Registration No. 333-46538
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. BMA Variable Life Account A
(Exact Name of Trust)
B. Business Men's Assurance Company of America
(Name of Depositor)
C. BMA Tower, P.O. Box 412879
Kansas City, MO 64141
(Complete address of depositor's principal executive offices)
D. Name and complete address of agent for service:
David A. Gates
Business Men's Assurance Company of America
700 Karnes Blvd.
Kansas City, Missouri 64108
(800) 423-9398
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
4401 West Tradewinds Avenue
Suite 207
Fort Lauderdale, Florida 33308
(954)771-7909
E. Last Survivor Flexible Premium Adjustable Variable Life Insurance Policies
(Title and amount of securities being registered)
F. Proposed maximum aggregate offering price to the public of the securities
being registered:
Continuous offering
G. Amount of Filing Fee: Not Applicable
H. Approximate date of proposed public offering:
As soon as practicable after the effective date of this filing.
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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.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
- - ----------- ---------------------
1(a) Other Information
(b) The Variable Insurance Policy
2 Other Information
3 Not Applicable
4 Other Information
5 Other Information
6(a) Not Applicable
(b) Not Applicable
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Purchases; Investment Choices; Access to Your Money
11 Investment Choices
12 Investment Choices
13 Expenses
14 Purchases
15 Purchases
16 Purchases; Investment Choices
17 Access to Your Money
18 Access to Your Money
19 Reports to Owners
20 Not Applicable
21 Access to Your Money
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 Other Information
26 Expenses
27 Other Information
28 Executive Officers and Directors of BMA
29 Other Information
30 Other Information
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Other Information
36 Not Applicable
37 Not Applicable
38 Other Information
39 Other Information
40 Not Applicable
41 Not Applicable
42 Not Applicable
43 Not Applicable
44 Purchases
45 Investment Choices; Other Information
46 Purchases; Access to Your Money
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 Other Information; Purchases
52 Investment Choices
53 Other Information
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
LAST SURVIVOR FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
ISSUED BY
BMA VARIABLE LIFE ACCOUNT A
AND
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
This Prospectus describes the Last Survivor Flexible Premium Adjustable Variable
Life Insurance Policy (Policy) offered by Business Men's Assurance Company of
America (BMA).
The Policy has been designed to be used for creation or conservation of one's
estate, retirement planning and other insurance needs of individuals and
businesses.
The Policy has 24 investment choices--a Fixed Account and 23 Investment Options
listed below.
When You buy a Policy, to the extent You have selected the Investment Options,
You bear the complete investment risk. Your Accumulation Value and, under
certain circumstances, the Death Benefit under the Policy may increase or
decrease or the duration of the Policy may vary depending on the investment
experience of the Investment Option(s) You select.
You can put Your money in the Fixed Account and/or any of the following
Investment Options:
INVESTORS MARK SERIES FUND, INC.
Managed By Standish, Ayer & Wood, Inc.
Intermediate Fixed Income
Mid Cap Equity
Money Market
Managed By Standish International Management Company, LLC
Global Fixed Income
Managed By Stein Roe & Farnham Incorporated
Small Cap Equity
Large Cap Growth
Managed By David L. Babson & Co. Inc.
Large Cap Value
Managed By Lord, Abbett & Co.
Growth & Income
Managed By Kornitzer Capital Management, Inc.
Balanced
BERGER INSTITUTIONAL PRODUCTS TRUST
Managed By BBOI Worldwide LLC
Berger IPT--International
THE ALGER AMERICAN FUND
Managed By Fred Alger Management, Inc.
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
Managed By American Century Investment Management, Inc.
VP Income & Growth
VP Value
DREYFUS STOCK INDEX FUND
Managed By the Dreyfus Corporation (Index Fund Manager: Mellon Equity
Associates)
DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS VIF")
Managed By the Dreyfus Corporation
Dreyfus VIF Disciplined Stock
VARIABLE INSURANCE PRODUCTS FUND ("VIP") AND VARIABLE INSURANCE
PRODUCTS FUND II ("VIP II")
Managed By Fidelity Management & Research Company
Fidelity VIP Overseas Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP II Contrafund Portfolio
INVESCO VARIABLE INVESTMENT FUNDS, INC.
Managed By INVESCO Funds Group, Inc.
INVESCO VIF--High Yield
INVESCO VIF--Equity Income
LAZARD RETIREMENT SERIES, INC.
Managed By Lazard Asset Management
Lazard Retirement Small Cap
Please read this Prospectus before investing and keep it on file for future
reference. It contains important information about the BMA Last Survivor
Flexible Premium Adjustable Variable Life Insurance Policy. The Securities and
Exchange Commission maintains a Web site (http://www.sec.gov) that contains
information regarding companies that file electronically with the Commission.
The Policies:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o are not guaranteed and may be subject to loss of principal
Date: _______, 2001
TABLE OF CONTENTS
PAGE
DEFINITIONS
SUMMARY
1. The Variable Life Insurance Policy
2. Purchases
3. Investment Choices
4. Expenses
5. Death Benefit
6. Taxes
7. Access To Your Money
8. Other Information.
9. Inquiries
PART I
1. THE VARIABLE LIFE INSURANCE POLICY
2. PURCHASES
Premiums Waiver of Planned Premiums Application for a Policy Issue Ages
Application of Premiums Grace Period.
Accumulation Unit Values
Right to Refund
Exchange of a Policy for a BMA Policy
3. INVESTMENT CHOICES
Transfers
Dollar Cost Averaging
Asset Rebalancing Option
Asset Allocation Option
Substitution
4. EXPENSES
Premium Charge
Monthly Deduction
Surrender Charge
Partial Surrender Fee
Waiver of Surrender Charges
Reduction or Elimination of the Surrender Charge
Transfer Fee
Taxes
Investment Option Expenses
5. DEATH BENEFIT
Change in Death Benefit Option
Change in Specified Amount
Guaranteed Minimum Death Benefit
Accelerated Death Benefit
6. TAXES
Life Insurance in General
Taking Money Out of Your Policy
Diversification
7. ACCESS TO YOUR MONEY
Loans
Surrenders
8. OTHER INFORMATION
BMA
The Separate Account
Distributors
Administration
Suspension of Payments or Transfers
Ownership
PART II
Executive Officers and Directors of BMA Officers and Directors of Jones
& Babson, Inc. Voting Legal Opinions Reduction or Elimination of
Surrender Charge Net Amount at Risk Maturity Date Misstatement of Age
or Sex.
Our Right to Contest
Payment Options
Federal Tax Status
Reports to Owners
Legal Proceedings
Experts
Financial Statements
APPENDIX A--Illustration of Policy Values
APPENDIX B--Rates of Return
DEFINITIONS
Accumulation Value: The sum of Your Policy values in the Subaccounts, the Fixed
Account and the Loan Account.
Accumulation Unit: A unit of measure used to calculate Your Accumulation Value
in the Subaccounts.
Age: Issue Age is age last birthday on the Policy Date. Attained Age is the
Issue Age plus the number of completed Policy Years.
Authorized Request: A request, in a form satisfactory to Us, which is received
by the BMA Service Center.
Beneficiary: The person who is named in the application or at a later date to
receive the Death Proceeds of the Policy or any rider(s).
BMA: Business Men's Assurance Company of America.
Business Day: Each day that the New York Stock Exchange is open for business.
The Separate Account will be valued each Business Day.
Cash Surrender Value: The Accumulation Value less the surrender charge, if any,
and less any Indebtedness.
Death Benefit: The amount used to determine the Death Proceeds payable upon the
death of the last surviving Insured while the Policy is in force. The Death
Benefit can be either Level or Adjustable.
Death Proceeds: The Death Proceeds equal the Death Benefit less any
Indebtedness.
Fixed Account: A portion of the General Account into which You can allocate Net
Premiums or transfer Accumulation Values. It does not share in the investment
experience of any Subaccount of the Separate Account.
General Account: Our general investment account which contains all of Our assets
with the exception of the Separate Account and other segregated asset accounts.
Grace Period: The 61 days that follow the date We mail a notice to You for
payment if the Cash Surrender Value is not sufficient to cover the Monthly
Deduction.
Indebtedness: Unpaid Policy loans plus unpaid Policy loan interest.
Initial Base Policy Specified Amount: The amount of coverage selected by You at
the time of application and which will be used to determine the Death Benefit.
Insureds: The two persons whose lives are insured under the Policy.
Investment Option(s): Those investment options available through the Separate
Account.
Loan Account: An account established within Our General Account for any amounts
transferred from the Fixed Account and the Separate Account as a result of
loans. The Loan Account is credited with interest and is not based on the
experience of any Separate Account.
Maturity Date: The date the Accumulation Value, less any Indebtedness, becomes
payable to You if at least one of the Insureds is living on the Maturity Date
and the Policy is in force. Insurance may terminate prior to the Maturity Date
if no Premiums are paid after the initial Premium or if additional Premiums are
not sufficient to continue insurance to such date. Insurance is also affected by
any changes in monthly deductions, the investment performance of the selected
Subaccounts and the amount of interest We credit to the Fixed Account depending
upon Your selections.
Monthly Anniversary Day: The same day of each month as the Policy Date for each
succeeding month the Policy remains in force. If the Monthly Anniversary falls
on a day that is not a Business Day, any Policy transaction due as of that day
will be processed the first Business Day following such date.
Monthly Deduction: On the Policy Date and each Monthly Anniversary Day
thereafter We deduct certain charges from Your Policy.
Net Premium: We deduct a Premium Charge from each Premium paid. The Net Premium
is the Premium paid less the Premium Charge.
Owner: The Insureds are the Owner unless otherwise designated. If the Policy has
joint Owners, then all reference to Owner includes the joint Owner.
Policy Anniversary: The same month and day as the Policy Date for each
succeeding year the Policy remains in force.
Policy Date: The date by which Policy months, years and anniversaries are
measured.
Policy Month: The one month period from the Policy Date to the same date of the
next month, or from one Monthly Anniversary Day to the next.
Policy Year: The one year period from the Policy Date to the first Policy
Anniversary or from one Policy Anniversary to the next.
Premium: A payment You make towards the Policy that does not re-pay any
Indebtedness.
Rate Class: This is anything that would affect the level of Your Premium, such
as health status and tobacco use.
Reinstatement: To restore coverage after the Policy has terminated.
Separate Account: A segregated asset account maintained by Us in which a portion
of Our assets has been allocated for this and certain other policies.
Service Center: The office indicated in the Summary to which notices, requests
and Premiums must be sent. All sums payable to Us under the Policy are payable
only at the Service Center.
Specified Amount: The Initial Base Policy Specified Amount plus each increase to
the Specified Amount and less each decrease to the Specified Amount.
Underwriting Process: The underwriting process begins the day We receive Your
application at the Service Center and ends the day We receive and approve all
required documents, including the initial Premium, necessary to put the Policy
in force.
Us, We, Our: Business Men's Assurance Company of America.
You, Your, Yours: The Owner of the Policy.
SUMMARY
The prospectus is divided into three sections: Summary, Part I and Part II. The
sections in this summary correspond to sections in Part I of this prospectus
which discuss the topics in more detail. Even more detailed information is
contained in Part II.
1. THE VARIABLE LIFE INSURANCE POLICY: The variable life insurance policy
offered by BMA is a contract between You, the Owner, and BMA, an insurance
company.
The Policy provides for life insurance coverage on the lives of two persons who
are referred to as the Insureds. Upon the death of the last surviving Insured
the payment of the Death Proceeds will be made to your selected Beneficiary,
which should be excludable from the gross income of the Beneficiary. However,
under some circumstances estate taxes may apply. The Policy can be used to
create or conserve one's estate or to save for retirement. The Policy can also
be used for certain business purposes, such as keyman insurance. The Insureds
are the Owner of the Policy unless you tell us otherwise.
Under the Policy, You may, subject to certain limitations, make Premium
payments, in any amount and at any frequency. The Policy provides an
Accumulation Value, surrender rights, loan privileges and other features
traditionally associated with life insurance.
The Policy has a no-lapse guarantee in the first five years providing the
no-lapse Monthly Minimum Premiums are paid. The Policy can lapse (terminate
without value) when the Cash Surrender Value is insufficient to cover the
Monthly Deduction and a Grace Period of 61 days has expired without an adequate
payment being made.
You should consult Your Policy for further understanding of its terms and
conditions and for any state-specific provisions and variances that may apply to
Your Policy.
2. PURCHASES: You can buy the Policy by completing the proper forms. Your
registered representative can help You. The minimum initial Premium We will
accept will be computed for You with respect to the Specified Amount You have
requested. In some circumstances We may contact You for additional information
regarding the Insureds and may require the Insureds to provide Us with medical
records, a physician's statement or a complete paramedical examination.
The Policy is a flexible premium policy and unlike traditional insurance
policies, there is no fixed schedule for Premium payments after the initial
Premium. Although you may establish a schedule of Premium payments (Planned
Premium), if you fail to make the Planned Premium payments it will not
necessarily cause the Policy to lapse nor will paying the Planned Premium
payments guarantee that a Policy will remain in force until maturity. Under most
circumstances it is anticipated that You will need to make additional Premium
payments, after the initial Premium, to keep the Policy in force.
3. INVESTMENT CHOICES: You can put Your money in the Fixed Account or in any or
all of the Investment Options which are briefly described in Section
3--Investment Choices and are more fully described in the prospectuses for the
funds.
4. EXPENSES: The Policy has both insurance and investment features, and there
are costs related to each that reduce the return on Your investment.
We deduct a Premium Charge from each Premium payment made. The Premium Charge is
as follows:
Policy Years 1-10: 8.0% of all Premiums.
Policy Years 11 and later: 4.0% of all Premiums.
We deduct a Policy Charge each month from the unloaned Accumulation Value of the
Policy. The Policy Charge is as follows:
Policy Year 1: $35 each month
Policy Years 2 and later: Currently, $7.50 each
month. This charge is not guaranteed and may
be increased, but it will not exceed $10.
We deduct a Per $1,000 of Specified Amount Charge each month from the unloaned
Accumulation Value of the Policy. The Per $1,000 of Specified Amount Charge is
equal to $.08 per month per $1,000 of Initial Base Policy Specified Amount for
the first Policy Year. This charge will also be assessed during the 12 months
following an increase to the Specified Amount.
We deduct a Risk Charge each month from the unloaned Accumulation Value of the
Policy. The Risk Charge is calculated as follows:
Policy Years 1-15: Each month, 0.07%, on a monthly
basis, of the Accumulation Value
in the Separate Account.
Policy Years 16 and later: Each month,
0.03%, on a monthly basis, of the
Accumulation Value in the Separate
Account.
Each month We will make a deduction from the unloaned Accumulation Value of the
Policy for the cost of insurance. This charge will depend upon the Specified
Amount, Your Accumulation Value, the sex, age and Rate Class of each Insured and
the Policy Year. We may also charge for any riders attached to the Policy.
There are also daily investment charges which apply to the average daily value
of the Investment Options. These charges are deducted from the Investment
Options and range on an annual basis from .26% to 1.25%, depending on the
Investment Option.
We may assess a surrender charge which depends upon Your Initial Base Policy
Specified Amount, the year of surrender, issue Age, sex and Rate Class. The
maximum surrender charge that will be deducted is $40.00 per $1,000 specified
amount. The maximum charge varies by issue Age, sex and tobacco use and ranges
from $1.50 to $40.00 per $1,000. See "Expenses--Surrender Charge" in Part I for
more information. The surrender charge for total surrenders is level for the
first three Policy Years then grades down (pursuant to a set formula) each month
beginning in the forth Policy Year and is zero in Policy Years 16 and later.
Your Policy is issued with a surrender charge schedule which shows the surrender
charge at the end of the Policy Year. The charge is not affected by the addition
of riders.
When You make a partial surrender, We assess a pro-rata portion of the surrender
charge. In the event that You increase Your Specified Amount, a new surrender
charge schedule will be imposed on the increased amount.
There is a partial surrender fee of $25 assessed for any partial surrender in
addition to any surrender charge that may be assessed. The partial surrender fee
is deducted from the unloaned Accumulation Value of the Policy.
Each transfer after 12 in any calendar year, unless the transfer is
pre-scheduled, will incur a transfer fee of $25.
5. DEATH BENEFIT: The amount of the Death Benefit depends on:
o the Specified Amount of Your Policy,
o the Death Benefit option in effect at the time of the last surviving
Insured's death, and
o under some circumstances, Your Policy's Accumulation Value.
There are two Death Benefit options: Level Death Benefit and Adjustable Death
Benefit. Under certain circumstances, You can change Death Benefit options. You
can also change the Specified Amount under certain circumstances.
The actual amount payable to Your Beneficiary is the Death Proceeds which is
equal to the Death Benefit less any Indebtedness. At the time of application for
a Policy, You designate a Beneficiary who is the person or persons who will
receive the Death Proceeds. You can change Your Beneficiary unless You have
designated an irrevocable Beneficiary. The Beneficiary does not have to be a
natural person.
All or part of the Death Proceeds may be paid in a lump sum or applied under one
of the Payment Options contained in the Policy.
6. TAXES: Your Policy has been designed to comply with the definition of life
insurance in the Internal Revenue Code. As a result, the Death Proceeds paid
under the Policy should be excludable from the gross income of the Beneficiary.
Your earnings in the Policy are not tasked until You take them out. The tax
treatment of the loan proceeds and surrender proceeds will depend on whether the
Policy is considered a Modified Endowment Contract (MEC). Proceeds taken out of
a MEC are considered to come from earnings first and are includible in taxable
income. If You are younger than 59 1/2 when You take money out of a MEC, You may
also be subject to a 10% federal tax penalty on the earnings withdrawn.
7. ACCESS TO YOUR MONEY: You can terminate the Policy at any time and We will
pay You the Cash Surrender Value. After the first Policy Year, You may surrender
a part of the Cash Surrender Value subject to the requirements of the Policy.
When You terminate Your Policy or make a partial surrender, a surrender charge
(or a portion thereof in the case of a partial surrender) may be assessed.
You can also borrow some of Your Accumulation Value.
8. OTHER INFORMATION:
Free Look.
You can cancel the Policy within ten days after You receive it (or whatever
period is required in Your state) and We will refund all Premiums paid less any
Indebtedness. Upon completion of the Underwriting Process, We will allocate the
initial Net Premium to the Money Market Portfolio for fifteen days (or the Free
Look period required in Your state plus five days). After that, We will invest
Your Accumulation Value as You requested.
Who Should Purchase the Policy?
The Policy is designed for individuals and businesses that have a need for death
protection but who also desire to potentially increase the values in their
Policies through investment in the Investment Options.
The Policy offers the following to individuals:
o create or conserve one's estate.
o supplement retirement income.
o access to funds through loans and surrenders.
The Policy offers the following to businesses:
o protection for the business in the event a key employee dies.
o provide debt protection for business loans.
o create a fund for employee benefits, buy-outs and future business
needs.
If You currently own a variable life insurance policy on the life of any of the
Insureds, You should consider whether the purchase of the Policy is appropriate.
Also, You should carefully consider whether the Policy should be used to replace
an existing Policy on the life of either of the Insureds.
Additional Features
o You can arrange to have a regular amount of money automatically
transferred from the Money Market Portfolio to the Investment Options
each month, theoretically giving You a lower average cost per unit
over time than a single one time purchase. We call this feature the
Dollar Cost Averaging Option.
o We will automatically readjust Your money between Investment Options
periodically to keep the blend You select. We call this feature the
Asset Rebalancing Option.
o If the Insureds get a divorce or, under certain circumstances, if
there is a significant change to the Federal Tax Law, We will exchange
the Policy for two individual Policies. We call this feature the
Exchange Option Rider.
o If You pay a certain required Premium, We guarantee that the Policy
will not lapse even if Your Accumulation Value is not sufficient to
cover the Monthly Deductions. We call this feature the Guaranteed
Minimum Death Benefit Rider.
o We also offer a number of additional riders that are common for
universal life policies.
These features and riders may not be available in Your state and may not be
suitable for Your particular situation.
9. INQUIRIES: If You need more information about buying a Policy, please
contact Us at:
BMA
P.O. Box 412879
Kansas City, Missouri 63127-1690
If You need policy owner service (such as changes in Policy
information, inquiry into Policy values, or to make a loan), please
contact Us at our service center:
BMA
9735 Landmark Parkway Drive
St. Louis, Missouri 63127-1690
1-800-423-9398
PART I
1. THE VARIABLE LIFE INSURANCE POLICY
The variable life insurance policy is a contract between You, the Owner, and
BMA, an insurance company. The Policy can be used to create or conserve one's
estate and for retirement planning for individuals. It can also be used for
certain business purposes.
The Policy provides for life insurance coverage on the lives of two persons (the
"Insureds") and has Accumulation Values, a Death Benefit, surrender rights, loan
privileges and other characteristics associated with traditional and universal
life insurance. However, since the Policy is a variable life insurance policy,
the Accumulation Value, to the extent invested in the Investment Options, will
increase or decrease depending upon the investment experience of those
Investment Options. The duration or amount of the Death Benefit may also vary
based on the investment performance of the underlying Investment Options. To the
extent you allocated premium or accumulation value to the separate account, you
bear the investment risk. If the Cash Surrender Value is insufficient to pay the
Monthly Deductions, the Policy may terminate.
Because the Policy is like traditional and universal life insurance, it provides
a Death Benefit which will be paid to Your named Beneficiary. Upon the death of
the last surviving Insured, the Death Proceeds are paid to Your Beneficiary
which should be excludable from the gross income of the Beneficiary. However,
under some circumstances estate taxes may apply. The tax-free Death Proceeds
makes this an excellent way to accumulate money You don't think you'll use in
Your lifetime and is a tax-efficient way to provide for those You leave behind.
If You need access to Your money, You can borrow from the Policy or make a total
or partial surrender.
You should consult Your Policy for further understanding of its terms and
conditions and for any state-specific provisions and variances that may apply to
Your Policy.
2. PURCHASES
PREMIUMS
Premiums are the monies You give Us to buy the Policy. The Policy is a Flexible
Premium Policy which allows You to make Premium payments in any amount and at
any time, subject of course to making sufficient Premium payments to keep the
Policy in force. Even though the Policy is flexible, when You apply for coverage
You can establish a schedule of Premium payments (Planned Premium). The Planned
Premium is selected by You. Thus they will differ from Policy to Policy. You
should consult Your Registered Representative about Your Planned Premium.
We guarantee that the Policy will stay in force for the first five years after
issue if total Premiums paid are at least as great as:
1. the cumulative five year No-Lapse Monthly Minimum Premium; plus
2. the total of all partial surrenders made; plus
3. Indebtedness.
We will establish a No-Lapse Monthly Minimum Premium at the time you apply for
coverage which is the smallest level of Planned Premium.
The Policy will remain in force if the Cash Surrender Value is greater than the
next Monthly Deduction regardless of how long it has been in force.
Additional Premiums may be paid at any time. However, We reserve the right to
limit the number and amount of additional Premiums. Under some circumstances, We
may require evidence that the Insureds are still insurable. All Premiums are
payable at the Service Center.
APPLICATION FOR A POLICY
In order to purchase a Policy, You must submit an application to Us that
requests information about the proposed Insureds. In some cases, We will ask for
additional information. We may request that the Insureds provide Us with medical
records, a physician's statement or possibly require other medical tests.
ISSUE AGES
We currently issue to Insureds whose ages are 20-90. The older Insured must be
no older than 90 and the younger Insured must be no older than 85. Standard
rates are issued to ages 20-90 and Preferred rates are issued to ages 20-85.
We will review all the information We are provided about the Insureds and
determine whether or not the Insureds meet Our standards for issuing the Policy.
This process is called underwriting. If the Insureds meet all of Our
underwriting requirements, We will issue a Policy. There are several
underwriting classes under which the Policy may be issued.
The underwriting period could be up to 60 days or longer from the time the
application is signed. If We receive the initial Premium with the application,
Your Registered Representative will give you a conditional receipt. If You
receive a conditional receipt, you will be eligible for conditional coverage.
The conditional coverage, if You meet the conditions specified on the
conditional receipt, will be effective from the later date of the application, a
medical exam, if required, or a date You request (it must be within 60 days of
the date of the application). It will expire 60 days from the effective date.
The conditional insurance is subject to a number of restrictions and is only
applicable if the proposed Insureds were an acceptable risk for the insurance
applied for.
APPLICATION OF PREMIUMS
When You purchase a Policy and We receive money with Your application, We will
initially put Your money in Our General Account. Your money will remain in Our
General Account during the Underwriting Process. Upon completion of the
Underwriting Process, Your money will be moved to the Money Market Portfolio
where it will remain for 15 days (or the period required in Your state plus five
days). After the 15 days, We will allocate Your money less any charges, plus
interest earned to the Investment Option(s) You requested in the application.
All allocation directions must be in whole percentages. If You pay additional
Premiums, We will allocate them in the same way as Your first Premium unless You
tell Us otherwise.
If You change Your mind about owning a Policy, You can cancel it within 10 days
after receiving it (or the period required in Your state) (Free Look Period).
(If the Owner is a resident of California and is age 60 or older, the period is
30 days.) When You cancel the Policy within this time period, We will not assess
a Surrender Charge and will give You back Your Premium payment less any
Indebtedness.
When Your application for the Policy is in good order, We will invest Your first
Premium in the Money Market Portfolio within two days after We have completed
Our underwriting. Subsequent Premiums will be allocated in accordance with the
selections in Your application. If as a result of Our underwriting review, We do
not issue You a Policy, We will return Your Premium, and interest, if any,
required by Your state. If We do issue a Policy, on the Policy Date We will
deduct the first Monthly Deduction and credit interest. The maximum first
Monthly Deduction is 100% of the first net Premium paid. The maximum deduction
that We will take from the Premium is 8.0% of the Premium paid.
EXCHANGE OPTION
We will exchange this Policy for two individual Policies on the life of each
Insured, subject to the following occurrences:
1. A final divorce decree on the Insureds' marriage is issued and in
effect for 6 months. The Insureds must have been married to each other
on the Policy Date.
2. A significant change to the Federal Tax Law of the Internal Revenue
Code that results in (1) or (2) below:
a) The repeal of the unlimited marital deduction provision; or
b) The tax rate in the maximum federal estate bracket is reduced to
25% or less.
The exercise of this option to exchange the policy for two individual policies
may, under certain circumstances, result in adverse tax consequences. Please
consult your tax adviser before exercising any option under this rider.
GRACE PERIOD
Your Policy will stay in effect as long as Your Cash Surrender Value is
sufficient to cover Monthly Deductions. If the Cash Surrender Value of Your
Policy is not enough to cover these deductions, We will mail You a notice. You
will have 61 days from the time the notice is mailed to You to send Us the
required payment. This is called the Grace Period. During the first five Policy
Years, the Policy will not terminate if the cumulative Premiums paid equal the
No-Lapse Monthly Premium shown in the Policy times the number of monthly
Anniversary Days that have occurred plus one. The cumulative Premiums paid are
equal to:
o the total Premiums paid; less
o any Indebtedness; less
o any partial surrenders, Partial Surrender Fees assessed and any
pro-rata charge assessed for the partial surrenders.
If the last surviving Insured dies during the Grace Period, the Premiums
required to provide coverage to the date of the last surviving Insureds' death
will be deducted from any amounts payable under the policy.
