Date you may Transfer all or
part of your Annuity Account Value among and between the Investment
Divisions and the available Guarantee Periods by telephone or by
sending a Request to the Schwab Annuity Service Center. The
Request must specify the amounts being Transferred, the Investment
Division(s) and/or Guarantee Period(s) from which the Transfer is
to be made, and the Investment Division(s) and/or Guarantee
Period(s) that will receive the Transfer.
Currently, there is no limit on the number of Transfers you
can make among the Investment Divisions during any Contract Year.
There is no charge for the first ten Transfers each Contract Year,
but there will be a charge of $10 for each additional Transfer in
each Contract Year. We reserve the right to limit the number of
Transfers you make. All Transfers made on a single Transaction
Date will be aggregated to count as only one Transfer toward the
ten free Transfers; however, if a one time rebalancing Transfer
also occurs on the Transaction Date, it will be counted as a
separate and additional Transfer.
Transfers involving the Guarantee Period Fund (including
Transfers to or from the Investment Division(s)) are not limited
during any calendar year. These Guarantee Period Fund Transfers
are counted against your ten free Transfer as discussed above. The
$10 charge will apply to each Transfer made in excess of the first
ten Transfers each calendar year.
A Transfer generally will be effective on the date the Request
for Transfer is received by the Schwab Annuity Service Center if
received before 4:00 p.m. Eastern Time. Under current law, there
will not be any tax liability to you if you make a Transfer.
Transfers involving the Investment Divisions will result in
the purchase and/or cancellation of Accumulation Units having a
total value equal to the dollar amount being Transferred to or from
a particular Investment Division. The purchase and/or cancellation
of such units generally shall be made using the Variable Account
Value as of the end of the Valuation Date on which the Transfer is
effective.
When a Transfer is made from amounts in a Guarantee Period
before the Guarantee Period Maturity Date, the amount Transferred
may be subject to a Market Value Adjustment. (See "Market Value
Adjustment," page 15.) A Request for Transfer from amounts in a
Guarantee Period made prior to the Guarantee Period Maturity Date
for Transfers on the Guarantee Period Maturity Date will not be
counted for the purpose of determining any Transfer Fee on
Transfers in excess of the ten Transfers per year if these
Transfers are to take place on the Guarantee Period Maturity Date.
Possible Restrictions
We reserve the right without prior notice to modify, restrict,
suspend or eliminate the Transfer privileges (including telephone
Transfers) at any time. For example, restrictions may be necessary
to protect Owners from adverse impacts on portfolio management of
large and/or numerous Transfers by market timers or others. We
have determined that the movement of significant amounts from one
Investment Division to another may prevent the underlying Eligible
Fund from taking advantage of investment opportunities because the
Eligible Fund must maintain a significant cash position in order to
handle redemptions. Such movement may also cause a substantial
increase in Eligible Fund transaction costs which must be
indirectly borne by Owners. Therefore, we reserve the right to
require that all Transfer Requests be made by the Owner and not by
an Owner's designee and to require that each Transfer Request be
made by a separate communication to us. We also reserve the right
to request that each Transfer Request be submitted in writing and
be manually signed by the Owner; facsimile Transfer Requests may
not be allowed. Transfers among the Investment Divisions may also
be subject to such terms and conditions as may be imposed by the
Eligible Funds.
Dollar Cost Averaging (Automatic Transfers)
The Owner may Request to automatically Transfer at regular
intervals, predetermined amounts from one Investment Division
selected from among those being allowed under this option (which
may be modified by the Company from time to time) to any of the
other Investment Divisions. The intervals between Transfers may
be monthly, quarterly, semi-annually or annually. The Transfer
will be initiated on the Transaction Date one frequency period
following the date of the Request. Transfers will continue on that
same day each interval unless terminated by you or for other
reasons as set forth in the Contract. If there are insufficient
funds in the applicable Variable Sub-Account on the date of
Transfer, no Transfer will be made; however, Dollar Cost Averaging
will resume once there are sufficient funds in the applicable
Variable Sub-Account. Dollar Cost Averaging will terminate
automatically upon the annuity commencement date. Amounts
transferred through Dollar Cost Averaging are not counted against
the ten free Transfers allowed in a calendar year.
Automatic Transfers must meet the following conditions:
1. The minimum amount that can be Transferred out of the
selected Investment Division is $100 per month.
2. The Owner must specify dollar amount to be Transferred,
designate the Investment Division(s) to which the Transfer will be
made and the percent to be allocated to such Investment
Division(s), the Accumulation Unit values will be determined on the
Transfer Date.
Dollar Cost Averaging may be used to purchase Accumulation
Units of the Investment Divisions over a period of time. The
Owner, by Request, may cease Dollar Cost Averaging at any time.
Participation in Dollar Cost Averaging does not, however, assure a
greater profit, nor will it prevent or necessarily alleviate losses
in a declining market. The Company reserves the right to modify,
suspend or terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Owner may Request to automatically Transfer among the
Investment Divisions on a periodic basis by electing the Rebalancer
Option. This option automatically reallocates the Variable Account
Value to maintain a particular allocation among Investment
Divisions selected by the Owner. The amount allocated to each
Investment Division will increase or decrease at different rates
depending on the investment experience of the Investment Division.
The Owner may Request that the rebalancing occur one time
only, in which case the Transfer will take place on the Transaction
Date of the Request. This Transfer will count as one Transfer
towards the ten free Transfers allowed in a calendar year. (See
"Transfer Fee," page 26.)
Rebalancing may also be set up on a quarterly, semiannual or
annual basis, in which case the first Transfer will be initiated on
the Transaction Date one frequency period following the date of the
Request. On the Transaction Date for the specified Request, assets
will be automatically reallocated to the selected Investment
Divisions. Rebalancing will continue on the same Transaction Date
for subsequent periods. In order to participate in the Rebalancer
Option, the entire Variable Account Value must be included.
Transfers set up with these frequencies will not count against the
ten free Transfers allowed in a calendar year.
The Owner must specify the percentage of Variable Account
Value to be allocated to each Investment Division and the frequency
of rebalancing. The Owner, by Request, may modify the allocations
or cease the Rebalancer Option at any time. The Rebalancer Option
will terminate automatically upon the annuity commencement date.
Participation in the Rebalancer Option and Dollar Cost Averaging at
the same time is not allowed. Participation in the Rebalancer
Option does not assure a greater profit, nor will it prevent or
necessarily alleviate losses in a declining market. The Company
reserves the right to modify, suspend, or terminate the Rebalancer
Option at any time.
___________________________________________________________________
CASH WITHDRAWALS
___________________________________________________________________
Withdrawals
You (the Owner) may withdraw from the Contract all or part of
your Annuity Account Value at any time during the life of the
Annuitant and prior to the date annuity payments commence by
Request at the Schwab Annuity Service Center subject to the rules
below. Federal or state laws, rules or regulations may apply. The
amount payable to you if you surrender your Contract is your
Annuity Account Value, with a Market Value Adjustment, if
applicable, on the effective date of the surrender, and less any
applicable Premium Tax. No withdrawals may be made after the date
annuity payments commence.
A Request for a partial withdrawal will result in a reduction
in your Annuity Account Value equal to the sum of the dollar amount
withdrawn. A Market Value Adjustment may apply. (See "Market
Value Adjustment," page 15.) The partial withdrawal proceeds may be
greater or less than the amount requested, depending on the effect
of the Market Value Adjustment.
The minimum partial withdrawal before application of the MVA
is $500. Partial withdrawals are unlimited; however, you must
specify the Investment Division(s) or Guarantee Period(s) from
which the withdrawal is to be made. After any partial withdrawal,
if the remaining Annuity Account Value is less than $2,000, then a
full surrender may be required.
The following terms apply:
(a) No partial withdrawals are permitted after the date
annuity payments commence.
(b) A partial withdrawal will be effective upon the
Transaction Date.
(c) A partial withdrawal from amounts in a Guarantee Period
may be subject to the Market Value Adjustment provisions,
the Guarantee Period Fund provisions of the Contract, and
the terms of the attached Guarantee Period Fund Rider(s),
if any.
Withdrawals may be taxable (this includes Periodic
Withdrawals, discussed below). Moreover, the Internal Revenue Code
(the "Code") provides that a 10% penalty tax may be imposed on the
taxable portions of certain early withdrawals. The Code generally
requires us to withhold federal income tax from withdrawals.
However, generally you will be entitled to elect, in writing, not
to have tax withholding apply unless withholding is mandatory for
your Contract. Withholding applies to the portion of the
withdrawal which is included in your income and subject to federal
income tax. The tax withholding rate is 10% of the taxable amount
of the withdrawal. Withholding applies only if the taxable amount
of the withdrawal is at least $200. Some states also require
withholding for state income taxes. (See "Federal Tax Matters,"
page 31.)
Withdrawal Requests must be in writing to ensure that your
instructions regarding withholding are followed. If an adequate
election is not made, the Request will be denied and no withdrawal
or partial withdrawal will be processed.
After a withdrawal of all of your total Annuity Account Value,
or at any time that your Annuity Account Value is zero, all your
rights under the Contract will terminate.
Since IRAs are offered by this Prospectus, reference should be
made to the applicable provisions of the Code for any additional
limitations or restrictions on cash withdrawals.
___________________________________________________________________
TELEPHONE TRANSACTIONS
___________________________________________________________________
We will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if we follow
such procedures we will not be liable for any losses due to
unauthorized or fraudulent instructions. However, we may be liable
for such losses if we do not follow those reasonable procedures.
The procedures we will follow for telephone transactions may
include requiring some form of personal identification prior to
acting on instructions received by telephone, providing written
confirmation of the transaction, and/or tape recording the
instructions given by telephone.
We reserve the right to suspend telephone transaction
privileges at any time, for some or all Contracts, and for any
reason. Withdrawals are not permitted by telephone.
___________________________________________________________________
DEATH BENEFIT
___________________________________________________________________
Payment of Death Benefit
Before the date annuity payments commence, the death benefit,
if any, will be equal to the greater of: (a) the Annuity Account
Value with an MVA, if applicable, as of the date the Request for
payment is received, less Premium Tax, if any, or (b) the sum of
Contributions paid, less partial withdrawals and/or Periodic
Withdrawals, less charges under the Contract, less Premium Tax, if
any. The death benefit will become payable following the Company's
receipt of a Request from the Beneficiary. When an Owner or the
Annuitant dies before the annuity commencement date and a death
benefit is payable to a Beneficiary, the death benefit proceeds
will remain invested in accordance with the allocation instructions
given by the Owner(s) until new allocation instructions are
Requested by the Beneficiary or until the death benefit is actually
paid to the Beneficiary. The death benefit will be determined as
of the date payments commence; however, on the date a payment
option is processed, amounts in the Variable Sub-Account will be
Transferred to the Money Market Investment Division unless the
Beneficiary otherwise elects by Request. Subject to the
distribution rules set forth below, payment of the death benefit
may be Requested to be made as follows:
A. Proceeds from the Variable Sub-Account(s)
1. payment in a single sum; or
2. payment under any of the variable annuity options
provided under this Contract.
B. Proceeds from the Guarantee Period(s)
1. payment in a single sum with respect to which a
Market Value Adjustment may apply; or
2. payment under any of the annuity options provided
under this Contract with respect to which a Market
Value Adjustment may apply; or
3. payment on the Guarantee Period Maturity Date so
that a Market Value Adjustment will not apply.
In any event, no payment of benefits provided under the
Contract will be allowed that does not satisfy the requirements of
Section 72(s) of the Code and any other applicable federal or state
law, rules or regulations.
DISTRIBUTION RULES
1. Death of Annuitant
Upon the death of the Annuitant while the Owner is living, and
before the annuity commencement date, the Company will pay the
death benefit to the Beneficiary unless there is a Contingent
Annuitant.
If a Contingent Annuitant was named by the Owner(s) prior to
the Annuitant's death, and the Annuitant dies before the annuity
commencement date while the Owner and Contingent Annuitant are
living, no death benefit will be payable by reason of the
Annuitant's death and the Contingent Annuitant will become the
Annuitant.
If the Annuitant dies after the date annuity payments commence
and before the entire interest has been distributed, any benefit
payable must be distributed to the Beneficiary in accordance with
and at least as rapidly as under the payment option applicable to
the Annuitant on the Annuitant's date of death.
If a corporation or other non-individual is an Owner, or if
the deceased Annuitant is an Owner, the death of the Annuitant will
be treated as the death of an Owner and the Contract will be
subject to the "Death of Owner" provisions described below.
2. Death of Owner
If the Owner is not the Annuitant:
(1) If there is a Joint Owner who is the surviving spouse of
the deceased Owner, the Joint Owner will become the Owner and
Beneficiary and may elect to take the death benefit or elect
to continue the Contract in force.
(2) In all other cases, the Company will pay the death
benefit to the Beneficiary even if a Joint Owner (who was not
the Owner's spouse on the date of the Owner's death), the
Annuitant and/or the Contingent Annuitant are alive at the
time of the Owner's death, unless the sole Beneficiary is the
deceased Owner's surviving spouse and the Beneficiary elects
to become the Owner and Annuitant and to continue the Contract
in force.
If the Owner is not the Annuitant, and the Owner dies after
annuity payments commence and before the entire interest has been
distributed while the Annuitant is living, any benefit payable
will continue to be distributed to the Annuitant at least as
rapidly as under the payment option applicable on the Owner's
death. All rights granted the Owner under the Contract will pass
to any surviving Joint Owner and, if none, to the Annuitant.
If the Owner is the Annuitant (Owner/Annuitant):
(1) If there is a Joint Owner who is the surviving spouse of
the deceased Owner and a Contingent Annuitant, the Joint Owner
will become the Owner and the Beneficiary, the Contingent
Annuitant will become the Annuitant, and the Contract will
continue in force.
(2) If there is a Joint Owner who is the surviving spouse of
the deceased Owner but no Contingent Annuitant, the Joint
Owner will become the Owner, Annuitant and Beneficiary and may
elect to take the death benefit or continue the Contract in
force.
(3) In all other cases, the Company will pay the death
benefit to the Beneficiary, even if a Joint Owner (who was not
the Owner's spouse on the date of the Owner's death),
Annuitant and/or Contingent Annuitant are alive at the time of
the Owner's death, unless the sole Beneficiary is the deceased
Owner's surviving spouse and the Beneficiary Requests to
become the Owner and Annuitant and to continue the Contract in
force.
Any death benefit payable to the Beneficiary upon an Owner's
death will be distributed as follows:
(1) If the Owner's surviving spouse is the person entitled to
receive benefits upon the Owner's death, the surviving spouse
will be treated as the Owner and will be allowed to take the
death benefit or continue the Contract in force; or
(2) If the Beneficiary is a non-spouse individual, she/he may
elect, not later than one year after the Owner's date of
death, to receive the death benefit in either a single sum or
payment under any of the variable or fixed annuity options
available under the Contract, provided that (a) such annuity
is distributed in substantially equal installments over the
life or life expectancy of the Beneficiary or over a period
not extending beyond the life expectancy of the Beneficiary;
and (b) such distributions begin not later than one year after
the Owner's date of death. If no election is received by the
Company from a non-spouse Beneficiary such that substantially
equal installments have begun not later than one year after
the Owner's date of death, then the entire amount must be
distributed within five years of the Owner's date of death.
The death benefit will be determined as of the date the
payments commence; or
(3) If a corporation or other non-individual entity is
entitled to receive benefits upon the Owner's death, the death
benefit must be completely distributed within five years of
the Owner's date of death.
Beneficiary
You may select one or more Beneficiaries. If more than one
Beneficiary is selected, unless you indicate otherwise, they will
share equally in any death benefit payable. You may change the
Beneficiary any time before the Annuitant's death.
You may, while the Annuitant is living, change the Beneficiary
by Request. A change of Beneficiary will take effect as of the
date the Request is processed by the Schwab Annuity Service Center,
unless a certain date is specified by the Owner. If the Owner dies
before the Request was processed, the change will take effect as of
the date the Request was made, unless the Company has already made
a payment or otherwise taken action on a designation or change
before receipt or processing of such Request. A beneficiary
designated irrevocably may not be changed without the written
consent of that Beneficiary, except as allowed by law.
The interest of any Beneficiary who dies before the Owner or
the Annuitant will terminate at the death of the Beneficiary. The
interest of any Beneficiary who dies at the time of, or within 30
days after, the death of an Owner or the Annuitant will also
terminate if no benefits have been paid to such Beneficiary, unless
the Owner otherwise indicates by Request. The benefits will then
be paid as though the Beneficiary had died before the deceased
Owner or Annuitant. If no Beneficiary survives the Owner or
Annuitant, as applicable, the Company will pay the death benefit
proceeds to the Owner's estate.
If the surviving spouse of an Owner is the surviving Joint
Owner, the surviving spouse will become the Beneficiary upon such
Owner's death and may elect to take the death benefit or may elect
to continue the Contract in force. If there is no surviving Joint
Owner, and no named Beneficiary is alive at the time at the time of
an Owner's death, any benefits payable will be paid to the Owner's
estate.
Contingent Annuitant
While the Annuitant is living, the Owner(s) may, by Request,
designate or change a Contingent Annuitant from time to time. A
change of Contingent Annuitant will take effect as of the date the
Request is processed at the Schwab Annuity Service Center, unless
a
certain date is specified by the Owner(s).
___________________________________________________________________
CHARGES AND DEDUCTIONS
___________________________________________________________________
No deductions are made from Contributions except for any
applicable Premium Tax. Therefore, the full amount of the
Contributions (less any applicable Premium Tax) are invested in the
Contract.
As more fully described below, charges under the Contract are
assessed only as deductions for Premium Tax, if applicable, for
certain Transfers, as a Contract Maintenance Charge, and as charges
against the assets in the Owner's Variable Sub-Account(s) for our
assumption of mortality and expense risks. In addition, a Market
Value Adjustment may apply to withdrawals and surrenders,
Transfers, amounts applied to purchase an annuity, and
distributions resulting from death of the Owner or Annuitant if the
amounts held in a Guarantee Period are paid out prior to the
Guarantee Period Maturity Date.
Mortality and Expense Risk Charge
We deduct a Mortality and Expense Risk Charge from your
Variable Sub-Account(s) at the end of each Valuation Period to
compensate us for bearing certain mortality and expense risks under
the Contract. This is a daily charge equal to an effective annual
rate of 0.85% of the value of the net assets in your Variable Sub-
Account(s). The approximate portion of this charge attributable to
mortality risks is 0.68%; the approximate portion of this charge
estimated to be attributable to expense risk is 0.17% of the value
of the net assets in your Variable Sub-Account(s). We guarantee
that this charge will never increase beyond 0.85%.
The Mortality and Expense Risk Charge is reflected in the
Accumulation Unit Values for each of your Variable Sub-Accounts.
Annuity Account Values and annuity payments are not affected
by changes in actual mortality experience incurred by us. The
mortality risks assumed by us arise from our contractual
obligations to make annuity payments determined in accordance with
the annuity tables and other provisions contained in the Contract.
Thus you are assured that neither the Annuitant's longevity nor an
unanticipated improvement in general life expectancy will adversely
affect the annuity payments under the Contract.
We bear substantial risk in connection with the death benefit
before the annuity commencement date, since we will pay a death
benefit equal to the greater of the Annuity Account Value with a
Market Value Adjustment, if applicable, as of the later of the date
of death or the date the Request for payment is received, less
Premium Tax, if any; or the sum of the Contributions paid, less
partial withdrawals and/or Periodic Withdrawals, less any charges
under Contract less Premium Tax, if any (i.e., we bear the risk of
unfavorable experience in your Variable Sub-Accounts).
The expense risk assumed is the risk that our actual expenses
in administering the Contracts and the Series Account will be
greater than anticipated, or exceed the amount recovered through
the Contract Maintenance Charge plus the amount, if any, recovered
through Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to
cover actual costs and risks assumed, the loss will fall on us.
Conversely, if this charge is more than sufficient, any excess will
be profit to us. Currently, we expect a profit from this charge.
Our expenses for distributing the Contracts will be borne by our
general assets, including any profits from this charge.
Contract Maintenance Charge
We currently deduct a $25 annual Contract Maintenance Charge
from the Annuity Account Value on each Contract anniversary to
partially cover our costs for administering the Contracts and the
Series Account. The Contract Maintenance Charge is deducted from
the Schwab Money Market Investment Division. If there are not
sufficient funds in the Schwab Money Market Investment Division to
cover the Contract Maintenance Charge, then the charge or any
portion thereof will be deducted on a pro rata basis from all your
Variable Sub-Accounts with current value. If the entire Annuity
Account is held in the Guarantee Period Fund or there is not enough
funds in any Variable Sub-Account to pay the entire charge, then
the Contract Maintenance Charge will be deducted on a pro rata
basis from amounts held in all Guarantee Periods. There is no MVA
on amounts deducted from a Guarantee Period for the Contract
Maintenance Charge. We do not expect a profit from amounts held in
the Contract Maintenance Charge.
Premium Tax
We may be required to pay state premium taxes or retaliatory
taxes currently ranging from 0% to 3.5% in connection with
Contributions or values under the Contracts. Depending upon
applicable state law, we will deduct charges for the premium taxes
we incur with respect to a particular Contract from the
Contributions, from amounts withdrawn, or from amounts applied on
the Payment Commencement Date. In some states, charges for both
direct premium taxes and retaliatory premium taxes may be imposed
at the same or different times with respect to the same
Contribution, depending on applicable state law.
Transfer Fee
There will be a $10 charge for each Transfer in excess of ten
Transfers in any calendar year. We do not expect a profit from the
Transfer fee for excess Transfers.
Other Taxes
Under present laws, we will incur state or local taxes (in
addition to the Premium Tax described above) in several states. No
charges are currently made for taxes other than Premium Tax.
However, we reserve the right to deduct charges in the future for
federal, state, and local taxes or the economic burden resulting
from the application of any tax laws that we determine to be
attributable to the Contracts.
Expenses of the Eligible Funds
The value of the assets in the Investment Divisions reflect
the value of Eligible Fund shares and therefore the fees and
expenses paid by each Eligible Fund. A complete description of the
fees, expenses, and deductions from the Eligible Funds are found in
the Eligible Funds' prospectuses. (See "The Eligible Funds," page
8.) Current prospectuses for the Funds can be obtained by calling
the Schwab Annuity Service Center at 800-838-0650, or by writing to
the Schwab Annuity Service Center, P.O. Box 7785, San Francisco,
California 94120-9420.
___________________________________________________________________
PAYMENT OPTIONS
___________________________________________________________________
Periodic Withdrawal Option
The Owner may Request that all or part of the Annuity Account
Value be applied to a Periodic Withdrawal Option. The amount
applied to a Periodic Withdrawal is the Annuity Account Value with
an MVA, if applicable, less Premium Tax, if any.
In Requesting Periodic Withdrawals, the Owner must elect:
- The withdrawal frequency of either 12-, 6-, 3-, or 1-
month intervals;
- A withdrawal amount; a minimum of $100 is required;
- The calendar day of the month on which withdrawals will
be made;
- One withdrawal option; and
- The allocation of withdrawals from the Owner's Variable
and/or Fixed Sub-Account(s) as follows:
1) Prorate the amount to be paid across all Variable
and Fixed Sub-Accounts in proportion to the assets
in each sub-account; or
2) Select the Variable and/or Fixed Sub-Account(s) from
which withdrawals will be made. Once the Variable
and/or Fixed Sub-Accounts have been depleted, the
Company will automatically prorate the remaining
withdrawals against all remaining available Variable
and/or Fixed Sub-Accounts unless the Owner Requests
the selection of another Variable and/or Fixed Sub-
Account.
The Owner may elect to change the withdrawal option and/or the
frequency once each calendar year.
While Periodic Withdrawals are being received:
1. the Owner may continue to exercise all contractual rights
that are available prior to electing an annuity option,
except that no Contributions may be made;
2. for Periodic Withdrawals from Guarantee Periods six or
more months prior to its Guarantee Period Maturity Date,
a Market Value Adjustment, if applicable, will be
assessed;
3. the Owner may keep the same investment options as were in
force before periodic withdrawals began;
4. charges and fees under the Contract continue to apply;
and
5. maturing Guarantee Periods renew into the shortest
Guarantee Period then available.
Periodic Withdrawals will cease on the earlier of the date:
1. the amount elected to be paid under the option selected
has been reduced to zero;
2. the Annuity Account Value is zero; or
3. the Owner Requests that withdrawals stop;
4. an Owner or the Annuitant dies.
The Owner must elect one of the following five (5) withdrawal
options:
1. Income for a Specified Period for at least thirty-six
(36) months - The Owner elects the duration over which
withdrawals will be made. The amount paid will vary based on
the duration.
2. Income of a Specified Amount for at least thirty-six (36)
months - The Owner elects the dollar amount of the
withdrawals. Based on the amount elected, the duration may
vary; or
3. Interest Only - The withdrawals will be based on the
amount of interest credited to the Guarantee Period Fund
between each withdrawal. Available only if 100% of the
account value is invested in the Guarantee Period Fund; or
4. Minimum Distribution - If this is an IRA contract, the
Owner may Request minimum distributions as specified under
Code Section 401(a)(9); or
5. Any Other Form for a period of at least thirty-six (36)
months - Any other form of Periodic Withdrawal which is
acceptable to the Company.
If Periodic Withdrawals cease, the Owner may resume making
Contributions. The Owner may elect to restart a Periodic
Withdrawal program; however, the Company may limit the number of
times the Owner may restart a Periodic Withdrawal program.
Periodic withdrawals may be taxable, subject to withholding
and subject to the 10% penalty tax. IRAs are subject to complex
rules with respect to restrictions on and taxation of
distributions, including the applicability of penalty taxes. A
competent tax adviser should be consulted before a Periodic
Withdrawal Option is requested. (See "Federal Tax Matters," page
31.)
Annuity Date
The date annuity payments commence may be chosen when the
Contract is purchased or at a later date. This date must be at
least one year after the initial Contribution. In the absence of
an election, the annuity date is the first day of the month of the
Annuitant's 91st birthday.
If an option has not been elected within 30 days of the
annuity commencement date, the Annuity Account Value held in the
Fixed Sub-Account(s) will be applied under Annuity Payment Option
3, discussed below, to provide payments for life with a guaranteed
period of 20 years. The Annuity Account Value held in the
Variable Sub-Account(s) will be applied under Variable Annuity
Payment Option 1, discussed below, to provide payments for life
with a guaranteed period of 20 years.
Under section 401(a)(9) of the Code, a Contract which is
purchased and used in connection with an Individual Retirement
Account or with certain other plans qualifying for special federal
income tax treatment is subject to complex "minimum distribution"
requirements, which require that distributions under such a plan
must begin by a specific date, and also that the entire interest of
the plan participant must be distributed within certain specified
periods under formulas that specify minimum annual distributions.
The application of the minimum distribution requirements to each
person will vary according to the person's age and other
circumstances. A prospective purchaser may wish to consult a
competent tax adviser regarding the application of the minimum
distribution requirements. (See "Federal Tax Matters," page 31.)
Annuity Options
An annuity option may be selected by the Owner when the
Contract is purchased, or at a later date. This selection may be
changed, by Request, at any time up to 30 days before the annuity
date. In the absence of an election, payments will automatically
commence on the annuity date as described above. The amount to be
applied is the Annuity Account Value on the annuity date. The
minimum amount that may be withdrawn from the Annuity Account Value
to purchase an annuity payment option is $2,000 with an MVA, if
applicable. If the amount is less than $2,000, the Company may pay
the amount in a single sum subject to the Contract provisions
applicable to a partial withdrawal. Payments may be elected to be
received monthly, quarterly, semi-annually or annually. Payments
to be made under the annuity payment option selected must be at
least $50. The Company reserves the right to make payments using
the most frequent payment interval which produces a payment of not
less than $50. The maximum amount that may be applied under any
payment option is $1,000,000, unless prior approval is obtained
from the Company.
A single sum payment may be elected. If it is, then the
amount to be paid is the Surrender Value. If the Owner elects a
variable annuity with funds from the Owner's Variable Sub-Accounts,
then the amount to be applied is the Annuity Account Value held in
the Variable Sub-Account(s), as of the annuity commencement date,
less any applicable Premium Tax. If the Owner elects a fixed
annuity with funds from the Fixed Sub-Accounts, then the amount to
be applied is the Annuity Account Value held in the Fixed Sub-
Account(s), as of the annuity commencement date with an MVA, if
applicable, less any applicable Premium Tax.
Fixed Annuity Payment Options
Option 1: Income of Specified Amount
The amount applied under this option may be paid in equal
annual, semiannual, quarterly or monthly installments of the dollar
amount elected for not more than 240 months. Upon death of the
Annuitant, the Beneficiary will begin to receive the remaining
payments at the same interval that was elected by the Owner.
Option 2: Income for a Specified Period
Payments are paid annually, semiannually, quarterly or
monthly, as elected, for a selected number of years not to exceed
240 months. Upon death of the Annuitant, the Beneficiary will
begin to receive the remaining payments at the same interval that
was elected by the Owner.
Option 3: Fixed Life Annuity with Guaranteed Period
This option provides for monthly payments during a designated
period and thereafter throughout the lifetime of the Annuitant.
The designated period may be 5, 10, 15 or 20 years. Upon death of
the Annuitant, for each remaining designated period, the amounts
payable under this payment option will be paid to the Beneficiary.
Option 4: Fixed Life Annuity
This annuity is payable monthly during the lifetime of the
Annuitant, terminating with the last payment due prior to the death
of the Annuitant. Since no minimum number of payments is
guaranteed, this option may offer the maximum level of monthly
payments of the annuity options. It is possible that only one
payment may be made if the Annuitant died before the date on which
the second payment was due. No other payments nor death benefits
would be payable.
Option 5: Any Other Form
This option allows an Owner the ability to choose any other
form of annuity which is acceptable to the Company.
Variable Annuity Payment Options
Option 1: Variable Life Annuity with Guarantee Period
This option provides for payments during a designated period
and thereafter throughout the life time of the Annuitant. The
designated period may be 5, 10, 15 or 20 years. Upon death of the
Annuitant, for each remaining designated period, the amounts
payable under this payment option will be paid to the Beneficiary.
Option 2: Variable Life Annuity
This annuity is payable during the lifetime of the Annuitant.
The annuity terminates with the last payment due prior to the death
of the Annuitant. Since no minimum number of payments is
guaranteed, this option may offer the maximum level of monthly
payments of the annuity options. It is possible that only one
payment may be made if the Annuitant died before the date on which
the second payment was due. No other payments nor death benefits
would be payable.
Option 3: Any other Form
This option allows an Owner the ability to choose any other
form of annuity which is acceptable to the Company.
Variable annuity payment options are subject to the following
provisions:
Amount of First Payment
The first payment under a variable annuity payment option will
be based on the value of the amounts held in each Variable Sub-
Account on the 5th Valuation Date preceding the annuity
commencement date. It will be determined by applying the
appropriate rate to the amount applied under the payment option.
Annuity Units
The number of Annuity Units paid to the Annuitant for each
Variable Sub-Account is determined by dividing the amount of the
first monthly payment by its Accumulation Unit Value on the 5th
Valuation Date preceding the date the first payment is due. The
number of Annuity Units used to calculate each payment for a
Variable Sub-Account remains fixed during the Annuity Payment
Period.
Amount of Payments after the First
Payments after the first will vary depending upon the
investment experience of the Investment Divisions. The subsequent
amount paid from each sub-account is determined by multiplying (a)
by (b) where (a) is the number of sub-account Annuity Units to be
paid and (b) is the sub-account Annuity Unit value on the 5th
Valuation Date preceding the date the annuity payment is due. The
total amount of each variable annuity payment will be the sum of
the variable annuity payments for each Variable Sub-Account. The
Company guarantees that the dollar amount of each payment after
the first will not be affected by variations in expenses or
mortality experience.
Transfers After the Annuity Commencement Date
Once annuity payments have begun, no Transfers may be made
from a fixed annuity payment option to a variable annuity payment
option, or vice versa; however, for variable annuity payment
options, Transfers may be made among Investment Divisions.
Transfers after the annuity commencement date will be made by
converting the number of Annuity Units being Transferred to the
number of Accumulation Units of the Variable Sub-Account to which
the Transfer is made. The result will be that the next annuity
payment, if it were made at that time, would be the same amount
that it would have been without the Transfer. Thereafter, annuity
payments will reflect changes in the value of the new Annuity
Units.
***
For annuity options involving life income, the actual age
and/or
sex of the Annuitant will affect the amount of each payment. We
reserve the right to ask for satisfactory proof of the Annuitant's
age. We may delay annuity payments until satisfactory proof is
received. Since payments to older Annuitants are expected to be
fewer in number, the amount of each annuity payment under a
selected
annuity form will be greater for older Annuitants than for younger
Annuitants.
If the age of the Annuitant has been misstated, the payments
established will be made on the basis of the correct age. If
payments were too large because of misstatement, the difference
with
interest may be deducted by the Company from the next payment or
payments. If payments were too small, the difference with interest
may be added by the Company to the next payment. This interest is
at
an annual effective rate which will not be less than the Guaranteed
Interest Rate.
The Payment Commencement Date and annuity options available
for
IRAs may also be controlled by endorsements, the plan documents, or
applicable law.
Once payments start under the annuity form selected by the
Owner: (a) no changes can be made in the annuity form, (b) no
additional Contributions will be accepted under the Contract, and
(c)
no further withdrawals, other than withdrawals made to provide
annuity benefits, will be allowed.
***
A portion or the entire amount of the annuity payments may be
taxable as ordinary income. If, at the time the annuity payments
begin, we have not received a proper written election not to have
federal income taxes withheld, we must by law withhold such taxes
from the taxable portion of such annuity payments and remit that
amount to the federal government (an election not to have taxes
withheld is not permitted for certain Qualified Contracts). State
income tax withholding may also apply. (See "Federal Tax-Matters,"
below.)
___________________________________________________________________
FEDERAL TAX MATTERS
___________________________________________________________________
Introduction
The following discussion is a general description of federal
income tax considerations relating to the Contracts and is not
intended as tax advice. Further, this discussion is based on the
assumption that the Contract qualifies as an annuity contract for
federal income tax purposes. This discussion is not intended to
address the tax consequences resulting from all of the situations
in
which a person may be entitled to or may receive a distribution
under
the Contract. Any person concerned about these tax implications
should consult a competent tax adviser before initiating any
transaction. This discussion is based upon our understanding of
the
present federal income tax laws as they are currently interpreted
by
the Internal Revenue Service. No representation is made as to the
likelihood of the continuation of the present federal income tax
laws
or of the current interpretation by the Internal Revenue Service.
Moreover, no attempt has been made to consider any applicable state
or other tax laws.
The Contract may be purchased on a non-tax qualified basis
("Non-Qualified Contract") or purchased and used in connection with
IRAs. The ultimate effect of federal income taxes on the amounts
held under a Contract, on annuity payments, and on the economic
benefit to you, the Annuitant, or the Beneficiary may depend on the
type of Contract, and on the tax status of the individual
concerned.
In addition, certain requirements must be satisfied in purchasing
an
IRA and receiving distributions from an IRA in order to continue
receiving favorable tax treatment. Therefore, purchasers of IRAs
should seek competent legal and tax advice regarding the
suitability
of the Contract for their situation, the applicable requirements,
and
the tax treatment of the rights and benefits of the Contract. The
following discussion assumes that an IRA is purchased with proceeds
from and/or Contributions that qualify for the intended special
federal income tax treatment.
Tax Status
The Company is taxed as a life insurance company under Part I
of
Subchapter L of the Code.