ACCUMULATION UNIT VALUES
The value of Your Policy that is invested in the Investment Option(s) will go up
or down depending upon the investment performance of the Investment Option(s)
You choose. In order to keep track of the value of Your Policy, We use a unit of
measure We call an Accumulation Unit. (An Accumulation Unit works like a share
of a mutual fund.)
Every Business Day We determine the value of an Accumulation Unit for each of
the Investment Options. The value of an Accumulation Unit for any given Business
Day is determined by multiplying a factor We call the net investment factor
times the value of the Accumulation Unit for the previous Business Day. We do
this for each Investment Option. The net investment factor is a number that
reflects the change (up or down) in an underlying Investment Option share. Our
Business Days are each day that the New York Stock Exchange is open for
business. Our Business Day closes when the New York Stock Exchange closes,
usually 4:00 P.M. Eastern time.
When You make a Premium payment, We credit Your Policy with Accumulation Units.
The number of Accumulation Units credited is determined by dividing the amount
of Net Premium allocated to an Investment Option by the value of the
Accumulation Unit for the Investment Option for the Business Day when the
Premium payment is applied to Your Policy.
We calculate the value of an Accumulation Unit for each Investment Option after
the New York Stock Exchange closes each Business Day and then apply it to Your
Policy.
When We assess the Monthly Deductions, We do so by deducting Accumulation Units
from Your Policy. When You have selected more than one Investment Option and/or
the Fixed Account, We make the deductions pro-rata from all the Investment
Options and the Fixed Account.
When You make a surrender We determine the number of Accumulation Units to be
deducted by dividing the amount of the surrender from an Investment Option by
the value of an Accumulation Unit for the Investment Option. The resulting
number of Accumulation Units is deducted from Your Policy. When You make a
transfer from one Investment Option to another We treat the transaction by its
component parts, i.e. a surrender and a purchase.
EXAMPLE:
On Monday We receive a Premium payment from You. You have told Us You
want $700 of this payment to go to the Large Cap Value Portfolio. When
the New York Stock Exchange closes on that Monday, We determine that
the value of an Accumulation Unit for the Large Cap Value Portfolio is
$12.70. We then divide $700 by $12.70 and credit Your Policy on Monday
night with 55.12 Accumulation Units for the Large Cap Value Portfolio.
RIGHT TO REFUND
To receive the tax treatment accorded life insurance under Federal laws,
insurance under the Policy must initially qualify and continue to qualify as
life insurance under the Internal Revenue Code. To maintain qualification to the
maximum extent permitted by law, We reserve the right to return Premiums you
have paid which We determine will cause any coverage under the Policy to fail to
qualify as life insurance under applicable tax law and any changes in applicable
tax laws or will cause it to become a Modified Endowment Contract (MEC).
Additionally, We reserve the right to make changes in the Policy or to make
distributions to the extent We determine necessary to continue to qualify the
Policy as life insurance and to comply with applicable laws. We will provide You
advance written notice of any change.
If subsequent Premium payments will cause Your Policy to become a MEC We will
contact You prior to applying the Premium. If You elect to have the Premium
applied, We require that You acknowledge in writing that You understand the tax
consequences of a MEC before We will apply the Premiums. Section 6 contains a
discussion of certain tax considerations, including MECs.
EXCHANGE OF A POLICY FOR A BMA POLICY
Under federal tax law a life insurance policy may be exchanged tax-free for
another life insurance policy. However, a policy received in exchange for a MEC
will also be treated as a MEC. Any exchange of a policy for a BMA Policy must
meet Our policy exchange rules in effect at that time.
3. INVESTMENT CHOICES
The Policy offers 24 investment choices--a Fixed Account and 23 Investment
Options. Additional Investment Options may be available in the future.
You should read the prospectuses for these funds carefully. Copies of these
prospectuses will be sent to you with your Policy. Certain portfolios contained
in the fund prospectuses may not be available with Your Policy. Below is a
summary of the investment objectives and strategies of each Investment Option.
There can be no assurance that the investment objectives will be achieved. The
fund prospectuses contain more complete information, including a description of
the investment objectives, policies, restrictions and risks of each Investment
Option.
Shares of the funds are offered in connection with certain variable annuity
contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with BMA. Certain portfolios are
also sold directly to qualified plans. The funds believe that offering their
shares in this manner will not be disadvantageous to you.
BMA may enter into certain arrangements under which it is reimbursed by the
Investment Options' advisers, distributors and/or affiliates for the
administrative services which it provides to the Investment Options.
The investment objectives and policies of certain of the Investment Options are
similar to the investment objectives and policies of other mutual funds that
certain of the investment advisers manage. Although the objectives and policies
may be similar, the investment results of the Investment Options may be higher
or lower than the results of such other mutual funds. The investment advisers
cannot guarantee, and make no representation, that the investment results of
similar funds will be comparable even though the Investment Options have the
same investment advisers.
An Investment Option's performance may be affected by risks specific to certain
types of investments, such as foreign securities, derivative investments,
non-investment grade debt securities, initial public offerings (IPOs) or
companies with relatively small market capitalizations. IPOs and other
investment techniques may have a magnified performance impact on an Investment
Option with a small asset base. An Investment Option may not experience similar
performance as its assets grow.
INVESTORS MARK SERIES FUND, INC.
Investors Mark Series Fund, Inc. is managed by Investors Mark Advisors, LLC
(Adviser), which is an affiliate of BMA. Investors Mark Series Fund, Inc. is a
mutual fund with multiple portfolios. Each Investment Option has a different
investment objective. The Adviser has engaged sub-advisers to provide investment
advice for the individual Investment Options. The following Investment Options
are available under the Policy:
Standish, Ayer & Wood, Inc. is the Sub-Adviser to the following Portfolios:
Intermediate Fixed Income Portfolio
The goal of this Portfolio is a high level of current income with stability of
principal and liquidity. The Portfolio seeks to accomplish this by investing in
intermediate term, high-quality corporate and mortgage-backed fixed income
investments. The average maturity of the investments in the Portfolio is five to
thirteen years. The Portfolio also looks for other opportunities to invest in
securities that have the potential for capital appreciation, but are not likely
to add risk to the Portfolio.
Mid Cap Equity Portfolio
The goal of the Portfolio is to achieve long-term growth by investing in the
common stock of mid-sized U.S. companies.
Stocks must meet two criteria in order to be included in the Portfolio:
o they must have above-average growth potential and momentum, and
o they must be undervalued, or "cheap," relative to other stocks and the
market as a whole.
The Portfolio's Adviser uses both mathematical models and years of experience in
individual judgment to make the stock buy and sell decisions for the Portfolio.
Money Market Portfolio
The goal of this Portfolio is to earn the highest possible level of current
income while preserving capital and maintaining liquidity. It invests in
carefully selected short-term fixed income securities issued by the U.S.
government and its agencies and by other stable financial institutions.
Standish International Management Company, LLC is the Sub-Adviser to the
following Portfolio:
Global Fixed Income Portfolio
The Portfolio's objective is to maximize total return and to generate a market
level return while preserving both liquidity and principal. Typically, assets
are diversified across ten or more countries.
Stein Roe & Farnham Incorporated is the Sub-Adviser to the following Portfolios:
Small Cap Equity Portfolio
This Portfolio seeks long-term growth by investing in small and medium-sized
companies that the Portfolio's Adviser believes have the potential to grow at
above average rates. The Portfolio's Adviser seeks to invest in companies who
compete in large and growing markets and possess ready access to capital,
growing market share, strong management teams with ownership interests, and a
business strategy designed to fully exploit future growth opportunities.
Large Cap Growth Portfolio
The goal of this Portfolio is long-term capital appreciation. The Portfolio
invests, under normal circumstances, at least 65 percent of its total assets in
common stocks and other equity type securities believed to have the ability to
appreciate in value over time. The Portfolio's Adviser seeks to invest in
companies that it believes have the potential to maintain their competitive
advantages and to create wealth over a long period of time.
David L. Babson & Co., Inc. is the Sub-Adviser to the following Portfolio:
Large Cap Value Portfolio
The goal of this Portfolio is long-term capital growth. It invests in common
stocks that are seen as undervalued, or "cheap," relative to corporate earnings,
dividends, and/or assets-striving to achieve above-average return with below
average risk.
Lord, Abbett & Co. is the Sub-Adviser to the following Portfolio:
Growth & Income Portfolio
This Portfolio is seeks long-term growth of capital and income without excessive
fluctuation in market value. It invests in large, seasoned companies in sound
financial condition that are expected to show above average price appreciation.
Kornitzer Capital Management, Inc. is the Sub-Adviser to the following
Portfolio:
Balanced Portfolio
The goal of this Portfolio is both long-term capital growth and high current
income. It invests in both stocks and fixed income securities. The balance of
stocks and bonds in the Portfolio can change based on the Portfolio Adviser's
view of economic conditions, interest rates, and stock prices. Generally, the
Portfolio's assets will be invested in common stocks, in high yielding corporate
bonds, and in convertible securities. Convertible securities offer current
income like a corporate bond, but can also provide capital appreciation through
their conversion feature (the right to convert to common stock).
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple portfolios.
BBOI Worldwide LLC is the adviser to the Berger IPT-International Fund. BBOI
Worldwide LLC has retained Bank of Ireland Asset Management (U.S.). The
following Investment Option is available under the Policy:
Berger IPT-International Fund
The goal of this Fund is long-term capital appreciation through investments in
non-U.S. equity securities of well-established companies. The primary focus of
the fund is on undervalued, or "cheap," stocks of mid-sized to large companies.
THE ALGER AMERICAN FUND
The Alger American Fund is a mutual fund with multiple portfolios. Fred Alger
Management, Inc. serves as the investment adviser. The following Investment
Options are available under the Policy:
Alger American Growth Portfolio
This portfolio seeks long-term capital appreciation. It focuses on growing
companies that generally have broad product lines, markets, financial resources
and depth of management. Under normal circumstances, the portfolio invests
primarily in the equity securities of large companies. The portfolio considers a
large company to have a market capitalization of $1 billion or greater.
Alger American Leveraged AllCap Portfolio
This portfolio seeks long-term capital appreciation. Under normal circumstances,
the Portfolio invests in the equity securities of companies of any size which
demonstrate promising growth potential. The Portfolio can leverage, that is,
borrow money, up to one-third of its total assets to buy additional securities.
By borrowing money, the portfolio has the potential to increase its returns if
the increase in the value of the securities purchased exceeds the cost of
borrowing, including interest paid on the money borrowed.
Alger American MidCap Growth Portfolio
This Portfolio seeks long-term capital appreciation. It focuses on midsize
companies with promising growth potential that generally have broad product
lines, markets, financial resources and depth of management. Under normal
circumstances, the Portfolio invests primarily in the equity securities of
companies having a market capitalization within the range of companies in the
S&P MidCap 400 Index(R).
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a series of funds managed by
American Century Investment Management, Inc. The following Investment Options
are available under the Policy:
VP Income & Growth
This Portfolio seeks dividend growth, current income, and capital appreciation
by investing in common stocks. The Portfolio invests in mainly large company
stocks, such as those in the Standard & Poor's 500 Composite Stock Price Index,
but it also may invest in the stocks of small and medium-size companies. The
management team strives to outperform the Standard & Poor's 500 Composite Stock
Price Index over time while matching its risk characteristics.
VP Value
This Portfolio seeks long-term capital growth as a primary objective and income
as a secondary objective. It invests in well-established companies that the
Portfolio's Adviser believes are undervalued at the time of purchase.
DREYFUS STOCK INDEX FUND
The Dreyfus Corporation serves as the Fund's manager. Dreyfus has hired its
affiliate, Mellon Equity Associates, to serve as the Fund's index fund manager
and provide day-to-day management of the Fund's investments.
The objective of this Portfolio is to match, as closely as possible, the
performance of the Standard & Poor's 500 Composite Price Index (S&P 500). To
pursue this goal, the fund generally invests in all 500 stocks in the S&P 500 in
proportion to their weighting in the index.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund is a mutual fund with multiple portfolios.
The Dreyfus Corporation serves as the investment adviser. The following
Investment Option is available under the Policy:
Dreyfus VIF Disciplined Stock Portfolio
This Portfolio seeks investment returns (consisting of capital appreciation and
income) that are greater than the total return performance of stocks represented
by the Standard & Poor's 500 Composite Stock Price Index. To pursue this goal,
the portfolio invests in a blended portfolio of growth and value stocks chosen
through a disciplined investment process.
VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II
Variable Insurance Products Fund and Variable Insurance Products Fund II are
each mutual funds managed by Fidelity Management & Research Company. The
following Investment Options are available under the Policy:
Fidelity VIP Overseas Portfolio
This Portfolio seeks long-term growth of capital by investing at least 65% of
total assets in foreign securities and allocating investments across countries
and regions considering the size of the market in each country and region
relative to the size of the international market as a whole.
Fidelity VIP Growth Portfolio
This Portfolio seeks to achieve capital appreciation by investing primarily in
common stocks of companies that the Adviser believes have above-average growth
potential (stocks of these companies are often called "growth" stocks).
Fidelity VIP II Contrafund Portfolio
This Portfolio seeks long-term capital appreciation by investing primarily in
common stocks of companies whose value the Adviser believes is not fully
recognized by the public.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a mutual fund with multiple
portfolios. INVESCO Funds Group, Inc. is the investment adviser. The following
Investment Options are available under the Policy:
INVESCO VIF--High Yield Fund
The objective of this Portfolio is to seek a high level of current income by
investing substantially all of its assets in lower-rated debt bonds and other
debt securities as well as preferred stock. A secondary goal is long-term
capital appreciation.
INVESCO VIF--Equity Income Fund
This Portfolio seeks high total return through both growth and current income.
The Portfolio normally invests primarily in dividend paying common and preferred
stocks. The remaining assets are generally invested in income producing
securities such as corporate bonds; however, in order to take advantage of
strong equity markets, there are no limits on the amount of equity securities in
which the Portfolio may invest.The Portfolio may invest up to 30 percent of its
total assets in non-dividend paying common stocks.
LAZARD RETIREMENT SERIES, INC.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios. Lazard
Asset Management, a division of Lazard Freres & Co. LLC, a New York limited
liability company, is the investment manager for each portfolio. The following
Investment Option is available under the Policy:
Lazard Retirement Small Cap Portfolio
This Portfolio seeks long-term capital appreciation. It invests primarily in
equity securities, principally common stocks, of relatively small U.S. companies
with market capitalizations in the range of the Russell 2000(R) Index that the
manager believes are undervalued based on their earnings, cash flow or asset
values.
TRANSFERS
You can transfer money among the Fixed Account and the Investment Options. You
can make 12 free transfers each calendar year. You can make a transfer to or
from the Fixed Account and to or from any Investment Option. If You make more
than 12 transfers in a calendar year, there is a transfer fee deducted. The fee
is $25 per transfer. The following apply to any transfer:
1. The minimum amount which You can transfer from the Fixed Account or
any Investment Option is $250 or Your entire interest in the
Investment Option or the Fixed Account, if the remaining balance is
less than $250.
2. The maximum amount which can be transferred from the Fixed Account is
limited to 25% of the Accumulation Value in the Fixed Account. Only
one transfer out of the Fixed Account is allowed each Calendar Year.
These requirements are waived if the transfer is pursuant to a
pre-scheduled transfer.
3. The minimum amount which must remain in any Investment Option or Fixed
Account after a transfer is $250.
4. A transfer will be effective as of the end of the Business Day when We
receive an Authorized Request at the Service Center.
5. Neither We nor Our Service Center is liable for a transfer made in
accordance with Your instructions.
6. We reserve the right to restrict the number of transfers per year and
to restrict transfers from being made on consecutive Business Days.
7. Your right to make transfers is subject to modification if We
determine, in Our sole opinion, that the exercise of the right by one
or more Owners is, or would be, to the disadvantage of other Owners.
Restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by Us to be
to the disadvantage of other Owners. A modification could be applied
to transfers to or from one or more of the Investment Options and
could include but not be limited to:
o a requirement of a minimum time period between each transfer;
o not accepting transfer requests of an agent acting under a power
of attorney on behalf of more than one Owner; or
o limiting the dollar amount that may be transferred by an Owner at
any one time.
TELEPHONE TRANSFERS
You may elect to make transfers by telephone. To elect this option You must do
so in an Authorized Request. If there are Joint Owners, unless We are instructed
to the contrary, instructions will be accepted from either one of the Joint
Owners. We will use reasonable procedures to confirm that instructions
communicated by telephone are genuine. If We do not, We may be liable for any
losses due to unauthorized or fraudulent instructions. The Service Center tape
records all telephone instructions. Transfers do not change the allocation
instructions for future Premiums.
DOLLAR COST AVERAGING
The Dollar Cost Averaging Option allows You to systematically transfer a set
amount each month from the Money Market Portfolio to any of the other Investment
Option(s). By allocating amounts on a regular schedule as opposed to allocating
the total amount at one particular time, You may be less susceptible to the
impact of market fluctuations.
The minimum amount which can be transferred each month is $250. You must have an
unloaned Accumulation Value of at least $5,000. The amount required to complete
Your program must be in the source account in order to participate in dollar
cost averaging.
All dollar cost averaging transfers will be made on the 15th day of the month
unless that day is not a Business Day. If it is not, then the transfer will be
made the next Business Day. You must participate in dollar cost averaging for at
least 6 months.
If You participate in dollar cost averaging, the transfers made under this
option are not taken into account in determining any transfer fee. Currently,
there is no charge for participating in Dollar Cost Averaging.
ASSET REBALANCING OPTION
Once Your money has been allocated among the Investment Options, the performance
of the Accumulation Value of each option may cause Your allocation to shift. If
the unloaned Accumulation Value of Your Policy is at least $5,000, You can
direct Us to automatically rebalance Your Policy each quarter to return to Your
original percentage allocations by selecting Our asset rebalancing option. The
program will terminate if You make any transfer outside of the Investment
Options You have selected under the asset rebalancing option. The minimum period
to participate in this program is 6 months. The transfer date will be the 15th
of the month unless that day is not a Business Day. If it is not, then the
transfer will be made the next Business Day. The Fixed Account is not part of
asset rebalancing.
If You participate in the asset rebalancing option, the transfers made under the
program are not taken into account in determining any transfer fee. Currently,
there is no charge for participating in the asset rebalancing option.
ASSET REBALANCING EXAMPLE:
Assume that You want the Accumulation Value split between two Investment
Options. You want 40% to be in the Intermediate Fixed Income Portfolio and 60%
to be in the Mid Cap Equity Portfolio. Over the next 2 1/2 months the bond
market does very well while the stock market performs poorly. At the end of the
first quarter, the Intermediate Fixed Income Portfolio now represents 50% of
Your holdings because of its increase in value. If You had chosen to have Your
holdings rebalanced quarterly, on the first day of the next quarter, We would
sell some of Your units in the Intermediate Fixed Income Portfolio to bring its
value back to 40% and use the money to buy more units in the Mid Cap Equity
Portfolio to increase those holdings to 60%.
SUBSTITUTION
We may be required to substitute one of the Investment Options You have selected
with another Investment Option. We would not do this without the prior approval
of the Securities and Exchange Commission. We will give You notice of Our intent
to do this.
4. EXPENSES
There are charges and other expenses associated with the Policy that reduce the
return on Your investment in the Policy. The charges and expenses are:
PREMIUM CHARGE
We deduct a Premium Charge from each Premium payment You make. We consider a
portion of the Premium Charge a sales load. The sales load portion is 5.0% of
Premiums paid during the first ten Policy Years and 2.0% of Premiums paid
thereafter. The portion of the Surrender Charge that does not recover issue and
underwriting expenses is assessed as a sales load but only if the Policy is
surrendered during the first fifteen Policy Years. The Premium Charge is as
follows:
Policy Years 1-10: 8.0% of all Premiums.
Policy Years 11 and later: 4.0% of all Premiums.
The Premium Charge is to cover some of Our costs incurred in selling the Policy
and in issuing it, such as commissions, premium tax, DAC tax (Deferred
Acquisition Costs) and administrative costs.
MONTHLY DEDUCTION
The initial Monthly Deduction is made on the Policy Date. On each Monthly
Anniversary Day We make a Monthly Deduction from the Accumulation Value of Your
Policy. The Monthly Deduction will be taken on a pro-rata basis from the
Investment Options and the Fixed Account, exclusive of the Loan Account. The
Monthly Deduction equals:
o the Cost of Insurance for the Policy; plus
o the monthly rider charges, if any; plus
o the Per $1,000 of Specified Amount Charge; plus
o the Risk Charge; plus
o the monthly Policy Charge.
Cost of Insurance. This charge compensates Us for insurance coverage provided
for the month. The cost of insurance charge for a Policy month equals the
appropriate current cost of insurance rate per $1,000, including any special
Rate Classes, times the net amount at risk. The net amount at risk is different
for the Level Death Benefit Option and the Adjustable Death Benefit Option. Part
II contains a more detailed description of the net amount at risk.
The monthly cost of insurance rate, per $1,000 of net amount at risk, is based
on:
o issue Age of each of the Insureds;
o sex of each of the Insureds;
o Rate Class of each of the Insureds; and
o the Policy Year.
We will determine the monthly cost of insurance rates based on the expectations
as to future experience. We may charge less than the maximum cost of insurance
rates as shown in the Table of Cost of Insurance Rates contained in Your Policy.
Any change in the cost of insurance rates will apply to Insureds of the same
Age, sex, Rate Class and Policy Year. The cost of insurance rates are greater
for Insureds in special Rate Classes.
Monthly Rider Charges. We charge separately for any riders attached to the
Policy. We deduct the cost of the riders for a Policy Month as part of the
Monthly Deduction on each Monthly Anniversary Day.
Per $1,000 of Specified Amount Charge. We assess a Per $1,000 of Specified
Amount Charge which is equal to $0.08 per month per $1,000 of Initial Base
Policy Specified Amount for the first Policy Year. It is also deducted each
month for the next 12 months following an increase to the Specified Amount.
Risk Charge. We assess a Risk Charge which is deducted as part of the Monthly
Deduction. The Risk Charge is calculated as follows:
Policy Years 1-15: Each month, 0.07%, on a monthly basis,
of the Accumulation Value in the Separate
Account.
Policy Years 16 and later: Each month, 0.03%, on
a monthly basis, of the Accumulation
Value in the Separate Account.
The Risk Charge compensates Us for some of the mortality risks We assume, and
the risk that We will experience costs above that for which We are compensated.
It also compensates Us for some of the administrative costs in administering the
Policy. We expect to profit from the charge.
Policy Charge. We assess a Policy Charge which is deducted each Monthly
Anniversary Day. The Policy Charge is:
Policy Year 1: $35 each month
Policy Years 2 and later: Currently, $7.50 each
month. This charge is not guaranteed and may
be increased, but it will not exceed $10.
The Policy Charge compensates Us for some of the administrative costs of the
Policy and the Separate Account.
SURRENDER CHARGE
If the Policy is surrendered before the 15th Policy Anniversary or within 15
years following the effective date of any increase in Specified Amount, a
Surrender Charge may be deducted. The Surrender Charge specific to Your Policy
is shown on Your Policy Schedule.
The maximum Surrender Charge that will be assessed ranges from $1.50 to $40.00
per $1,000 of Specified Amount.
The charge is not affected by the addition of riders. After the third Policy
Year, or after three years following the effective date of an increase, the
Surrender Charge for subsequent Policy Years decreases annually on the policy
Anniversary or the anniversary of any Specified Amount increase (pursuant to a
formula). When there is a partial surrender of Cash Surrender Value, a pro-rata
portion of the Surrender Charge is assessed for any amount that the Specified
Amount is reduced. The pro-rata Surrender Charge is calculated in the same
manner as for a requested decrease.
The Surrender Charge and the pro-rata Surrender Charge compensates Us for the
costs associated with selling the Policy and for issue and underwriting
expenses.
PARTIAL SURRENDER FEE
When there is a partial surrender of the Cash Surrender Value, in addition to
any Surrender Charge that may be assessed, We will charge a Partial Surrender
Fee of $25. This charge compensates Us for administrative expenses associated
with a surrender.
The Surrender Charge and Partial Surrender Fee are deducted from the unloaned
Accumulation Value of the Policy. The Partial Surrender Fee is deducted pro-rata
from the Investment Option(s) and/or the Fixed Account from which the withdrawal
is made.
REDUCTION OR ELIMINATION OF THE SURRENDER CHARGE
We may reduce or eliminate the amount of the Surrender Charge when the Policy is
sold under circumstances which reduce its sales expense. Some examples are: if
there is a large group of individuals that will be purchasing the Policy or a
prospective purchaser already had a relationship with Us. We will not deduct a
Surrender Charge under a Policy issued to an officer, director or employee of
BMA or any of its affiliates.
TRANSFER FEE
You can make 12 free transfers every calendar year. If You make more than 12
transfers in a calendar year, We will deduct a transfer fee of $25. If We do
assess a transfer fee, it will be deducted from the amount transferred.
If the transfer is part of the Dollar Cost Averaging Option or the Asset
Rebalancing Option, it will not count in determining the transfer fee.
TAXES
We do not currently assess any charge for income taxes which We incur as a
result of the operation of the Separate Account. We reserve the right to assess
a charge for such taxes against the Separate Account or your Accumulation Value
if we determine that such taxes will be incurred.
INVESTMENT OPTION EXPENSES
There are deductions from and expenses paid out of the assets of the various
Investment Options, which are summarized below. See the fund prospectuses for
more information.
INVESTMENT OPTION EXPENSES
(as a percentage of the average daily net assets of an Investment Option for
the most recent fiscal year, except as noted)
Total Annual
Other Portfolio
Expenses Expenses
(after (after
reimbursement reimbursement
Management 12b-1 for certain for certain
Fees Fees Portfolios) Portfolios)
------------- ------- --------------- -----------------
INVESTORS MARK SERIES FUND,
INC.(1)
Intermediate Fixed Income Portfolio .60% -- .20% .80%
Mid Cap Equity Portfolio .80% -- .10% .90%
Money Market Portfolio .40% -- .10% .50%
Global Fixed Income Portfolio .75% -- .25% 1.00%
Small Cap Equity Portfolio .95% -- .10% 1.05%
Large Cap Growth Portfolio .80% -- .10% .90%
Large Cap Value Portfolio .80% -- .10% .90%
Growth & Income Portfolio .80% -- .10% .90%
Balanced Portfolio .80% -- .10% .90%
BERGER INSTITUTIONAL PRODUCTS
TRUST(2)
Berger IPT--International Fund .85% -- .35% 1.20%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio .75% -- .04% .79%
Alger American Leveraged AllCap Portfolio .85% -- .05% .90%
Alger American MidCap Growth Portfolio .80% -- .04% .84%
AMERICAN CENTURY VARIABLE
PORTFOLIOS, INC.