Taxation of Annuities
In General
Section 72 of the Code governs taxation of annuities in
general.
An Owner who is a natural person generally is not taxed on
increases
(if any) in the value of an Annuity Account Value until
distribution
occurs by withdrawing all or part of the Annuity Account Value
(e.g.,
withdrawals or annuity payments under the annuity form elected).
However, under certain circumstances, the Owner may be subject to
taxation currently. In addition, an assignment, pledge, or
agreement
to assign or pledge any portion of the Annuity Account Value
generally will be treated as a distribution. The taxable portion
of
a distribution (in the form of a single sum payment or an annuity)
is
taxable as ordinary income. An IRA Contract may not be assigned as
collateral.
The Owner of any annuity contract who is not a natural person
(e.g. a corporation) generally must include in income any increase
in
the excess of the Annuity Account Value over the "investment in the
contract" (discussed below) during each taxable year. The rule
does
not apply where the non-natural person is the nominal owner of a
Contract and the beneficial owner is a natural person. The rule
also
does not apply in the following circumstances: (1) where the
annuity
Contract is acquired by the estate of a decedent, (2) where the
Contract is held under an IRA, (3) where the Contract is a
qualified
funding asset for a structured settlement, and (4) where the
Contract
is purchased on behalf of an employee upon termination of a
qualified
plan. A prospective Owner that is not a natural person may wish to
discuss these matters with a competent tax adviser.
The following discussion generally applies to a Contract owned
by a natural person.
Withdrawals
In the case of a withdrawal under an IRA, including
withdrawals
under the Periodic Withdrawal Option, a ratable portion of the
amount
received may be non-taxable. The amount of the non-taxable portion
is generally determined by the ratio of the "investment in the
contract" to the individual's total accrued benefit under the
retirement plan. The "investment in the contract" generally equals
the amount of any nondeductible Contributions paid by or on behalf
of
any individual. Special tax rules may be available for certain
distributions from an IRA.
With respect to Non-Qualified Contracts, partial withdrawals,
including Periodic Withdrawals, are generally treated as taxable
income to the extent that the Annuity Account Value immediately
before the withdrawal exceeds the "investment in the contract" at
that time. If a partial withdrawal is made from a Guarantee Period
which is subject to a Market Value Adjustment, then the Annuity
Account Value immediately before the withdrawal will not be altered
to take into account the Market Value Adjustment. As a result, for
purposes of determining the taxable portion of the partial
withdrawal, the Annuity Account Value will not reflect the amount,
if
any, deducted from or added to the Guarantee Period due to the
Market
Value Adjustment. Full surrenders are treated as taxable income to
the extent that the amount received exceeds the "investment in the
contract." The taxable portion of any annuity payment is taxed at
ordinary income tax rates.
Annuity Payments
Although the tax consequences may vary depending on the
annuity
form elected under the Contract, in general, only the portion of
the
annuity payment that represents the amount by which the Annuity
Account Value exceeds the "investment in the contract" will be
taxed;
after the investment in the contract is recovered, the full amount
of
any additional annuity payments is taxable. For fixed annuity
payments, in general there is no tax on the portion of each payment
which represents the same ratio that the "investment in the
contract"
bears to the total expected value of the annuity payments for the
term of the payments; however, the remainder of each annuity
payment
is taxable. Once the investment in the Contract has been fully
recovered, the full amount of any additional annuity payments is
taxable. If the annuity payments cease as a result of an
Annuitant's
death before full recovery of the "investment in the contract," you
should consult a competent tax adviser regarding the deductibility
of
the unrecovered amount.
Penalty Tax
In the case of a distribution pursuant to a Non-Qualified
Contract, there may be imposed a federal income tax penalty equal
to
10% of the amount treated as taxable income. In general, however,
there is no penalty tax on distributions: (1) made on or after the
date on which the Owner attains age 59 1/2; (2) made as a result of
death or disability of the Owner; or (3) received in substantially
equal periodic payments as a life annuity or a joint and survivor
annuity for the lives or life expectancies of the Owner and a
"designated beneficiary." Other exemptions or tax penalties may
apply to certain distributions pursuant to an IRA. For more
details
regarding these exemptions or penalties consult a competent tax
adviser.
Taxation of Death Benefit Proceeds
Amounts may be distributed from the Contract because of the
death of an Owner or the Annuitant. Generally such amounts are
includible in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a
full surrender, as described above, or (2) if distributed under an
annuity form, they are taxed in the same manner as annuity
payments,
as described above.
Distribution-at-Death Rules
In order to be treated as an annuity contract, the terms of
the
Contract must provide the following two distribution rules: (A) if
any Contract Owner dies on or after the date annuity payments
commence, and before the entire interest in the Contract has been
distributed, the remainder of his interest will not be distributed
under a slower distribution schedule than that provided for in the
method in effect on the Contract Owner's death; and (B) if any
Contract Owner dies before the date annuity payments commence, his
entire interest must generally be distributed within five years
after
the date of death provided that if such interest is payable to a
designated Beneficiary, then such interest may be made over the
life
of that designated Beneficiary or over a period not extending
beyond
the life expectancy of that Beneficiary, so long as payments
commence
within one year after the Contract Owner's death. If the sole
designated Beneficiary is the spouse of the Contract Owner, the
Contract may be continued in the name of the spouse as Contract
Owner. The designated Beneficiary is the natural person designated
by the terms of the Contract or by the Contract Owner as the
individual to whom ownership of the contract passes by reason of
the
Contract Owner's death. If the Contract Owner is not an
individual,
then for purposes of the distribution at death rules, the Primary
Annuitant is considered the Contract Owner. In addition, when the
Contract Owner is not an individual, a change in the Primary
Annuitant is treated as the death of the Contract Owner.
Transfers, Assignments, or Exchanges
A Transfer of ownership of a Contract, the designation of an
Annuitant, Payee or other Beneficiary who is not also the Owner, or
the exchange of a Contract may result in adverse tax consequences
to
the Owner that are not discussed herein. An Owner contemplating
any
such designation, transfer, assignment, or exchange of a Contract
should contact a competent tax adviser with respect to the
potential
tax effects of such a transaction.
Multiple Contracts
All deferred, non-qualified annuity contracts that are issued
by
the Company (or our affiliates) to the same Owner during any
calendar
year will be treated as one annuity contract for purposes of
determining the amount includible in gross income under section
72(e)
of the Code. Amounts received under any such Contract may be
taxable
(and may be subject to the 10% Penalty Tax) to the extent of the
combined income in all such Contracts. In addition, the Treasury
Department has specific authority to issue regulations that prevent
the avoidance of section 72(e) through the serial purchase of
annuity
contracts or otherwise. Congress has also indicated that the
Treasury Department may have authority to treat the combination
purchase of an immediate annuity contract and separate deferred
annuity contracts as a single annuity contract under its general
authority to prescribe rules as may be necessary to enforce the
income tax laws.
Withholding
Annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax
status.
Recipients, however, generally are provided the opportunity to
elect
not to have tax withheld from distributions. Certain distributions
from IRAs are subject to mandatory federal income tax withholding.
Possible Changes in Taxation
In past years, legislation has been proposed that would have
adversely modified the federal taxation of certain annuities. For
example, one such proposal would have changed the tax treatment of
non-qualified annuities that did not have "substantial life
contingencies" by taxing income as it is credited to the annuity.
There is always the possibility that the tax treatment of annuities
could change by legislation or other means (such as IRS
regulations,
revenue rulings, judicial decisions, etc.). Moreover, it is also
possible that any change could be retroactive (that is, effective
prior to the date of the change).
Section 1035 Exchanges
Code Section 1035 provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. A
replacement contract obtained in a tax-free exchange of contracts
succeeds to the status of the original contract. Special rules
apply
to Contracts issued prior to August 14, 1982. Prospective Owners
wishing to take advantage of a Section 1035 exchange should consult
their tax adviser.
Individual Retirement Annuities
The Contract may be used with IRAs as described in Section 408
of the Code. Section 408 of the Code permits eligible individuals
to contribute to an individual retirement program known as an
Individual Retirement Annuity. Also, certain kinds of
distributions
from certain types of qualified and non-qualified retirement plans
may be "rolled over" following the rules set out in the Code to
maintain favorable tax treatment, to an Individual Retirement
Annuity. The sale of a Contract for use with an IRA may be subject
to special disclosure requirements of the Internal Revenue Service.
Purchasers of the Contract for use with IRA's will be provided with
supplemental information required by the Internal Revenue Service
or
other appropriate agency. Such purchasers will have the right to
revoke their purchase within seven days of purchase of the IRA
Contract.
Various tax penalties may apply to contributions in excess of
specified limits, aggregate distributions in excess of $150,000
annually, distributions that do not satisfy specified requirements,
and certain other transactions. The Contract will be amended as
necessary to conform to the requirements of the Code. Purchasers
should seek competent advice as to the suitability of the Contract
for use with IRA's.
If a Contract is issued in connection with an employer's
Simplified Employee Pension ("SEP") plan, Owners, Annuitants and
Beneficiaries are cautioned that the rights of any person to any of
the benefits under the Contract may be subject to the terms and
conditions of the plan itself, regardless of the terms and
conditions
of the Contract.
If a Contract is purchased to fund an IRA the Annuitant must
also be the Owner. In addition, if a Contract is purchased to fund
an IRA, minimum distributions must commence not later than April
1st
of the calendar year following the calendar year in which you
attain
age 70 1/2. You should consult your tax adviser concerning these
matters.
The Contract and prototype IRA endorsement have been submitted
IRS approval that they are acceptable under Section 408 of the
Code,
so that each individual who purchases a Contract with an IRA
endorsement will be considered to have adopted a retirement savings
program that satisfies the requirements of Section 408 of the Code.
The IRS approval is a determination only as to the form of the
Contract and does not represent a determination of the merits of
the
Contract.
At the time the Initial Contribution is paid, a prospective
purchaser must specify whether he or she is purchasing a Non-
Qualified Contract or an IRA. If the initial Contribution is
derived
from an exchange or surrender of another annuity contract, we may
require that the prospective purchaser provide information with
regard to the federal income tax status of the previous annuity
contract. We will require that persons purchase separate Contracts
if they desire to invest monies qualifying for different annuity
tax
treatment under the Code. Each such separate Contract would
require
the minimum initial Contribution stated above. Additional
Contributions under a Contract must qualify for the same federal
income tax treatment as the initial Contribution under the
Contract;
we will not accept an additional Contribution under a Contract if
the
federal income tax treatment of such Contribution would be
different
from that of the initial Contribution.
Seek Tax Advice
The foregoing discussion of the federal income tax
consequences
is only a brief summary and is not intended as tax advice.
Further,
the federal income tax consequences discussed herein reflect our
understanding of current law and the law may change. Federal
estate
tax consequences and state and local estate, inheritance, and other
tax consequences of ownership or receipt of distributions under a
Contract depend on the individual circumstances of each Owner or
recipient of the distribution. A competent tax adviser should be
consulted for further information.
___________________________________________________________________
ASSIGNMENTS OR PLEDGES
___________________________________________________________________
Generally, rights in the Contract may be assigned or pledged
for
loans at any time during the life of the Annuitant; however, if the
Contract is an IRA, the Owner may not assign the Contract as
collateral.
If a non-IRA Contract is assigned, the interest of the
assignee
has priority over the interest of the Owner and the interest of the
Beneficiary. Any amount payable to the assignee will be paid in a
single sum.
A copy of any assignment must be submitted to the Company at
the
Schwab Annuity Service Center. Any assignment is subject to any
action taken or payment made by the Company before the assignment
was
processed. The Company is not responsible for the validity or
sufficiency of any assignment.
If any portion of the Annuity Account Value is assigned or
pledged for a loan, it may be treated as a distribution. A
competent
tax adviser should be consulted for further information.
___________________________________________________________________
PERFORMANCE DATA
___________________________________________________________________
From time to time, we may advertise yields and average annual
total returns for the Investment Divisions. In addition, we may
advertise the effective yield of the Schwab Money Market Investment
Division. These figures will be based on historical information
and
are not intended to indicate future performance.
The yield of the Schwab Money Market Investment Division
refers
to the annualized income generated by an investment in that
Investment Division over a specified seven-day period. The yield
is
calculated by assuming that the income generated for that seven-day
period is generated each seven-day period over a 52-week period and
is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an
investment in that Investment Division is assumed to be reinvested.
The effective yield will be slightly higher than the yield because
of
the compounding effect of this assumed reinvestment.
The yield of an Investment Division (other than the Schwab
Money
Market Investment Division) refers to the annualized income
generated
by an investment in that Investment Division over a specified
thirty-
day period. The yield is calculated by assuming that the income
generated by the investment during that thirty-day period is
generated each thirty-day period over a twelve-month period and is
shown as a percentage of the investment.
The yield calculations do not reflect the effect of any
Premium
Tax that may be applicable to a particular Contract. To the extent
that premium taxes are applicable to a particular Contract, the
yield
of that Contract will be reduced. For a description of the methods
used to determine yield and total returns, see the Statement of
Additional Information.
The average annual total return of an Investment Division
refers
to return quotations assuming an investment has been held in the
Investment Division for various periods of time including, but not
limited to, a period measured from the date the Investment Division
commenced operations. When an Investment Division has been in
operation for 1, 5, and 10 years, respectively, the average annual
total return for these periods will be provided. The average
annual
total return quotations will represent the average annual
compounded
rates of return that would equate an initial investment of $1,000
to
the redemption value of that investment (excluding Premium Tax) as
of
the last day of each of the periods for which total return
quotations
are provided. For additional information regarding yields and
total
returns calculated using the standard formats briefly described
herein, please refer to the Statement of Additional Information.
Performance information for any Investment Division reflects
only the performance of a hypothetical Contract under which Annuity
Account Value is allocated to an Investment Division during a
particular time period on which the calculations are based.
Performance information should be considered in light of the
investment objectives and policies and characteristics of the
Eligible Funds in which the Investment Division invests, and the
market conditions during the given time period, and should not be
considered as a representation of what may be achieved in the
future.
Reports and promotional literature may also contain other
information including (1) the ranking of any Investment Division
derived from rankings of variable annuity separate accounts or
their
investment products tracked by Lipper Analytical Services, Inc.,
VARDS, Morningstar, Value Line, IBC/Donoghue's Money Fund Report,
Financial Planning Magazine, Money Magazine, Bank Rate Monitor,
Standard & Poor's Indices, Dow Jones Industrial Average, and other
rating services, companies, publications, or other persons who rank
separate accounts or other investment products on overall
performance
or other criteria, and (2) the effect of tax-deferred compounding
on
investment returns, or returns in general, which may be illustrated
by graphs, charts, or otherwise, and which may include a
comparison,
at various points in time, of the return from an investment in a
Contract (or returns in general) on a tax-deferred basis (assuming
one or more tax rates) with the return on a currently taxable
basis.
Other ranking services and indices may be used.
We may from time to time also disclose cumulative (non-
annualized) total returns for the Investment Divisions. We may
from
time to time also disclose yield and standard total returns for any
or all Investment Divisions.
We may also advertise performance figures for the Investment
Divisions based on the performance of a Eligible Fund prior to the
time the Series Account commenced operations.
For additional information regarding the calculation of other
performance data, please refer to the Statement of Additional
Information.
___________________________________________________________________
DISTRIBUTION OF THE CONTRACTS
___________________________________________________________________
Charles Schwab & Co., Inc. ("Schwab") is the distributor of
the
Contracts. Schwab is registered with the Securities and Exchange
Commission as a broker/dealer and is a member of the National
Association of Securities Dealers, Inc. ("NASD"). Its principal
offices are located at 101 Montgomery, San Francisco, California
94104, telephone 800-838-0650.
Certain administrative services are provided by Schwab to
assist
the Company in the processing of the Contracts, which services are
described in written agreements between Schwab and the Company.
As compensation for distributing the Contracts, the Company
pays
Schwab a distribution fee at an annual rate ranging from .30% to
.78%
of total Annuity Account Values. The Company has agreed to
indemnify
Schwab (and its agents, employees, and controlling persons) for
certain damages arising out of the sale of the Contracts, including
those arising under the securities laws.
___________________________________________________________________
SELECTED FINANCIAL DATA
___________________________________________________________________
The following is a summary of certain financial data of Great-
West Life & Annuity Insurance Company. This summary has been
derived
in part from, and should be read in conjunction with, the financial
statements of Great-West Life & Annuity Insurance Company included
elsewhere in this Prospectus.
Year Ended December 31,
(In Millions) 1995 1994 1993
1992 1991
INCOME STATEMENT DATA
Premiums and other income $ 1,067$ 1,000 $
696 $ 245 $ 58
Net investment income 835768 792
661 599
Realized investment gains (losses) 8 (72)
25 (4) (30)
Total Revenues $ 1,910$ 1,696 $ 1,513 $
902 $ 627
Total benefits and expenses $ 1,733 $ 1,594 $
1,417 $ 844 $ 596
Income tax expense 49 28 31 187
Cumulative effect of adopting a
new accounting method for income taxes _____ ____
____ (23) ___
Net income $ 128$ 74$ 65 $
63 $ 24
BALANCE SHEET DATA
Investment assets $ 12,473 $11,791
$11,592 $10,771 $8,483
Separate account assets 3,999 2,555
1,680 937 550
Total assets 17,68215,616 14,296
12,948 9,571
Total policy liabilities 11,492 10,929
10,592 10,352 7,808
Total shareholders equity 993 777
821 769 624
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company
The Company operates in one business segment as a provider of
life, health and annuity products to groups of individuals
associated
with employers or distributors; however, the business operations of
GWL&A will be discussed in terms of its major business units:
Employee Benefits Division, which distributes life, health,
disability income insurance and 401(k) products to employee groups,
primarily to small to mid-sized corporations; and Financial
Services
Division, which distributes accumulation and payout annuity
products
for both group and individual clients, primarily in the public\non-
profit sector, as well as insurance products for individual
clients.
GWL&A recognized the potential problems of high yielding
assets
in the late 1980's and adjusted its investment policy accordingly.
The impact of problem mortgage and real estate accounts showed
marked
improvement in the last few years as the Company curtailed any new
investment in mortgage loans. The emphasis of quality over yield
in
the bond portfolio certainly has proved to be beneficial to the
overall strength of the investment assets.
Going forward, GWL&A intends to increase the percentage of
assets and liabilities funded on a separate account basis.
Management believes this emphasis is in the best interests of its
customers and shareholders. GWL&A intends to continue to improve
its
administrative and distribution systems in order to compete with
insurers, mutual fund companies, and other money managers.
YEARS ENDED DECEMBER 31, 1995 and 1994
Results of Operations
The net income of $128 million in 1995 is up significantly
from
the $74 million recorded in 1994. The growth in earnings is
related
to the Company's continued investment philosophy of replacing
mortgage loans with higher quality bonds which ultimately resulted
in
a reduction of mortgage writedowns. This is very apparent in the
Financial Services Division where the asset intensive lines
benefited
from a combination of lower mortgage writedowns and capital gains
in
the bond portfolio. The Company's strategy of increasing fee
income
and reducing interest rate exposure is apparent in the growth of
the
separate accounts. The Employee Benefits Division's net income
from
operations increased in 1995, largely due to low healthcare
inflation, favorable mortality, outstanding 401(k) growth and
effective expense management.
Life, accident, and health premium increased $49 million from
1994 to a total of $988 million primarily due to an increase in
group
health premium which primarily reflects the acquisition of a block
of
business from Confederation Life Insurance Company.
Net investment income increased $67 million in 1994 to a total
of $835 million reflecting higher interest rates and growth in
policy
loans associated with corporate owned life insurance (COLI)
business.
The net realized gains and losses improved significantly over
last year as the $8 million of gains in 1995 was substantially
better
than the $72 million of losses recorded in 1994. Mortgage
writedowns, included in realized losses, continued to decline as
the
$22 million in 1995 was $12 million better than the $34 million
recorded in 1994. As interest rates decreased in 1995, bond
capital
gains of $28 million in 1995 were better than the $39 million of
losses recorded in 1994.
The capital gains and losses recorded in 1994 and 1995 were
somewhat mitigated by adjustments to the amortization of deferred
acquisition costs and premium deficiency reserves totalling $(10)
million in 1995 and $19 million in 1994.
Policyholder benefits increased to $1.2 billion, up $76
million,
which is a combination of an increase in interest credits to
policyholders and higher group life and health claims.
The commissions and operating expense increase of $56 million
to
a total of $465 million includes expense increases associated with
managed care and the acquisition of a block of group life and
health
business from Confederation Life Insurance Company.
The effective income tax rate in 1995 and 1994 was lower than
the statutory rate due to a reduction of $13 million and $7
million,
respectively, in the deferred tax asset valuation allowance held in
a subsidiary company, GWL Properties Inc.
Balance Sheet
Total assets grew approximately $2.1 billion to a total of
$17.7
billion, reflecting continued growth in the separate accounts of
$1.4
billion and a $333 million increase in policy loans associated with
COLI business.
It is important to recognize the continued shift away from
mortgages as the portfolio dropped $298 million during 1995. The
mortgage portfolio of $1.7 billion at December 31, 1995 represented
13.7% of total investment assets compared to 17.1% at December 31,
1994.
Stockholder's equity at December 31, 1995 of $993 million
increased substantially from December 31, 1994, as the result of
higher earnings and a significant increase in the unrealized gains
on
the bond portfolio that is available for sale.
YEARS ENDED DECEMBER 31, 1994 and 1993
Results of Operations
Net income in 1994 of $74 million increased from 1993's $65
million. The higher group life and health earnings more than
offset
the lower asset intensive earnings associated with the capital
losses
on the bond portfolio.
Premiums and other income consist primarily of life, accident,
and health premiums which increased 48% over 1993 to a total of
$939
million. The $306 million increase was primarily the result of
group
life and health which was up $248 million as none of the premium
was
reinsured to The Great-West Life Assurance Company (the Parent)
during 1994 compared to $179 million reinsured in 1993.
Net investment income decreased $24 million to a total of $768
million. The decrease was associated with a 0.68% drop in the
yield
on investments as higher yielding mortgages and bonds continued to
be
replaced by lower yielding, higher quality bonds.
The net realized losses of $72 million were significantly
worse
than the $25 million of net gains recorded in 1993 reflecting the
decline in bond prices during 1994. However, mortgage writedowns
in
1994 of $34 million showed improvement over the $43 million in
1993,
reflecting the overall decrease in mortgage investments and the
reduction in problem mortgages.
The capital losses in 1994 were somewhat mitigated by
adjustments to the amortization of deferred acquisition costs and
premium deficiency reserves totalling $19 million. The same
components were adjusted by $44 million in 1993.
The increase in benefits and expenses was primarily related to
a $69 million increase in policy benefits and a $98 million
increase
in commission and operating expenses, both the result of the group
life and health business not being reinsured at all during 1994.
In
1993 the business had been reinsured to the Parent for part of the
year.
The 1994 effective income tax rate of 27.7% is lower than the
1993 rate of 32.5% as the result of a $7 million reduction in the
deferred income tax asset valuation allowance being held in a
subsidiary company, GWL Properties Inc.
Balance Sheet
Total assets increased $1.3 billion in 1994 to a total of
$15.6
billion. The only growth in the general account was the
acquisition
of corporate owned life insurance (COLI) policies from
Confederation
Life which increased assets $250 million. The majority of the
increase is associated with separate account assets which grew by
$875 million over 1993 to a total of $2.6 billion. The growth in
separate accounts is derived from a combination of good sales in
both
the 401(k) and the public non-profit business units and good
investment performance.
The mortgage loans on real estate portfolio reduced $367
million
bringing the total portfolio to $2.0 billion or 17.1% of total
investment assets. The reduction is related to a combination of
prepayments, renewals refinanced with other lenders, and the
Companys policy of not initiating any new mortgage loans.
Liquidity and Capital Resources
The principal short- and long-term liquidity needs of the
Company are to satisfy policyholder benefits. The liquidity needs
of
the Company are closely managed through cash flow matching of
assets
and liabilities, and the forecasting of earned and required yields
to
ensure consistency between policyholder requirements and the yield
of
assets. Over 88.1% of policy liabilities are non-cashable prior to
maturity or subject to market value adjustments or withdrawal
penalties.
Investments in highly marketable securities at the end of 1995
totaled $6.4 billion, including short-term investments of $135
million which have minimal market risk. For several years, the
Company has followed an investment policy that has emphasized high-
quality bonds and de-emphasized high-yield, lower quality bonds and
mortgage loans. At December 31, 1995, mortgages represented 13.7%
of
investments, compared to 25.2% at December 31, 1991. Bonds rated
below investment grade were only 1.4% of investments at December
31,
1995. The Company's investments in mortgage-backed and
asset-backed
bonds do not include highly volatile issues. The Company limits
its
use of derivative financial instruments to contracts which change
the
interest rate characteristics of certain bonds from variable to
fixed
rates or which effectively change interest paid in foreign
currencies
to U.S. dollars.
Additional liquidity is available through the Company's
commercial paper program which is partially supported by a standby
letter of credit. At December 31, 1995, the program has an
outstanding balance of $85 million with maturities ranging from 25
to
160 days and interest rates ranging from 5.7% to 5.9%.
The National Association of Insurance Commissioners (NAIC)
utilize risk-based capital standards to determine the capital
requirements of a life insurance company based upon its inherent
operating risks. These standards require the computation of a
risk-
based capital amount which is then compared to the Companys actual
adjusted capital. Based on current calculations of the risk-based
capital standards, the Companys percentage to total adjusted
capital
is well in excess of ratios that would require regulatory
attention.
The Parent owns all of the Companys $122 million of preferred
shares and all of its common stock. The shareholders equity was
$993 million as of December 31, 1995 compared to $777 million as of
December 31, 1994. Most of the increase was related to the
increase
in fair value of the Company's available-for-sale bond portfolio,
including $23 million related to the Company's reclassification on
December 31, 1995 of $2.1 billion of bonds from the
held-to-maturity
portfolio.
Ratings
The Company operates in a very competitive market place, and
therefore its ratings from various rating agencies are very
important
to its ability to distribute certain products. A.M. Best Company
has
assigned the Company its highest financial strength and operating
performance rating of A++. Duff & Phelps Corporation and Standard
&
Poors Corporation have also assigned the Company their highest
claims paying ability rating of AAA. Moodys Investors Service has
assigned the Company an insurance and financial strength rating of
Aa2.
These ratings represent the rating agencys independent
opinion
of the Companys financial strength and ability to meet its
policyholder obligations, but have no relevance to the performance
or
quality of the assets in the Series Account.
Regulation and Reserves
The Company is subject to regulation and supervision by the
insurance departments of the state in which it is licensed. This
regulation covers a variety of areas, including policy reserve
requirements, adequacy of company capital and surplus, operational
standards, and financial accounting policies and procedures.
Pursuant to state insurance laws and regulations, the Company
is
obligated to hold policy reserves to meet its obligations under all
outstanding insurance contracts. These reserves are based on a
number of assumptions as to future experience. Neither the reserve
requirements nor the other aspects of state insurance regulation
provide absolute protection to holders of insurance contracts if
the
Company were to experience unexpected losses (i.e., infectious
diseases or catastrophic investment losses).
Competition
The Company is engaged in a business that is highly
competitive
due to the large number of insurance companies and other entities
competing in marketing, administering, and selling insurance
products. There are approximately 2,300 insurers in the life
insurance business in the United States.
Segment Information
The Company operates in one business segment as a provider of
life, health and annuity products to groups of individuals
associated
with employers or distributors.
Employees and Facilities
The Company has an administrative services agreement with the
Parent Corporation, to provide total administrative support for all
aspects of the Companys business. The Parent Corporation has
approximately 4,288 employees in its U.S. operations. The home
office facilities are in Englewood, Colorado which includes 517,633
square feet in a three building complex. As well, there are sales
and claims offices located in several states.
State Regulation
As a life insurance company organized and operated under
Colorado law, GWL&A is subject to provisions governing such
companies
and regulation by the Colorado Commissioner of Insurance.
GWL&A's books and accounts are subject to review and
examination
by the Colorado Division of Insurance at any time, and a full
examination of its operations is conducted triennially.
In addition, GWL&A is subject to comprehensive and detailed
regulation and supervision by the supervisory agencies in each
jurisdiction in which it conducts business. Each state's
supervisory
agency has broad administrative authority which includes, but is
not
limited to, the power to regulate licenses to transact business,
trade practices, agent licensing, policy forms, claims practices,
underwriting practices, reserve requirements, fixing maximum
interest
rates on life insurance policy loans and minimum rates for
accumulation of surrender values, the form and content of required
financial statements and the type and amounts of investments
permitted. GWL&A is required to file detailed annual reports with
supervisory agencies in each of the jurisdictions in which it does
business and its accounts are subject to examination by such
agencies
at regular intervals.
Under insurance guaranty fund laws in most states, insurers
can
be assessed up to prescribed limits for insurance contract losses
incurred by insolvent companies. GWL&A has estimated that the $9
million reserve being held at December 31, 1995 is adequate to
cover
any obligations of known insolvencies.
In addition, most jurisdictions, including Colorado, regulate
affiliated groups of insurers such as GWL&A and its affiliates
under
insurance holding company legislation. Under such laws,
intercorporate transfers of assets and dividend payments from
insurance subsidiaries may be subject to prior notice or approval,
depending on the size of such transfers and payments in relation to
the financial position of the company making the transfer. Changes
in control also are regulated under these laws.
Although the federal government generally does not directly
regulate the business of insurance, federal initiatives often have
an
impact on the business in a variety of ways. Current and proposed
federal measures which may significantly affect GWL&A's insurance
business include employee benefits regulation, controls on medical
care costs, medical entitlement programs (e.g., Medicare), removal
of
barriers preventing banks from engaging in the insurance and mutual
fund businesses, the taxation of insurance companies and the tax
treatment of insurance products.
The Securities and Exchange Commission regulates certain
separate accounts of GWL&A and the mutual funds used as funding
vehicles for those accounts.
Directors and Executive Officers
Set forth below is information concerning the Company's
directors and executive officers, to the extent responsible for its
variable annuity operations, together with their principal
occupation
for the past five years:
Directors
James Balog
James W. Burns, O.W.
Orest T. Dackow
Paul Desmarais, Jr.
Robert G. Graham
Robert Gratton
N. Berne Hart
Kevin P. Kavanagh
William Mackness
William T. McCallum
Jerry E.A. Nickerson
P. Michael Pitfield, P.C., Q.C.
Michel Plessis-Belair
Ross J. Turner
Brian E. Walsh
Executive Officers
William T. McCallum, President and Chief Executive Officer
Dennis Low, Executive Vice President, Financial Services
D. Craig Lennox, Senior Vice President, General Counsel and
Secretary
Alan D. MacLennan, Executive Vice President, Employee Benefits
John T. Hughes, Senior Vice President, Chief Investment Officer
Douglas L. Wooden, Senior Vice President, Chief Financial Officer
Executive Compensation
Executive officers of the Company may also serve one or more
affiliated companies of Great-West Life & Annuity Insurance
Company.
Allocations have been made as to each individual's time devoted to
his duties as an executive officer of the Company. The following
table shows the cash compensation paid, based on these allocations,
to the five most highly compensated executive officers whose
allocated compensation exceed $60,000, for services rendered in all
capacities in the Company in 1995.
Compensation Table
Ownership of Securities
All of the Company's outstanding shares are owned by The
Great-
West Life Assurance Company, 100 Osborne Street North, Winnipeg,
Manitoba, Canada R3C 3A5. The Great-West Life Assurance Company is
owned 99.4% by Great-West Lifeco Inc., both of which share the same
address. Great-West Lifeco Inc. is owned 86.4% by Power Financial
Corporation of Canada, 751 Victoria Square, Montreal, Quebec,
Canada
H2Y 2J3. It is owned 68.4% by 171263 Canada Inc., which is owned
100% by Power Corporation of Canada, both of which share the same
address as Power Financial Corporation of Canada. Mr. Paul
Desmarais, 751 Victoria Square, Montreal, Quebec, Canada H2Y 2J3,
through a group of private holding companies, which he controls,
has
voting control of Power Corporation of Canada.
___________________________________________________________________
VOTING RIGHTS
___________________________________________________________________
To the extent required by applicable law, all Eligible Fund
shares held in the Series Account will be voted by the Company at
regular and special shareholder meetings of the respective Eligible
Funds in accordance with instructions received from persons having
voting interests in the corresponding Investment Division. If,
however, the 1940 Act or any regulation thereunder should be
amended,
or if the present interpretation thereof should change, or if we
determine that we are allowed to vote all Eligible Funds shares in
our own rights, we may elect to do so.
Before the annuity commencement date, you the Owner, have the
voting interest. The number of votes which are available to you
will
be calculated separately for each of your Variable Sub-Account.
That
number will be determined by applying your percentage interest, if
any, in a particular Investment Division to the total number of
votes
attributable to that Investment Division. You hold a voting
interest
in each Investment Division to which your Annuity Account Value is
allocated. If you select a variable annuity option, the votes
attributable to a Contract will decrease as annuity payments are
made.
The number of votes of a Eligible Fund will be determined as
of
the date coincident with the date established by that Eligible Fund
for determining shareholders eligible to vote at the meeting of the
Eligible Funds. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures
established by the respective Eligible Funds.
Shares as to which no timely instructions are received and
shares held by us as to which Owners have no beneficial interest
will
be voted in proportion to the voting instructions which are
received
with respect to all Contracts participating in the Investment
Division. Voting instructions to abstain on any item to be voted
upon will be applied on a pro rata basis to reduce the votes
eligible
to be cast.
Each person or entity having a voting interest in a Investment
Division will receive proxy material, reports and other material
relating to the appropriate Eligible Fund.
It should be noted that generally the Eligible Funds are not
required to, and do not intend to, hold annual or other regular
meetings of shareholders.
Contract Owners have no voting rights in the Company.
___________________________________________________________________
RIGHTS RESERVED BY THE COMPANY
___________________________________________________________________
The Company reserves the right to make certain changes if, in
its judgment, they would best serve the interests of Owners and
Annuitants or would be appropriate in carrying out the purposes of
the Contracts. Any changes will be made only to the extent and in
the manner permitted by applicable laws. Also, when required by
law,
the Company will obtain your approval of the changes and approval
from any appropriate regulatory authority. Such approval may not
be
required in all cases, however. Examples of the changes the
Company
may make include:
- To operate the Series Account in any form permitted under
the
Investment Company Act of 1940 or in any other form permitted
by
law.
- To transfer any assets in any Investment Division to
another
Investment Division, or to one or more separate accounts, or
to
a Guarantee Period; or to add, combine or remove Investment
Divisions of the Series Account.
- To substitute, for the Eligible Fund shares in any
Investment
Division, the shares of another Eligible Fund or shares of
another investment company or any other investment permitted
by
law.
- To make any changes required by the Internal Revenue Code
or
by any other applicable law in order to continue treatment of
the Contract as an annuity.
- To change the time or time of day at which a Valuation Date
is deemed to have ended.
- To make any other necessary technical changes in the
Contract
in order to conform with any action the above provisions
permit
the Company to take, including to change the way the Company
assess charges, but without increasing as to any then
outstanding Contract the aggregate amount of the types of
charges which the Company has guaranteed.
___________________________________________________________________
LEGAL PROCEEDINGS
___________________________________________________________________
There is at present no pending material legal proceedings to
which the Series Account is a party or to which the assets of the
Series Account are subject. The Company is not a party to, and its
property is not subject to, any material pending legal proceedings
other than ordinary routine litigation incidental to its business.