VP Value 1.00% -- .00% 1.00%
VP Income & Growth .70% -- .00% .70%
DREYFUS STOCK INDEX FUND-Initial Shares (5) .25% -- .01% .26%
DREYFUS VARIABLE INVESTMENT FUND (5)
Dreyfus VIF Disciplined Stock Portfolio-Initial Shares .75% -- .06% .81%
VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND
II, SERVICE CLASS II (6)
Fidelity VIP Overseas Portfolio .72% .25% .18% 1.15%
Fidelity VIP Growth Portfolio .57% .25% .09% .91%
Fidelity VIP II Contrafund Portfolio .57% .25% .10% .92%
INVESCO VARIABLE INVESTMENT
FUNDS, INC.(3)
INVESCO VIF--High Yield Fund .60% -- .45% 1.05%
INVESCO VIF--Equity Income Fund .75% -- .33% 1.08%
LAZARD RETIREMENT SERIES, INC.(4)
Lazard Retirement Small Cap Portfolio .75% .25% .25% 1.25%
(1) Investors Mark Advisors, LLC voluntarily agreed to reimburse expenses of
each Portfolio of Investors Mark Series Fund, Inc. for the year ended
December 31, 2000 and will continue this arrangement until April 30, 2002
so that the annual expenses do not exceed the amounts set forth above under
"Total Annual Portfolio Expenses" for each Portfolio. Absent such expense
reimbursement, the Total Annual Portfolio Expenses for the year ended
December 31, 2000 were: 1.62% for the Money Market Portfolio; 2.15% for the
Intermediate Fixed Income Portfolio; 1.83% for the Global Fixed Income
Portfolio; 1.91% for the Mid Cap Equity Portfolio; 1.51% for the Balanced
Portfolio; 1.28% for the Growth & Income Portfolio; 1.45% for the Small Cap
Equity Portfolio; 1.15% for the Large Cap Growth Portfolio; and 1.45% for
the Large Cap Value Portfolio.
(2) Under a written contract, the Funds' investment adviser has agreed to waive
its advisory fee and reimburse the Funds to the extent that, at any time
during the life of a Fund, such Fund's annual operating expenses exceed a
specified amount (1.20%-Berger IPT-International Fund). The contract may
not be terminated or amended except by a vote of the Funds' Board of
Trustees. Absent the waiver and reimbursements, the Management Fee for
Berger IPT-International Fund would have been .85%; their Other Expenses
would have been 1.29%; and their Total AnnualPortfolio Expenses would have
been 2.14%. Effective May 12, 2000, the investment advisory fee charged to
Berger IPT-International Fund was reduced to the following rates of average
daily net assets: 0.85% of the first $500 million, 0.80% of the next $500
million, and 0.75% over $1 billion. The amount shown reflects the restated
advisory fee.
(3) The Fund's actual Other Expenses and Total Annual Fund Operating Expenses
were lower than the figures shown because their custodian fees were reduced
under an expense offset arrangement.
(4) Lazard Asset Management, Inc., the fund's investment adviser,
voluntarily agreed to reimburse all expenses through December 31, 2001
to the extent total annual portfolio expenses exceed in any fiscal
year 1.25% of the
Portfolio's average daily net assets. Absent this expense reimbursement,
Total Portfolio Expenses for the year ended December 31, 2000 would have
been 2.76% for the Lazard Retirement Small Cap Portfolio.
(5) The figures in the above Expense Table are for the initial share class
for the fiscal year ended December 31, 2000. Actual Expenses in future
years may be higher or lower than the figures given above.
(6) Actual annual class operating expenses were lower because a portion of the
brokerage commissions that the fund paid was used to reduce the fund's
expenses, and/or because through arrangements with the fund's custodian,
credits realized as a result of uninvested cash balances were used to reduce
a portion of the fund's custodian expenses. See the accompanying fund
prospectus for details.
5. DEATH BENEFIT
The primary purpose of the Policy is to provide Death Benefit protection on the
lives of the Insureds. While the Policy is in force, upon the death of the last
surviving Insured, the Beneficiary(ies) will receive the Death Proceeds. The
Death Proceeds equal the Death Benefit under the Policy less any Indebtedness.
The amount of the Death Benefit depends upon:
o the Specified Amount;
o Your Policy's Accumulation Value on the date of the last surviving
Insured's death; and
o the Death Benefit Option in effect at the time of death.
The Policy provides two Death Benefit options:
o a Level Death Benefit; and
o an Adjustable Death Benefit.
So long as the Policy remains in force, the Death Benefit under either option
will never be less than the Specified Amount.
Level Death Benefit Option. The amount of the Death Benefit under the Level
Death Benefit Option is the greater of:
1. the Specified Amount on the date of death of the last surviving
Insured; or
2. the Accumulation Value on the date of death of the last surviving
Insured multiplied by the applicable factor from the Table of Minimum
Death Benefit Corridor Percentages shown below.
Adjustable Death Benefit Option. The amount of the Death Benefit under the
Adjustable Death Benefit Option is the greater of:
1. the Specified Amount on the date of death of the last surviving
Insured plus the Accumulation Value on the date of death of the last
surviving Insured; or
2. the Accumulation Value on the date of death of the last surviving
Insured multiplied by the applicable factor from the Table of Minimum
Death Benefit Corridor Percentages shown below.
The applicable percentage is a percentage that is based on the attained Age of
the younger of the Insureds on the Policy Date plus the number of completed
Policy Years on the date that the Death Benefit is to be determined and is equal
to the following:
Attained Corridor Attained Corridor
Age Percentage Age Percentage
-------------- ------------ ------------- ---------------
0-40 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75-90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94 101%
95-100 100%
CHANGE IN DEATH BENEFIT OPTION
You may change the Death Benefit option after the Policy has been in force for
at least one year, subject to the following:
1. You must submit an Authorized Request;
2. once the Death Benefit option has been changed, it cannot be changed
again until the next policy Year;
3. if the Level Death Benefit Option is to be changed to the Adjustable
Death Benefit Option, You must submit proof satisfactory to Us that
both Insureds are still living;
4. if the Level Death Benefit Option is changed to the Adjustable Death
Benefit Option, the resulting Specified Amount can never be less than
the Minimum Base Policy Specified Amount. The Specified Amount will be
reduced to equal the Specified Amount less the Accumulation Value on
the date of change. This decrease will not result in any decrease in
Premiums or Surrender Charges; and
5. if the Adjustable Death Benefit Option is changed to the Level Death
Benefit Option, the Specified Amount will be increased by an amount
equal to the Accumulation Value on the date of the change. This
increase will not result in any increase in Premiums or Surrender
Charges.
Any change in a Death Benefit option will take effect on the Monthly Anniversary
Day on or following the date We approve the request for the change.
CHANGE IN SPECIFIED AMOUNT
You may change the Specified Amount of the Policy effective on any Monthly
Anniversary Day after the Policy has been in force at least one year, subject to
the following requirements. Once the Specified Amount has been changed, it
cannot be changed again until the next Policy Year.
Specified Amount Increase. To increase the Specified Amount You must:
1. submit an application for the increase;
2. submit proof satisfactory to Us that each Insured is an insurable
risk; and
3. pay any additional Premium which is required.
The Specified Amount can only be increased while the older Insured is age 90 or
less and the younger Insured is age 85 or less. A Specified Amount increase will
take effect on the Monthly Anniversary Day on or following the day We approve
the application for the increase provided both Insureds are alive on that day.
The Specified Amount increase must be for at least $100,000. Each increase will
have its own Surrender Charge schedule based on the increased issue Age, sex and
Rate Class of each Insured. The Rate Class that applies to any Specified Amount
increase may be different from the Rate Class that applies to the Initial Base
Policy Specified Amount. Each increase will have its own cost of insurance
schedule.
The following changes will be made to reflect the increase in Specified Amount:
1. the No-Lapse Monthly Minimum Premium will be increased;
2. an additional Surrender Charge for the increase in Specified Amount
will apply.
We will furnish You with documentation showing You the Rate Classes for the
Specified Amount increase, the amount of the increase and the additional
Surrender Charges.
Specified Amount Decrease. You must request by Authorized Request any decrease
in the Specified Amount. The decrease will take effect on the later of:
1. the Monthly Anniversary Day on or following the day We receive Your
request for the decrease; or
2. the Monthly Anniversary Day one year after the last change in
Specified Amount was made.
A Specified Amount decrease will be used to reduce any previous increases to the
Specified Amount which are then in effect starting with the latest increase and
continuing in the reverse order in which the increases were made. If any portion
of the decrease is left over after all Specified Amount increases have been
reduced to zero, it will be used to reduce the Initial Base Policy Specified
Amount. We will not permit a Specified Amount decrease that would reduce the
Specified Amount below the Minimum Base Policy Specified Amount. The applicable
Surrender Charge for the amount of decrease will be deducted from the
Accumulation Value.
The No-Lapse Monthly Minimum Premium will be reduced to reflect the Specified
Amount decrease.
GUARANTEED MINIMUM DEATH BENEFIT RIDER
You can elect to have a Guaranteed Minimum Death Benefit Rider added to Your
Policy. This rider guarantees that the Death Benefit under Your Policy will
never be less than the Specified Amount during the Guaranteed Minimum Death
Benefit (GMDB) period provided that the GMDB payment requirement has been met.
By meeting the GMDB Payment requirement, the Policy and any Riders will not
lapse even if the Policy's Cash Surrender Value is not sufficient to cover the
Monthly Deduction on a Monthly Anniversary Day during the GMDB Period.
The GMDB Period begins when the policy is issued and continues until the policy
anniversary on which the younger insured's attained age is 65 or ten years, if
longer.
There is no separate charge for this rider but in order to have the GMDB
provided by the rider You must pay a certain level Premium each month which is
greater than the No-Lapse Monthly Minimum Premium. The GMDB payment requirement
is met if the total Premiums paid during the GMDB Period are at least as large
as the sum of cumulative GMDB Premiums paid plus any partial surrenders and plus
any Indebtedness. The cumulative GMDB Premiums equal the Guaranteed Minimum
Death Benefit Premium times the number of Monthly Anniversary Days that have
occurred plus one. The initial monthly GMDB Premium is shown in the Policy
Schedule. The payment requirement for the GMDB rider must be met on each Monthly
Anniversary Day. Ask Your registered representative for the particulars to Your
own situation.
6. TAXES
NOTE: BMA has prepared the following information on federal income taxes as a
general discussion of the subject. It is not intended as tax advice to any
person. You should consult your own tax adviser about your own circumstances.
BMA has included an additional discussion regarding taxes in Part II.
LIFE INSURANCE IN GENERAL
Life insurance, such as this Policy, is a means of providing for death
protection and setting aside money for future needs. Congress recognized the
importance of such planning and provided special rules in the Internal Revenue
Code (Code) for life insurance.
Simply stated, these rules provide that You will not be taxed on the earnings on
the money held in Your life insurance policy until You take the money out.
Beneficiaries generally are not taxed when they receive the Death Proceeds upon
the death of the last Insured. Estate taxes may apply.
TAKING MONEY OUT OF YOUR POLICY
You, as the Owner, will not be taxed on increases in the value of Your Policy
until a distribution occurs either as a surrender or as a loan. If Your Policy
is a Modified Endowment Contract (MEC) any loans or withdrawals from the Policy
will be treated as first coming from earnings and then from Your investment in
the Policy. Consequently, these earnings are included in taxable income.
The Code also provides that any amount received from a MEC which is included in
income may be subject to a 10% penalty. The penalty will not apply if the income
received is:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code); or
(3) in a series of substantially equal payments made annually (or more
frequently) for the life or life expectancy of the taxpayer.
If Your Policy is not a MEC, any surrender proceeds will be treated as first a
recovery of the investment in the Policy and to that extent will not be included
in taxable income. Furthermore, any loan will be treated as indebtedness under
the Policy and not as a taxable distribution. See "Federal Tax Status" in Part
II for more details.
DIVERSIFICATION
The Code provides that the underlying investments for a variable life policy
must satisfy certain diversification requirements in order to be treated as a
life insurance contract. We believe that the Investment Options are being
managed so as to comply with such requirements.
Under current Federal tax law, it is unclear as to the circumstances under which
You, because of the degree of control You exercise over the underlying
investments, and not Us would be considered the Owner of the shares of the
Investment Options. If You are considered the Owner of the investments, it will
result in the loss of the favorable tax treatment for the Policy. It is unknown
to what extent Owners are permitted to select Investment Options, to make
transfers among the Investment Options or the number and type of Investment
Options Owners may select from. If guidance from the Internal Revenue Service is
provided which is considered a new position, then the guidance would generally
be applied prospectively. However, if such guidance is considered not to be a
new position, it may be applied retroactively. This would mean that You, as the
Owner of the Policy, could be treated as the Owner of the Investment Options.
Due to the uncertainty in this area, BMA reserves the right to modify the Policy
in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
LOANS
We will loan You money while the Policy is in force and not in a Grace Period.
The Policy will be the sole security for the loan. We will advance a loan amount
not to exceed the Loan Value. The loan must be secured by proper assignment of
the Policy. We may defer granting loans but not for more than six months, or the
time period required by your state.
The Accumulation Value securing the loan is transferred to the Loan Account on a
pro-rata basis. The amount transferred from each Investment Option and the Fixed
Account will equal the ratio of the value each bears to the total unloaned
Accumulation Value. If You desire other than the above, You may specify the
specific Investment Option from which the transfer is to be made.
Any Indebtedness will be deducted from any amount payable under the Policy.
No new loan may be taken which, in combination with existing loans and accrued
interest, is greater than the Loan Value.
Effect of a Loan. A Policy loan will result in Accumulation Value being
transferred from the Investment Options or the Fixed Account to the Loan
Account. A Policy loan, whether or not repaid, will have a permanent effect on
the death benefits and Policy values, because the amount of the Policy loan
transferred to the Loan Account will not share in the investment results of the
Investment Options while the Policy loan is outstanding. If the Loan Account
earnings rate is less than the investment performance of the selected Investment
Options and/or the Fixed Account, the values and benefits under the Policy will
be reduced (and the Policy may even terminate) as a result of the Policy loan.
Furthermore, if not repaid, the Policy loan will reduce the amount of Death
Benefit and Cash Surrender Value.
Loan Value. The loan value is equal to 90% of the Accumulation Value as of the
date the Authorized Request for the loan is received at the Service Center less:
(a) an amount equal to the Surrender Charge, if any, that applies if the
Policy is surrendered in full;
(b) any existing Indebtedness;
(c) interest on all Indebtedness on the Policy to the next Policy
Anniversary; and
(d) prior to the ninth Policy Month, an amount equal to the balance of the
Monthly Deductions for the first Policy Year; or on or after the ninth
Policy Month, an amount equal to the sum of the next three Monthly
Deductions.
Loan Interest (Charged). You must pay interest on each Policy Anniversary at the
loan interest rate which is shown on Your Policy Schedule. The interest rate
applies to the unpaid balance of the loan. The first interest payment is due on
the first Policy Anniversary following the date the loan was made.
If you do not pay loan interest, we will transfer the difference between the
value of the Loan Account and the Indebtedness from the Investment Options and
the Fixed Account on a pro-rata basis to the Loan Account.
Interest Credited. The Accumulation Value in the Loan Account will earn interest
at a rate not less than 5% for Policy Years 1-20 and 5.5% for Policy Years 21
and later.
Loan Repayment. You may repay loans at any time while the Policy is in force.
There is no minimum loan repayment amount. Any loan repayment received will be
repaid according to Your current allocation of Premiums.
Amounts received by us will be applied as Premiums unless we are otherwise
instructed to apply such amounts as repayment of the loan.
Termination for Maximum Indebtedness. The Policy will terminate when
Indebtedness equals or exceeds the Accumulation Value less the Surrender Charge,
if any, that applies if the Policy is surrendered in full. Termination will be
effective 61 days after We send notice of the termination to Your last known
address and the last known address of any assignee of record. A termination of
the Policy with a loan outstanding may have Federal income tax consequences.
(See Part II--"Federal Tax Status--Tax Treatment of Loans and Surrenders").
SURRENDERS
Total Surrender. You may terminate the Policy at any time by submitting an
Authorized Request to the Service Center. We will pay the Cash Surrender Value
to You as of the Business Day the Authorized Request is received in good order
and Our liability under the Policy will cease. We may assess a Surrender Charge.
Partial Surrender. After the first Policy Year, You may surrender a part of the
Cash Surrender Value by submitting an Authorized Request to the Service Center.
All partial surrenders are subject to the following:
1. A partial surrender must be for at least $500.
2. Unless You specify otherwise, the partial surrender will be deducted
on a pro-rata basis from the Fixed Account and the Investment Options.
The Surrender Charge and the Partial Surrender Fee are also deducted
from the Accumulation Value. You may specify if a different allocation
method is to be used. However the proportion to be taken from the
Fixed Account may never be greater than the Fixed Account's proportion
of the total unloaned Accumulation Value.
3. You cannot replace the surrendered Cash Surrender Value. Unlike a loan
repayment, all additional deposits will be considered Premium and
subject to the Premium charge.
4. Upon a partial surrender, the Specified Amount may be reduced if the
Level Death Benefit Option is in effect. The Specified Amount will not
be reduced if the Adjustable Death Benefit Option is in effect. The
Specified Amount will be reduced by the amount of the partial
surrender if the Policy is not in corridor. (A Policy is in corridor
if the Accumulation Value exceeds certain specified percentages as set
forth in the Internal Revenue Code.)
5. You can make a partial surrender twice each Policy Year. The partial
surrender will be limited to such amounts so that the partial
surrender will not reduce the Specified Amount below the Minimum Base
Policy Specified Amount, or reduce the remaining Cash Surrender Value
below $500.
6. We may assess a pro-rata portion of the Surrender Charge for any
amount by which the Specified Amount is reduced. We may also assess a
Partial Surrender Fee.
8. OTHER INFORMATION
BMA
Business Men's Assurance Company of America ("BMA" or the "Company"), BMA Tower,
700 Karnes Blvd., Kansas City, Missouri 64108 was incorporated on July 1, 1909
under the laws of the state of Missouri. BMA is licensed to do business in the
District of Columbia, Puerto Rico and all states except New York. BMA operates
as a reinsurer in the state of New York. BMA is a wholly owned subsidiary of
Assicurazioni Generali S.p.A., which is the largest insurance organization in
Italy.
THE SEPARATE ACCOUNT
We have established a separate account, BMA Variable Life Account A (Separate
Account), to hold the assets that underlie the Policies.
The assets of the Separate Account are being held in Our name on behalf of the
Separate Account and legally belong to Us. However, those assets that underlie
the Policies, are not chargeable with liabilities arising out of any other
business We may conduct. All the income, gains and losses (realized and
unrealized) resulting from those assets are credited to or charged against the
Policies and not against any other Policies We may issue.
DISTRIBUTORS
Jones & Babson, Inc., 700 Karnes Boulevard, Kansas City, Missouri 64108, acts as
a distributor of the Policies. Jones & Babson, Inc. was organized under the laws
of the state of Missouri on February 23, 1959. Jones & Babson, Inc., is a member
of the National Association of Securities Dealers, Inc., and is a wholly owned
subsidiary of BMA.
The Policy will be sold by individuals who, in addition to being licensed as
life insurance agents for BMA, are also National Association of Securities
Dealers (NASD) registered representatives. These persons will receive
compensation for this sale.
ADMINISTRATION
We have hired Liberty Insurance Services, 2000 Wade Hampton Boulevard,
Greenville, South Carolina to perform certain administrative services regarding
the Policies. The administrative services include issuance of the Policy and
maintenance of Policy records. Claims are handled jointly between BMA and
Liberty Insurance Services.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone any payments or transfers involving an
Investment Option for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
Investment Options is not reasonably practicable or BMA cannot
reasonably value the shares of the Investment Options;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
We may defer the portion of any transfer, amount payable or surrender, or Policy
Loan from the Fixed Account for not more than six months, or the time period
required by your state.
OWNERSHIP
Owner. You, as the Owner of the Policy, have all of the rights under the Policy.
If You die while the Policy is still in force and both of the Insureds are
living, ownership passes to a contingent Owner or if none, then Your estate
becomes the Owner.
Joint Owner. The Policy can be owned by Joint Owners. Authorization of both
Joint Owners is required for all Policy changes except for telephone transfers.
Beneficiary. The Beneficiary is the person(s) or entity You name to receive any
Death Proceeds. The Beneficiary is named at the time the Policy is issued unless
changed at a later date. Unless an irrevocable Beneficiary has been named, You
can change the Beneficiary at any time before the last insured dies. If there is
an irrevocable Beneficiary, all Policy changes except Premium allocations and
transfers require the consent of the Beneficiary.
Assignment. You can assign the Policy.
PART II
EXECUTIVE OFFICERS AND DIRECTORS OF BMA
As of May 1, 2001, the directors and executive officers of BMA and their
business experience for the past five years are as follows:
Name and Principal Positions and Offices With Depositor and
Business Address* Business Experience for the Past Five Years
Giorgio Balzer Director, Chairman of the Board and Chief Executive Officer of BMA; U.S.
Representative-Generali-US Branch.
Robert Thomas Rakich Director, President and Chief Operating Officer of BMA from 1995 to present; President
and Chief Executive Officer, Laurentian Capital Corp., 1988 to October, 1995.
Dennis Keith Cisler Senior Vice President-Information Systems of BMA from 1991-present.
David Lee Higley Senior Vice President and Chief Financial Officer of BMA from 1989-present.
Stephen Stanley Soden Senior Vice President-Financial Group of BMA from 1994 to present; President & Executive
Vice President from 1985 to 1996, BMA Financial Services, Inc.
Michael Kent Deardorff Senior Vice President-Marketing BMA Financial Group from 1996- present; Vice President
Annuity from 1994 to 1996; Vice President-Advance Markets from 1990 to 1994.
Edward Scott Ritter Senior Vice President-Insurance Services, Corporate Development & Communications of BMA from
1998 to present; Vice President from 1990 to 1998.
David Allen Gates Vice President - General Counsel and Secretary from 10/20/2000 to
present; Vice President and General
Counsel of BMA from 1998 to 10/19/2000;
Regulatory Affairs Vice President from
1991 to 1998.
Robert Noel Sawyer Director since 1997, Senior Vice President and Chief Investment Officer of BMA From 1990
to present.
Margaret Mary Heidkamp Vice President-Operations, Variable and Asset Accumulation Products of BMA from 1998 to
present; Vice President, Management Services from 1986 to 1998.
Jay Brian Kinnamon Vice President and Corporate Actuary of BMA from 1991 to present.
Susan Annette Sweeney Vice President-Treasurer & Controller of BMA from 1995 to
present; Chief Financial Officer-Dean Machinery 1995; Manager of
Finance-Jackson County, Missouri from 1991 to 1995.
Gerald Wayne Selig Vice President and Actuary-Accumulation Products of BMA from 1998 to present;
Actuary-Accumulation Products from 1996 to 1998; Actuary- Qualified Plan
Services from 1989 to 1996.
Thomas Morton Bloch Director of BMA since 1993; Teacher, St. Francis Xavier School from August 1995 to
present; President and Chief Executive Officer-H & R Block, Inc. until 1995.
Mel G. Carvill Director of BMA since March 9, 2000; Managing Director, Generali Worldwide Insurance
Company, Ltd., Channel. Islands - GUERNSEY.
Name and Principal Positions and Offices with Depositor and
Business Address* Business Experience for the Past Five Years
William Thomas Grant II Director of BMA since 1990; President and Chief Executive
Officer, Chairman of the Board-LabOne, from 1997 to present; Chairman and Chief
Executive Officer Seafield Capital Corporation from 1993 to 1997.
Donald Joyce Hall, Jr Director of BMA since 1990; Hallmark Vice President-Creative-Hallmark Cards, Inc.; Hallmark
Vice President- Product Development-Hallmark; Hallmark Vice President- Creative-Hallmark;
General Manager-Keepsakes- Hallmark; Executive Assistant to Executive Vice
President-Hallmark; Director, Specialty Store Development-Hallmark.
Renzo Isler Director of BMA since December 31, 1999; Joint-Manager Life Division, Assicurazioni
Generali, S.p.A., Trieste, Italy.
Allan Drue Jennings Director of BMA since 1990; Chairman of the Board, President
and Chief Executive Officer-Kansas City Power & Light Company.
David Woods Kemper Director of BMA since 1991; Chairman of the Board, President and
Chief Executive Officer-Commerce Bancshares, Inc.
John Kessander Lundberg Director of BMA since 1990; Retired.
John Pierre Mascotte Director of BMA since 1990; President and Chief Executive
Officer-Blue Cross Blue Shield of Kansas City, Chairman- Johnson & Higgins of
Missouri, Inc.; Chairman and Chief Executive Officer-The Continental
Corporation.
Andrea Rabusin Director of BMA since December 31, 1999; Manager, Pension Fund Investments
Assicurazioni Generali, S.p.A., Tieste, Italy.
* Principal business address is BMA Tower, 700 Karnes Blvd., Kansas City,
Missouri 64108-3306.
OFFICERS AND DIRECTORS OF JONES & BABSON, INC.
As of May 1, 2001, the following are the officers and directors of Jones &
Babson, Inc. and their position with Jones & Babson, Inc.
=======================================================================================================================
Name and Principal
Business Address* Position with Jones & Babson, Inc.
=======================================================================================================================
Stephen S. Soden........................... President, Chairman and Chief Executive Officer
P. Bradley Adams........................... Vice President, Chief Financial Officer and Treasurer
William G. Cooke........................... Chief Compliance Officer
Martin A. Cramer........................... Legal and Regulatory Affairs-Vice President and Secretary
Constance B. Martin........................ Assistant Vice President
Giorgio Balzer............................. Director
Robert T. Rakich........................... Director
Edward S. Ritter........................... Director
Robert N. Sawyer........................... Director
- --------------
* Principal business address is 700 Karnes Boulevard, Kansas City,
Missouri 64108-3306.
OFFICERS AND DIRECTORS OF CONSECO EQUITY SALES, INC.
As of May 1, 2001, the following are the officers and directors of Conseco
Equity Sales, Inc. and their position with Conseco Equity Sales, Inc.
=======================================================================================================================
Name and Principal
Business Address* Position with Conseco Equity Sales, Inc.
=======================================================================================================================
L. Gregory Gloeckner....................... President and Director
William P. Kovacs.......................... Vice President, General Counsel, Secretary and Director
James S. Adams............................. Senior Vice President, Chief Accounting Officer, Treasurer and Director
William T. Devanney, Jr.................... Senior Vice President, Corporate Taxes
Christene H. Darnell....................... Vice President, Management Reporting
Donald B. Johnston.......................... Vice President, Director - Mutual Fund Sales and Marketing
- --------------
* Principal business address is 11815 N. Pennsylvania Street, Carmel,
Indiana 46032.
VOTING
In accordance with Our view of present applicable law, We will vote the shares
of the Investment Options at special meetings of shareholders in accordance with
instructions received from Owners having a voting interest. We will vote shares
for which We have not received instructions in the same proportion as We vote
shares for which We have received instructions. We will vote shares We own in
the same proportion as We vote shares for which We have received instructions.
The funds do not hold regular meetings of shareholders.
If the Investment Company Act of 1940 or any regulation thereunder is amended or
if the present interpretation of these laws should change, and as a result We
determine that We are permitted to vote the shares of the funds in Our own
right, We may elect to do so.
The voting interests of the Owner in the Investment Options will be determined
as follows: Owners may cast one vote for each $100 of Accumulation Value of a
Policy which is allocated to an Investment Option on the record date. Fractional
votes are counted.
We will determine the number of shares which a person has a right to vote as of
the date to be chosen by Us not more than sixty (60) days prior to the meeting
of the fund. Voting instructions will be solicited by written communication at
least fourteen (14) days prior to such meeting.
Each Owner having such a voting interest will receive periodic reports relating
to the Investment Options in which he or she has an interest, proxy material and
a form with which to give such voting instructions.
Disregard of Voting Instructions. We may, when required to do so by state
insurance authorities, vote shares of the funds without regard to instructions
from Owners if such instructions would require the shares to be voted to cause
an Investment Option to make, or refrain from making, investments which would
result in changes in the sub-classification or investment objectives of the
Investment Option.