___________________________________________________________________
LEGAL MATTERS
___________________________________________________________________
Advice regarding certain legal matters concerning the federal
securities laws applicable to the issue and sale of the Contract
has
been provided by Jorden Burt Berenson & Johnson LLP. The
organization of the Company, the Company's authority to issue the
Contract, and the validity of the form of the Contract have been
passed upon by R.B. Lurie, Vice President, Counsel and Associate
Secretary of the Company.
___________________________________________________________________
EXPERTS
___________________________________________________________________
The consolidated financial statements of Great-West Life &
Annuity Insurance Company at December 31, 1995 and 1994, and for
each
of the three years in the period ended December 31, 1995 included
in
this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein,
and
are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
___________________________________________________________________
AVAILABLE INFORMATION
___________________________________________________________________
We have filed a registration statement ("Registration
Statement") with the Commission under the 1933 Act relating to the
Contracts offered by this Prospectus. This Prospectus has been
filed
as a part of the Registration Statement and does not contain all of
the information set forth in the Registration Statement and
exhibits
thereto. Reference is hereby made to the Registration Statement
and
exhibits for further information relating to us and the Contracts.
Statements contained in this Prospectus, as to the content of the
Contracts and other legal instruments, are summaries. For a
complete
statement of the terms thereof, reference is made to the
instruments
as filed as exhibits to the Registration Statement. The
Registration
Statement and its exhibits may be inspected and copied at the
offices
of the Commission located at 450 Fifth Street, N.W., Washington,
D.C.
Appendix A
Appendix B
On the following pages are four examples of Market Value
Adjustments
illustrating (1) increasing interest rates, (2) decreasing interest
rates, (3) flat interest rates (i and j are within .10% of each
other), and (4) less than 6 months to maturity.
Example #1 - Increasing Interest Rates
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period: 10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 7.00%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.071]65/12} - 1
= .952885 - 1
= .047115
MVA = (amount Transferred or surrendered) x MVAF
= $10,000 x - .047115
= - $471.15
Surrender Value = (amount Transferred or surrendered +
MVA)
= ($10,000 + - $471.15)
= $9,528.85
Example #2 - Decreasing Interest Rates
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period: 10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 5.00%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.05]65/12} - 1
= .0055323
MVAF = (amount Transferred or surrendered) x MVAF
= $10,000 x .0055323
= $553.23
Surrender Value = (amount Transferred or surrendered +
MVA)
= ($10,000 + $553.23)
= $10,553.23
Example #3 - Flat Interest Rates (i and j are within .10% of
each other)
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period: 10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2000
j: 6.24%
Amount Surrendered: $10,000
N: 65
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.0634]65/12} - 1
= .99036 - 1
= -.00964
However, [i-j] <.10%, so MVAF = 0
MVAF = (amount Transferred or surrendered) x MVAF
= $10,000 x 0
= $0
Surrender Value = (amount Transferred or surrendered +
MVA)
= ($10,000 + $0)
= $10,000
Example #4 - N<6 (less than 6 months to maturity)
Deposit: $25,000 on November 1, 1996
Maturity Date: December 31, 2005
Interest Guarantee Period: 10 years
i: assumed to be 6.15%
Surrender Date: July 1, 2005
j: 7.00%
Amount Surrendered: $10,000
N: 5
MVAF = {[(1 + i)/(1 + j + .10%)]N/12} - 1
= {[1.0615/1.071]5/12} - 1
= .99629 - 1
= -.00371
However, N<6, so MVAF = 0
MVAF = (amount Transferred or surrendered) x MVAF
= $10,000 x 0
= $0
Surrender Value = (amount Transferred or surrendered + MVA)
= ($10,000 + $0)
= $10,000
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 1995, 1994 AND 1993
AND INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
of Great-West Life & Annuity Insurance Company:
We have audited the accompanying consolidated balance sheets of
Great-West Life & Annuity Insurance Company (a wholly-owned
subsidiary of The Great-West Life Assurance Company) and
subsidiaries
as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholder's equity, and cash flows for each
of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform
the audit to obtain reasonable assurance about whether the
financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Great-
West Life & Annuity Insurance Company and subsidiaries as of
December
31, 1995 and 1994, and the results of their operations and their
cash
flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 19, 1996
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands) ASSETS 1995 1994
INVESTMENTS: Fixed Maturities: Held-to-maturity, at amort
ized cost
(fair value $2,158,043 and $4,135,248)
$ 2,054,204 $ 4,293,985
Available for sale, at fair value
(amortized cost $6,087,969 and $2,997,087)
6,263,187 2,824,703 Common
stock
9,440 5,222 Mortgage loans on real estate 1,713,195 2,011,059
Real estate
60,454 43,663 Policy loans 2,237,745 1,905,013 Short-term
investments
134,835 706,920 Total Investments 12,473,060
11,790,565
Cash 90,939 131,621 Reinsurance receivable 333,924
295,148
Deferred policy acquisition costs 278,526 297,092 Investment income
due and accrued
211,922 195,817 Other assets 40,038 55,579
statements.
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
POLICY BENEFIT LIABILITIES: Policy reserves $ 10,845,935 $
10,334,456
Policy and contract claims 359,791 338,515
Policyholders' funds
154,872 144,262 Experience refunds 83,562
70,359
Provision for policyholders'
dividends
47,760 41,840 GENERAL
LIABILITIES:
Due to Parent Corporation 149,974 159,117
Repurchase agreements
372,965 564,160 Commercial paper 84,854 89,686
Other liabilities
453,889 420,154 Undistributed earnings on
participating business
136,617 120,927 Separate account liabilities
3,998,878
2,554,836 Total Liabilities 16,689,097 14,838,312
STOCKHOLDER'S EQUITY: Preferred stock, $1 par value,
1500 shares authorized,
l
iquidation value of
$100,000 per share,
600
shares issued and
outstanding
60,000 60,000 Series
B, cumulative,
1500 shares authorized,
liquidation value of
$100,000 per share,
200
shares issued and
outstanding
20,000 20,000 Series
C, cumulative,
1500 shares authorized,
none
outstanding
Series D, cumulative,
1500 shares authorized,
none
outstanding
Series E, non-cumulative,
2,000,000
shares authorized,
liquidation value of $20.90
41,800 41,800 per
share, issued, and
outstanding
Common stock,
$1 par value;
50,000,000 shares authorized;
7,032,000
shares issued and
outstanding
7,032 7,032 Additional
paid-in capital
657,265 657,265 Net unrealized gains (losses) on
securities available-for-sale
58,763 (78,427) Retained
earnings
148,261 69,561 Total Stockholder's Equity 993,121
777,231
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY
$ 17,682,218 $ 15,615,543
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED
DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands) 1995 1994 1993
REVENUES:
Annuity contract charges and
premiums
$ 79,816 $ 61,122 $ 63,210 Life,
accident, and health premiums
earned (net of
premiums ceded totaling $60,880,
$48,115
and
$254,969)
987,611 938,947 632,961 Net investment income
835,046 767,646 791,424 Net realized gains (losses) on
investments
7,465 (71,939) 25,342
1,909,938 1,695,776 1,512,937 BENEFITS AND EXPENSES: Life and
other policy benefits (net
of reinsurance
recoveries totaling $43,574,
$18,937,
and
$151,598)
557,469 548,950 390,562 Increase in reserves 98,797 64,834
59,873
Interest paid or credited to
contractholders
562,263 529,118 623,417
Provision for policyholders' share
of earnings (losses)
on
participating business
2,027 (725) (1,498) Dividends to policyholders
48,150
42,094 34,474 1,268,706 1,184,271 1,106,828 C
ommissions
122,926 120,058 90,472 Operating expenses 314,810 261,311
196,820
Premium taxes 26,884 27,402 23,129 1,733,326 1,593,042
1,417,249
INCOME BEFORE INCOME TAXES 176,612 102,734 95,688
PROVISION FOR INCOME TAXES:
Current 88,366 65,070
7,680
$ 74,278 $ 64,636
See notes to consolidated financial
statements.
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S
EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND
1993
(Dollars in Thousands)
Net Additi
onal
Unreal
ized
Retain
ed
Preferred Stock
Common Stock
Paid-
In
Gains Earnin
gs
Shares Amount Shares Amoun
t
Capita
l
(Losse
s)
(Defic
it)
Total BALANCE, JANUARY 1, 1993 2,000,800 $ 121,800
7,028,217
$ 7,028 $ 647,199 $ 0 $
(7,063)
$
768,964
Issuance of common stock 3,783 4
496
500 Capital contributions 9,098
9,098
Dividends (21,852
)
(21,852)
Net income 64,636
64,636
BALANCE, DECEMBER 31,
1993
2,000,800 121,800 7,032,000 7,032 656,793 0
35,721
821,346 Adjustment to beginning
balance for change in
accounting method
for investment
securities 6,515 6,515
Change in net unrealized
gains (losses)
(84,942)
(84,942) Capital contributions 472
472 Dividends (40,438
)
(40,438)
Net income 74,278
74,278
BALANCE, DECEMBER 31,
1994
2,000,800 121,800 7,032,000 7,032 657,265
(78,427)
69,561 777,231 Change in net unrealized
gains (losses)
137,190
137,190 Dividends (48,980
)
(48,980)
Net income
127,680
127,680 BALANCE, DECEMBER 31,
1995
2,000,800 $ 121,800 7,032,000 $ 7,032 $ 657,265
$
58,763 $ 148,261 $ 993,121 See notes to
consolidated financial
statements.
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED
DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands) 1995 1994 1993
OPERATING ACTIVITIES: Net income $ 127,680 $ 74,278 $ 64,636
Adjustments to reconcile net
income to
net
cash provided by
operating activities:
Gain (loss) allocated to
par policyholders
2,027
(725)
(1,498)
Amortization of
investments
26,725 36,978 36,782
Realized losses (gains) on
disposal of investments
and write-downs of
mortgage loans and real estate
(7,465) 71,939
(25,342)
Amortization 49,464 29,197 34,115
Deferred income taxes
(39,763)
(38,631)
(56,959)
Changes in assets and
liabilities:
Policy benefit
liabilities
346,975 93,998 438,809
Reinsurance receivable
(38,776)
(25,868)
352,106
Accrued interest and
other receivables
(17,617)
(26,032)
(19,817)
Other, net 8,834 96,950 119,284
Net cash
provided by operating activities
458,084 312,084 942,116
INVESTING ACTIVITIES:
Proceeds from sales,
maturities, and
redemptions of
investments:
Fixed maturities
4,744,309 Held-to-maturity
Sales
18,821 16,014 Maturities and
redemptions
655,993 1,034,324
Available-for-sale
Sales 4,211,649 1,753,445
Maturities and
redemptions
253,747 141,299
Mortgage loans
260,960 291,102 339,406 Real estate 4,401 29,868
22,974 Common stock 178 Purchases of investments:
Fixed maturities
(5,494,534
)
Held-to-maturity (490,228)
(673,567)
Available-for-sale
(4,932,566) (2,606,028
)
Mortgage loans
(683)
(9)
(52,917)
Real estate (5,302)
(9,253)
(14,303)
Common stock (4,218)
(2,063)
Net cash used in
investing activities
(27,426)
(24,690)
(455,065)
(Continu
ed)
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED
DECEMBER 31, 1995, 1994,
AND 1993
(Dollars in Thousands) 1995 1994 1993
FINANCING ACTIVITIES:
Contract withdrawals, net of
deposits
$ (217,190) $ (238,166) $ (590,118)
Due to Parent Corporation
(9,143) (13,078) (149,510) Dividends paid
(48,980)
(40,438) (21,852) Net commercial paper (repayments)
borrowings
(4,832) 89,686 Net
repurchase agreements
(repayments) borrowings
(191,195) (39,244) 311,937
Net cash used in
financing activities
(471,340) (241,240) (449,543)
NET INCREASE IN CASH (40,682) 46,154 37,508 CASH, BEGINNING OF
YEAR
131,621 85,467 47,959 CASH, END OF YEAR $ 90,939 $ 131,621 $
85,467
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for: Income
taxes
$ 83,841 $ 68,892 $ 87,778 Interest 17,016 12,229 7,438
notes to consolidated financial
statements.
(Conclud
ed)
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - Great-West Life & Annuity Insurance Company
(the
Company) is a wholly-owned subsidiary of The Great-West Life
Assurance Company (the Parent Corporation). The Company is an
insurance company domiciled in the State of Colorado. The
Company
offers a wide range of life insurance, health insurance, and
retirement and investment products to individuals, businesses,
and
other private and public organizations throughout the United
States.
Basis of Presentation - The preparation of financial
statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect
the reported amounts of assets and liabilities and disclosure
of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during
the reporting period. Actual results could differ from those
estimates. The consolidated financial statements include the
accounts of the Company and its subsidiaries. All material
intercompany transactions and balances have been eliminated.
Certain reclassifications have been made to the 1994 and 1993
financial statements to conform with the basis of presentation
used
in 1995.
Investments - Investments are reported as follows:
1. Management determines the classification of fixed
maturities
at the time of purchase. Fixed maturities are classified
as
held-to-maturity when the Company has the positive intent
and
ability to hold the securities to maturity.
Held-to-maturity
securities are stated at amortized cost unless fair value
is
less than cost and the decline is deemed to be other than
temporary, in which case they are written down to fair
value
and a new cost basis is established.
Fixed maturities not classified as held-to-maturity are
classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the net
unrealized
gains and losses reported as a separate component of
stockholder's equity. The net unrealized gains and
losses in
derivative financial instruments used to hedge
available-for-
sale securities is included in the separate component of
stockholders equity.
The amortized cost of fixed maturities classified as
held-to-
maturity or available-for-sale is adjusted for
amortization of
premiums and accretion of discounts using the effective
interest method over the life of the related bonds. Such
amortization is included in interest income from
investments.
Realized gains and losses, and declines in value judged
to be
other-than-temporary are included in net realized gains
(losses) on investments.
2. Mortgage loans on real estate are carried at their unpaid
balances adjusted for any unamortized premiums or
discounts
and any valuation reserves. Interest income is accrued
on the
unpaid principal balance. Discounts and premiums are
amortized to income using the effective interest method.
Accrual of interest is discontinued on any impaired loans
where collection of interest is doubtful.
The Company maintains an allowance for credit losses at
a
level that, in managements opinion, is sufficient to
absorb
possible credit losses on its impaired loans and to
provide
adequate provision for any possible future losses in the
portfolio. Managements judgement is based on past loss
experience, current and projected economic conditions,
and
extensive situational analysis of each individual loan.
Effective January 1, 1995, the Company adopted Statement
of
Financial Accounting Standards (SFAS) No. 114 "Accounting
by
Creditors for Impairment of a Loan" and SFAS No. 118
"Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures". In accordance with these
standards, a mortgage loan is considered to be impaired
when
it is probable that the Company will be unable to collect
all
amounts due according to the contractual terms of the
loan
agreement. The measurement of impaired loans is based on
the
fair value of the collateral. As the Company was already
providing for impairment of loans through an allowance
for
credit losses, the implementation of these statements had
no
material effect on the Company's financial statements.
3. Real estate is carried at the lower of cost or fair
value. In
March 1995, the FASB issued SFAS No. 121 "Accounting for
the
Impairment of Long-Lived Assets and for Long-Lived Assets
to
be Disposed Of" to be effective for fiscal years
beginning
after December 15, 1995. The effect of adopting this
statement is not expected to be material.
4. Policy loans are carried at their unpaid balances.
5. Short-term investments include securities purchased with
initial maturities of one year or less and are carried at
amortized cost. The Company considers short-term
investments
to be available-for-sale and amortized cost approximates
fair
value.
Gains and losses realized on disposal of investments are
determined
on a specific identification basis.
Cash - Cash includes only amounts in demand deposit accounts.
Deferred Policy Acquisition Costs - Policy acquisition costs,
which
consist of sales commissions and other costs that vary with
and are
primarily related to the production of new and renewal
business,
have been deferred to the extent recoverable. Deferred costs
associated with the annuity products are being amortized over
the
life of the contracts in proportion to the emergence of gross
profits. Retrospective adjustments of these amounts are made
when
the Company revises its estimates of current or future gross
profits. Deferred costs associated with traditional life
insurance
are amortized over the premium paying period of the related
policies in proportion to premium revenues recognized.
Amortization of deferred policy acquisition costs totalled
$48,054,
$28,199, and $32,611 in 1995, 1994, and 1993, respectively.
Separate Account - Separate account assets and related
liabilities
are carried at fair value. The Companys separate accounts
invest
in shares of Maxim Series Fund, Inc., a diversified, open-end
management investment company which is an affiliate of the
Company,
shares of other external mutual funds, or government or
corporate
bonds.
Life Insurance and Annuity Reserves - Life insurance and
annuity
policy reserves with life contingencies of $4,675,175, and
$3,995,927 at December 31, 1995 and 1994, respectively, are
computed on the basis of estimated mortality, investment
yield,
withdrawals, future maintenance and settlement expenses, and
retrospective experience rating premium refunds. Annuity
contract
reserves without life contingencies of $6,170,760, and
$6,338,529
at December 31, 1995 and 1994, respectively, are established
at the
contractholder's account value.
Reinsurance - Policy reserves ceded to other insurance
companies
are carried as reinsurance receivable on the balance sheet
(See
Note 3).
The cost of reinsurance related to long-duration contracts is
accounted for over the life of the underlying reinsured
policies
using assumptions consistent with those used to account for
the
underlying policies.
Policy and Contract Claims - Policy and contract claims
include
provisions for reported claims in process of settlement,
valued in
accordance with the terms of the related policies and
contracts, as
well as provisions for claims incurred and unreported based
primarily on prior experience of the Company.
Participating Fund Account - Participating life and annuity
policy
reserves are $3,339,316 and $2,917,273 at December 31, 1995
and
1994, respectively. Participating business approximates 46%
of the
Company's ordinary life insurance in force and 84% of ordinary
life
insurance premium income at December 31, 1995.