We may also disapprove changes in the investment policy initiated by Owners or
trustees of the funds, if such disapproval is reasonable and is based on a good
faith determination by Us that the change would violate state or federal law or
the change would not be consistent with the investment objectives of the
Investment Options or which varies from the general quality and nature of
investments and investment techniques used by other funds with similar
investment objectives underlying other variable contracts offered by Us or of an
affiliated company. In the event We disregard voting instructions, a summary of
this action and the reasons for such action will be included in the next
semi-annual report to Owners.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut and Fort Lauderdale,
Florida has provided advice on certain matters relating to the Federal
securities and income tax laws in connection with the Policies.
REDUCTION OR ELIMINATION OF SURRENDER CHARGE
We may reduce or eliminate the amount of the Surrender Charge on the Policies
when sales of the Policies are made to individuals or to a group of individuals
in a manner that results in savings of sales expenses. We will determine whether
the Surrender Charge will be reduced after We examine all the relevant factors
such as:
1. We will consider the size and type of group to which sales are to be
made. Generally, the sales expenses for a larger group are less than
for a smaller group because of the ability to implement large numbers
of Policies with fewer sales contacts.
2. We will consider the total amount of Premiums to be received. Per
Policy sales expenses are likely to be less on larger Premium payments
than on smaller ones.
3. We will consider any prior or existing relationship with Us. Per
Policy sales expenses are likely to be less when there is a prior
existing relationship because of the likelihood of implementing the
Policy with fewer sales contacts.
4. There may be other circumstances, of which We are not presently aware,
which could result in reduced sales expenses.
If, after consideration of the foregoing factors, We determine that there will
be a reduction in sales expenses, We may provide for a reduction or elimination
of the Surrender Charge.
We may eliminate the Surrender Charge when the Policies are issued to an
officer, director or employee of BMA or any of Our affiliates. In no event will
any reduction or elimination of the Surrender Charge be permitted where the
reduction or elimination will be unfairly discriminatory to any person.
NET AMOUNT AT RISK
Level Death Benefit. For the Level Death Benefit Option, the Net Amount at Risk
is the greater of:
1. the Specified Amount divided by 1.0032737 less the Accumulation Value;
and
2. the Accumulation Value times the applicable Minimum Death Benefit
Corridor Percentage (shown in Part I-Section 5-Death Benefit) divided
by 1.0032737, less the Accumulation Value.
Adjustable Death Benefit Option. For the Adjustable Death Benefit Option, the
Net Amount at Risk is the greater of:
1. the Specified Amount plus the Accumulation Value divided by 1.0032737,
less the Accumulation Value, and
2. the Accumulation Value times the applicable Minimum Death Benefit
Corridor Percentage divided by 1.0032737, less the Accumulation Value.
MATURITY DATE
The Maturity Date is the date the Accumulation Value of the Policy, less
Indebtedness, is paid to You, if at least one of the Insureds is living and the
Policy is in force. The Maturity Date is the Policy Anniversary following the
younger Insureds 100th birthday. Your Policy will automatically be extended
beyond the Maturity Date unless You requested to have the Policy matured.
If all past due Monthly Deductions have been paid, the Policy will continue in
force beyond the Maturity Date until the earlier of the death of the last
Insured or the date that We receive Your request to surrender the Policy for its
Cash Surrender Value.
No rider will be extended past the original Policy Maturity Date.
Once the Maturity Date extension is in place, the Death Benefit will be the
Accumulation Value, less any Indebtedness. The Monthly Deduction will no longer
be deducted and no new Premiums will be accepted. Interest or loans, if any,
will continue to accrue and will be added to the total Indebtedness.
Loan repayments will be accepted. There is no charge for this rider.
MISSTATEMENT OF AGE OR SEX
The ages of the Insureds are the Ages as of their last birthday on the Policy
Date or Policy Anniversary. We determine this from the date of birth shown in
the application. If the age or sex shown on the Policy Schedule is not correct,
we will adjust the Death Benefit to that which would be purchased by the most
recent cost of insurance charge at the correct age and sex.
OUR RIGHT TO CONTEST
We cannot contest the validity of the Policy except in the case of fraud after
it has been in effect during the Insureds' lifetime for two years from the
Policy Date. If the Policy is reinstated, the two-year period is measured from
the date of reinstatement. In addition, if either of the Insureds commits
suicide in the two-year period, or such period as specified in state law, the
benefit payable will be limited to Premiums paid less loans and less any
surrenders.
PAYMENT OPTIONS
The Death Proceeds may be paid in a lump sum or may be applied to one of the
following Payment Options:
Option 1-- Life Annuity
Option 2-- Life Annuity with 120 or 240 Monthly Annuity Payments Guaranteed
Option 3-- Joint and Last Survivor Annuity
Option 4-- Joint and Last Survivor Annuity with 120 or 240 Monthly Annuity
Payments Guaranteed
You or the Beneficiary can select to have the Payment Options payable on either
a fixed or variable basis.
FEDERAL TAX STATUS
NOTE: The following description is based upon Our understanding of current
federal income tax law applicable to life insurance in general. We cannot
predict the probability that any changes in such laws will be made. Purchasers
are cautioned to seek competent tax advice regarding the possibility of such
changes. Section 7702 of the Internal Revenue Code of 1986, as amended ("Code"),
defines the term "life insurance contract" for purposes of the Code. We believe
that the Policies to be issued will qualify as "life insurance contracts" under
Section 7702. We do not guarantee the tax status of the Policies. Purchasers
bear the complete risk that the Policies may not be treated as "life insurance"
under federal income tax laws. Purchasers should consult their own tax advisers.
It should be further understood that the following discussion is not exhaustive
and that special rules not described in this prospectus may be applicable in
certain situations.
Introduction. The discussion in this prospectus is general in nature and is not
intended as tax advice. Each person concerned should consult a competent tax
adviser. No attempt is made to consider any applicable state or other tax laws.
Moreover, this discussion is based upon Our understanding of current Federal
income tax laws as they are currently interpreted. No representation is made
regarding the likelihood of continuation of those current Federal income tax
laws or of the current interpretations by the Internal Revenue Service.
BMA is taxed as a life insurance company under the Code. For Federal income tax
purposes, the Separate Account is not a separate entity from BMA and its
operations form a part of BMA.
Diversification. Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable life insurance policies. The Code
provides that a variable life insurance policy will not be treated as life
insurance for any period (and any subsequent period) for which the investments
are not, in accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification of
the Policy as a life insurance contract would result in imposition of federal
income tax to the Owner with respect to earnings allocable to the Policy prior
to the receipt of payments under the Policy. The Code contains a safe harbor
provision which provides that life insurance policies such as these Policies
meet the diversification requirements if, as of the close of each quarter, the
underlying assets meet the diversification standards for a regulated investment
company and no more than fifty-five (55%) percent of the total assets consist of
cash, cash items, U.S. Government securities and securities of other regulated
investment companies. There is an exception for securities issued by the U.S.
Treasury in connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
Section 1.817-5), which established diversification requirements for the
investment portfolios underlying variable contracts such as the Policies. The
Regulations amplify the diversification requirements for variable contracts set
forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if:
(i) no more than 55% of the value of the total assets of the portfolio is
represented by any one investment;
(ii) no more than 70% of the value of the total assets of the portfolio is
represented by any two investments;
(iii) no more than 80% of the value of the total assets of the portfolio is
represented by any three investments; and
(iv) no more than 90% of the value of the total assets of the portfolio is
represented by any four investments.
For purposes of these Regulations, all securities of the same issuer are treated
as a single investment.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
BMA intends that each Investment Option underlying the Policies will be managed
by the managers in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
Owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Policy. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Policy is different
in some respects from the situations addressed in published rulings issued by
the Internal Revenue Service in which it was held that the policy owner was not
the owner of the assets of the separate account. It is unknown whether these
differences, such as the Owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the Owner to be
considered as the Owner of the assets of the Separate Account.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owner being
retroactively determined to be the Owner of the assets of the Separate Account.
Due to the uncertainty in this area, BMA reserves the right to modify the Policy
in an attempt to maintain favorable tax treatment.
Tax Treatment of the Policy. The Policy has been designed to comply with the
definition of life insurance contained in Section 7702 of the Code. Although
some interim guidance has been provided and proposed regulations have been
issued, final regulations have not been adopted. Section 7702 of the Code
requires the use of reasonable mortality and other expense charges. In
establishing these charges, BMA has relied on the interim guidance provided in
IRS Notice 88-128 and proposed regulations issued on July 5, 1991. Currently,
there is even less guidance as to a Policy issued on a substandard risk basis
and thus it is even less clear whether a Policy issued on such basis would meet
the requirements of Section 7702 of the Code.
While BMA has attempted to comply with Section 7702, the law in this area is
very complex and unclear. There is a risk, therefore, that the Internal Revenue
Service will not concur with BMA's interpretations of Section 7702 that were
made in determining such compliance. In the event the Policy is determined not
to so comply, it would not qualify for the favorable tax treatment usually
accorded life insurance policies. Owners should consult their tax advisers with
respect to the tax consequences of purchasing the Policy.
Policy Proceeds. The tax treatment accorded to loan proceeds and/or surrender
payments from the Policies will depend on whether the Policy is considered to be
a MEC. (See "Tax Treatment of Loans and Surrenders.") Otherwise, BMA believes
that the Policy should receive the same federal income tax treatment as any
other type of life insurance. As such, the death benefit thereunder is
excludable from the gross income of the Beneficiary under Section 101(a) of the
Code. Also, the Owner is not deemed to be in constructive receipt of the Cash
Surrender Value, including increments thereon, under a Policy until there is a
distribution of such amounts.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of Policy proceeds, depend on the circumstances of each
Owner or Beneficiary.
Tax Treatment of Loans and Surrenders. Section 7702A of the Code sets forth the
rules for determining when a life insurance policy will be deemed to be a MEC. A
MEC is a contract which is entered into or materially changed on or after June
21, 1988 and fails to meet the 7-pay test. A Policy fails to meet the 7-pay test
when the cumulative amount paid under the Policy at any time during the first 7
Policy Years exceeds the sum of the net level premiums which would have been
paid on or before such time if the Policy provided for paid-up future benefits
after the payment of seven (7) level annual premiums. A material change would
include any increase in the future benefits or addition of qualified additional
benefits provided under a policy unless the increase is attributable to: (1) the
payment of premiums necessary to fund the lowest death benefit and qualified
additional benefits payable in the first seven policy years; or (2) the
crediting of interest or other earnings (including policyholder dividends) with
respect to such premiums.
Furthermore, any Policy received in exchange for a Policy classified as a MEC
will be treated as a MEC regardless of whether it meets the 7-pay test. However,
an exchange under Section 1035 of the Code of a life insurance policy entered
into before June 21, 1988 for the Policy will not cause the Policy to be treated
as a MEC if no additional premiums are paid.
Due to the flexible premium nature of the Policy, the determination of whether
it qualifies for treatment as a MEC depends on the individual circumstances of
each Policy.
If the Policy is classified as a MEC, then surrenders and/or loan proceeds are
taxable to the extent of income in the Policy. Such distributions are deemed to
be on a last-in, first-out basis, which means the taxable income is distributed
first. Loan proceeds and/or surrender payments, including those resulting from
the termination of the Policy, may also be subject to an additional 10% federal
income tax penalty applied to the income portion of such distribution. The
penalty shall not apply, however, to any distributions:
(1) made on or after the date on which the taxpayer reaches age 59 1/2;
(2) which is attributable to the taxpayer becoming disabled (within the
meaning of Section 72(m)(7) of the Code); or
(3) which is part of a series of substantially equal periodic payments
made not less frequently than annually for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of such taxpayer and his beneficiary.
If a Policy is not classified as a MEC, then any surrenders shall be treated
first as a recovery of the investment in the Policy which would not be received
as taxable income. However, if a distribution is the result of a reduction in
benefits under the Policy within the first fifteen years after the Policy is
issued in order to comply with Section 7702, such distribution will, under rules
set forth in Section 7702, be taxed as ordinary income to the extent of income
in the Policy.
Any loans from a Policy which is not classified as a MEC, will be treated as
indebtedness of the Owner and not a distribution. Upon complete surrender or
termination of the Policy, if the amount received plus loan indebtedness exceeds
the total premiums paid that are not treated as previously surrendered by the
Owner, the excess generally will be treated as ordinary income.
Personal interest payable on a loan under a Policy owned by an individual is
generally not deductible. Furthermore, no deduction will be allowed for interest
on loans under Policies covering the life of any employee or officer of the
taxpayer or any person financially interested in the business carried on by the
taxpayer to the extent the indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on Policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
You should seek competent tax advice on the tax consequences of taking loans,
distributions, exchanging or surrendering any Policy.
Tax Treatment of Payment Options. Under the Code, a portion of the Payment
Option payments which are in excess of the death benefit proceeds are included
in the Beneficiary's taxable income. Under a Payment Option payable for the
lifetime of the Beneficiary, the death benefit proceeds are divided by the
Beneficiary's life expectancy (or joint life expectancy in the case of a joint
and survivor option) and proceeds received in excess of these prorated amounts
are included in taxable income. The value of the death benefit proceeds is
reduced by the value of any period certain or refund guarantee. Under a fixed
payment or fixed period option, the death benefit proceeds are prorated by
dividing the proceeds over the payment period under the option. Any payments in
excess of the prorated amount will be included in taxable income.
Multiple Policies. The Code further provides that multiple MECs which are issued
within a calendar year period to the same Owner by one company or its affiliates
are treated as one MEC for purposes of determining the taxable portion of any
loans or distributions. Such treatment may result in adverse tax consequences
including more rapid taxation of the loans or distributed amounts from such
combination of contracts. You should consult a tax adviser prior to purchasing
more than one MEC in any calendar year period.
Tax Treatment of Assignments. An assignment of a Policy or the change of
ownership of a Policy may be a taxable event. You should therefore consult a
competent tax adviser should you wish to assign or change the Owner of Your
Policy.
Qualified Plans. The Policies may be used in conjunction with certain Qualified
Plans. Because the rules governing such use are complex, you should not do so
until you have consulted a competent Qualified Plans consultant.
Income Tax Withholding. All distributions or the portion thereof which is
includible in gross income of the Owner are subject to federal income tax
withholding. However, the Owner in most cases may elect not to have taxes
withheld. The Owner may be required to pay penalties under the estimated tax
rules, if the Owner's withholding and estimated tax payments are insufficient.
REPORTS TO OWNERS
At least once each calendar year We will furnish You with a report showing the
amount of Death Benefit, Accumulation Value, Premiums paid since the last
report, the amount of Debt and any other information as may be required by law.
Any reports will be sent to Your last known address.
Upon request You are entitled to a receipt of Premium payment.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account or the Distributor
is a party or to which the assets of the Separate Account are subject. We are
not involved in any litigation that is of material importance in relation to our
total assets or that relates to the Separate Account.
EXPERTS
The financial statements of the BMA Variable Life Account A as of and for the
year ended December 31, 2000 and the Consolidated Financial Statements of
Business Men's Assurance Company of America as of and for the year ended
December 31, 2000 have been audited by PricewaterhouseCoopers LLP, 1055
Broadway, Kansas City, Missouri 64105, independent accountants, as set forth in
their reports, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing. The financial
statements of the BMA Variable Life Account A for the year ended December 31,
1999 and for the period from December 1, 1998 (inception) to December 31, 1998,
and the Consolidated Financial Statements of Business Men's Assurance Company of
America as of December 31, 1999 and for the two years then ended were audited by
Ernst & Young LLP, 1200 Main Street, Kansas City, Missouri 64105, independent
accountants, as set forth in their reports, and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.
FINANCIAL STATEMENTS
The financial statements of the Separate Account and BMA follow.
BMA Variable Life Account A
Financial Statements with Reports of Independent Accountants
Years Ended December 31, 2000 and 1999 and period from December 1, 1998
(inception) to December 31, 1998
BMA VARIABLE LIFE ACCOUNT A
FINANCIAL STATEMENTS
Years ended December 31, 2000 and 1999 and period from December 1, 1998
(inception) to December 31, 1998
CONTENTS
Reports of Independent Accountants.......................................... 1
Audited Financial Statements
Statement of Net Assets..................................................... 3
Statements of Operations and Changes in Net Assets.......................... 5
Notes to Financial Statements............................................... 27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of
BMA Variable Life Account A
and
The Board of Directors of
Business Men's Assurance Company of America:
In our opinion, the accompanying statement of net assets as of December 31,
2000 and the related statement of operations and changes in net assets present
fairly, in all material respects, the financial position of BMA Variable Life
Account A (the Account) at December 31, 2000, and the results of its
operations and its changes in net assets for the year then ended in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Account's management;
our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion. The financial
statements of the Account as of and for the year ended December 31, 1999 and
for the period from December 1, 1998 (inception) to December 31, 1998 were
audited by other independent accountants whose report dated February 3, 2000
expressed an unqualified opinion on those statements.
/s/ PricewaterhouseCoopers LLP
Kansas City, Missouri
February 26, 2001
F-1
Report of Independent Auditors
The Contract Owners
BMA Variable Life Account A
and
The Board of Directors
Business Men's Assurance Company of America
We have audited the accompanying statements of operations and changes in
net assets of BMA Variable Life Account A (the Account) for the year ended
December 31, 1999 and the period from December 1, 1998 (inception) to December
31, 1998. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, the financial statements referred to above present fairly,
in all material respects, the results of operations and changes in net assets
of BMA Variable Life Account A for the periods described above in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Kansas City, Missouri
February 3, 2000
F-2
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 2000
Number of Shares Share Value Cost Balance Sheet Amount
---------------- ----------- -------- --------------------
Assets
Investments (Note 1):
Investors Mark Series
Fund, Inc.:
Balanced............. 145 $ 9.31 $ 1,387 $ 1,353
Growth and Income.... 11,104 14.21 134,776 157,794
Large Cap Value...... 9,290 10.07 91,941 93,549
Small Cap Equity..... 5,530 9.45 71,298 52,262
Large Cap Growth..... 22,435 14.94 364,502 335,183
Intermediate Fixed
Income.............. 6,596 9.74 62,347 64,242
Mid Cap Equity....... 10,254 12.39 119,896 127,052
Money Market......... 71,039 1.00 71,039 71,039
Global Fixed Income.. 122 8.98 1,272 1,095
Berger Institutional
Products Trust
(Berger IPT):
100 Fund............. 431 15.32 7,143 6,603
Growth and Income
Fund................ 2,869 22.98 78,737 65,924
Small Company Growth
Fund................ 1,403 21.61 31,845 30,318
International Fund... 23,309 13.10 318,441 305,347
Conseco Series Trust:
Asset Allocation
Portfolio........... 2,018 13.45 30,472 27,143
Common Stock
Portfolio........... 2,000 19.43 47,664 38,868
Corporate Bond
Portfolio........... 247 9.63 2,417 2,378
Government Securities
Portfolio........... 97 11.54 1,175 1,125
The Alger American
Fund:
Growth Portfolio..... 5,241 47.27 295,609 247,765
Leveraged AllCap
Portfolio........... 3,652 38.80 175,223 141,715
MidCap Growth
Portfolio........... 3,648 30.62 115,985 111,707
Small Capitalization
Portfolio........... 406 23.49 14,368 9,541
American Century
Variable Portfolios,
Inc.:
VP Income and Growth. 42,125 7.11 317,328 299,511
VP International..... 3,817 10.23 48,899 39,049
VP Value............. 8,584 6.67 49,622 57,252
Dreyfus Socially
Responsible Growth
Fund, Inc............. 1,117 34.47 42,256 38,508
Dreyfus Stock Index
Fund.................. 9,752 34.00 360,712 331,553
Dreyfus Variable
Investment Fund:
Disciplined Stock
Portfolio........... 2,705 24.19 69,619 65,445
International Value
Portfolio........... 126 13.52 1,803 1,707
Federated Insurance
Series:
High-Income Bond Fund
II.................. 3,119 8.46 31,122 26,387
International Equity
Fund II............. 497 18.49 10,303 9,192
Utility Fund II...... 125 12.44 1,745 1,558
INVESCO Variable
Investment Funds:
High Yield Portfolio. 915 10.07 10,443 9,211
Industrial Income
Portfolio........... 923 20.71 19,020 19,122
Lazard Retirement
Series, Inc.:
Retirement Equity
Portfolio........... 154 10.20 1,667 1,573
Retirement Small Cap
Portfolio........... 15,096 11.75 159,457 177,382
Neuberger & Berman
Advisors Management
Trust:
Limited Maturity Bond
Portfolio........... 183 13.19 2,363 2,418
Partners Portfolio... 1,174 16.17 19,397 18,984
Strong Opportunity
Fund II............... 881 23.94 22,473 21,084
Strong Variable
Insurance Funds,
Inc.:
Growth Fund II....... 3,556 23.66 113,288 84,144
Van Eck Worldwide
Insurance Trust:
Worldwide Bond Fund.. 92 10.37 1,100 949
Worldwide Emerging
Markets Fund........ 1,310 8.29 15,888 10,858
Worldwide Hard Assets
Fund................ 830 12.07 9,504 10,023
Worldwide Real Estate
Fund................ 123 10.62 1,157 1,301
Variable Insurance
Products Fund (VIP):
Fidelity VIP Overseas
Portfolio........... 1,587 19.90 35,036 31,586
Fidelity VIP Growth
Portfolio........... 90 43.43 4,078 3,901
Variable Insurance
Products Fund II (VIP
II):
Fidelity VIP II
Contrafund
Portfolio........... 140 23.64 3,332 3,314
----------
Total investments....... 3,158,015
Dividend receivable..... 378
Receivable from BMA..... 16,956
----------
Total assets............ 3,175,349
Liability payable to
BMA.................... (1,520)
----------
Net assets.............. $3,173,829
==========
See accompanying notes.
F-3
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF NET ASSETS--(Continued)
December 31, 2000
Number of Units Unit Value Amount
--------------- ---------- ----------
Net assets are represented by (Note 3):
Accumulation units:
Investors Mark Series Fund, Inc.:
Balanced............................ 118 $11.4489 $ 1,356
Growth and Income................... 11,387 13.9407 158,738
Large Cap Value..................... 8,727 10.9836 95,853
Small Cap Equity.................... 3,154 16.9536 53,470
Large Cap Growth.................... 25,894 13.1601 340,771
Intermediate Fixed Income........... 5,801 11.0768 64,254
Mid Cap Equity...................... 9,438 13.8252 130,487
Money Market........................ 6,518 11.1106 72,419
Global Fixed Income................. 100 10.9459 1,095
Berger Institutional Products Trust
(Berger IPT):
100 Fund............................ 498 13.2664 6,607
Growth and Income Fund.............. 4,183 15.7594 65,924
Small Company Growth Fund........... 1,504 20.3330 30,588
International Fund.................. 25,027 12.1513 304,109
Conseco Series Trust:
Asset Allocation Portfolio.......... 1,839 14.8424 27,298
Common Stock Portfolio.............. 2,267 17.1570 38,898
Corporate Bond Portfolio............ 216 10.9890 2,378
Government Securities Portfolio..... 103 10.8831 1,125
The Alger American Fund:
Growth Portfolio.................... 19,423 12.7816 248,257
Leveraged AllCap Portfolio.......... 9,107 15.5867 141,947
MidCap Growth Portfolio............. 6,894 16.2026 111,705
Small Capitalization Portfolio...... 817 11.7718 9,611
American Century Variable Portfolios,
Inc.:
VP Income and Growth................ 26,791 11.1801 299,531
VP International.................... 2,715 14.3801 39,044
VP Value............................ 4,904 11.6618 57,185
Dreyfus Socially Responsible Growth
Fund, Inc............................ 3,096 12.4878 38,668
Dreyfus Stock Index Fund.............. 28,671 11.5736 331,829
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio......... 5,669 11.5414 65,422
International Value Portfolio....... 135 12.5865 1,706
Federated Insurance Series:
High-Income Bond Fund II............ 2,843 9.2822 26,391
International Equity Fund II........ 594 15.4415 9,168
Utility Fund II..................... 162 9.5923 1,552
INVESCO Variable Investment Funds:
High Yield Portfolio................ 962 9.5660 9,202
Industrial Income Portfolio......... 1,533 12.4466 19,086
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio......... 139 11.3042 1,572
Retirement Small Cap Portfolio...... 13,719 12.9449 177,591
Neuberger & Berman Advisors Management
Trust:
Limited Maturity Bond Portfolio..... 222 10.8519 2,403
Partners Portfolio.................. 1,712 11.0696 18,947
Strong Opportunity Fund II............ 1,436 15.0472 21,613
Strong Variable Insurance Funds, Inc.:
Growth Fund II...................... 4,610 18.2525 84,137
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund................. 100 9.5373 949
Worldwide Emerging Markets Fund..... 925 11.7256 10,843
Worldwide Hard Assets Fund.......... 760 13.1649 10,013
Worldwide Real Estate Fund.......... 112 11.7011 1,301
Variable Insurance Products Fund
(VIP):
Fidelity VIP Overseas Portfolio..... 3,711 8.5043 31,562
Fidelity VIP Growth Portfolio....... 467 8.3729 3,910
Variable Insurance Products Fund II
(VIP II):
Fidelity VIP II Contrafund
Portfolio.......................... 356 9.3071 3,314
----------
Net assets............................... $3,173,829
==========
See accompanying notes.
F-4
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
Year Ended December 31, 2000
Investors Mark Series Fund
--------------------------------------------------------------------
Growth Large Small Large Intermediate Mid
and Cap Cap Cap Fixed Cap
Balanced Income Value Equity Growth Income Equity
-------- -------- ------- ------- -------- ------------ --------
Net investment income
(loss):
Dividend income....... $ 45 $ 1,489 $ 1,372 $ 0 $ 0 $ 3,372 $ 169
Risk charge (Note 2).. (1) (689) (419) (209) (2,030) (201) (613)
------ -------- ------- ------- -------- ------- --------
Net investment income
(loss)................. 44 800 953 (209) (2,030) 3,171 (444)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 25 3,045 (692) 14,727 22,240 (148) 17,764
Increase (decrease) in
unrealized
appreciation on
investments.......... 17 23,353 7,880 (21,405) (70,361) 2,176 5,471
------ -------- ------- ------- -------- ------- --------
Net realized and
unrealized gain (loss)
on investments......... 42 26,398 7,188 (6,678) (48,121) 2,028 23,235
------ -------- ------- ------- -------- ------- --------
Net increase (decrease)
in net assets resulting
from operations........ 86 27,198 8,141 (6,887) (50,151) 5,199 22,791
Capital share
transactions:
Transfers of net
variable contract
deposits............. 381 97,443 34,989 26,737 51,246 48,226 50,065
Transfers of
surrenders and death
benefits............. -- -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. (219) (11,565) (6,799) (5,824) (21,011) (4,032) (11,580)
Transfers between
subaccounts,
including fixed
interest subaccount.. 52 16,156 17,294 31,585 154,261 11,294 23,080
------ -------- ------- ------- -------- ------- --------
Net increase in net
assets resulting from
capital share
transactions........... 214 102,034 45,484 52,498 184,496 55,488 61,565
------ -------- ------- ------- -------- ------- --------
Net increase in net
assets................. 300 129,232 53,625 45,611 134,345 60,687 84,356
Net assets at beginning
of year................ 1,056 29,506 42,228 7,859 206,426 3,567 46,131
------ -------- ------- ------- -------- ------- --------
Net assets at end of
year................ $1,356 $158,738 $95,853 $53,470 $340,771 $64,254 $130,487
====== ======== ======= ======= ======== ======= ========
See accompanying notes.