The liability for undistributed earnings on participating
business
was increased by $15,690 in 1995, which represented $2,027 of
earnings on participating business and adjustments of $13,663
to
reflect the net unrealized gains on securities classified as
available-for-sale, net of certain adjustments to policy
reserves
and income taxes.
The amount of dividends to be paid from undistributed earnings
on
participating business is determined annually by the Board of
Directors. Amounts allocable to participating policyholders
are
consistent with established Company practice.
The Company has established a Participating Policyholder
Experience
Account (PPEA) for the benefit of all participating
policyholders
which is included in the accompanying consolidated balance
sheet.
Earnings associated with the operation of the PPEA are
credited to
the benefit of all participating policyholders. In the event
that
the assets of the PPEA are insufficient to provide
contractually
guaranteed benefits, the Company must provide such benefits
from
its general assets.
The Company has also established a Participation Fund Account
(PFA)
for the benefit of the participating policyholders previously
transferred to the Company from the Parent under an assumption
reinsurance transaction. The PFA is part of the PPEA. The
assets
and liabilities associated with these policies are segregated
in
the accounting records of the Company to assure the
continuation of
current policyholder dividend expectations. Earnings derived
from
the operation of the PFA accrue solely for the benefit of the
acquired participating policyholders.
Recognition of Premium Income and Benefits and Expenses - Life
insurance premiums are recognized as earned. Annuity premiums
with
life contingencies are recognized as received. Accident and
health
premiums are earned on a monthly pro rata basis. Revenues for
annuity and other contracts without significant life
contingencies
consist of contract charges for the cost of insurance,
contract
administration, and surrender fees that have been assessed
against
the contract account balance during the period. Benefits and
expenses on policies with life contingencies are associated
with
premium income by means of the provision for future policy
benefit
reserves, resulting in recognition of profits over the life of
the
contracts. The average crediting rate on annuity products was
approximately 7.2% in 1995.
Income Taxes - Income taxes are recorded using the asset and
liability approach which requires, among other provisions, the
recognition of deferred tax assets and liabilities for
expected
future tax consequences of events that have been recognized in
the
Company's financial statements or tax returns. In estimating
future tax consequences, all expected future events (other
than the
enactments or changes in the tax laws or rules) are
considered.
Deferred tax assets are recorded net of a valuation allowance
to
the extent that management estimates that recovery of the
asset is
not more likely than not.
Repurchase Agreements - The Company enters into repurchase
agreements with third-party broker-dealers in which the
Company
sells securities and agrees to repurchase substantially
similar
securities at a specified date and price. Such agreements are
accounted for as collateralized borrowings. Interest expense
on
repurchase agreements is recorded at the coupon interest rate
on
the underlying securities. The repurchase fee received or
paid is
amortized over the term of the related agreement and
recognized as
an adjustment to investment income.
Derivatives - The Company engages in hedging activities to
manage
interest rate and foreign exchange risk (See Note 6).
2. RELATED-PARTY TRANSACTIONS
Reinsurance Transactions - The Company entered into a series
of
reinsurance transactions with the Parent Corporation during
1993
and prior years intended to make the Company the underwriter
and
administrator of all life and health insurance, annuity
products,
and related services with respect to United States
policyholders.
A May 1, 1993, reinsurance transaction resulted in the Company
recapturing certain group life and health business previously
ceded
to the Parent under a coinsurance agreement, as follows:
Assets
Liabilities and
Stockholder's Equity
Bonds $
217,254
Policy reserves $ 253,479 Mortgage loans 27,182 Cash and short
- -term
investments
5,607
Investment
income
due & accrued
3,436 $
253,479
$ 253,479
In addition, effective December 31, 1993, the Company
recaptured
certain participating life business also previously ceded to
the
Parent Corporation, as follows:
Assets
Liabilities and
Stockholder's Equity
Bonds $ 171,005 Policy reserves $ 180,000 Cash and short-term
investments
8,087
Investment income
due & accrued
908
$ 180,000 $ 180,000
From 1989 to 1993, the Company has assumed most of the United
States business of the Parent Corporation. During this
period, the
Parent Corporation had recorded estimated tax liabilities for
certain United States federal income taxes in its financial
statements. On December 31, 1993 and December 30, 1994, the
Parent
Corporation transferred assets with an estimated fair value of
$82,800 and $9,391, respectively, to the Company in exchange
for
the Company agreeing to assume the estimated tax liabilities
of the
Parent Corporation, and the issuance of shares of the
Company's
common stock.
Fees and Expenses - The Company and the Parent Corporation
have a
number of service agreements whereby the Parent Corporation
administers, distributes, and underwrites business for the
Company
and administers the Company's investment portfolio. Certain
operating expenses represent allocations made by the Parent
Corporation to the Company for services provided pursuant to
these
service agreements. These transactions are summarized as
follows:
Years Ended December 31,
1995 1994 1993 Investment management expense
(included in net
investment income)
$ 15,182 $ 13,841 $ 17,767 Administrative and underwriting
payments (included
in
operating expenses)
301,529 269,020 199,947
Other - At December 31, 1995 and 1994, due to Parent
Corporation
includes $27,814 and $35,388 due on demand and $122,160 and
$123,729 of notes payable which bear interest and mature at
various
dates. These notes may be prepaid in whole or in part at any
time
without penalty; the issuer may not demand payment before the
maturity date. The Company also has available an arrangement
to
obtain advances from the Parent Corporation to fund short-term
liquidity needs. The due on demand to the Parent Corporation
bears
interest at the public bond rate (6.4% and 8.5% at December
31,
1995 and 1994, respectively) while the remainder bear interest
at
various rates.
3. REINSURANCE
In the normal course of business, the Company seeks to limit
its
exposure to loss on any single insured and to recover a
portion of
benefits paid by ceding risks to other insurance enterprises
under
excess coverage and co-insurance contracts. The Company
retains a
maximum of $1.5 million of coverage per individual life.
Reinsurance contracts do not relieve the Company from its
obligations to policyholders. Failure of reinsurers to honor
their
obligations could result in losses to the Company;
consequently,
allowances are established for amounts deemed uncollectible.
The
Company evaluates the financial condition of its reinsurers
and
monitors concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of
the
reinsurers to minimize its exposure to significant losses from
reinsurer insolvencies. At December 31, 1995 and 1994,
reinsurance
receivables with a carrying value of $333,924, and $295,148,
respectively, were due primarily from the Parent Corporation.
Total reinsurance premiums assumed from the Parent Corporation
were
$1,606 and $2,438, and $0, in 1995, 1994, and 1993,
respectively.
The Company considers all accident and health policies to be
short-
duration contracts. The following schedule details life
insurance
in force and life and accident/health premiums:
Assumed Ceded Primari
ly
Percent
age
Primaril
y to
From of
Amount
Gross the
Parent
Other Net Assumed
to
Amount Corporat
ion
Compani
es
Amount Net December 31,
1995:
Life
insurance in
force:
Individual
$ 22,388,520 $ 7,200,882 $ 3,476,784 $ 18,664,422 18.6%
Group
48,415,592 1,954,313 50,369,905 3.9% Total $
70,804,112 $ 7,200,882 $ 5,431,097 $ 69,034,327 Premiums:
Life
insurance
$ 339,342 $ 51,688 $ 21,028 $ 308,682 6.8%
Accident/healt
h
623,626 9,192 64,495 678,929 9.5%
Total
$ 962,968 $ 60,880 $ 85,523 $ 987,611 December 31,
1994:
Life
insurance in
force:
Individual
$ 21,461,590 $ 7,411,811 $ 3,415,596 $ 17,465,375 19.6%
Group
48,948,669 2,102,228 51,050,897 4.1% Total $
70,410,259
$ 7,411,811 $ 5,517,824 $ 68,516,272 Premiums:
Life
insurance
$ 322,263 $ 42,946 $ 22,009 $ 301,326 7.3%
Accident/healt
h
579,650 5,169 63,140 637,621 9.9%
Total
$ 901,913 $ 48,115 $ 85,149 $ 938,947 December 31,
1993:
Life
insurance in
force:
Individual
$ 17,131,994 $ 7,797,389 $ 3,142,723 $ 12,477,328 25.2%
Group
37,789,859 2,108,314 39,898,173 5.3% Total $
54,921,853
$ 7,797,389 $ 5,251,037 $ 52,375,501 Premiums:
Life
insurance
$ 283,707 $ 112,798 $ 18,753 $ 189,662 9.9%
Accident/healt
h
524,747 142,171 60,723 443,299 13.7%
Total
$ 808,454 $ 254,969 $ 79,476 $ 632,961
4. NET INVESTMENT INCOME
Net investment income is
summarized as follows:
Years Ended December 31,
1995 1994 1993 Investment income: Bonds
and short-term
investments
$ 592,062 $ 555,103 $ 545,926
Mortgage loans on real
estate
171,008 182,544 220,477
Real estate
3,936 5,700 9,265 Policy loans 163,547 116,060
91,529
930,553 859,407 867,197 Investment expenses,
including
interest on amounts
charged
by the Parent
Corporation
of $10,778, $11,145, and
$7,250
95,507 91,761 75,773
Net investment income
$ 835,046 $ 767,646 $ 791,424
5. NET REALIZED GAINS (LOSSES) ON
INVESTMENTS
Net realized gains (losses) on
investments are as follows:
Years Ended December 31,
1995 1994 1993 Net realized gains
(losses):
Bonds $ 28,166 $ (39,775) $ 68,884
Mortage loans on real
estate
1,309 2,120 (98)
Real estate
(10) (102) (102) Bond provisions (5,000) (3,200)
(4,456)
Mortgage loan provisions (15,877) (27,918) (38,089)
Real estate provisions
(1,123) (3,064) (797) Net realized gains
(losses) on investments
$ 7,465 $ (71,939) $ 25,342
6
.
SUMMARY OF INVESTMENTS
Fixed maturities owned at December 31, 1995 are summarized as
follows:
Gross Gross Estima
ted
Amortiz
ed
Unreali
zed
Unreal
ized
Fair Carryi
ng
Cost Gains Losses Value Value Held-to-Maturity:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$ $ $ $ $
Direct
mortgage pass-through
certificates
Other
11,107 1,093 12,200 11,107 Collateralized
mortgage obligations
Public utilities
269,671 22,084 95 291,660 269,671 Corporate bonds
1,732,046 83,583 5,867 1,809,762 1,732,046 Foreign governments 1
8,596
1,087 12 19,671 18,596 State and
municipalities
22,784 1,966 24,750 22,784
$ 2,054,204 $ 109,813 $ 5,974 $ 2,158,043 $ 2,054,204
Available-for-Sale: U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$ 561,475 $ 9,983 $ 1,948 $ 569,510 $ 569,510
Direct
mortgage pass-through
certificates
794,056 11,980 2,233 803,803 803,803
Other
561,736 7,703 39 569,400 569,400 Collateralized
mortgage obligations
490,074 18,044 3,304 504,814 504,814
Public utilities
581,482 ` 16,607 2,425 595,664 595,664 Corporate
bonds
2,943,918 121,537 26 3,065,429 3,065,429 Foreign governments
141,362 5,021 5,644 140,739 140,739 State and
municipalities
13,866 22 60 13,828 13,828
$ 6,087,969 $ 190,897 $ 15,679 $ 6,263,187 $ 6,263,187
6
.
SUMMARY OF INVESTMENTS (Continued)
Fixed maturities owned at December 31, 1994 are summarized as
follows:
Gross Gross Estima
ted
Amortiz
ed
Unreali
zed
Unreal
ized
Fair Carryi
ng
Cost Gains Losses Value Value Held-to-Maturity:
U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$ 521,408 $ 389 $ 33,018 $ 488,779 $ 521,408
Direct
mortgage pass-through
certificates
69,559 617 1,001 69,175 69,559
Other
85,406 246 923 84,729 85,406 Collateralized
mortgage obligations
309,869 1,205 14,208 296,866 309,869
Public utilities
457,758 2,898 14,340 446,316 457,758 Corporate
bonds
2,757,612 14,701 111,410 2,660,903 2,757,612 Foreign
governments
90,690 47 3,950 86,787 90,690 State and
municipalities
1,683 10 1,693 1,683
$ 4,293,985 $ 20,113 $ 178,850 $ 4,135,248 $ 4,293,985
Available-for-Sale: U.S. Treasury
Securities and
obligations
of U.S.
Government Agencies:
Collateralized
mortgage obligations
$ 80,531 $ $ 3,798 $ 76,733 $ 76,733
Direct
mortgage pass-through
certificates
759,815 871 49,462 711,224 711,224
Other
198,651 9 2,654 196,006 196,006 Collateralized
mortgage obligations
203,036 6,379 196,657 196,657
Public utilities
325,383 193 26,379 299,197 299,197 Corporate bonds
1,119,726 3,253 65,398 1,057,581 1,057,581 Foreign governments
298,597
17 21,826 276,788 276,788 State and
municipalities
11,348 831 10,517 10,517
$ 2,997,087 $ 4,343 $ 176,727 $ 2,824,703 $ 2,824,703
Most of the collateralized mortgage obligations consist of
planned
amortization classes with final stated maturities of three to
thirty years and average lives of less than one to twelve
years.
Prepayments on all mortgage-backed securities are monitored
monthly
and amortization of the premium and/or the accretion of the
discount associated with the purchase of such securities is
adjusted by such prepayments.
The cumulative effect as of January 1, 1994 of adopting SFAS
No.
115 "Accounting for Certain Investments in Debt and Equity
Securities," increased the opening balance of stockholders'
equity
by $6,515 to reflect the net unrealized gains on securities
classified as available-for-sale (previously carried at the
lower
of aggregate amortized cost or fair value) and the
corresponding
adjustments to deferred policy acquisition costs, policy
reserves,
and amounts allocable to the liability for undistributed
earnings
on participating business, all net of income taxes.
In November 1995, the Financial Accounting Standards Board
issued
a special report entitled A Guide to Implementation of SFAS
115 on
Accounting for Certain Investments in Debt and Equity
Securities.
In accordance with the adoption of this guidance, the Company
reassessed the classification of its investment portfolio in
December 1995 and reclassed securities totalling $2,119,814
from
held-to-maturity to available-for-sale. In connection with
this
reclassification, an unrealized gain, net of related
adjustments
(see above), of $23,449 was recognized in stockholders equity
at
the date of transfer.
The estimated fair value of fixed maturities that are publicly
traded are obtained from an independent pricing service. To
determine fair value for fixed maturities not actively traded,
the
Company utilized discounted cash flows at determined current
market
spread rates on investments of similar quality and term.
The amortized cost and estimated fair value of fixed maturity
investments at December 31, 1995, by projected maturity, are
shown
below. Actual maturities will likely differ from these
projections
because borrowers may have the right to call or prepay
obligations
with or without call or prepayment penalties.
Held-to-
Maturity
Available-
for-Sale
Amorti
zed
Estima
ted
Amorti
zed
Estima
ted
Cost Fair
Value
Cost Fair
Value
Due in one year or
less
$ 287,565 $ 293,666 $ 326,032 $ 337,792 Due
after one year
through five years
838,993 877,949 1,452,442 1,495,755 Due
after five years
through ten years
537,365 575,896 1,023,894 1,064,871 Due
after ten years
159,064 173,487 522,002 542,559 Mortgage-backed
securities
1,845,605 1,878,127
Asset-backed
securities
231,217 237,045 917,994 944,083 $
2,054,204
$ 2,158,043 $ 6,087,969 $ 6,263,187
During the years ended December 31, 1995 and 1994,
available-for-
sale securities with a fair value at the date of sale of
$4,211,649
and $1,753,445 were sold. The realized gains and losses on
such
sales totaled $39,755 and $15,516 for 1995 and $7,030 and
$50,612
for 1994. During 1995 and 1994, held-to-maturity securities
with
an amortized cost of $18,087 and $15,300 were sold due to
credit
deterioration with insignificant realized gains and losses.
Gains
on securities which were called for redemption by the
respective
issuers prior to maturity were $2,990 and $3,093 in 1995 and
1994,
respectively.
At December 31, 1995 and 1994, pursuant to fully
collateralized
securities lending arrangements, the Company had loaned
$343,351
and $0 of fixed maturities, respectively.
The Company makes limited use of derivative financial
instruments
to manage interest rate and foreign exchange risk. Such
hedging
activity consists of interest rate swap agreements, interest
rate
floors and caps, and foreign currency exchange contracts.
Interest
rate floors and caps are interest rate protection instruments
that
require the payment by a counter-party to the Company of an
interest differential. This differential represents the
difference
between current interest rates and an agreed-upon rate, the
strike
rate, applied to a notional principal amount. Interest rate
swap
agreements are used to convert the interest rate on certain
fixed
maturities from a floating rate to a fixed rate. Interest
rate
swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the
exchange of
the underlying principal amounts. Foreign currency exchange
contracts are used to hedge the foreign exchange rate risk
associated with bonds denominated in other than U.S. dollars.
The
differential paid or received on interest rate and amounts
received
under interest rate floor and cap agreements are recognized as
an
adjustment to net investment income on the accrual method.
Gains
and losses on foreign exchange contracts are deferred and
recognized in net investment income when the hedged
transactions
are realized.
Although derivative financial instruments taken alone may
expose
the Company to varying degrees of market and credit risk when
used
solely for hedging purposes, these instruments typically
reduce
overall market and interest rate risk. The Company controls
the
credit risk of its financial contracts through credit
approvals,
limits, and monitoring procedures. As the Company generally
enters
into transactions only with high quality institutions, no
losses
associated with non-performance on derivative financial
instruments
have occurred or are expected to occur.