F-5
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 2000
Investors Mark
Series Fund Berger Institutional Products Trust
------------------- -----------------------------------------
Growth Small
Global and Company
Money Fixed 100 Income Growth International
Market Income Fund Fund Fund Fund
----------- ------ ------- -------- ------- -------------
Net investment income
(loss):
Dividend income....... $ 9,282 $ 120 $ 0 $ 0 $ 0 $ 909
Risk charge (Note 2).. (2,455) -- (45) (478) (182) (1,563)
----------- ------ ------- -------- ------- --------
Net investment income
(loss)................. 6,827 120 (45) (478) (182) (654)
Net realized and
unrealized loss on
investments:
Net realized gain on
investment
transactions......... -- -- 660 5,953 4,245 3,883
Decrease in unrealized
appreciation on
investments.......... -- (25) (2,117) (17,347) (7,914) (17,897)
----------- ------ ------- -------- ------- --------
Net realized and
unrealized loss on
investments............ -- (25) (1,457) (11,394) (3,669) (14,014)
----------- ------ ------- -------- ------- --------
Net increase (decrease)
in net assets resulting
from operations........ 6,827 95 (1,502) (11,872) (3,851) (14,668)
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,341,721 -- 2,443 26,909 7,460 151,111
Transfers of
surrenders and death
benefits............. -- -- (465) (1,218) -- --
Transfers of cost of
insurance and policy
charges.............. (45,981) -- (951) (9,023) (2,979) (22,399)
Transfers between
subaccounts,
including fixed
interest subaccount.. (1,429,679) -- 1,379 43,040 15,559 162,715
----------- ------ ------- -------- ------- --------
Net increase (decrease)
in net assets resulting
from capital share
transactions........... (133,939) -- 2,406 59,708 20,040 291,427
----------- ------ ------- -------- ------- --------
Net increase (decrease)
in net assets.......... (127,112) 95 904 47,836 16,189 276,759
Net assets at beginning
of year................ 199,531 1,000 5,703 18,088 14,399 27,350
----------- ------ ------- -------- ------- --------
Net assets at end of
year................ $ 72,419 $1,095 $ 6,607 $ 65,924 $30,588 $304,109
=========== ====== ======= ======== ======= ========
See accompanying notes.
F-6
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 2000
The Alger American
Conseco Series Trust Fund
----------------------------------------- --------------------
Asset Common Corporate Government Leveraged
Allocation Stock Bond Securities Growth AllCap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- ---------- --------- ---------
Net investment income
(loss):
Dividend income....... $ 3,915 $ 7,145 $ 137 $ 62 $ -- $ --
Risk charge (Note 2).. (183) (41) (8) -- (637) (518)
------- ------- ------ ------ -------- --------
Net investment income
(loss)................. 3,732 7,104 129 62 (637) (518)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 821 1,204 -- (2) 32,754 11,408
Increase (decrease) in
unrealized
appreciation on
investments.......... (3,669) (8,558) 55 59 (78,653) (46,068)
------- ------- ------ ------ -------- --------
Net realized and
unrealized gain (loss)
on investments......... (2,848) (7,354) 55 57 (45,899) (34,660)
------- ------- ------ ------ -------- --------
Net increase (decrease)
in net assets resulting
from operations........ 884 (250) 184 119 (46,536) (35,178)
Capital share
transactions:
Transfers of net
variable contract
deposits............. 12,522 11,142 759 126 83,762 72,930
Transfers of
surrenders and death
benefits............. -- (535) -- -- (10,214) (4,252)
Transfers of cost of
insurance and policy
charges.............. (4,260) (5,221) (203) (102) (26,142) (21,427)
Transfers between
subaccounts,
including fixed
interest subaccount.. 3 6,936 27 10 61,569 74,189
------- ------- ------ ------ -------- --------
Net increase in net
assets resulting from
capital share
transactions........... 8,265 12,322 583 34 108,975 121,440
------- ------- ------ ------ -------- --------
Net increase in net
assets................. 9,149 12,072 767 153 62,439 86,262
Net assets at beginning
of year................ 18,149 26,826 1,611 972 185,818 55,685
------- ------- ------ ------ -------- --------
Net assets at end of
year................ $27,298 $38,898 $2,378 $1,125 $248,257 $141,947
======= ======= ====== ====== ======== ========
See accompanying notes.
F-7
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 2000
American Century Variable
The Alger American Fund Portfolios, Inc.
------------------------- ------------------------------- Dreyfus
VP Socially
MidCap Small Income Responsible
Growth Capitalization and VP VP Growth
Portfolio Portfolio Growth International Value Fund, Inc.
--------- -------------- -------- ------------- ------- -----------
Net investment income
(loss):
Dividend income....... $ -- $ -- $ 813 $ 43 $ 332 $ 314
Risk charge (Note 2).. (364) (80) (1,415) (214) (332) (213)
-------- ------- -------- -------- ------- -------
Net investment income
(loss)................. (364) (80) (602) (171) -- 101
Net realized and
unrealized gain (loss)
on investments:
Net realized gain on
investment
transactions......... 3,795 3,276 442 666 387 678
Increase (decrease) in
unrealized
appreciation on
investments.......... (7,315) (6,431) (22,554) (10,813) 8,822 (5,212)
-------- ------- -------- -------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... (3,520) (3,155) (22,112) (10,147) 9,209 (4,534)
-------- ------- -------- -------- ------- -------
Net increase (decrease)
in net assets resulting
from operations........ (3,884) (3,235) (22,714) (10,318) 9,209 (4,433)
Capital share
transactions:
Transfers of net
variable contract
deposits............. 33,569 3,535 113,660 9,439 13,558 28,123
Transfers of
surrenders and death
benefits............. (1,475) (404) (509) -- -- (1,169)
Transfers of cost of
insurance and policy
charges.............. (8,563) (1,310) (21,915) (2,258) (4,638) (9,565)
Transfers between
subaccounts,
including fixed
interest subaccount.. 72,242 2,052 172,435 39,725 17,802 7,694
-------- ------- -------- -------- ------- -------
Net increase in net
assets resulting from
capital share
transactions........... 95,773 3,873 263,671 46,906 26,722 25,083
-------- ------- -------- -------- ------- -------
Net increase in net
assets................. 91,889 638 240,957 36,588 35,931 20,650
Net assets at beginning
of year................ 19,816 8,973 58,574 2,456 21,254 18,018
-------- ------- -------- -------- ------- -------
Net assets at end of
year................ $111,705 $ 9,611 $299,531 $ 39,044 $57,185 $38,668
======== ======= ======== ======== ======= =======
See accompanying notes.
F-8
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 2000
Dreyfus Variable
Investment Fund Federated Insurance Series
------------------------- ------------------------------
Dreyfus High-
Stock Disciplined International Income International
Index Stock Value Bond Equity Utility
Fund Portfolio Portfolio Fund II Fund II Fund II
-------- ----------- ------------- ------- ------------- -------
Net investment income
(loss):
Dividend income....... $ 2,672 $ 141 $ 7 $ 2,879 $ -- $ 56
Risk charge (Note 2).. (1,838) (368) (2) (234) (55) (5)
-------- ------- ------ ------- ------ ------
Net investment income
(loss)................. 834 (227) 5 2,645 (55) 51
Net realized and
unrealized loss on
investments:
Net realized gain
(loss) on investment
transactions......... 6,186 1,050 159 (347) 1,288 (53)
Decrease in unrealized
appreciation on
investments.......... (33,468) (7,908) (227) (5,124) (3,155) (167)
-------- ------- ------ ------- ------ ------
Net realized and
unrealized loss on
investments............ (27,282) (6,858) (68) (5,471) (1,867) (220)
-------- ------- ------ ------- ------ ------
Net decrease in net
assets resulting from
operations............. (26,448) (7,085) (63) (2,826) (1,922) (169)
Capital share
transactions:
Transfers of net
variable contract
deposits............. 90,162 32,218 92 14,260 2,976 1,002
Transfers of
surrenders and death
benefits............. (1,273) -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. (26,669) (9,839) (66) (3,596) (940) (320)
Transfers between
subaccounts,
including fixed
interest subaccount.. 225,889 13,393 421 108 4,240 (644)
-------- ------- ------ ------- ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 288,109 35,772 447 10,772 6,276 38
-------- ------- ------ ------- ------ ------
Net increase (decrease)
in net assets.......... 261,661 28,687 384 7,946 4,354 (131)
Net assets at beginning
of year................ 70,168 36,735 1,322 18,445 4,814 1,683
-------- ------- ------ ------- ------ ------
Net assets at end of
year................ $331,829 $65,422 $1,706 $26,391 $9,168 $1,552
======== ======= ====== ======= ====== ======
See accompanying notes.
F-9
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 2000
Neuberger & Berman
INVESCO Variable Lazard Retirement Advisors Management
Investment Funds Series, Inc. Trust
-------------------- --------------------- -------------------
Limited
High Industrial Retirement Retirement Maturity Strong
Yield Income Equity Small Cap Bond Partners Opportunity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Fund II
--------- ---------- ---------- ---------- --------- --------- -----------
Net investment income
(loss):
Dividend income....... $ 86 $ 16 $ 178 $ 1,881 $ 100 $ 66 $ 47
Risk charge (Note 2).. (12) (125) (2) (727) (9) (68) (157)
------- ------- ------ -------- ------ ------- -------
Net investment income
(loss)................. 74 (109) 176 1,154 91 (2) (110)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... (23) 1,151 2 426 (41) 1,135 4,351
Increase (decrease) in
unrealized
appreciation on
investments.......... (1,003) (456) (184) 17,938 88 (733) (2,878)
------- ------- ------ -------- ------ ------- -------
Net realized and
unrealized gain (loss)
on investments......... (1,026) 695 (182) 18,364 47 402 1,473
------- ------- ------ -------- ------ ------- -------
Net increase (decrease)
in net assets resulting
from operations........ (952) 586 (6) 19,518 138 400 1,363
Capital share
transactions:
Transfers of net
variable contract
deposits............. 2,116 10,446 92 18,680 834 15,398 9,117
Transfers of
surrenders and death
benefits............. -- -- -- -- (435) -- --
Transfers of cost of
insurance and policy
charges.............. (430) (2,991) (68) (6,630) (276) (2,283) (4,318)
Transfers between
subaccounts,
including fixed
interest subaccount.. 3,205 2,913 421 140,770 457 (353) 2,670
------- ------- ------ -------- ------ ------- -------
Net increase in net
assets resulting from
capital share
transactions........... 4,891 10,368 445 152,820 580 12,762 7,469
------- ------- ------ -------- ------ ------- -------
Net increase in net
assets................. 3,939 10,954 439 172,338 718 13,162 8,832
Net assets at beginning
of year................ 5,263 8,132 1,133 5,253 1,685 5,785 12,781
------- ------- ------ -------- ------ ------- -------
Net assets at end of
year................ $ 9,202 $19,086 $1,572 $177,591 $2,403 $18,947 $21,613
======= ======= ====== ======== ====== ======= =======
See accompanying notes.
F-10
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 2000
Strong
Variable
Insurance
Funds, Inc. Van Eck Worldwide Insurance Trust
----------- ---------------------------------------
Worldwide Worldwide Worldwide
Emerging Hard Real
Growth Worldwide Markets Assets Estate
Fund II Bond Fund Fund Fund Fund
----------- --------- --------- --------- ---------
Net investment income
(loss):
Dividend income......... $ -- $ 44 $ -- $ 61 $ 22
Risk charge (Note 2).... (517) -- (92) (49) --
-------- ---- ------- ------- ------
Net investment income
(loss)................... (517) 44 (92) 12 22
Net realized and
unrealized gain (loss) on
investments:
Net realized gain on
investment
transactions........... 12,313 -- 1,027 140 --
Increase (decrease) in
unrealized appreciation
on investments......... (35,611) (27) (8,436) 360 173
-------- ---- ------- ------- ------
Net realized and
unrealized gain (loss) on
investments.............. (23,298) (27) (7,409) 500 173
-------- ---- ------- ------- ------
Net increase (decrease) in
net assets resulting from
operations............... (23,815) 17 (7,501) 512 195
Capital share
transactions:
Transfers of net
variable contract
deposits............... 43,815 -- 5,736 5,069 204
Transfers of surrenders
and death benefits..... (1,937) -- -- -- --
Transfers of cost of
insurance and policy
charges................ (14,532) -- (1,626) (1,288) (114)
Transfers between
subaccounts, including
fixed interest
subaccount............. 53,970 5,420 -- 24
-------- ---- ------- ------- ------
Net increase in net assets
resulting from capital
share transactions....... 81,316 -- 9,530 3,781 114
-------- ---- ------- ------- ------
Net increase in net
assets................... 57,501 17 2,029 4,293 309
Net assets at beginning of
year..................... 26,636 932 8,814 5,720 992
-------- ---- ------- ------- ------
Net assets at end of
year.................. $ 84,137 $949 $10,843 $10,013 $1,301
======== ==== ======= ======= ======
See accompanying notes.
F-11
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 2000
Variable Insurance Variable Insurance
Products Fund Products Fund II
------------------- ------------------
Overseas Growth Contrafund
Portfolio Portfolio Portfolio Total
--------- --------- ------------------ ----------
Net investment income
(loss):
Dividend income.......... $ -- $ -- $ -- $ 37,775
Risk charge (Note 2)..... (87) (2) (4) (17,243)
------- ------ ------ ----------
Net investment income
(loss).................... (87) (2) (4) 20,532
Net realized and unrealized
gain (loss) on
investments:
Net realized gain (loss)
on investment
transactions............ (9) (1) -- 155,885
Decrease in unrealized
appreciation on
investments............. (3,450) (177) (19) (362,970)
------- ------ ------ ----------
Net realized and unrealized
loss on investments....... (3,459) (178) (19) (207,085)
------- ------ ------ ----------
Net decrease in net assets
resulting from operations. (3,546) (180) (23) (186,553)
Capital share transactions:
Transfers of net variable
contract deposits....... 6,204 420 95 2,480,792
Transfers of surrenders
and death benefits...... -- -- -- (23,886)
Transfers of cost of
insurance and policy
charges................. (528) (220) (82) (324,783)
Transfers between
subaccounts, including
fixed interest
subaccount.............. 29,432 3,890 3,324 (9,030)
------- ------ ------ ----------
Net increase in net assets
resulting from capital
share transactions........ 35,108 4,090 3,337 2,123,093
------- ------ ------ ----------
Net increase in net assets. 31,562 3,910 3,314 1,936,540
Net assets at beginning of
year...................... -- -- -- 1,237,289
------- ------ ------ ----------
Net assets at end of
year................... $31,562 $3,910 $3,314 $3,173,829
======= ====== ====== ==========
See accompanying notes.
F-12
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
Year ended December 31, 1999
Investors Mark Series Fund
-----------------------------------------------------------------
Growth Large Small Large
and Cap Cap Cap Intermediate Mid Cap
Balanced Income Value Equity Growth Fixed Income Equity
-------- ------- ------- ------ -------- ------------ -------
Net investment income
(loss):
Dividend income....... $ 50 $ 237 $ 936 $ -- $ -- $ 215 $ 109
Risk charge (Note 2).. -- (91) (142) (12) (456) (17) (146)
------ ------- ------- ------ -------- ------ -------
Net investment income
(loss)................. 50 146 794 (12) (456) 198 (37)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 8 1,729 1,417 80 310 (13) 136
Increase (decrease) in
unrealized
appreciation on
investments.......... 22 (353) (6,240) 2,297 40,982 (221) 1,637
------ ------- ------- ------ -------- ------ -------
Net realized and
unrealized gain (loss)
on investments......... 30 1,376 (4,823) 2,377 41,292 (234) 1,773
------ ------- ------- ------ -------- ------ -------
Net increase (decrease)
in net assets resulting
from operations........ 80 1,522 (4,029) 2,365 40,836 (36) 1,736
Capital share
transactions:
Transfers of net
variable contract
deposits............. -- 5,045 1,536 799 1,835 176 3,701
Transfers of
surrenders and death
benefits............. -- -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- (2,466) (1,843) (544) (3,582) (555) (2,604)
Transfers between
subaccounts,
including fixed
interest subaccount.. -- 24,376 45,566 4,166 166,276 2,982 42,240
------ ------- ------- ------ -------- ------ -------
Net increase in net
assets resulting from
capital share
transactions........... -- 26,955 45,259 4,421 164,529 2,603 43,337
------ ------- ------- ------ -------- ------ -------
Net increase in net
assets................. 80 28,477 41,230 6,786 205,365 2,567 45,073
Net assets at beginning
of year................ 976 1,029 998 1,073 1,061 1,000 1,058
------ ------- ------- ------ -------- ------ -------
Net assets at end of
year................ $1,056 $29,506 $42,228 $7,859 $206,426 $3,567 $46,131
====== ======= ======= ====== ======== ====== =======
See accompanying notes.
F-13
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
Investors Mark
Series Fund Berger Institutional Products Trust
---------------- ---------------------------------------
Growth Small
Global and Company
Money Fixed 100 Income Growth International
Market Income Fund Fund Fund Fund
-------- ------ ------ ------- ------- -------------
Net investment income
(loss):
Dividend income....... $ 2,339 $ 69 $ 1 $ -- $ -- $ 152
Risk charge (Note 2).. (1,663) -- (10) (37) (40) (77)
-------- ------ ------ ------- ------- -------
Net investment income
(loss)................. 676 69 (9) (37) (40) 75
Net realized and
unrealized gain (loss)
on investments:
Net realized gain on
investment
transactions......... -- -- 63 289 45 191
Increase (decrease) in
unrealized
appreciation on
investments.......... -- (72) 1,510 4,447 6,255 4,758
-------- ------ ------ ------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... (72) 1,573 4,736 6,300 4,949
-------- ------ ------ ------- ------- -------
Net increase (decrease)
in net assets resulting
from operations........ 676 (3) 1,564 4,699 6,260 5,024
Capital share
transactions:
Transfers of net
variable contract
deposits............. 986,922 -- 1,023 3,647 2,398 5,278
Transfers of
surrenders and death
benefits............. -- -- -- (73) -- --
Transfers of cost of
insurance and policy
charges.............. (41,858) -- (400) (2,081) (737) (3,402)
Transfers between
subaccounts,
including fixed
interest subaccount.. (747,209) -- 2,447 10,803 5,344 19,389
-------- ------ ------ ------- ------- -------
Net increase in net
assets resulting from
capital share
transactions........... 197,855 -- 3,070 12,296 7,005 21,265
-------- ------ ------ ------- ------- -------
Net increase (decrease)
in net assets.......... 198,531 (3) 4,634 16,995 13,265 26,289
Net assets at beginning
of year................ 1,000 1,003 1,069 1,093 1,134 1,061
-------- ------ ------ ------- ------- -------
Net assets at end of
year................ $199,531 $1,000 $5,703 $18,088 $14,399 $27,350
======== ====== ====== ======= ======= =======
See accompanying notes.
F-14
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
The Alger American
Conseco Series Trust Fund
----------------------------------------- --------------------
Asset Common Corporate Government Leveraged
Allocation Stock Bond Securities Growth AllCap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- ---------- --------- ---------
Net investment income
(loss):
Dividend income....... $ 254 $ 2 $ 88 $ 54 $ 12 $ --
Risk charge (Note 2).. (53) (85) (4) -- (430) (113)
------- ------- ------ ----- -------- -------
Net investment income
(loss)................. 201 (83) 84 54 (418) (113)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 2,900 7,689 (2) 22 889 1,924
Increase (decrease) in
unrealized
appreciation on
investments.......... 300 (337) (90) (100) 30,707 12,422
------- ------- ------ ----- -------- -------
Net realized and
unrealized gain (loss)
on investments......... 3,200 7,352 (92) (78) 31,596 14,346
------- ------- ------ ----- -------- -------
Net increase (decrease)
in net assets resulting
from operations........ 3,401 7,269 (8) (24) 31,178 14,233
Capital share
transactions:
Transfers of net
variable contract
deposits............. 11,298 8,508 383 -- 32,244 19,392
Transfers of
surrenders and death
benefits............. -- (329) -- -- (961) (965)
Transfers of cost of
insurance and policy
charges.............. (2,270) (2,173) (97) -- (10,092) (7,034)
Transfers between
subaccounts,
including fixed
interest subaccount.. 4,672 12,451 332 -- 132,347 28,921
------- ------- ------ ----- -------- -------
Net increase in net
assets resulting from
capital share
transactions........... 13,700 18,457 618 -- 153,538 40,314
------- ------- ------ ----- -------- -------
Net increase (decrease)
in net assets.......... 17,101 25,726 610 (24) 184,716 54,547
Net assets at beginning
of year................ 1,048 1,100 1,001 996 1,102 1,138
------- ------- ------ ----- -------- -------
Net assets at end of
year................ $18,149 $26,826 $1,611 $ 972 $185,818 $55,685
======= ======= ====== ===== ======== =======
See accompanying notes.
F-15
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
American Century Variable
The Alger American Fund Portfolios, Inc.
------------------------ ------------------------------- Dreyfus
VP Socially
MidCap Small Income Responsible
Growth Capitalization and VP Growth
Portfolio Portfolio Growth International VP Value Fund, Inc.
--------- -------------- ------- ------------- -------- -----------
Net investment loss:
Dividend income....... $ -- $ -- $ -- $ -- $ 10 $ 2
Risk charge (Note 2).. (41) (20) (147) (1) (37) (51)
------- ------ ------- ------ ------- -------
Net investment loss..... (41) (20) (147) (1) (27) (49)
Net realized and
unrealized gain (loss)
on investments:
Net realized gain on
investment
transactions......... 327 498 326 11 62 1,159
Increase (decrease) in
unrealized
appreciation on
investments.......... 2,917 1,491 4,694 884 (1,185) 1,444
------- ------ ------- ------ ------- -------
Net realized and
unrealized gain (loss)
on investments......... 3,244 1,989 5,020 895 (1,123) 2,603
------- ------ ------- ------ ------- -------
Net increase (decrease)
in net assets resulting
from operations........ 3,203 1,969 4,873 894 (1,150) 2,554
Capital share
transactions:
Transfers of net
variable contract
deposits............. 4,981 1,484 15,206 509 3,633 6,935
Transfers of
surrenders and death
benefits............. (316) -- (65) -- -- (208)
Transfers of cost of
insurance and policy
charges.............. (2,655) (513) (5,277) (232) (673) (2,764)
Transfers between
subaccounts,
including fixed
interest subaccount.. 13,485 4,919 42,789 206 18,451 10,440
------- ------ ------- ------ ------- -------
Net increase in net
assets resulting from
capital share
transactions........... 15,495 5,890 52,653 483 21,411 14,403
------- ------ ------- ------ ------- -------
Net increase in net
assets................. 18,698 7,859 57,526 1,377 20,261 16,957
Net assets at beginning
of year................ 1,118 1,114 1,048 1,079 993 1,061
------- ------ ------- ------ ------- -------
Net assets at end of
year................ $19,816 $8,973 $58,574 $2,456 $21,254 $18,018
======= ====== ======= ====== ======= =======
See accompanying notes.
F-16
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
Dreyfus
Variable Investment Fund Federated Insurance Series
------------------------- ------------------------------
Dreyfus High-
Stock Disciplined International Income International
Index Stock Value Bond Equity Utility
Fund Portfolio Portfolio Fund II Fund II Fund II
------- ----------- ------------- ------- ------------- -------
Net investment income
(loss):
Dividend income....... $ 349 $ 134 $ 10 $ 79 $ -- $ 25
Risk charge (Note 2).. (169) (75) -- (36) (7) (2)
------- ------- ------ ------- ------ ------
Net investment income
(loss)................. 180 59 10 43 (7) 23
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... 695 387 102 (70) 44 50
Increase (decrease) in
unrealized
appreciation on
investments.......... 4,265 3,678 176 393 1,950 (53)
------- ------- ------ ------- ------ ------
Net realized and
unrealized gain (loss)
on investments......... 4,960 4,065 278 323 1,994 (3)
------- ------- ------ ------- ------ ------
Net increase in net
assets resulting from
operations............. 5,140 4,124 288 366 1,987 20
Capital share
transactions:
Transfers of net
variable contract
deposits............. 21,652 519 -- -- 329 732
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. (4,938) (2,281) -- (892) (152) (277)
Transfers between
subaccounts,
including fixed
interest subaccount.. 47,267 33,312 -- 17,974 1,556 176
------- ------- ------ ------- ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 63,981 31,550 -- 17,082 1,733 631
------- ------- ------ ------- ------ ------
Net increase in net
assets................. 69,121 35,674 288 17,448 3,720 651
Net assets at beginning
of year................ 1,047 1,061 1,034 997 1,094 1,032
------- ------- ------ ------- ------ ------
Net assets at end of
year................... $70,168 $36,735 $1,322 $18,445 $4,814 $1,683
======= ======= ====== ======= ====== ======
See accompanying notes.
F-17
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
Neuberger & Berman
INVESCO Variable Lazard Retirement Advisors Management
Investment Funds Series, Inc. Trust
-------------------- --------------------- -------------------
Limited
High Industrial Retirement Retirement Maturity Strong
Yield Income Equity Small Cap Bond Partners Opportunity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Fund II
--------- ---------- ---------- ---------- --------- --------- -----------
Net investment income
(loss):
Dividend income....... $ 359 $ 94 $ 7 $ 8 $ 56 $ 13 $ 135
Risk charge (Note 2).. (8) (14) -- (13) (1) (13) (35)
------ ------ ------ ------ ------ ------ -------
Net investment income
(loss)................. 351 80 7 (5) 55 -- 100
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... (3) 86 33 106 (6) 31 177
Increase (decrease) in
unrealized
appreciation on
investments.......... (118) 583 46 (32) (32) 301 1,448
------ ------ ------ ------ ------ ------ -------
Net realized and
unrealized gain (loss)
on investments......... (121) 669 79 74 (38) 332 1,625
------ ------ ------ ------ ------ ------ -------
Net increase in net
assets resulting from
operations............. 230 749 86 69 17 332 1,725
Capital share
transactions:
Transfers of net
variable contract
deposits............. -- 78 -- 366 284 1,807 2,447
Transfers of
surrenders and death
benefits............. -- -- -- -- -- -- (139)
Transfers of cost of
insurance and policy
charges.............. (37) (436) -- (382) (109) (667) (1,114)
Transfers between
subaccounts,
including fixed
interest subaccount.. 4,077 6,715 -- 4,181 494 3,294 8,819
------ ------ ------ ------ ------ ------ -------
Net increase in net
assets resulting from
capital share
transactions........... 4,040 6,357 -- 4,165 669 4,434 10,013
------ ------ ------ ------ ------ ------ -------
Net increase in net
assets................. 4,270 7,106 86 4,234 686 4,766 11,738
Net assets at beginning
of year................ 993 1,026 1,047 1,019 999 1,019 1,043
------ ------ ------ ------ ------ ------ -------
Net assets at end of
year................... $5,263 $8,132 $1,133 $5,253 $1,685 $5,785 $12,781
====== ====== ====== ====== ====== ====== =======
See accompanying notes.