The following table summarizes the financial hedge
instruments:
Notional Strike/Swap December 31, 1995
Amount Rate Maturity Interest Rate Floor $ 100,000 4.5%
[LIBOR]
1999 Interest Rate Cap 100,000 11.0% [CMT] 2000 Interest Rate
Swaps
165,000 6.203% to
9.35%
01/98 to
2/2002
Foreign Currency
Exchange Contracts
66,650 N/A 10/96 to
09/98
Notional Strike December 31, 1994 Amount Rate Maturity
Interest Rate Floor
$ 100,000 4.5%
[LIBOR]
1999 Interest Rate Swaps
150,000
6.275% to
10.644%
01/95 -
01/2000
Foreign Currency
Exchange Contracts
70,991 N/A 10/96 -
09/98
LIBOR - London Interbank Offered Rate
CMT - Constant Maturity Treasury Rate
The Company has established specific investment guidelines
designed
to emphasize a diversified and geographically dispersed
portfolio
of mortgages collateralized by commercial and industrial
properties
located in the United States. The Company's policy is to
obtain
collateral sufficient to provide loan-to-value ratios of not
greater than 75% at the inception of the mortgages. At
December
31, 1995 approximately 28% and 11% of the Company's mortgage
loans
were collateralized by real estate located in California and
Illinois, respectively.
At December 31, 1995, the recorded investment in loans that
were
considered to be impaired under SFAS No. 114 was $23,678
including
$3,254 of loans with a related allowance for credit losses of
$654.
Additionally, loans totaling $6,481 were on a non-accrual
basis.
The average recorded investment in impaired loans during the
year
ended December 31, 1995 was approximately $29,150. For the
year
ended December 31, 1995, the Company recognized interest
income on
those impaired loans of $675. Interest income received and
recorded using the cash basis method of recognition during
1995
totalled $857.
As part of an active loan management policy and in the
interest of
maximizing the future return of each individual loan, the
Company
may from time to time alter the original terms of certain
loans.
These restructured loans, all performing in accordance with
their
modified terms, aggregated $89,160 and $102,538 at December
31,
1995 and 1994, respectively.
The following table presents changes in the allowance for
credit
losses since January 1, 1995 (date of the adoption of SFAS No.
114):
Balance at January 1, 1995
$ 57,987 Provision for loan losses
15,877
Direct chargeoffs (10,480) Recoveries 610 Balance at December 31,
1995
$ 63,994
7. COMMERCIAL PAPER
The Company has a commercial paper program which is partially
supported by a $50,000 standby letter-of-credit. At December
31,
1995, commercial paper outstanding has maturities ranging from
25
to 160 days and interest rates ranging from 5.7% to 5.9%. At
December 31, 1994, maturities ranged from 40 to 120 days and
interest rates ranged from 5.4% to 6.4%
8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table provides estimated fair value for all
assets
and liabilities and hedge contracts considered to be financial
instruments:
December 31, 1995
1994
Estimat
ed
Carryin
g
Estimat
ed
Carryi
ng
Fair Amount Fair
Value
Amount Value ASSETS: Fixed
maturities
and short-term
investments
$ 8,452,226 $ 8,556,065 $ 7,825,608 $ 7,666,871 Mortgage loans
on real estate
1,713,195 1,749,514 2,011,059 2,037,694 Policy
loans
2,237,745 2,237,745 1,905,013 1,905,013 Common stock 9,440
9,440
5,222 5,222 LIABILITIES: Annuity contract
reserves
without life
contingencies
6,170,760 6,268,749 6,338,529 6,286,966
Policyholders'
funds
154,872 154,872 144,262 144,262 Due to
Parent
Corporation
149,974 152,347 159,117 159,334
Repurchase
agreements
372,965 372,965 564,160 564,160
Commercial paper
84,854 84,854 89,686 89,686 HEDGE CONTRACTS:
Interest rate
floor
84 1,320 88 76
Interest rate
cap
90 90
Interest rate
swaps
10,052 10,052
(771)
(771)
Foreign currency
exchange contracts
(4,604) (4,604)
(4,345
)
(4,345)
The estimated fair value of financial instruments has been
determined using available market information and appropriate
valuation methodologies. However, considerable judgement is
necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented
are
not necessarily indicative of the amounts the Company could
realize
in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a
material
effect on the estimated fair value amounts.
Mortgage loans fair value estimates generally are based on a
discounted cash flow basis. A discount rate "matrix" is
incorporated whereby the discount rate used in valuing a
specific
mortgage generally corresponds to that mortgage's remaining
term.
The rates selected for inclusion in the discount rate "matrix"
reflect rates that the Company would quote if placing loans
representative in size and quality to those currently in the
portfolio.
Policy loans accrue interest generally at variable rates with
no
fixed maturity dates and, therefore, estimated fair value
approximates carrying value.
The fair value of annuity contract reserves without life
contingencies is estimated by discounting the cash flows to
maturity of the contracts, utilizing current credited rates
for
similar products.
The estimated fair value of policyholder's funds is the same
as the
carrying amount as the Company can change the crediting rates
with
30 days notice.
The estimated fair value of due to Parent Corporation is based
on
discounted cash flows at current market spread rates on high
quality investments.
The carrying value of repurchase agreements and commercial
paper is
a reasonable estimate of fair value due to the short-term
nature of
the liabilities.
The estimated fair value of financial hedge instruments, all
of
which are held for other than trading purposes, is the
estimated
amount the Company would receive or pay to terminate the
agreement
at each year-end, taking into consideration current interest
rates
and other relevant factors. Included in the net gain (loss)
position for interest rates swaps are $0 and $2,985 of
unrealized
losses in 1995 and 1994, respectively. Included in the net
loss
position for foreign currencies exchange contracts are $5,497
and
$4,504 loss exposures in 1995 and 1994, respectvely.
See note 6 for additional information on policies regarding
estimated fair value of fixed maturities.
9. FEDERAL INCOME TAXES
The following is a reconciliation between the federal income
tax
rate and the Companys effective rate:
1995 1994 1993 Federal tax rate 35.0 % 35.0 % 35.0 % Change in tax rate
resulting
from:
Investment income not
subject to federal tax
(0.5) (1.0
)
(1.2
)
Effect of tax rate change
on net deferred tax assets
(1.8
)
Change in valuation
allowance
(7.8) (6.9
)
1.0 State and environmental
taxes
0.7 0.9 Other, net 0.3 (0.3
)
(0.5
)
Total 27.7 % 27.7 % 32.5 %
Temporary differences which give rise to the deferred tax
assets
and liabilities as of December 31, 1995 and 1994 are as
follows:
1995 1994 Deferre
d Tax
Asset
Deferre
d Tax
Liabili
ty
Deferre
d Tax
Asset
Deferre
d Tax
Liabili
ty
Policyholder
reserves
$ 162,073 $ $ 119,764 $
Deferred policy
acquisition costs
55,542
62,040
Deferred acquisition
cost proxy tax
58,481 45,422
Investment assets 16,372 97,249 Net operating loss
carryforwards
17,588 22,666
Tax credits and
other
4,786 2,564
Subtotal
242,928 71,914 287,665 62,040 Valuation allowance (2,073)
(15,218)
Total Deferred
Taxes
$ 240,855 $ 71,914 $ 272,447 $ 62,040
Amounts related to investment assets above include $33,735 and
$(47,493) related to the unrealized gains (losses) on the
Company's
fixed maturities available-for-sale at December 31, 1995 and
1994,
respectively.
The Company files a separate tax return and, therefore, losses
incurred by subsidiaries cannot be offset against operating
income of the Company. At December 31, 1995, the Companys
subsidiaries have approximately $50,251 of net operating loss
carryforwards, expiring through the year 2010. The tax
benefit
of subsidiaries net operating loss carryforwards, net of a
valuation allowance of $419 are included in the deferred tax
assets.
The Company's valuation allowance was decreased in 1995 and
1994 by
$13,145 and $6,278, respectively, primarily as a result of
taxable
income in subsidiaries which was greater than expected and the
resulting re-evaluation by management of future estimated
taxable
income in the subsidiaries.
Under pre-1984 life insurance company income tax laws, a
portion
of life insurance company gain from operations was not subject
to
current income taxation but was accumulated, for tax purposes,
in
a memorandum account designated as "policyholders' surplus
account." The aggregate accumulation in the account is $7,742
and the Company does not anticipate any transactions which
would
cause any part of the amount to become taxable. Accordingly,
no
provision has been made for possible future federal income
taxes
on this accumulation.
The Internal Revenue Service is currently auditing tax years
1988
to 1991, inclusive. In the opinion of Company management,
amounts
paid or accrued are adequate, however, it is possible that the
Companys estimate may change as a result of the completion of
the
IRS audits.
10. STOCKHOLDER'S EQUITY, DIVIDEND RESTRICTIONS, AND OTHER MATTERS
All of the Company's outstanding series of preferred stock are
owned by the Parent Corporation. The dividend rate on the
Series
A Stated Rate Auction Preferred Stock (STRAPS) is 7.3% through
December 30, 2002. The Series A STRAPS are redeemable at the
option of the Company on or after December 29, 2002 at a price
of
$100,000 per share, plus accumulated and unpaid dividends.
Through December 30, 1995, the Series B STRAPS had a 7%
dividend
rate. Thereafter, the Company will, at its option, select
future
dividend periods. Future dividend rates will be fixed by a
market
auction process with dividend rates dependent upon the
Company. If
auctions are undersubscribed or otherwise unsuccessful, the
dividend rate is fixed by formula. The Company has the
flexibility
of specifying, before each auction, the rights of redemption
which
it has during the succeeding dividend period. These
redemption
rights are factored into the auctions which set dividend
rates.
The Series B STRAPS are redeemable at the option of the
Company at
a price of $100,000 per share, plus accumulated and unpaid
dividends.
The Company's Series E 7.5% non-cumulative preferred shares
are
redeemable by the Company after April 1, 1999. The shares are
not
redeemable at the option of the holder at any time. The
shares are
convertible into common shares at the option of the holder on
or
after September 30, 1999, at a conversion price negotiated
between
the holder and the Company or at a formula determined
conversion
price in accordance with the share conditions.
On December 31, 1993, the Company issued 3,783 shares of
common
stock to the Parent Corporation in connection with an
assumption of
estimated tax liabilities. The Company also received $472 and
$9,098 of contributed capital in the form of deferred tax
assets
from the Parent Corporation during 1994 and 1993,
respectively, in
connection with the 1993 reinsurance transactions (see Note
2).
The Company's net income and capital and surplus, as
determined in
accordance with statutory accounting principles and practices
for
December 31 are as follows:
1995 1994 1993 (Unaudit
ed)
Net Income $ 114,931 $ 70,091 $ 55,995 Capital
and Surplus
653,479 621,589 628,944
The maximum amount of dividends which can be paid to
stockholders
by insurance companies domiciled in the State of Colorado is
subject to restrictions relating to statutory surplus and
statutory
net gain from operations. Statutory surplus and net gains
from
operations at December 31, 1995 were $524,647 and $119,299
(unaudited), respectively. The Company should be able to pay
up to
$119,299 (unaudited) of dividends without regulatory approval
in
1996.
Dividends of $9,217, $7,475, and $9,335, were paid on
preferred
stock in 1995, 1994, and 1993, respectively. In addition,
dividends of $39,763, $32,963, and $12,517 were paid on common
stock in 1995, 1994 and 1993, respectively. Dividends are
paid as
determined by the Board of Directors.
The Company is involved in various legal proceedings which
arise in
the ordinary course of its business. In the opinion of
management,
after consultation with counsel, the resolution of these
proceedings should not have a material adverse effect on its
financial position or results of operations.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of the issuance and distribution of the
Contracts, other than commissions on sales of the Contracts are as
follows:
Securities and Exchange Commission fee $
68,965.52
Accounting fees and expenses $
5,000.00
Legal fees and expenses $
20,000.00
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Provisions exist under the Colorado General Corporation Code
and
the Bylaws of GWL&A whereby GWL&A may indemnify a director,
officer, or
controlling person of GWL&A against liabilities arising under the
Securities Act of 1933. The following excerpts contain the
substance of
these provisions:
Colorado Business Corporation Act
Article 109 - INDEMNIFICATION
Section 7-109-101. Definitions.
As used in this Article:
(1) "Corporation" includes any domestic or foreign entity
that is
a predecessor of the corporation by reason of a merger,
consolidation, or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director
of a
corporation or an individual who, while a director of a
corporation, is or was serving at the corporation's request as
a
director, officer, partner, trustee, employee, fiduciary or
agent
of another domestic or foreign corporation or other person or
employee benefit plan. A director is considered to be serving
an
employee benefit plan at the corporation's request if his or
her
duties to the corporation also impose duties on or otherwise
involve services by, the director to the plan or to
participants in
or beneficiaries of the plan.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to
a
proceeding to pay a judgment, settlement, penalty, fine,
including
an excise tax assessed with respect to an employee benefit
plan, or
reasonable expenses.
(5) "Official capacity" means, when used with respect to a
director, the office of director in the corporation and, when
used
with respect to a person other than a director as contemplated
in
Section 7-109-107, means the office in the corporation held by
the
officer or the employment, fiduciary, or agency relationship
undertaken by the employee, fiduciary, or agent on behalf of
the
corporation. "Official capacity" does not include service for
any
other domestic or foreign corporation or other person or
employee
benefit plan.
(6) "Party" includes a person who was, is, or is threatened
to be
made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or
informal.
Section 7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to the
proceeding
because the person is or was a director against liability
incurred
in any proceeding if:
(a) The person conducted himself or herself in good
faith;
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity
with
the corporation, that his or her conduct was in the
corporation's best interests; or
(II) In all other cases, that his or her conduct was
at
least not opposed to the corporation's best
interests;
and
(c) In the case of any criminal proceeding, the person
had no
reasonable cause to believe his or her conduct was
unlawful.
(2) A director's conduct with respect to an employee benefit
plan
for a purpose the director reasonably believed to be in the
interests of the participants in or beneficiaries of the plan
is
conduct that satisfies the requirements of subparagraph (II)
of
paragraph (b) of subsection (1) of this section. A director's
conduct with respect to an employee benefit plan for a purpose
that
the director did not reasonably believe to be in the interests
of
the participants in or beneficiaries of the plan shall be
deemed
not to satisfy the requirements of subparagraph (a) of
subsection
(1) of this section.
(3) The termination of any proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere
or its
equivalent, is not, of itself, determinative that the director
did
not meet the standard of conduct described in this section.
(4) A corporation may not indemnify a director under this
section:
(a) In connection with a proceeding by or in the right
of the
corporation in which the director was adjudged liable to
the
corporation; or
(b) In connection with any proceeding charging that the
director derived an improper personal benefit, whether or
not
involving action in his official capacity, in which
proceeding
the director was adjudged liable on the basis that he or
she
derived an improper personal benefit.
(5) Indemnification permitted under this section in
connection
with a proceeding by or in the right of a corporation is
limited to
reasonable expenses incurred in connection with the
proceeding.
Section 7-109-103. Mandatory Indemnification of Directors.
Unless limited by the articles of incorporation, a corporation
shall be required to indemnify a person who is or was a director of
the
corporation and who was wholly successful, on the merits or
otherwise,
in defense of any proceeding to which he was a party, against
reasonable
expenses incurred by him in connection with the proceeding.
Section 7-109-104. Advance of Expenses to Directors.
(1) A corporation may pay for or reimburse the reasonable
expenses
incurred by a director who is a party to a proceeding in
advance of
the final disposition of the proceeding if:
(a) The director furnishes the corporation a written
affirmation of his good-faith belief that he has met the
standard of conduct described in Section 7-109-102;
(b) The director furnishes the corporation a written
undertaking, executed personally or on the director's
behalf,
to repay the advance if it is ultimately determined that
he or
she did not meet such standard of conduct; and
(c) A determination is made that the facts then know to
those
making the determination would not preclude
indemnification
under this article.
(2) The undertaking required by paragraph (b) of subsection
(1) of
this section shall be an unlimited general obligation of the
director, but need not be secured and may be accepted without
reference to financial ability to make repayment.
(3) Determinations and authorizations of payments under this
section shall be made in the manner specified in Section
7-109-106.
Section 7-109-105. Court-Ordered Indemnification of Directors.
(1) Unless otherwise provided in the articles of
incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to
another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court
considers
necessary, may order indemnification in the following manner:
(a) If it determines the director is entitled to
mandatory
indemnification under section 7-109-103, the court shall
order
indemnification, in which case the court shall also order
the
corporation to pay the director's reasonable expenses
incurred
to obtain court-ordered indemnification.
(b) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director met
the
standard of conduct set forth in section 7-109-102 (1) or
was
adjudged liable in the circumstances described in Section
7-
109-102 (4), the court may order such indemnification as
the
court deems proper; except that the indemnification with
respect to any proceeding in which liability shall have
been
adjudged in the circumstances described Section 7-109-102
(4)
is limited to reasonable expenses incurred in connection
with
the proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.
Section 7-109-106. Determination and Authorization of
Indemnification
of Directors.
(1) A corporation may not indemnify a director under Section
7-
109-102 unless authorized in the specific case after a
determination has been made that indemnification of the
director is
permissible in the circumstances because he has met the
standard of
conduct set forth in Section 7-109-102. A corporation shall
not
advance expenses to a director under Section 7-109-104 unless
authorized in the specific case after the written affirmation
and
undertaking required by Section 7-109-104(1)(a) and (1)(b) are
received and the determination required by Section
7-109-104(1)(c)
has been made.
(2) The determinations required to be made under subsection
(1) of
this section shall be made:
(a) By the board of directors by a majority vote of
those
present at a meeting at which a quorum is present, and
only
those directors not parties to the proceeding shall be
counted
in satisfying the quorum.