F-18
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Year ended December 31, 1999
Strong
Variable
Insurance
Funds, Inc. Van Eck Worldwide Insurance Trust
----------- ---------------------------------------
Worldwide Worldwide Worldwide
Emerging Hard Real
Growth Fund Worldwide Markets Assets Estate
II Bond Fund Fund Fund Fund Total
----------- --------- --------- --------- --------- ----------
Net investment income
(loss):
Dividend income....... $ 2 $ 39 $ -- $ 15 $ 21 $ 5,876
Risk charge (Note 2).. (36) -- (11) (12) -- (4,105)
------- ------ ------ ------ ------ ----------
Net investment income
(loss)................. (34) 39 (11) 3 21 1,771
Net realized and
unrealized gain (loss)
on investments:
Net realized gain on
investment
transactions......... 415 17 100 47 -- 22,271
Increase (decrease) in
unrealized
appreciation on
investments.......... 6,338 (135) 3,382 170 (42) 130,487
------- ------ ------ ------ ------ ----------
Net realized and
unrealized gain (loss)
on investments......... 6,753 (118) 3,482 217 (42) 152,758
------- ------ ------ ------ ------ ----------
Net increase (decrease)
in net assets resulting
from operations........ 6,719 (79) 3,471 220 (21) 154,529
Capital share
transactions:
Transfers of net
variable contract
deposits............. 6,788 -- 122 4 -- 1,152,061
Transfers of
surrenders and death
benefits............. (75) -- -- -- -- (3,131)
Transfers of cost of
insurance and policy
charges.............. (2,675) -- (302) (441) -- (108,555)
Transfers between
subaccounts,
including fixed
interest subaccount 14,753 -- 4,500 4,948 -- (2,541)
------- ------ ------ ------ ------ ----------
Net increase in net
assets resulting from
capital share
transactions........... 18,791 -- 4,320 4,511 -- 1,037,834
------- ------ ------ ------ ------ ----------
Net increase (decrease)
in net assets.......... 25,510 (79) 7,791 4,731 (21) 1,192,363
Net assets at beginning
of year................ 1,126 1,011 1,023 989 1,013 44,926
------- ------ ------ ------ ------ ----------
Net assets at end of
year................ $26,636 $ 932 $8,814 $5,720 $ 992 $1,237,289
======= ====== ====== ====== ====== ==========
See accompanying notes
F-19
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
Period from December 1, 1998 (inception) to December 31, 1998
Investors Mark Series Fund
-----------------------------------------------------
Interme-
Growth Large Small Large diate Mid
and Cap Cap Cap Fixed Cap
Balanced Income Value Equity Growth Income Equity
-------- ------ ------ ------ ------ -------- ------
Net investment income:
Dividend income........ $ 49 $ 11 $ 28 $ 1 $ 1 $ 60 $ 10
Risk charge............ -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net investment income.... 49 11 28 1 1 60 10
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions.......... -- -- -- -- -- -- --
Unrealized appreciation
(depreciation) on
investments........... (73) 18 (30) 72 60 (60) 48
------ ------ ------ ------ ------ ------ ------
Net realized and
unrealized gain (loss)
on investments.......... (73) 18 (30) 72 60 (60) 48
------ ------ ------ ------ ------ ------ ------
Net increase (decrease)
in net assets resulting
from operations......... (24) 29 (2) 73 61 -- 58
Capital share
transactions:
Transfers of net
variable contract
deposits.............. 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of surrenders
and death benefits.... -- -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges............... -- -- -- -- -- -- --
Transfers between
subaccounts, including
fixed interest
subaccount............ -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net increase in net
assets resulting from
capital share
transactions............ 1,000 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ------ ------
Net increase in net
assets.................. 976 1,029 998 1,073 1,061 1,000 1,058
Net assets at beginning
of period............... -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net assets at end of
period.............. $ 976 $1,029 $ 998 $1,073 $1,061 $1,000 $1,058
====== ====== ====== ====== ====== ====== ======
See accompanying notes.
F-20
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Period from December 1, 1998 (inception) to December 31, 1998
Investors
Mark Series
Fund Berger Institutional Products Trust
------------- -----------------------------------
Growth Small
Global and Company
Money Fixed 100 Income Growth International
Market Income Fund Fund Fund Fund
------ ------ ------ ------ ------- -------------
Net investment income:
Dividend income........... $ -- $ 83 $ 2 $ 7 $ -- $ 15
Risk charge............... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net investment income....... -- 83 2 7 -- 15
Net realized and unrealized
gain (loss) on investments:
Net realized gain (loss)
on investment
transactions............. -- -- -- -- -- --
Unrealized appreciation
(depreciation) on
investments.............. -- (80) 67 86 134 46
------ ------ ------ ------ ------ ------
Net realized and unrealized
gain (loss) on investments. -- (80) 67 86 134 46
------ ------ ------ ------ ------ ------
Net increase (decrease) in
net assets resulting from
operations................. -- 3 69 93 134 61
Capital share transactions:
Transfers of net variable
contract deposits........ 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of surrenders
and death benefits....... -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.................. -- -- -- -- -- --
Transfers between
subaccounts, including
fixed interest
subaccount............... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net increase in net assets
resulting from capital
share transactions......... 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ------
Net increase in net assets.. 1,000 1,003 1,069 1,093 1,134 1,061
Net assets at beginning of
period..................... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net assets at end of
period................. $1,000 $1,003 $1,069 $1,093 $1,134 $1,061
====== ====== ====== ====== ====== ======
See accompanying notes.
F-21
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Period from December 1, 1998 (inception) to December 31, 1998
The Alger
Conseco Series Trust American Fund
----------------------------------------- -------------------
Asset Common Corporate Government Leveraged
Allocation Stock Bond Securities Growth AllCap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- ---------- --------- ---------
Net investment income:
Dividend income....... $ 8 $ 1 $ 5 $ 4 $ -- $ --
Risk charge........... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net investment income... 8 1 5 4 -- --
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... 40 99 (4) (8) 102 138
------ ------ ------ ------ ------ ------
Net realized and
unrealized gain (loss)
on investments......... 40 99 (4) (8) 102 138
------ ------ ------ ------ ------ ------
Net increase (decrease)
in net assets resulting
from operations........ 48 100 1 (4) 102 138
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ------
Net increase in net
assets................. 1,048 1,100 1,001 996 1,102 1,138
Net assets at beginning
of period.............. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net assets at end of
period............. $1,048 $1,100 $1,001 $ 996 $1,102 $1,138
====== ====== ====== ====== ====== ======
See accompanying notes.
F-22
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Period from December 1, 1998 (inception) to December 31, 1998
American Century Variable
The Alger American Fund Portfolios, Inc.
------------------------ -------------------------- Dreyfus
VP Socially
MidCap Small Income Responsible
Growth Capitalization and VP VP Growth
Portfolio Portfolio Growth International Value Fund, Inc.
--------- -------------- ------ ------------- ----- -----------
Net investment income:
Dividend income....... $ -- $ -- $ 5 $ -- $ -- $ 40
Risk charge........... -- -- -- -- -- --
Net investment income... -- -- 5 -- -- 40
------ ------ ------ ------ ----- ------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... 118 114 43 79 (7) 21
------ ------ ------ ------ ----- ------
Net realized and
unrealized gain (loss)
on investments......... 118 114 43 79 (7) 21
------ ------ ------ ------ ----- ------
Net increase (decrease)
in net assets resulting
from operations........ 118 114 48 79 (7) 61
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- --
------ ------ ------ ------ ----- ------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ----- ------
Net increase in net
assets................. 1,118 1,114 1,048 1,079 993 1,061
Net assets at beginning
of period.............. -- -- -- -- -- --
------ ------ ------ ------ ----- ------
Net assets at end of
period............. $1,118 $1,114 $1,048 $1,079 $ 993 $1,061
====== ====== ====== ====== ===== ======
See accompanying notes.
F-23
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Period from December 1, 1998 (inception) to December 31, 1998
Dreyfus Variable
Investment Fund Federated Insurance Series
------------------------- ------------------------------
Dreyfus High-
Stock International Income International
Index Disciplined Value Bond Equity Utility
Fund Stock Fund Portfolio Fund II Fund II Fund II
------- ----------- ------------- ------- ------------- -------
Net investment income:
Dividend income....... $ 4 $ 5 $ 80 $ -- $ -- $ --
Risk charge........... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net investment income... 4 5 80 -- -- --
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... 43 56 (46) (3) 94 32
------ ------ ------ ------ ------ ------
Net realized and
unrealized gain (loss)
on investments......... 43 56 (46) (3) 94 32
------ ------ ------ ------ ------ ------
Net increase (decrease)
in net assets resulting
from operations........ 47 61 34 (3) 94 32
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ------
Net increase in net
assets................. 1,047 1,061 1,034 997 1,094 1,032
Net assets at beginning
of period.............. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Net assets at end of
period............. $1,047 $1,061 $1,034 $ 997 $1,094 $1,032
====== ====== ====== ====== ====== ======
See accompanying notes.
F-24
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Period from December 1, 1998 (inception) to December 31, 1998
Neuberger & Berman
Invesco Variable Lazard Retirement Advisors Management
Investment Funds Series, Inc. Trust
-------------------- --------------------- -------------------
Limited
High- Industrial Retirement Retirement Maturity Strong
Yield Income Equity Small Cap Bond Partners Opportunity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Fund II
--------- ---------- ---------- ---------- --------- --------- -----------
Net investment income:
Dividend income....... $ 104 $ 52 $ 3 $ -- $ -- $ -- $ 2
Risk charge........... -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net investment income... 104 52 3 -- -- -- 2
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... (111) (26) 44 19 (1) 19 41
------ ------ ------ ------ ------ ------ ------
Net realized and
unrealized gain (loss)
on investments......... (111) (26) 44 19 (1) 19 41
------ ------ ------ ------ ------ ------ ------
Net increase (decrease)
in net assets resulting
from operations........ (7) 26 47 19 (1) 19 43
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 1,000 1,000
------ ------ ------ ------ ------ ------ ------
Net increase in net
assets................. 993 1,026 1,047 1,019 999 1,019 1,043
Net assets at beginning
of period.............. -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net assets at end of
period................. $ 993 $1,026 $1,047 $1,019 $ 999 $1,019 $1,043
====== ====== ====== ====== ====== ====== ======
See accompanying notes.
F-25
BMA VARIABLE LIFE ACCOUNT A
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS--(Continued)
Period from December 1, 1998 (inception) to December 31, 1998
Strong
Variable
Insurance
Funds, Inc. Van Eck Worldwide Insurance Trust
----------- ---------------------------------------
Worldwide Worldwide Worldwide
Emerging Hard Real
Growth Worldwide Markets Assets Estate
Fund II Bond Fund Fund Fund Fund Total
----------- --------- --------- --------- --------- -------
Net investment income:
Dividend income....... $ -- $ -- $ -- $ -- $ -- $ 580
Risk charge........... -- -- -- -- -- --
------ ------ ------ ------ ------ -------
Net investment income... -- -- -- -- -- 580
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) on investment
transactions......... -- -- -- -- -- --
Unrealized
appreciation
(depreciation) on
investments.......... 126 11 23 (11) 13 1346
------ ------ ------ ------ ------ -------
Net realized and
unrealized gain
(loss) on
investments.......... 126 11 23 (11) 13 1346
------ ------ ------ ------ ------ -------
Net increase (decrease)
in net assets resulting
from operations........ 126 11 23 (11) 13 1,926
Capital share
transactions:
Transfers of net
variable contract
deposits............. 1,000 1,000 1,000 1,000 1,000 43,000
Transfers of
surrenders and death
benefits............. -- -- -- -- -- --
Transfers of cost of
insurance and policy
charges.............. -- -- -- -- -- --
Transfers between
subaccounts,
including fixed
interest subaccount.. -- -- -- -- -- --
------ ------ ------ ------ ------ -------
Net increase in net
assets resulting from
capital share
transactions........... 1,000 1,000 1,000 1,000 1,000 43,000
------ ------ ------ ------ ------ -------
Net increase in net
assets................. 1,126 1,011 1,023 989 1,013 44,926
Net assets at beginning
of period.............. -- -- -- -- -- --
------ ------ ------ ------ ------ -------
Net assets at end of
period............. $1,126 $1,011 $1,023 $ 989 $1,013 $44,926
====== ====== ====== ====== ====== =======
See accompanying notes.
F-26
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
1. Summary of Significant Accounting Policies
Organization
BMA Variable Life Account A (the Account) is a separate account of Business
Men's Assurance Company of America (BMA) established to fund flexible premium
variable life insurance policies. The Account is registered as a unit
investment trust under the Investment Company Act of 1940, as amended.
Investments
Deposits received by the Account are invested in 43 separate subaccounts,
each of which invests solely in the various funds (mutual funds not otherwise
available to the public) as directed by the owners. Amounts may be invested in
shares of the following portfolios:
Investors Mark Series Fund: Balanced, Growth and Income, Large Cap Value,
Small Cap Equity, Large Cap Growth, Intermediate Fixed Income, Mid Cap
Equity, Money Market and Global Fixed Income.
Berger Institutional Products Trust (Berger IPT): 100 Fund, Growth and
Income Fund, Small Company Growth Fund and International Fund.
Conseco Series Trust: Asset Allocation Portfolio, Common Stock Portfolio,
Corporate Bond Portfolio and Government Securities Portfolio.
The Alger American Fund: Growth Portfolio, Leveraged AllCap Portfolio,
MidCap Growth Portfolio and Small Capitalization Portfolio.
American Century Variable Portfolios, Inc.: VP Income and Growth, VP
International and VP Value.
Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund.
Dreyfus Variable Investment Fund: Disciplined Stock Portfolio and
International Value Portfolio.
Federated Insurance Series: High-Income Bond Fund II, International Equity
Fund II and Utility Fund II.
INVESCO Variable Investment Funds: High Yield Portfolio and Industrial
Income Portfolio.
Lazard Retirement Series, Inc.: Retirement Equity Portfolio and Retirement
Small Cap Portfolio.
Neuberger & Berman Advisors Management Trust: Limited Maturity Bond
Portfolio and Partners Portfolio.
Strong Opportunity Fund II.
Strong Variable Insurance Funds, Inc.: Growth Fund II.
Van Eck Worldwide Insurance Trust: Worldwide Bond Fund, Worldwide Emerging
Markets Fund, Worldwide Hard Assets Fund and Worldwide Real Estate Fund.
Variable Insurance Products Fund (VIP): Fidelity VIP Overseas Portfolio and
Fidelity VIP Growth Portfolio.
Variable Insurance Products Funds II (VIP II): Fidelity VIP II Contrafund
Portfolio.
Management of the Funds
Under the terms of the investment advisory contracts, portfolio investments
of the underlying mutual funds of Investors Mark Series Fund are made by
Investors Mark Series Fund, LLC (IMSF, LLC), which is owned by Jones & Babson,
Inc., a wholly-owned subsidiary of BMA. IMSF, LLC has engaged Standish, Ayer &
Wood,
F-27
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
Inc. to provide subadvisory services for the Intermediate Fixed Income
Portfolio, the Mid Cap Equity Portfolio and the Money Market Portfolio. IMSF,
LLC has engaged Standish International Management Company, L.P. to provide
subadvisory services for the Global Fixed Income Portfolio. IMSF, LLC has
engaged Stein Roe & Farnam, Inc. to provide subadvisory services for the Small
Cap Equity Portfolio and the Large Cap Growth Portfolio. IMSF, LLC has engaged
David L. Babson & Co., Inc. to provide subadvisory services for the Large Cap
Value Portfolio. IMSF, LLC has engaged Lord, Abbett & Co. to provide
subadvisory services for the Growth and Income Portfolio. IMSF, LLC has
engaged Kornitzer Capital Management, Inc. to provide subadvisory services for
the Balanced Portfolio.
Berger Institutional Products Trust is a mutual fund with multiple
portfolios. Berger Associates is the investment advisor to all portfolios
except the Berger/BIAM IPT--International Fund. BBOI Worldwide LLC is the
advisor to the Berger/BIAM IPT--International Fund. BBOI Worldwide LLC has
retained Bank of Ireland Asset Management (U.S.) Limited (BIAM) as subadvisor.
Conseco Series Trust is a mutual fund with multiple portfolios. Conseco
Capital Management, Inc. is the investment advisor to the portfolios.
The Alger American Fund is a mutual fund with multiple portfolios. Fred
Alger Management, Inc. serves as investment advisor.
American Century Variable Portfolios, Inc. is a series of funds managed by
American Century Investment Management, Inc.
The Dreyfus Socially Responsible Growth Fund, Inc. is managed by The
Dreyfus Corporation. Dreyfus has hired NCM Capital Management Group, Inc. to
serve as sub-investment advisor and to provide day-to-day management of the
fund's investments.
The Dreyfus Corporation serves as the Dreyfus Stock Index Fund's manager.
Dreyfus has hired an affiliate, Mellon Equity Associates, to serve as the
fund's index fund manager and to provide day-to-day management of the fund's
investments.
The Dreyfus Variable Investment Fund is a mutual fund with multiple
portfolios. The Dreyfus Corporation serves as the investment advisor.
Federated Insurance Series is a mutual fund with multiple portfolios.
Federated Advisors is the investment advisor.
INVESCO Variable Investment Fund is a mutual fund with multiple portfolios.
INVESCO Funds Group, Inc. is the investment advisor.
Lazard Retirement Series, Inc. is a mutual fund with multiple portfolios.
Lazard Asset Management, a division of Lazard Freres & Co. LLC, is the
investment manager for each portfolio.
Each portfolio of Neuberger & Berman Advisers Management Trust invests in a
corresponding series of Advisors Managers Trust. All series of Advisors
Managers Trust are managed by Neuberger & Berman Management, Inc.
Strong Opportunity Fund II is a mutual fund managed by Strong Capital
Management, Inc.
Strong Variable Insurance Funds, Inc. is a mutual fund with multiple
series. Strong Capital Management, Inc. serves as the investment advisor.
F-28
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
Van Eck Worldwide Insurance Trust is a mutual fund with multiple portfolios
managed by Van Eck Associates Corporation.
Variable Insurance Products Fund and Variable Insurance Products Fund II
are each mutual funds managed by Fidelity Management and Research Company.
Investment Valuation
Investments in mutual fund shares are carried in the statement of net
assets at market value (net asset value of the underlying mutual fund). The
first-in, first-out method is used to determine gains and losses. Security
transactions are accounted for on the trade date, and dividend income from the
funds to the Account is recorded on the ex-dividend date and reinvested upon
receipt. Capital gain distributions from the mutual funds to the Account also
are reinvested upon receipt.
The cost of investments purchased and proceeds from investment securities
sold by each subaccount were as follows:
Period from
December 1,
1998 (inception)
Year ended Year ended to December 31,
December 31, 2000 December 31, 1999 1998
--------------------- -------------------- ----------------
Cost of Proceeds Cost of Proceeds Cost of
Purchases from Sales Purchases from Sales Purchases
---------- ---------- --------- ---------- ----------------
Investors Mark Series
Fund:
Balanced.............. $ 280 $ -- $ 71 $ 13 $1,049
Growth and Income..... 116,087 10,987 32,099 3,564 1,011
Large Cap Value....... 47,580 3,467 49,030 1,549 1,028
Small Cap Equity...... 68,579 5,012 4,833 399 1,000
Large Cap Growth...... 211,038 15,785 167,221 3,137 1,001
Intermediate Fixed
Income............... 61,779 3,138 3,363 534 1,060
Mid Cap Equity........ 94,480 21,450 45,061 1,617 1,010
Money Market.......... 1,440,157 1,567,488 900,334 702,964 1,000
Global Fixed Income... 119 -- 69 -- 1,083
Berger Institutional
Products Trust:
100 Fund.............. 3,624 1,081 3,415 337 1,002
Growth and Income
Fund................. 73,771 12,729 13,257 1,080 1,007
Small Company Growth
Fund................. 27,054 7,043 7,181 165 1,000
International Fund.... 333,557 41,775 23,408 1,838 1,015
Conseco Series Trust:
Asset Allocation
Portfolio............ 15,850 4,029 19,427 2,661 1,008
Common Stock
Portfolio............ 24,068 4,848 26,985 868 1,001
Corporate Bond
Portfolio............ 712 -- 725 24 1,005
Government Securities
Portfolio............ 126 29 76 -- 1,004
The Alger American Fund:
Growth Portfolio...... 164,027 24,076 165,414 11,557 1,000
Leveraged AllCap
Portfolio............ 145,801 17,960 51,728 11,523 1,000
MidCap Growth
Portfolio............ 102,796 4,364 16,859 1,268 1,000
Small Capitalization
Portfolio............ 8,153 1,096 6,694 367 1,000
American Century
Variable Portfolios,
Inc.:
VP Income and Growth.. 272,832 9,770 57,994 5,501 1,005
VP International...... 59,431 12,073 536 35 1,000
VP Value.............. 30,190 2,559 21,759 274 1,000
F-29
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
Period from
December 1,
1998
(inception) to
Year ended Year ended December 31,
December 31, 2000 December 31, 1999 1998
--------------------- --------------------- --------------
Cost of Proceeds Cost of Proceeds Cost of
Purchases from Sales Purchases from Sales Purchases
---------- ---------- ---------- ---------- --------------
Dreyfus Socially
Responsible Growth
Fund, Inc.............. $ 31,436 $ 6,219 $ 22,033 $ 7,277 $ 1,005
Dreyfus Stock Index
Fund................... 312,428 18,750 72,270 7,616 1,004
Dreyfus Variable
Investment Fund:
Disciplined Stock
Portfolio............ 43,652 7,482 33,580 1,777 1,005
International Value
Portfolio............ 642 30 112 -- 1,080
Federated Insurance
Series:
High-Income Bond Fund
II................... 17,196 3,782 18,059 928 1,000
International Equity
Fund II.............. 7,735 232 1,746 35 1,000
Utility Fund II....... 902 792 737 31 1,000
INVESCO Variable
Investment Funds:
High Yield Portfolio.. 5,145 170 4,436 45 1,104
Industrial Income
Portfolio............ 13,027 1,552 6,897 597 1,052
Lazard Retirement
Series, Inc.:
Retirement Equity
Portfolio............ 654 32 39 -- 1,004
Retirement Small Cap
Portfolio............ 158,044 4,274 4,559 313 1,000
Neuberger & Berman
Advisors Management
Trust:
Limited Maturity Bond
Portfolio............ 1,407 720 833 111 1,000
Partners Portfolio.... 15,687 1,593 5,040 484 1,000
Strong Opportunity Fund
II..................... 26,646 16,769 11,508 1,848 1,002
Strong Variable
Insurance Funds, Inc.:
Growth Fund II........ 100,442 13,183 19,958 1,211 1,000
Van Eck Worldwide
Insurance Trust:
Worldwide Bond Fund... 44 -- 56 -- 1,000
Worldwide Emerging
Markets Fund......... 12,322 2,881 4,606 286 1,000
Worldwide Hard Assets
Fund................. 5,133 1,325 4,964 455 1,000
Worldwide Real Estate
Fund................. 136 -- 21 -- 1,000
Variable Insurance
Products Fund (VIP):
Fidelity VIP Overseas
Portfolio............ 35,176 131 -- -- --
Fidelity VIP Growth
Portfolio............ 4,087 8 -- -- --
Variable Insurance
Products Fund II (VIP
II):
Fidelity VIP II
Contrafund Portfolio. 3,338 5 -- -- --
---------- ---------- ---------- -------- -------
Total............... $4,097,370 $1,850,689 $1,828,993 $774,289 $43,545
========== ========== ========== ======== =======
There were no sales of investments during the period from December 1, 1998
(inception) to December 31, 1998.
Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the
operations of BMA, which is taxed as a life insurance company under the
Internal Revenue Code. Under current law, no federal income taxes are payable
with respect to the Account's net investment income or net realized gain on
investments. Accordingly, no charge for income tax is currently being made to
the Account. If such taxes are incurred by BMA in the future, a charge to the
Account may be assessed.
Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could
differ from those estimates.
F-30
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Variable Life Contract Charges
The Account pays BMA certain amounts relating to the distribution and
administration of the policies funded by the Account and as reimbursement for
certain mortality and other risks assumed by BMA.
Premium Charges: BMA deducts a premium charge from each premium payment of
5.5% of all premiums in the first through the 10th policy year and 4.0% of all
premiums in the 11th and later policy years.
Risk Charge: BMA deducts a risk charge each month of .80%, on an annual
basis, of the accumulation value in the separate account for the first through
10th policy year and .40%, on an annual basis, of the accumulation value in
the separate account for the 11th policy year and thereafter.
Policy Charges: The Account deducts a policy charge of $25 per month in the
first policy year and $5 per month thereafter.
Cost of Insurance: A deduction for cost of insurance and cost of any riders
also is made monthly. This charge will depend on the specified amount, the
accumulation value and the sex, age and rate class of the primary insured.
Surrender Charge: A surrender charge will be imposed in the event of a
partial or full surrender in excess of 10% of the unloaned accumulation value.
The surrender charge will depend on the sex, age and rate class of the primary
insured. In addition, a fee of $25 will be assessed for partial surrender in
excess of 10% of the unloaned accumulation values.
Charges retained by BMA from the proceeds of sales of variable life
contracts aggregated $17,243 and $4,105 during the years ended December 31,
2000 and 1999, respectively and were not significant during 1998.
3. Summary of Unit Transactions
Transactions in units of each subaccount were as follows:
Net
Units Units Increase
Sold Redeemed (Decrease)
------- -------- ----------
Year ended December 31, 2000
Investors Mark Series Fund:
Balanced.......................................... 37 19 18
Growth and Income................................. 9,929 996 8,933
Large Cap Value................................... 5,269 726 4,543
Small Cap Equity.................................. 3,013 310 2,703
Large Cap Growth.................................. 13,560 1,464 12,096
Intermediate Fixed Income......................... 5,850 406 5,444
Mid Cap Equity.................................... 6,208 1,008 5,200
Money Market...................................... 128,236 140,727 (12,491)
Global Fixed Income............................... -- -- --
Berger Institutional Products Trust:
100 Fund.......................................... 230 86 144
Growth and Income Fund............................ 3,737 578 3,159
Small Company Growth Fund......................... 980 137 843
International Fund................................ 24,905 1,899 23,006
F-31
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
Net
Units Units Increase
Sold Redeemed (Decrease)
------ -------- ----------
Conseco Series Trust:
Asset Allocation Portfolio......................... 812 285 527
Common Stock Portfolio............................. 966 305 661
Corporate Bond Portfolio........................... 76 20 56
Government Securities Portfolio.................... 14 10 4
The Alger American Fund:
Growth Portfolio................................... 9,676 2,643 7,033
Leveraged AllCap Portfolio......................... 7,741 1,319 6,422
MidCap Growth Portfolio............................ 6,193 635 5,558
Small Capitalization Portfolio..................... 376 115 261
American Century Variable Portfolios, Inc.:
VP Income and Growth............................... 24,152 2,044 22,108
VP International................................... 2,732 159 2,573
VP Value........................................... 3,238 487 2,751
Dreyfus Socially Responsible Growth Fund, Inc........ 2,604 791 1,813
Dreyfus Stock Index Fund............................. 25,645 2,474 23,171
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio........................ 3,594 817 2,777
International Value Portfolio...................... 40 6 34
Federated Insurance Series:
High-Income Bond Fund II........................... 1,422 387 1,035
International Equity Fund II....................... 409 57 352
Utility Fund II.................................... 95 93 2
INVESCO Variable Investment Funds:
High Yield Portfolio............................... 518 42 476
Industrial Income Portfolio........................ 1,103 255 848
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio........................ 45 6 39
Retirement Small Cap Portfolio..................... 13,841 613 13,228
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio.................... 127 71 56
Partners Portfolio................................. 1,436 251 1,185
Strong Opportunity Fund II........................... 835 304 531
Strong Variable Insurance Funds, Inc.:
Growth Fund II..................................... 4,134 767 3,367
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund................................ -- -- --
Worldwide Emerging Markets Fund.................... 590 102 488
Worldwide Hard Assets Fund......................... 386 110 276
Worldwide Real Estate Fund......................... 21 10 11
Variable Insurance Products Fund (VIP):
Fidelity VIP Overseas Portfolio.................... 3,779 68 3,711
Fidelity VIP Growth Portfolio...................... 493 26 467
Variable Insurance Products Fund II (VIP II):
Fidelity VIP II Contrafund Portfolio............... 365 9 356
F-32
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
Net
Units Units Increase
Sold Redeemed (Decrease)
------ -------- ----------
Year ended December 31, 1999
Investors Mark Series Fund:
Balanced.......................................... -- -- --
Growth and Income................................. 2,577 223 2,354
Large Cap Value................................... 4,274 191 4,083
Small Cap Equity.................................. 394 43 351
Large Cap Growth.................................. 14,020 319 13,701
Intermediate Fixed Income......................... 313 56 257
Mid Cap Equity.................................... 4,408 269 4,139
Money Market...................................... 95,438 76,529 18,909
Global Fixed Income............................... -- -- --
Berger Institutional Products Trust:
100 Fund.......................................... 288 33 255
Growth and Income Fund............................ 1,081 155 926
Small Company Growth Fund......................... 613 51 562
International Fund................................ 2,221 302 1,919
Conseco Series Trust:
Asset Allocation Portfolio........................ 1,436 223 1,213
Common Stock Portfolio............................ 1,704 196 1,508
Corporate Bond Portfolio.......................... 71 10 61
Government Securities Portfolio................... -- -- --
The Alger American Fund:
Growth Portfolio.................................. 13,167 875 12,292
Leveraged AllCap Portfolio........................ 3,087 499 2,588
MidCap Growth Portfolio........................... 1,476 240 1,236
Small Capitalization Portfolio.................... 498 42 456
American Century Variable Portfolios, Inc.:
VP Income and Growth.............................. 5,060 476 4,584
VP International.................................. 58 18 40
VP Value.......................................... 2,122 69 2,053
Dreyfus Socially Responsible Growth Fund, Inc. 1,428 243 1,185
Dreyfus Stock Index Fund............................ 5,859 458 5,401
Dreyfus Variable Investment Fund:
Disciplined Stock Portfolio....................... 2,994 201 2,793
International Value Portfolio..................... -- -- --
Federated Insurance Series:
High-Income Bond Fund II.......................... 1,800 92 1,708
International Equity Fund II...................... 151 11 140
Utility Fund II................................... 86 26 60
INVESCO Variable Investment Funds:
High Yield Portfolio.............................. 390 5 385
Industrial Income Portfolio....................... 624 38 586
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio....................... -- -- --
Retirement Small Cap Portfolio.................... 428 37 391
F-33
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
Net
Units Units Increase
Sold Redeemed (Decrease)
----- -------- ----------
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio................... 77 11 66
Partners Portfolio................................ 492 65 427
Strong Opportunity Fund II.......................... 910 104 806
Strong Variable Insurance Funds, Inc.:
Growth Fund II.................................... 1,308 165 1,143
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund............................... -- -- --
Worldwide Emerging Markets Fund................... 356 21 335
Worldwide Hard Assets Fund........................ 423 40 383
Worldwide Real Estate Fund........................ -- -- --
Period from December 1, 1998 (inception) to December
31, 1998
Investors Mark Series Fund:
Balanced.......................................... 100
Growth and Income................................. 100
Large Cap Value................................... 100
Small Cap Equity.................................. 100
Large Cap Growth.................................. 99
Intermediate Fixed Income......................... 100
Mid Cap Equity.................................... 99
Money Market...................................... 100
Global Fixed Income............................... 100
Berger Institutional Products Trust:
100 Fund.......................................... 99
Growth and Income Fund............................ 98
Small Company Growth Fund......................... 100
International Fund................................ 103
Conseco Series Trust:
Asset Allocation Portfolio........................ 99
Common Stock Portfolio............................ 98
Corporate Bond Portfolio.......................... 100
Government Securities Portfolio................... 100
The Alger American Fund:
Growth Portfolio.................................. 98
Leveraged AllCap Portfolio........................ 98
MidCap Growth Portfolio........................... 99
Small Capitalization Portfolio.................... 99
American Century Variable Portfolios, Inc.:
VP Income and Growth.............................. 99
VP International.................................. 102
VP Value.......................................... 100
F-34
BMA VARIABLE LIFE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS--(Continued)
Units Sold
----------
Period from December 1, 1998 (inception) to December 31, 1998
(continued)
Dreyfus Socially Responsible Growth Fund, Inc...................... 98
Dreyfus Stock Index Fund........................................... 99
Dreyfus Variable Investment Fund:
Disciplined Stock Fund........................................... 99
International Value Portfolio.................................... 101
Federated Insurance Series:
High-Income Bond Fund II......................................... 100
International Equity Fund II..................................... 101
Utility Fund II.................................................. 100
Invesco Variable Investment Funds:
High-Yield Portfolio............................................. 100
Industrial Income Portfolio...................................... 99
Lazard Retirement Series, Inc.:
Retirement Equity Portfolio...................................... 100
Retirement Small Cap Portfolio................................... 100
Neuberger & Berman Advisors Management Trust:
Limited Maturity Bond Portfolio.................................. 100
Partners Portfolio............................................... 100
Strong Opportunity Fund II......................................... 100
Strong Variable Insurance Funds, Inc.:
Growth Fund II................................................... 100
Van Eck Worldwide Insurance Trust:
Worldwide Bond Fund.............................................. 100
Worldwide Emerging Markets Fund.................................. 102
Worldwide Hard Assets Fund....................................... 101
Worldwide Real Estate Fund....................................... 101
F-35
Business Men's Assurance Company of America
(A Member of the Generali Group of Companies)
Consolidated Financial Statements
Years ended December 31, 2000, 1999 and 1998
with Reports of Independent Accountants
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
Consolidated Financial Statements
Years ended December 31, 2000, 1999 and 1998
Contents
Reports of Independent Accountants.......................................... F-1
Audited Consolidated Financial Statements
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Comprehensive Income (Loss)...................... F-5
Consolidated Statements of Stockholder's Equity............................. F-6
Consolidated Statements of Cash Flows....................................... F-7
Notes to Consolidated Financial Statements.................................. F-9
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholder
Business Men's Assurance Company of America
In our opinion, the accompanying consolidated balance sheet as of December
31, 2000 and the related consolidated statement of operations, comprehensive
income (loss), stockholder's equity and cash flows present fairly, in all
material respects, the financial position of Business Men's Assurance Company
of America and its subsidiaries (an ultimate subsidiary of Assicurazioni
Generali, S.p.A.) (the Company) at December 31, 2000, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion. The financial
statements of the Company as of December 31, 1999 and for the two years then
ended were audited by other independent accountants whose report dated
February 3, 2000 expressed an unqualified opinion on those statements.
/s/ PricewaterhouseCoopers LLP
Kansas City, Missouri
February 26, 2001
F-1
Report of Independent Auditors
The Board of Directors
Business Men's Assurance Company of America
We have audited the accompanying consolidated balance sheet of Business
Men's Assurance Company of America (an ultimate subsidiary of Assicurazioni
Generali, S.p.A.) (the Company) as of December 31, 1999, and the related
consolidated statements of operations, comprehensive income (loss),
stockholder's equity and cash flows for each of the two years in the period
ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Business Men's Assurance Company of America at December 31, 1999, and the
consolidated results of its operations and its cash flows for each of the two
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Kansas City, Missouri
February 3, 2000
F-2
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------
2000 1999
---------- ----------
(In Thousands)
Assets
Investments (Note 3):
Securities available-for-sale, at fair value:
Fixed maturities (amortized cost--$1,150,842,000 in
2000 and $1,284,919,000 in 1999).................. $1,117,456 $1,231,419
Equity securities (cost--$89,821,000 in 2000 and
$45,102,000 in 1999).............................. 80,924 43,204
Mortgage loans on real estate, net of allowance for
credit losses of $10,385,000 in 2000 and $10,385,000
in 1999............................................. 825,207 875,882
Policy loans......................................... 56,958 57,935
Short-term investments............................... 10,697 7,476
Other (Note 3)....................................... 18,423 32,444
---------- ----------
Total investments................................ 2,109,665 2,248,360
Cash................................................... 80,621 97,678
Accrued investment income.............................. 20,811 20,054
Premium and other receivables.......................... 31,384 20,271
Deferred policy acquisition costs...................... 136,050 134,343
Property, equipment and software (Note 6).............. 12,046 14,798
Reinsurance recoverables:
Paid benefits........................................ 5,090 2,441
Benefits and claim reserves ceded.................... 208,624 111,515
Other assets........................................... 12,613 13,099
Assets held in separate accounts....................... 402,652 415,077
---------- ----------
Total assets..................................... $3,019,556 $3,077,636
========== ==========
Liabilities and stockholder's equity
Future policy benefits:
Life and annuity (Notes 4 and 10).................... $1,332,530 $1,294,708
Health............................................... 116,176 89,539
Contract account balances (Note 4)..................... 502,364 681,958
Policy and contract claims............................. 72,493 72,163
Unearned revenue reserve............................... 7,796 10,056
Other policyholder funds............................... 10,924 14,155
Current income taxes payable (Note 7).................. 840 486
Deferred income taxes (Note 7)......................... 17,032 7,936
Payable to affiliate (Note 10)......................... 242 627
Other liabilities (Note 12)............................ 79,953 80,831
Liabilities related to separate accounts (Note 4)...... 402,652 415,077
---------- ----------
Total liabilities................................ 2,543,002 2,667,536
Commitments and contingencies (Note 5)
Stockholder's equity (Notes 2 and 11):
Preferred stock of $1 par value per share; authorized
3,000,000 shares, none issued and outstanding....... -- --
Common stock of $1 par value per share; authorized
24,000,000 shares, 12,000,000 shares issued and
outstanding......................................... 12,000 12,000
Paid-in capital...................................... 40,106 40,106
Accumulated other comprehensive loss................. (29,039) (41,667)
Retained earnings.................................... 453,487 399,661
---------- ----------
Total stockholder's equity....................... 476,554 410,100
---------- ----------
Total liabilities and stockholder's equity....... $3,019,556 $3,077,636
========== ==========
See accompanying notes.
F-3
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------
(In Thousands)
Revenues:
Premiums (Note 9):
Life and annuity.............................. $154,680 $131,667 $115,863
Health........................................ 4,878 4,863 10,828
Other insurance considerations.................. 31,197 33,788 37,599
Net investment income (Note 3).................. 188,211 185,521 176,085
Realized gains, net (Note 3).................... 2,111 8,458 10,556
Other income.................................... 34,935 37,242 43,886
-------- -------- --------
Total revenues................................ 416,012 401,539 394,817
Benefits and expenses:
Life and annuity benefits....................... 115,424 99,280 107,033
Health benefits................................. 827 938 3,021
Increase in policy liabilities including
interest credited to account balances.......... 118,251 115,785 103,298
Commissions..................................... 62,790 50,568 43,949
(Increase) decrease in deferred policy
acquisition costs.............................. (9,144) 330 11,271
Taxes, licenses and fees........................ 2,765 2,417 2,579
Other operating costs and expenses.............. 65,549 63,019 71,991
-------- -------- --------
Total benefits and expenses................... 356,462 332,337 343,142
-------- -------- --------
Income from continuing operations before income
tax expense...................................... 59,550 69,202 51,675
Income tax expense (Note 7)....................... 20,868 23,119 15,876
-------- -------- --------
Income from continuing operations................. 38,682 46,083 35,799
Discontinued operations (Note 13):
Income (loss) from discontinued operations, net
of income tax expense of $146,000 in 2000,
benefit of $994,000 in 1999 and expense of
$929,000 in 1998............................... 273 (2,012) 2,527
Gain on disposal of discontinued segment, net of
income tax expense of $8,008,000 in 2000....... 14,871 -- --
-------- -------- --------
Income (loss) from discontinued operations........ 15,144 (2,012) 2,527
-------- -------- --------
Net income........................................ $ 53,826 $ 44,071 $ 38,326
======== ======== ========
See accompanying notes.
F-4
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Year ended December 31,
--------------------------
2000 1999 1998
------- -------- -------
(In Thousands)
Net income......................................... $53,826 $ 44,071 $38,326
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during
period.......................................... 16,627 (76,822) 2,597
Less realized gains (losses) included in net
income.......................................... (2,042) 12,473 6,760
------- -------- -------
Net unrealized gains (losses)...................... 18,669 (89,295) (4,163)
Effect on deferred policy acquisition costs........ (7,436) 22,362 (1,483)
Effect on unearned revenue reserve................. 502 (1,370) 55
Related deferred income taxes...................... 893 15,906 1,957
------- -------- -------
Other comprehensive income (loss).................. 12,628 (52,397) (3,634)
------- -------- -------
Comprehensive income (loss)........................ $66,454 $ (8,326) $34,692
======= ======== =======
See accompanying notes.
F-5
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Year ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------
(In Thousands)
Common stock:
Balance at beginning and end of year............ $ 12,000 $ 12,000 $ 12,000
Paid-in capital:
Balance at beginning and end of year............ 40,106 40,106 40,106
Accumulated other comprehensive income (loss):
Balance at beginning of year.................... (41,667) 10,730 14,364
Net change in net unrealized gains (losses)... 12,628 (52,397) (3,634)
-------- -------- --------
Balance at end of year........................ (29,039) (41,667) 10,730
Retained earnings:
Balance at beginning of year.................... 399,661 355,590 317,264
Net income.................................... 53,826 44,071 38,326
-------- -------- --------
Balance at end of year.......................... 453,487 399,661 355,590
-------- -------- --------
Total stockholder's equity.................. $476,554 $410,100 $418,426
======== ======== ========
See accompanying notes.
F-6
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
(In Thousands)
Operating activities
Net income.................................... $ 53,826 $ 44,071 $ 38,326
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income tax expense................. 9,990 13,192 363
Realized gains, net......................... (2,111) (8,458) (10,556)
Gain on sale of discontinued segment........ (22,879) -- --
Premium amortization (discount accretion),
net........................................ 386 193 (1,618)
Policy loans lapsed in lieu of surrender
benefits................................... 2,724 2,858 3,740
Depreciation................................ 2,234 2,469 2,524
Amortization................................ 782 782 782
Changes in assets and liabilities:
(Increase) decrease in accrued investment
income................................... (757) (1,976) 442
Increase in receivables and reinsurance
recoverables (net of $305,000 realized
gain in 2000)............................ (110,871) (20,834) (24,876)
Policy acquisition costs deferred......... (34,057) (25,451) (22,484)
Policy acquisition costs amortized........ 24,913 25,781 33,755
Increase (decrease) in income taxes
payable.................................. 354 (1,814) 142
Increase in accrued policy benefits, claim
reserves, unearned revenues and
policyholder funds....................... 17,505 41,215 19,189
Interest credited to policyholder
accounts................................. 77,544 80,499 77,358
(Increase) decrease in other assets and
other liabilities, net................... 8,234 (18,030) 2,344
Other, net.................................. (794) 391 19
--------- --------- ---------
Net cash provided by operating activities..... 27,023 134,888 119,450
Investing activities
Purchases of investments:
Securities available-for-sale:
Fixed maturities.......................... (142,345) (558,982) (603,142)
Equity securities......................... (128,280) (48,088) (12,969)
Mortgage and policy loans................... (93,098) (172,625) (310,127)
Other....................................... (5,921) (19,572) (41,118)
Sales, calls or maturities of investments:
Maturities and calls of securities
available-for-sale:
Fixed maturities.......................... 120,727 225,728 305,013
Sales of securities available-for-sale:
Fixed maturities.......................... 149,579 312,069 360,296
Equity securities......................... 92,595 44,158 22,632
Mortgage and policy loans................... 142,411 169,498 277,325
See accompanying notes
F-7
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Year ended December 31,
-------------------------------
2000 1999 1998
--------- --------- ---------
(In Thousands)
Investing activities (continued)
Purchase of property, equipment and software. $ (552) $ (1,331) $ (1,805)
Net (increase) decrease in short-term
investments................................. (3,221) 3,303 (3,623)
Proceeds from sale of discontinued segment... 24,879 -- --
Distributions from unconsolidated related
parties..................................... 18,282 30,793 1,466
--------- --------- ---------
Net cash provided by (used in) investing
activities.................................. 175,056 (15,049) (6,052)
Financing activities
Deposits from interest sensitive and
investment-type contracts................... 151,713 290,119 245,620
Withdrawals from interest sensitive and
investment-type contracts (366,554) (347,673) (375,459)
Net proceeds from reverse repurchase
borrowing................................... 5,000 143,200 30,189
Retirement of reverse repurchase borrowing... (33,400) (144,989) (20,863)
Net proceeds from other borrowing............ 115,390 6,615 --
Retirement of other borrowing................ (91,285) -- --
--------- --------- ---------
Net cash used in financing activities........ (219,136) (52,728) (120,513)
--------- --------- ---------
Net increase (decrease) in cash.............. (17,057) 67,111 (7,115)
Cash at beginning of year.................... 97,678 30,567 37,682
--------- --------- ---------
Cash at end of year.......................... $ 80,621 $ 97,678 $ 30,567
========= ========= =========
Supplemental disclosures of cash flow
information
For purposes of the statements of cash flows,
Business Men's Assurance Company of America
considers only cash on hand and demand
deposits to be cash equivalents
Cash paid during the year for:
Income taxes............................... $ 18,679 $ 10,747 $ 16,300
========= ========= =========
Interest paid on reverse repurchase and
other borrowings.......................... $ 2,527 $ 1,884 $ 299
========= ========= =========
See accompanying notes.
F-8
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Organization
Business Men's Assurance Company of America (the Company) is a Missouri-
domiciled life insurance company licensed to sell insurance products in 49
states and the District of Columbia. The Company offers a diversified
portfolio of individual and group insurance and investment products both
directly, primarily distributed through general agencies, and through
reinsurance assumptions. Assicurazioni Generali S.p.A. (Generali), an Italian
insurer, is the ultimate parent company.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and all majority-owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
Investments
The Company's entire investment portfolio is designated as available-for-
sale. Changes in fair values of available-for-sale securities, after
adjustment of deferred policy acquisition costs (DPAC), unearned revenue
reserve (URR) and related deferred income taxes, are reported as unrealized
gains or losses directly in accumulated other comprehensive income (loss). The
DPAC and URR offsets to the unrealized gains or losses represents valuation
adjustments or reinstatements of DPAC and URR that would have been required as
a charge or credit to operations had such unrealized amounts been realized.
The amortized cost of fixed maturity investments classified as available-
for-sale is adjusted for amortization of premiums and accretion of discounts.
That amortization or accretion is included in net investment income.
Mortgage loans and mortgage-backed securities are carried at unpaid
balances adjusted for accrual of discount and allowances for other than
temporary decline in value.
Policy loans are carried at unpaid balances.
Realized gains and losses on sales of investments and declines in value
considered to be other than temporary are recognized in net income on the
specific identification basis.
Impairment of Loans
The Financial Accounting Standards Board's (FASB) 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," require that an impaired mortgage
loan's fair value be measured based on the present value of future cash flows
discounted at the loan's effective interest rate, at the loan's observable
market price or at the fair value of the collateral if the loan is collateral
dependent. If the
F-9
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
fair value of a mortgage loan is less than the recorded investment in the
loan, the difference is recorded as an allowance for mortgage loan losses. The
change in the allowance for mortgage loan losses is reported with realized
gains or losses on investments. Interest income on impaired loans is
recognized on a cash basis.
Deferred Policy Acquisition Costs
Certain commissions, expenses of the policy issue and underwriting
departments and other variable policy issue expenses have been deferred. For
limited payment and other traditional life insurance policies, these deferred
acquisition costs are being amortized over a period of not more than 25 years
in proportion to the ratio of the expected annual premium revenue to the
expected total premium revenue. Expected premium revenue was estimated with
the same assumptions used for computing liabilities for future policy benefits
for these policies.
For universal life-type insurance and investment-type products, the
deferred policy acquisition costs are amortized over a period of not more than
25 years in relation to the present value of estimated gross profits arising
from estimates of mortality, interest, expense and surrender experience. The
estimates of expected gross profits are evaluated regularly and are revised if
actual experience or other evidence indicates that revision is appropriate.
Upon revision, total amortization recorded to date is adjusted by a charge or
credit to current earnings.
Deferred policy acquisition costs are evaluated to determine that the
unamortized portion of such costs does not exceed recoverable amounts after
considering anticipated investment income.
Recognition of Insurance Revenue and Related Expenses
For limited payment and other traditional life insurance policies, premium
income is reported as earned when due, with past-due premiums being reserved.
Profits are recognized over the life of these contracts by associating
benefits and expenses with insurance in force for limited payment policies and
with earned premiums for other traditional life policies. This association is
accomplished by a provision for liability for future policy benefits and the
amortization of policy acquisition costs. Accident and health premium revenue
is recognized on a pro rata basis over the terms of the policies.
For universal life and investment-type policies, contract charges for
mortality, surrender and expense, other than front-end expense charges, are
reported as other insurance considerations revenue when charged to
policyholders' accounts. Expenses consist primarily of benefit payments in
excess of policyholder account values and interest credited to policyholder
accounts. Profits are recognized over the life of universal life-type
contracts through the amortization of policy acquisition costs and deferred
front-end expense charges with estimated gross profits from mortality,
interest, surrender and expense.
Policy Liabilities and Contract Values
The liability for future policy benefits for limited payment and other
traditional life insurance contracts has been computed primarily by a net
level premium reserve method based on estimates of future investment yield,
mortality and withdrawals made at the time gross premiums were calculated.
Assumptions used in computing future policy benefits are as follows: interest
rates range from 3.25% to 8.50%, depending on the year of issue; withdrawal
rates for individual life policies issued in 1966 and after are based on
Company experience, and policies issued prior to 1966 are based on industry
tables; and mortality rates are based on mortality tables that consider
Company experience. The liability for future policy benefits is graded to
reserves stipulated by the policy over a period of 20 to 25 years or the end
of the premium paying period, if less.
For universal life and investment-type contracts, the account value before
deduction of any surrender charges is held as the policy liability. An
additional liability is established for deferred front-end expense charges
F-10
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
on universal life-type policies. These expense charges are recognized in
income as insurance considerations using the same assumptions as are used to
amortize deferred policy acquisition costs.
Claims and benefits payable for reported disability income claims have been
computed as the present value of expected future benefit payments based on
estimates of future investment yields and claim termination rates. The net
amount of benefits payable included in the future policy benefit reserves and
policy and contract claims, less the amount of reinsurance recoverables for
December 31, 2000 and 1999 was $6,532,000 and $32,791,000, respectively.
Interest rates used in the calculation of future investment yields vary based
on the year the claim was incurred and range from 3% to 7.25%. Claim
termination rates are based on industry tables.
Other accident and health claims and benefits payable for reported claims
and incurred but not reported claims are estimated using prior experience. The
methods of calculating such estimates and establishing the related liabilities
are periodically reviewed and updated. Any adjustments needed as a result of
periodic reviews are reflected in current operations.
Federal Income Taxes
Deferred federal income taxes have been provided in the consolidated
financial statements to recognize temporary differences between the financial
reporting and tax bases of assets and liabilities measured using enacted tax
rates and laws (see Note 7). Temporary differences are principally related to
deferred policy acquisition costs, the provision for future policy benefits,
accrual of discounts on investments, accrued expenses, accelerated
depreciation and unrealized investment gains and losses.
Separate Accounts
These accounts arise from four lines of business--variable annuities,
variable universal life, variable 401(k) and MBIA insured guaranteed
investment contracts (GICs). The separate account assets are legally
segregated and are not subject to the claims which may arise from any other
business of the Company.
The assets and liabilities of the variable lines of business are reported
at fair value since the underlying investment risks are assumed by the
policyowners. Investment income and gains or losses arising from the variable
line of business accrue directly to the policyowners and are, therefore, not
included in investment earnings in the accompanying consolidated statements of
operations. Revenues to the Company from variable products consist primarily
of contract maintenance charges and administration fees. Separate account
assets and liabilities for the variable lines of business totaled $13,751,000
on December 31, 2000 and $6,297,000 on December 31, 1999.
The assets of the MBIA GIC line of business are maintained at an amount
equal to the related liabilities. These assets related to the MBIA GIC line of
business include securities available-for-sale reported at fair value and
mortgage loans carried at unpaid balances. Changes in fair values of
available-for-sale securities, net of deferred income taxes, are reported as
unrealized gains or losses directly in accumulated other comprehensive income
(loss).
The liabilities are reported at the original deposit amount plus accrued
interest guaranteed to the contractholders. Investment income and gains or
losses arising from MBIA GIC investments are included in investment income in
the accompanying consolidated statements of operations. The guaranteed
interest payable is included in the increase in policy liabilities in the
accompanying consolidated statements of operations. Separate account assets
and liabilities for the MBIA GIC line of business totaled $388,901,000 on
December 31, 2000 and $408,780,000 on December 31, 1999.
F-11
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property, Equipment and Software
Property, equipment and software and the home office building are generally
valued at cost, including development costs, less allowances for depreciation
and other than temporary declines in value. Property, equipment and software
are being depreciated over the estimated useful lives of the assets,
principally on a straight-line basis. Depreciation rates on these assets are
set forth in Note 6.
Intangible Assets
At December 31, 2000, goodwill of $9,976,000 (1999--$10,759,000), net of
accumulated amortization of $5,672,000 (1999--$4,889,000) resulting from the
acquisition of a subsidiary, is included in other assets. Goodwill is being
amortized over a period of 20 years on a straight-line basis, and amortization
amounted to $782,000 for the years ended December 31, 2000, 1999 and 1998.
Reinsurance
Premiums and expenses include amounts related to reinsurance assumed and
are net of amounts ceded. Reinsurance recoverables and prepaid reinsurance
premiums are reported as assets and are recognized in a manner consistent with
the liabilities related to the underlying reinsurance contracts.
Fair Values of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheets, for which it is practicable
to estimate that value. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instruments. SFAS No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company. The following represents the carrying amount
and fair value of significant assets and liabilities at December 31, 2000 and
1999:
December 31, 2000, December 31, 1999,
--------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
(In Thousands)
Fixed maturities (Note 3).......... $1,117,456 $1,117,456 $1,231,419 $1,231,419
Equity securities (Note 3)......... 80,924 80,924 43,204 43,204
Mortgage loans on real estate...... 825,207 855,833 875,882 852,238
Policy loans....................... 56,958 53,133 57,935 53,844
Short-term investments............. 10,697 10,697 7,476 7,476
Cash............................... 80,621 80,621 97,678 97,678
Reinsurance recoverables:
Paid benefits.................... 5,090 5,090 2,441 2,441
Benefits and claim reserves
ceded........................... 208,624 208,624 111,515 111,515
Assets held in separate accounts... 402,652 402,819 415,077 406,474
Investment-type insurance contracts
(Note 4).......................... 1,426,764 1,386,449 1,603,965 1,559,623
F-12
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheets for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturity securities are
based on quoted market prices, where available. For fixed maturity
securities not actively traded, fair values are estimated using values
obtained from independent pricing services or, in the case of private
placements, by discounting expected future cash flows using a current
market rate applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on quoted
market prices.