(b) If a quorum cannot be obtained, by a majority vote
of a
committee of the board of directors designated by the
board of
directors, which committee shall consist of two or more
directors not parties to the proceeding; except that
directors
who are parties to the proceeding may participate in the
designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in
paragraph
(a) of subsection (2) of this section, and the committee
cannot be
established under paragraph (b) of subsection (2) of this
section,
or even if a quorum is obtained or a committee designated, if
a
majority of the directors constituting such quorum or such
committee so directs, the determination required to be made by
subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote of
the
board of directors or the committee in the manner
specified in
paragraph (a) or (b) of subsection (2) of this section
or, if
a quorum of the full board cannot be obtained and a
committee
cannot be established, by independent legal counsel
selected
by a majority vote of the full board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as
the
determination that indemnification is permissible; except
that, if
the determination that indemnification is permissible is made
by
independent legal counsel, authorization of indemnification
and
advance of expenses shall be made by the body that selected
such
counsel.
Section 7-109-107. Indemnification of Officers, Employees,
Fiduciaries,
and Agents.
(1) Unless otherwise provided in the articles of
incorporation:
(a) An officer is entitled to mandatory indemnification
under
section 7-109-103, and is entitled to apply for
court-ordered
indemnification under section 7-109-105, in each case to
the
same extent as a director;
(b) A corporation may indemnify and advance expenses to
an
officer, employee, fiduciary, or agent of the corporation
to
the same extent as a director; and
(c) A corporation may indemnify and advance expenses to
an
officer, employee, fiduciary, or agent who is not a
director
to a greater extent, if not inconsistent with public
policy,
and if provided for by its bylaws, general or specific
action
of its board of directors or shareholders, or contract.
Section 7-109-108. Insurance.
A corporation may purchase and maintain insurance on behalf of
a
person who is or was a director, officer, employee, fiduciary, or
agent
of the corporation and who, while a director, officer, employee,
fiduciary, or agent of the corporation, is or was serving at the
request
of the corporation as a director, officer, partner, trustee,
employee,
fiduciary, or agent of any other domestic or foreign corporation or
other person or of an employee benefit plan against any liability
asserted against or incurred by the person in that capacity or
arising
out of his or her status as a director, officer, employee,
fiduciary, or
agent whether or not the corporation would have the power to
indemnify
the person against such liability under the Section 7-109-102,
7-109-103
or 7-109-107. Any such insurance may be procured from any
insurance
company designated by the board of directors, whether such
insurance
company is formed under the laws of this state or any other
jurisdiction
of the United States or elsewhere, including any insurance company
in
which the corporation has an equity or any other interest through
stock
ownership or otherwise.
Section 7-109-109. Limitation of Indemnification of Directors.
(1) A provision concerning a corporation's indemnification
of, or
advance of expenses to, directors that is contained in its
articles
of incorporation or bylaws, in a resolution of its
shareholders or
board of directors, or in a contract, except for an insurance
policy or otherwise, is valid only to the extent the provision
is
not inconsistent with Sections 7-109-101 to 7-109-108. If the
articles of incorporation limit indemnification or advance of
expenses, indemnification or advance of expenses are valid
only to
the extent not inconsistent with the articles of
incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a
corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at
a
time when he or she has not been made a named defendant or
respondent in the proceeding.
Section 7-109-110. Notice to Shareholders of Indemnification of
Director.
If a corporation indemnifies or advances expenses to a
director
under this article in connection with a proceeding by or in the
right of
the corporation, the corporation shall give written notice of the
indemnification or advance to the shareholders with or before the
notice
of the next shareholders' meeting. If the next shareholder action
is
taken without a meeting at the instigation of the board of
directors,
such notice shall be given to the shareholders at or before the
time the
first shareholder signs a writing consenting to such action.
Bylaws of GWL&A
Article II, Section 11. Indemnification of Directors.
The Company may, by resolution of the Board of Directors,
indemnify
and save harmless out of the funds of the Company to the extent
permitted by applicable law, any director, officer, or employee of
the
Company or any member or officer of any committee, and his heirs,
executors and administrators, from and against all claims,
liabilities,
costs, charges and expenses whatsoever that any such director,
officer,
employee or any such member or officer sustains or incurs in or
about
any action, suit, or proceeding that is brought, commenced, or
prosecuted against him for or in respect of any act, deed, matter
or
thing whatsoever made, done, or permitted by him in or about the
execution of his duties of his office or employment with the
Company, in
or about the execution of his duties as a director or officer of
another
company which he so serves at the request and on behalf of the
Company,
or in or about the execution of his duties as a member or officer
of any
such Committee, and all other claims, liabilities, costs, charges
and
expenses that he sustains or incurs, in or about or in relation to
any
such duties or the affairs of the Company, the affairs of such
Committee, except such claims, liabilities, costs, charges or
expenses
as are occasioned by his own wilful neglect or default. The
Company
may, by resolution of the Board of Directors, indemnify and save
harmless out of the funds of the Company to the extent permitted by
applicable law, any director, officer, or employee of any
subsidiary
corporation of the Company on the same basis, and within the same
constraints as, described in the preceding sentence.
Item 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1. Form of Principal Underwriter and Distribution Agreement
to be
filed by amendment.
2. Not applicable.
3. (a) Articles of Incorporation of Great-West Life &
Annuity
Insurance Company to be filed by amendment.
(b) Bylaws of Great-West Life & Annuity Insurance
Company to
be filed by amendment.
4. (a) Form of Combination Fixed and Variable Group Annuity
Contract to be filed by amendment.
(b) Form of IRA Endorsement to be filed by amendment.
5. Opinion and consent of Ruth B. Lurie, Vice President,
Counsel
and Associate Secretary as to the legality of the
securities
being registered, filed herewith.
6. Not applicable.
7. Not applicable.
8. Not applicable.
9. Not applicable.
10. Not applicable.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. Not applicable.
15. Not applicable.
16. Not applicable.
17. Not applicable.
18. Not applicable.
19. Not applicable.
20. Not applicable.
21. List of significant subsidiaries of Great-West Life &
Annuity
Insurance Company, the state or incorporation or
organization
or each, and the names under which such subsidiaries do
business, filed herewith.
22. Not applicable.
23. (a) Consent of Jorden Burt Berenson & Johnson LLP, filed
herewith.
(b) Consent of Deloitte & Touche LLP, filed herewith.
24. Power of Attorney for Messrs. Balog, Burns, Dackow,
Desmarais,
Jr., Gratton, Hart, Mackness, McCallum, Nickerson,
Pitfield,
Plessis-Belair, Turner and Walsh, filed herewith.
25. Not applicable.
26. Not applicable.
27. Financial Data Schedule for Great-West Life & Annuity
Insurance Company.
Item 17. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising
after the effective date of the registration statement
(or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect
to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement, including (but
not
limited to) any addition or deletion of a managing
underwriter.
(2) That, for the purpose of determining any liability under
the
Securities Act of 1933, each such post-effective amendment
shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) 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,
officer
or controlling person of the registrant in the successful
defense
of any action, suit or proceeding) is asserted by such
director,
officer or controlling person in connection with the
securities
being registered, the registrant will, unless in the opinion
of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether
such indemnification by it is against public policy as
expressed in
the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the
Registrant has duly caused this Registration Statement on Form S-1
to be
signed on its behalf, in the City of Englewood, State of Colorado,
on
this 14th day of February , 1996.
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
(Depositor)
By: /s/ W.T. McCallum
William T. McCallum, President
and Chief Executive Officer
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities
with Great-West Life & Annuity Insurance Company and on the dates
indicated:
Signature and Title Date
_____, 1996
Director and Chairman of the
Board (Robert Gratton)
/s/ W.T. McCallum Feb. 14, 1996
Director, President and Chief Executive
Officer (William T. McCallum)
/s/ D.L. Wooden Feb. 14, 1996
Principal Financial Officer
(Douglas L. Wooden)
/s/ D.L. Wooden Feb. 14, 1996
Senior Vice-President and
Treasurer (Douglas L. Wooden)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the
Registrant has duly caused this Registration Statement on Form S-1
to be
signed on its behalf, in the City of Englewood, State of Colorado,
on
this day of , 1996.
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
(Depositor)
By:
William T. McCallum, President
and Chief Executive Officer
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities
with Great-West Life & Annuity Insurance Company and on the dates
indicated:
Signature and Title Date
/s/ R. Gratton* Feb. 15, 1996
Director and Chairman of the
Board (Robert Gratton)
, 1996
Director, President and Chief Executive
Officer (William T. McCallum)
_____, 1996
Principal Financial Officer
(Douglas L. Wooden)
, 1996
Senior Vice-President and
Treasurer (Douglas L. Wooden)
Signature and Title Date
/s/ J. Balog* Feb. 15, 1996
Director, (James Balog)
/s/ J.W. Burns* Feb. 15, 1996
Director, (James W. Burns)
/s/ O.T. Dackow* Feb. 15, 1996
Director (Orest T. Dackow)
/s/ P. Desmarais, Jr.* Feb. 15, 1996
Director (Paul Desmarais, Jr.)
, 1996
Director (Robert G. Graham)
/s/ N.B. Hart* Feb. 15, 1996
Director (N. Berne Hart)
, 1996
Director (Kevin P. Kavanagh)
/s/ W. Mackness* Feb. 15, 1996
Director (William Mackness)
/s/ J.E.A. Nickerson* Feb. 15, 1996
Director (Jerry E.A. Nickerson)
Signature and Title Date
/s/ P.M. Pitfield* Feb. 15, 1996
Director (P. Michael Pitfield)
/s/ Michel Plessis-Belair* Feb. 15, 1996
Director (Michel Plessis-Belair)
/s/ R.J. Turner* Feb. 15, 1996
Director (Ross J. Turner)
/s/ B.E. Walsh* Feb. 15, 1996
Director (Brian E. Walsh)
*By: /s/ D.C. Lennox Feb. 15, 1996
D. C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed with
this
Registration Statement.
EXHIBIT 5
February 15, 1996
Securities and Exchange Commission
450 Fifth St., N.W.
Washington, D.C. 20549
Re: Opinion of Counsel
Gentlemen:
This letter is furnished as the requisite opinion of
counsel
described in Form S-1, Part II, Item 16(5). Under said
registration
statement, Great-West Life & Annuity Insurance Company (the
"Company")
has registered $200,000,000 of securities under the Securities Act
of
1933, as amended.
I am the Vice President, Counsel and Associate Secretary of
the
Company. In so acting, I have made such examination of the law,
records
and documents as in my judgment are necessary or appropriate to
enable
me to render the opinion expressed below. For purposes of such
examination, I have assumed the genuineness of all signatures and
the
conformity to the original of all copies.
I am a member of the Colorado Bar and do not purport to be
an
expert on the laws of any other state. My opinion herein as to any
other law is based upon a limited inquiry thereof which I have
deemed
appropriate under the circumstances.
Based on the foregoing, I am of the opinion with respect to
the
securities, assuming that the securities will be issued and sold in
accordance with the provisions of the registration statement, to
which
the Form S-1 registration statement is applicable and with which
this
opinion accompanies, will be legally issued, fully paid and
nonassessable.
I consent to the use of this opinion as an exhibit to the
registration statement.
Sincerely,
/s/ Ruth B. Lurie
Ruth B. Lurie
Vice President, Counsel
and Associate Secretary
EXHIBIT 21
SUBSIDIARIES
OF REGISTRANT
JURISDICTION OF
SUBSIDIARY INCORPORATION OR
ORGANIZATION
GWL Properties Inc. Colorado
Maxim Series Fund, Inc. Maryland
Financial Administrative Services
Corporation Colorado
Bancsource Insurance Services, Inc. Minnesota
Employee Benefit Services, Inc. Colorado
Great-West Benefit Services, Inc. Delaware
GW Capital Management, Inc. Colorado
Confed. Admin. Services, Inc. Delaware
Benefits Communication Corporation Delaware
Westkin Properties Ltd. California
Great-West Realty Investments Inc. Delaware
BenefitsCorp Equities, Inc. Delaware
Private Healthcare Systems, Inc. Delaware
One Health Plan of California, Inc. California
One Health Plan of Texas, Inc. Texas
One Health Plan of Illinois, Inc. Illinois
EXHIBIT 23 (a)
WRITTEN CONSENT OF JORDEN BURT BERENSON & JOHNSON LLP
February 14, 1996
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, Colorado 80111
Re: Registration Statement on Form S-1
filed by Great-West Life & Annuity Insurance Company
the "Registration Statement")
Dear Ladies and Gentlemen:
We have acted as counsel to Great-West Life & Annuity
Insurance
Company, a Colorado corporation, regarding the federal securities
laws
applicable to the issuance and sale of the Contract described
therein.
We hereby consent to the references to us under the heading "Legal
Matters" in the prospectus.
Very truly yours,
/s/ Jorden Burt Berenson &
Johnson LLP
Jorden Burt Berenson & Johnson LLP
EXHIBIT 23 (b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Great-West
Life
& Annuity Insurance Company on Form S-1 of our report dated January
19,
1996, appearing in the Prospectus, which is part of this
Registration
Statement. We also consent to the reference to us under the
headings
"Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
February 12, 1996
EXHIBIT 24
POWERS OF ATTORNEY
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, J. Balog, a Member of the
Board
of Directors of Great-West Life & Annuity Insurance Company, a
Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox
and
G.R. Derback as my true and lawful attorney and agent for me and in
my
name and on my behalf to do, individually and without the
concurrence of
the other attorney and agent, any and all acts and things and to
execute
any and all instruments which either said attorney and agent may
deem
necessary or desirable to enable Great-West Life & Annuity
Insurance
Company to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission
thereunder, in connection with the registration under said Acts of
market value adjusted annuity contracts, including specifically,
but
without limiting the generality of the foregoing, power and
authority to
sign my name, in my capacity as a Member of the Board of Directors
of
Great-West Life & Annuity Insurance Company, to the Registration
Statement (Form S-1) of Great-West Life & Annuity Insurance Company
(Registration No. ), and to any and all amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 29th day of
December, 1995.
/s/ J. Balog
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Kelly Peace
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, J.W. Burns, a Member of the
Board of Directors of Great-West Life & Annuity Insurance Company,
a
Colorado corporation, do hereby constitute and appoint each of D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
January,
1996.
/s/ J.W. Burns
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Louise Auriol
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, O.T. Dackow, a Member of
the
Board of Directors of Great-West Life & Annuity Insurance Company,
a
Colorado corporation, do hereby constitute and appoint each of D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
December, 1995.
/s/ O.T. Dackow
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Joan Preyer
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, P. Desmarais, Jr., a Member
of
the Board of Directors of Great-West Life & Annuity Insurance
Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
January,
1996.
/s/ P. Desmarais. Jr.
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Luci Filteau
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, R. Gratton, a Member of the
Board of Directors of Great-West Life & Annuity Insurance Company,
a
Colorado corporation, do hereby constitute and appoint each of D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of
January, 1996.
/s/ R. Gratton
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Nicole Barolet
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, N.B. Hart, a Member of the
Board
of Directors of Great-West Life & Annuity Insurance Company, a
Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox
and
G.R. Derback as my true and lawful attorney and agent for me and in
my
name and on my behalf to do, individually and without the
concurrence of
the other attorney and agent, any and all acts and things and to
execute
any and all instruments which either said attorney and agent may
deem
necessary or desirable to enable Great-West Life & Annuity
Insurance
Company to comply with the Securities Act of 1933 and any rules,
regulations, and requirements of the Securities and Exchange
Commission
thereunder, in connection with the registration under said Acts of
market value adjusted annuity contracts, including specifically,
but
without limiting the generality of the foregoing, power and
authority to
sign my name, in my capacity as a Member of the Board of Directors
of
Great-West Life & Annuity Insurance Company, to the Registration
Statement (Form S-1) of Great-West Life & Annuity Insurance Company
(Registration No. ), and to any and all amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
December, 1995.
/s/ N.B. Hart
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Wilma J. Hart
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, William Mackness, a Member
of
the Board of Directors of Great-West Life & Annuity Insurance
Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of
January, 1996.
/s/ William Mackness
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Louise Fabris
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, J.E.A. Nickerson, a Member
of
the Board of Directors of Great-West Life & Annuity Insurance
Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of
January, 1996.
/s/ J.E.A. Nickerson
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ M. Lynne Reid
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, P.M. Pitfield, a Member of
the
Board of Directors of Great-West Life & Annuity Insurance Company,
a
Colorado corporation, do hereby constitute and appoint each of D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of
January,
1996.
/s/ P.M. Pitfield
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Diane Milleur
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, M. Plessis-Belair, a Member
of
the Board of Directors of Great-West Life & Annuity Insurance
Company,
a Colorado corporation, do hereby constitute and appoint each of
D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of
January,
1996.
/s/ M. Plessis-Belair
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Danielle Durocher
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, R.J. Turner, a Member of
the
Board of Directors of Great-West Life & Annuity Insurance Company,
a
Colorado corporation, do hereby constitute and appoint each of D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of
December, 1995.
/s/ R.J. Turner
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Ila Rosengarten
POWER OF ATTORNEY
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, B.E. Walsh, a Member of the
Board of Directors of Great-West Life & Annuity Insurance Company,
a
Colorado corporation, do hereby constitute and appoint each of D.C.
Lennox and G.R. Derback as my true and lawful attorney and agent
for me
and in my name and on my behalf to do, individually and without the
concurrence of the other attorney and agent, any and all acts and
things
and to execute any and all instruments which either said attorney
and
agent may deem necessary or desirable to enable Great-West Life &
Annuity Insurance Company to comply with the Securities Act of 1933
and
any rules, regulations, and requirements of the Securities and
Exchange
Commission thereunder, in connection with the registration under
said
Acts of market value adjusted annuity contracts, including
specifically,
but without limiting the generality of the foregoing, power and
authority to sign my name, in my capacity as a Member of the Board
of
Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-1) of Great-West Life & Annuity
Insurance
Company (Registration No. ), and to any and all
amendments
thereto, and I hereby ratify and confirm all that either said
attorney
and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of
January,
1996.
/s/ B.E. Walsh
Member, Board of
Directors
Great-West Life &
Annuity
Insurance Company
Witness:
/s/ Irene Minuck
EXHIBIT 26
FINANCIAL DATA SCHEDULE