Off-balance-sheet instruments: The fair value for outstanding loan
commitments approximates the amount committed, as all loan commitments
were made within the last 60 days of the year.
Mortgage loans on real estate and policy loans: The fair value for
mortgage loans on real estate and policy loans is estimated using
discounted cash flow analyses, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Loans with similar characteristics are aggregated for purposes
of the calculations. The carrying amount of accrued interest
approximates its fair value.
Reinsurance recoverables: The carrying values of reinsurance
recoverables approximate their fair values.
Liabilities for flexible and single premium deferred annuities: The
cash surrender value of flexible and single premium deferred annuities
approximates their fair value.
Liabilities for guaranteed investment contracts: The fair value for the
Company's liabilities under guaranteed investment contracts is
estimated using discounted cash flow analyses, using interest rates
currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued.
Financial Instruments with Off-Balance-Sheet Risk
During 1999 and 1998, the Company was a party to various financial
transactions to reduce its exposure to fluctuations in interest rates. The
Company has entered into interest rate swap contracts for the purpose of
converting either the variable interest rate characteristics of certain
investments to fixed rates or from fixed rates to variable rates. The purpose
of these swaps is to better match the invested assets of the Company with the
related insurance liabilities (guaranteed investment contracts) that the
investments are supporting. The net interest effect of such swap transactions
is reported as an adjustment of interest income as incurred. The notional
amount of these contracts was $40,000,000 at December 31, 1999 and 1998. There
were no such contracts at December 31, 2000.
Postretirement Benefits
The projected future cost of providing postretirement benefits, such as
health care and life insurance, is recognized as an expense as employees
render service. See Note 8 for further disclosures with respect to
postretirement benefits other than pensions.
Comprehensive Income (Loss)
Unrealized gains and losses on our available-for-sale securities are
included in other comprehensive income (loss) in stockholder's equity. Other
comprehensive income (loss) excludes net investment gains (losses) included in
net income which merely represent transfers from unrealized to realized gains
and losses. These amounts, which have been measured through the beginning of
the year, are net of income taxes and adjustments to deferred policy
acquisition costs, value of insurance in force acquired and unearned revenue
reserve.
F-13
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Reclassifications
Certain amounts for 1999 and 1998 have been reclassified to conform to the
current year presentation.
Statutory Accounting Practices
In 1998, the NAIC adopted codified statutory accounting principles
(Codification) effective January 1, 2001. Codification provides guidance for
areas where statutory accounting has been silent and changes current statutory
accounting in some areas.
During the upcoming year, the Missouri Department of Insurance will seek to
have Missouri laws and rules amended to closely mirror Codification. The
effect of adoption on the Company's statutory surplus is expected to increase
surplus by approximately $7 million (unaudited), primarily as a result of the
recording of a deferred tax asset and a reduction of admitted pension plan
intangible assets.
2. Dividend Limitations
Missouri has legislation that requires prior reporting of all dividends to
the Director of Insurance. The Company, as a regulated life insurance company,
may pay a dividend from unassigned surplus without the approval of the
Missouri Department of Insurance if the aggregate of all dividends paid during
the preceding 12-month period does not exceed the greater of 10% of statutory
stockholder's equity at the end of the preceding calendar year or the
statutory net gain from operations for the preceding calendar year. A portion
of the statutory equity of the Company that is available for dividends would
be subject to additional federal income taxes should distribution be made from
"policyholders' surplus" (see Note 7).
As of December 31, 2000 and 1999, the Company's statutory stockholder's
equity was $284,102,000 and $250,774,000, respectively. Statutory net gain
from operations before realized capital gains and net income for each of the
three years in the period ended December 31, 2000 were as follows:
Year ended December 31,
-----------------------
2000 1999 1998
------- ------- -------
(In Thousands)
Net gain from operations
before realized capital
gains.................. $30,883 $29,369 $36,305
Net income.............. 36,583 32,915 44,692
3. Investment Operations
The Company's investments in securities available-for-sale are summarized
as follows:
December 31, 2000
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
Fixed maturities:
Bonds:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies..... $ 55,805 $ 4 $ (1,251) $ 54,558
Obligations of states and
political subdivisions........ 6,697 333 -- 7,030
Debt securities issued by
foreign governments........... 2,837 18 (21) 2,834
Corporate securities........... 470,606 3,551 (12,826) 461,331
Mortgage-backed securities..... 596,050 2,025 (25,103) 572,972
Redeemable preferred stocks.... 18,847 99 (215) 18,731
---------- ------ -------- ----------
Total fixed maturities............. 1,150,842 6,030 (39,416) 1,117,456
Equity securities.................. 89,821 2,749 (11,646) 80,924
---------- ------ -------- ----------
$1,240,663 $8,779 $(51,062) $1,198,380
========== ====== ======== ==========
F-14
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1999
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
Fixed maturities:
Bonds:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies..... $ 74,125 $ -- $ (4,591) $ 69,534
Obligations of states and
political subdivisions........ 8,165 -- (121) 8,044
Debt securities issued by
foreign governments........... 3,560 29 (133) 3,456
Corporate securities........... 417,899 593 (14,941) 403,551
Mortgage-backed securities..... 761,504 356 (33,191) 728,669
Redeemable preferred stocks.... 19,666 -- (1,501) 18,165
---------- ------ -------- ----------
Total fixed securities............. 1,284,919 978 (54,478) 1,231,419
Equity securities.................. 45,102 2,221 (4,119) 43,204
---------- ------ -------- ----------
$1,330,021 $3,199 $(58,597) $1,274,623
========== ====== ======== ==========
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 2000, by contractual maturity, are as follows. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Maturities of mortgage-backed securities have not been set forth in the
following table, as such securities are not due at a single maturity date:
Amortized
Cost Fair Value
---------- ----------
(In Thousands)
Due in one year or less............................ $ 41,859 $ 41,594
Due after one year through five years.............. 292,811 290,771
Due after five years through 10 years.............. 119,677 117,377
Due after 10 years................................. 100,445 94,742
---------- ----------
554,792 544,484
Mortgage-backed securities......................... 596,050 572,972
---------- ----------
Total fixed maturity securities.................... $1,150,842 $1,117,456
========== ==========
F-15
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The majority of the Company's mortgage loan portfolio is secured by real
estate. The following table presents information about the location of the
real estate that secures mortgage loans in the Company's portfolio:
Carrying Amount
as of December
31,
-----------------
2000 1999
-------- --------
(In Thousands)
State:
Missouri.............................................. $ 73,368 $ 74,922
Arizona............................................... 68,528 66,812
California............................................ 59,762 67,674
Texas................................................. 55,622 62,166
Florida............................................... 53,859 50,246
Utah.................................................. 47,388 48,450
Oklahoma.............................................. 41,866 39,410
Washington............................................ 31,192 33,674
Nevada................................................ 30,795 31,888
Other................................................. 362,827 400,640
-------- --------
$825,207 $875,882
======== ========
The Company had no investment in impaired mortgage loans and related
allowance for credit losses and no interest income on impaired loans for the
years ended December 31, 2000, 1999 and 1998. Additionally, the Company had no
investment in impaired loans at December 31, 2000 and 1999. The average
recorded investment in impaired loans was $413,000 at December 31, 1998.
Bonds, mortgage loans, preferred stocks and common stocks approximating
$3,340,000 and $3,840,000 were on deposit with regulatory authorities at
December 31, 2000 and 1999, respectively.
Set forth below is a summary of consolidated net investment income for the
years ended December 31:
Year ended December 31,
--------------------------
2000 1999 1998
-------- -------- --------
(In Thousands)
Fixed maturities:
Bonds............................................. $ 98,186 $102,990 $ 94,975
Redeemable preferred stocks....................... 1,548 1,917 1,603
Equity securities:
Common stocks..................................... 3,309 957 702
Nonredeemable preferred stocks.................... 30 43 237
Mortgage loans on real estate....................... 77,436 78,462 75,768
Real estate......................................... -- 11 18
Policy loans........................................ 3,547 3,486 3,667
Short-term investments.............................. 7,549 3,115 4,334
Other............................................... 2,701 2,898 2,685
-------- -------- --------
194,306 193,879 183,989
Less:
Net investment income from discontinued
operations....................................... 3,497 5,681 5,443
Investment expenses............................... 2,598 2,677 2,461
-------- -------- --------
Net investment income from continuing operations.... $188,211 $185,521 $176,085
======== ======== ========
F-16
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Realized gains (losses) on securities disposed of during 2000, 1999 and
1998 consisted of the following:
Year ended December 31,
-------------------------
2000 1999 1998
------- ------- -------
(In Thousands)
Fixed maturity securities:
Gross realized gains.............................. $ 866 $ 6,615 $ 5,149
Gross realized losses............................. (6,995) (1,636) (1,420)
Equity securities:
Gross realized gains.............................. 10,200 6,299 7,395
Gross realized losses............................. (1,177) (744) (1,636)
Other investments................................... (783) (2,076) 1,068
------- ------- -------
Net realized gains.................................. $ 2,111 $ 8,458 $10,556
======= ======= =======
Sales of investments in securities in 2000, 1999 and 1998, excluding
maturities and calls, resulted in gross realized gains of $10,524,000,
$12,338,000 and $10,980,000 and gross realized losses of $3,398,000,
$2,318,000 and $2,304,500, respectively.
There were no non-income producing investments at December 31, 2000 and
1999.
The Company began investing in the Cypress Tree Investment Fund LLC during
1998. At December 31, 2000 and 1999, the Company has invested $5 million and
$18 million, respectively, in the partnership, which primarily invests in
senior secured loans. The Company's portion of the investment is approximately
10% and 16% of the total fund value at December 31, 2000 and 1999,
respectively, and has been recorded under the guidelines of equity accounting.
This investment is classified in other investments on the balance sheets, with
unrealized gains and losses being reflected in accumulated other comprehensive
income (loss).
4. Investment Contracts
The carrying amounts and fair values of the Company's liabilities for
investment-type insurance contracts (included with future policy benefits,
contract account balances and separate accounts in the balance sheets) at
December 31 are as follows:
December 31,
-------------------------------------------
2000 1999
--------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
(In Thousands)
Guaranteed investment contracts.... $ 465,261 $ 459,605 $ 645,619 $ 629,240
Flexible and single premium
deferred annuities................ 558,851 538,155 543,269 523,519
Separate accounts.................. 402,652 388,689 415,077 406,864
---------- ---------- ---------- ----------
Total investment-type insurance
contracts......................... $1,426,764 $1,386,449 $1,603,965 $1,559,623
========== ========== ========== ==========
Fair values of the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into consideration in the
Company's overall management of interest rate risk which minimizes exposure to
changing interest rates through the matching of investment maturities with
amounts due under insurance contracts.
F-17
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Commitments and Contingencies
The Company leases equipment and certain office facilities from others
under operating leases through April 2004. Certain other equipment and
facilities are rented monthly. Rental expense amounted to $629,000, $781,000
and $1,364,000 for the years ended December 31, 2000, 1999 and 1998,
respectively. As of December 31, 2000, the minimum future payments under
noncancelable operating leases for each of the next five years are as follows
(in thousands):
Year ending December 31
-----------------------
2001................................................................ $355
2002................................................................ 197
2003................................................................ 81
2004................................................................ 20
2005................................................................ --
----
Total............................................................... $653
====
Total outstanding commitments to fund mortgage loans were $0 and
$11,632,500 at December 31, 2000 and 1999, respectively.
A number of insurance companies are under regulatory supervision that
results in assessments by state guaranty funds to cover losses to
policyholders of insolvent or rehabilitated insurance companies. Those
mandatory assessments may be partially recovered through a reduction in future
premium taxes in certain states. At December 31, 2000 and 1999, the Company
accrued $310,000 and $350,000, respectively, for guaranty fund assessments.
Expenses incurred for guaranty fund assessments were $314,000, $333,000 and
$417,000 in 2000, 1999 and 1998, respectively.
The Company and its subsidiaries are parties to certain claims and legal
actions arising during the ordinary course of business. In the opinion of
management, these matters will not have a materially adverse effect on the
operations or financial position of the Company.
6. Property, Equipment and Software
A summary of property, equipment and software and their respective
depreciation rates is as follows:
December 31,
Rate of ------------------
Depreciation 2000 1999
------------ -------- --------
(In Thousands)
Home office building, including land with a
cost of $425,000............................. 2% $ 23,218 $ 23,218
Other real estate not held-for-sale or rental. 4% 208 208
Less accumulated depreciation................. (14,246) (13,667)
-------- --------
9,180 9,759
Equipment and software........................ 5%-33% 18,182 20,785
Less accumulated depreciation................. (15,316) (15,746)
-------- --------
2,866 5,039
-------- --------
Total property, equipment and software........ $ 12,046 $ 14,798
======== ========
F-18
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Federal Income Taxes
The Company and its subsidiaries file a consolidated federal tax return.
Under a written agreement approved by the Board of Directors, the Company
collects from, or refunds to, the subsidiaries the amount of taxes or benefits
determined as if the Company and the subsidiaries filed separate returns.
The components of the provision for income taxes and the temporary
differences generating deferred income taxes are as follows:
Year ended December 31,
-------------------------
2000 1999 1998
------- ------- -------
(In Thousands)
Current............................................. $19,033 $ 8,933 $16,442
Deferred:
Deferred policy acquisition costs................. 3,099 (204) (3,385)
Future policy benefits............................ 10,032 9,501 6,620
Accrual of discount............................... 298 438 560
Tax on realized gains greater than book........... (2,384) (780) (1,610)
Recognition of tax effect previously deferred on
sale of affiliate stock in prior period.......... -- -- (1,311)
Employee benefit plans............................ 198 3,002 (2,014)
Prior year taxes.................................. (537) 1,698 1,018
Other, net........................................ (717) (463) 485
------- ------- -------
9,989 13,192 363
------- ------- -------
Total income tax expense............................ 29,022 22,125 16,805
Less income tax expense (benefit) from discontinued
operations......................................... 8,154 (994) 929
------- ------- -------
Total income tax expense from continuing operations. $20,868 $23,119 $15,876
======= ======= =======
At December 31, 2000 and 1999, the Company recorded a valuation allowance
against deferred tax assets resulting from cumulative unrealized losses on
available-for-sale securities for $3,000,000 and $8,000,000 respectively. The
Company did not record any valuation allowances against deferred tax assets at
December 31, 1998.
Total income taxes vary from the amounts computed by applying the federal
income tax rate of 35% to income before income tax expense for the following
reasons:
Year ended December 31,
-------------------------
2000 1999 1998
------- ------- -------
(In Thousands)
Application of statutory rate to income before taxes
on income.......................................... $28,997 $23,168 $19,296
Tax-exempt municipal bond interest and dividends
received deductions................................ (288) (171) (287)
Recognition of tax effect previously deferred on
sale of affiliate stock in
a prior period..................................... -- -- (1,311)
Other............................................... 313 (872) (893)
------- ------- -------
$29,022 $22,125 $16,805
======= ======= =======
F-19
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The significant components comprising the Company's deferred income tax
assets and liabilities as of December 31, 2000 and 1999 are as follows:
December 31,
---------------
2000 1999
------- -------
(In Thousands)
Deferred income tax liabilities:
Deferred policy acquisition costs............................ $33,593 $26,142
Other........................................................ 14,353 9,754
------- -------
Total deferred income tax liability............................ 47,946 35,896
Deferred income tax assets:
Reserve for future policy benefits........................... 6,866 6,142
Unrealized investment losses, net of valuation allowance of
$3,000,000 in 2000 and $8,000,000 in 1999................... 11,021 10,128
Other........................................................ 13,027 11,690
------- -------
Total deferred income tax assets............................... 30,914 27,960
------- -------
Net deferred income tax liability.............................. $17,032 $ 7,936
======= =======
Certain amounts that were not currently taxed under pre-1984 tax law were
credited to a "policyholders' surplus" account. This account is frozen under
the 1984 Tax Act and is taxable only when distributed to stockholders at which
time it is taxed at regular corporate rates. The policyholders' surplus of the
Company approximates $87,000,000. The Company has no present plan for
distributing the amount in policyholders' surplus. Consequently, no provision
has been made in the consolidated financial statements for the taxes thereon.
However, if such taxes were assessed, the amount of taxes payable would be
approximately $30,000,000.
Earnings taxed on a current basis are accumulated in a "shareholder's
surplus" account and can be distributed to the shareholder without tax. The
shareholder's surplus amounted to approximately $330,000,000 at December 31,
2000.
8. Benefit Plans
Trusteed Employee Retirement Plan
The Company has a trusteed employee retirement plan for the benefit of
salaried employees who have reached age 21 and who have completed one year of
service. The plan, which is administered by an Employees' Retirement Committee
consisting of at least three officers appointed by the Board of Directors of
the Company, provides for normal retirement at age 65 or earlier retirement
based on minimum age and service requirements. Retirement may be deferred to
age 70. Upon retirement, the retirees receive monthly benefit payments from
the plan's BMA group pension investment contract. During 2000, approximately
$4.9 million of annual benefits were covered by a group pension investment
contract issued by the Company. Assets of the plan, primarily equities, are
held by three trustees appointed by the Board of Directors.
F-20
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth the plan's funded status at December 31:
December 31,
------------------
2000 1999
-------- --------
(In Thousands)
Change in benefit obligations:
Benefit obligation at beginning of year............ $ 64,396 $ 66,944
Service cost....................................... 1,542 1,835
Interest cost...................................... 4,879 4,556
Curtailment Adjustment............................. (1,163) --
Settlement Adjustment.............................. (149) --
Actuarial (gains) losses........................... 1,257 (5,626)
Benefits paid...................................... (4,879) (3,313)
-------- --------
Benefit obligation at end of year.................... 65,883 64,396
Change in plan assets:
Fair value of plan assets at beginning of year..... 110,399 95,175
Actual return on plan assets....................... (804) 18,537
Benefits paid...................................... (4,879) (3,313)
-------- --------
Fair value of plan assets at end of year............. 104,716 110,399
-------- --------
Funded status of the plan............................ 38,833 46,003
Unrecognized net actuarial gain...................... (27,963) (41,634)
Unrecognized prior service cost...................... 57 650
Unrecognized net asset at January 1, 1987 being
recognized over 15 years............................ (292) (589)
-------- --------
Prepaid pension cost................................. $ 10,635 $ 4,430
======== ========
The additional minimum pension liability noted above results from the
pension plan for the Company's subsidiary, BMA Financial Services, Inc. Net
pension cost included the following components:
Year ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------
(In Thousands)
Service cost--benefits earned during the period... $ 1,542 $ 1,835 $ 1,873
Interest cost on projected benefit obligation..... 4,879 4,556 4,557
Actual return on plan assets...................... 804 (18,537) (12,988)
Net amortization and deferral..................... (11,997) 9,529 5,005
-------- -------- --------
Net pension benefit............................... $ (4,772) $ (2,617) $ (1,553)
======== ======== ========
In determining the actuarial present value of the projected benefit
obligation, the weighted-average discount rate utilized was 7.5% for 2000,
7.75% for 1999 and 7% for 1998. The rate of increase in future compensation
levels used for 2000 was 7.25% for employees at the younger attained ages
grading to 3.25% for older employees, the rate was 7.5% grading to 3.5% for
1999 and 7% grading to 3% for 1998. The expected long-term rate of return on
assets was 8% in 2000, 1999 and 1998.
As part of the 2000 net periodic retirement plan cost, curtailment and
settlement losses were recognized. These losses resulted from the disposal of
the Company's workplace benefits division (Note 13).
F-21
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Supplemental Retirement Programs and Deferred Compensation Plan
The Company has supplemental retirement programs for senior executive
officers and for group sales managers and group sales persons who are
participants in the trusteed retirement plan. These programs are not qualified
under Section 401(a) of the Internal Revenue Code and are not prefunded.
Benefits are paid directly by the Company as they become due. Benefits are
equal to an amount computed on the same basis as under the trusteed retirement
plan (except incentive compensation is included and limitations under Sections
401 and 415 of the Internal Revenue Code are not considered) less the actual
benefit payable under the trusteed plan.
The Company also has a deferred compensation plan for the Company's
managers that provides retirement benefits based on renewal premium income at
retirement resulting from the sales unit developed by the manager. This
program is not qualified under Section 401(a) of the Internal Revenue Code and
is not prefunded. As of January 1, 1987, the plan was frozen with respect to
new entrants. Currently, there are two managers who have not retired and will
be entitled to future benefits under the program. The actuarial present value
of benefits shown below includes these active managers, as well as all
managers who have retired and are entitled to benefits under the program.
The following table sets forth the combined supplemental retirement
programs' and deferred compensation plan's funded status at:
December 31,
------------------
2000 1999
-------- --------
(In Thousands)
Change in benefit obligations:
Benefit obligation at beginning of year............ $ 13,273 $ 12,512
Service cost....................................... 271 292
Interest cost...................................... 975 844
Amendments......................................... 1,174 --
Curtailment Adjustments............................ (539) --
Settlement Adjustments............................. (65) --
Actuarial losses................................... 1,807 563
Benefits paid...................................... (1,280) (938)
-------- --------
Benefit obligation at end of year.................... 15,616 13,273
Change in plan assets:
Fair value of plan assets at beginning and end of
year.............................................. -- --
-------- --------
Funded status of the plan (underfunded).............. (15,616) (13,273)
Unrecognized net actuarial loss...................... 4,270 3,460
Unrecognized prior service cost...................... 1,341 429
Unrecognized net asset at January 1, 1987 being
recognized over 15 years............................ 182 260
Adjustment to recognized minimum liability........... (4,590) (2,212)
-------- --------
Accrued pension cost................................. (14,413) (11,336)
Accrued benefit liability............................ 12,890 10,648
Intangible asset..................................... 1,523 688
-------- --------
Net amount recognized................................ $ -- $ --
======== ========
F-22
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net pension cost included the following components:
Year ended December
31,
--------------------
2000 1999 1998
------ ------ ------
(In Thousands)
Service cost--benefits earned during the period........... $ 271 $ 292 $ 235
Interest cost on projected benefit obligation............. 975 844 813
Net amortization and deferral............................. 654 626 541
------ ------ ------
Net pension cost.......................................... $1,900 $1,762 $1,589
====== ====== ======
In determining the actuarial present value of the projected benefit
obligation, the weighted-average discount rate utilized was 7.5% for 2000,
7.75% for 1999 and 7% for 1998. The rate of increase in future compensation
levels used was 5.0% for 2000, 5.25% for 1999 and 4.5% for 1998.
As part of the 2000 net periodic retirement plan cost, curtailment and
settlement losses were recognized. These losses resulted from the disposal of
the Company's workplace benefits division (Note 13).
Savings and Investment Plans
The Company has savings and investment plans qualifying under Section
401(k) of the Internal Revenue Code. Employees and sales representatives are
eligible to participate after one year of service. Participant contributions
are invested by the trustees for the plans at the direction of the participant
in any one or more of four investment funds. The Company makes matching
contributions in varying amounts. The Company's matching contributions
amounted to $1,008,000 in 2000, $1,086,000 in 1999 and $1,153,000 in 1998.
Participants are fully vested in the Company match after five years of
service.
The Company has a field force retirement plan for the benefit of agents and
managers. The plan is a defined contribution plan with contributions made
entirely by the Company. Each agent or manager under a standard contract with
one year of service with the Company is eligible to participate. The Company
makes an annual contribution for each participant equal to 3% of eligible
earnings up to the Social Security wage base and 6% of eligible earnings which
are in excess of the Social Security wage base. Each participant is fully
vested in his retirement account after five years of service. Assets of the
plan are deposited in a retirement trust fund and maintained by the plan
trustees who are appointed by the Company. The Company incurred no costs
related to this plan in 2000 and 1999 and $33,000 in 1998.
Defined Benefit Health Care Plan
In addition to the Company's other benefit plans, the Company sponsors an
unfunded defined benefit health care plan that provides postretirement medical
benefits to full-time employees for whom the sum of the employee's age and
years of service equals or exceeds 75, with a minimum age requirement of 50
and at least 10 years of service. The plan is contributory, with retiree
contributions adjusted annually, and contains other cost-sharing features such
as deductibles and coinsurance. The accounting for the plan anticipates a
future cost-sharing arrangement with retirees that is consistent with the
Company's past practices.
F-23
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table presents the plan's funded status:
December 31,
----------------
2000 1999
------- -------
(In Thousands)
Change in benefit obligations:
Projected benefit obligation at beginning of year.... $10,655 $11,401
Service cost......................................... 88 112
Interest cost........................................ 760 760
Actuarial (gains) losses............................. 138 (73)
Participant contributions............................ 442 548
Curtailment adjustment............................... (269) --
Benefits paid........................................ (1,884) (2,093)
------- -------
Projected benefit obligation at end of year............ 9,930 10,655
Change in plan assets:
Fair value of plan assets at beginning and end of
year................................................ -- --
------- -------
Funded status of the plan (underfunded)................ (9,930) (10,655)
Unrecognized net actuarial loss........................ 324 455
Unrecognized prior service cost........................ 1,051 1,921
Unrecognized transition obligation..................... 2,397 3,814
------- -------
Accrued pension cost................................... (6,158) (4,465)
Accrued benefit liability.............................. 6,158 4,465
------- -------
Net amount recognized.................................. $ -- $ --
======= =======
Net periodic postretirement benefit cost includes the following components:
Year ended December
31,
--------------------
2000 1999 1998
------ ------ ------
(In Thousands)
Service cost............................................... $ 88 $ 112 $ 108
Interest cost.............................................. 760 760 777
Amortization of transition obligation over 20 years........ 235 293 293
Amortization of past service costs......................... 228 294 295
------ ------ ------
Net periodic benefit cost.................................. 1,311 1,459 1,473
Plan curtailment adjustment................................ 1,824 -- 770
------ ------ ------
Final periodic postretirement benefit cost................. $3,135 $1,459 $2,243
====== ====== ======
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) varies per year, equal
to the maximum contractual increase of the Company's contribution. Because the
Company's future contributions are contractually limited as discussed above,
an increase in the health care cost trend rate has a minimal impact on
expected benefit payments.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75% at December 31, 2000 and 1999 and
7.00% at December 31, 1998.
As part of the 2000 and 1998 net periodic postretirement benefit cost, a
curtailment loss was recognized. The 2000 curtailment resulted from the
disposal of the Company's workplace benefits division (Note 13) and the 1998
adjustment resulted from the closing of certain field locations in March 1998.
F-24
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Reinsurance
The Company actively solicits reinsurance from other companies. The Company
also cedes portions of the insurance it writes as described in the next
paragraph. The effect of reinsurance on premiums earned from continuing
operations was as follows:
Year ended December 31,
------------------------------
2000 1999 1998
--------- --------- --------
(In Thousands)
Direct.......................................... $ 145,141 $ 144,224 $118,315
Assumed......................................... 201,273 174,794 152,844
Ceded........................................... (133,302) (78,023) (73,466)
--------- --------- --------
Total net premium............................... 213,112 240,995 197,693
Less net premium from discontinued operations... (53,554) (104,465) (71,002)
--------- --------- --------
Total net premium from continuing operations.... $ 159,558 $ 136,530 $126,691
========= ========= ========
The Company reinsures with other companies portions of the insurance it
writes, thereby limiting its exposure on larger risks. Normal retentions
without reinsurance are $750,000 on an individual life policy, $1,000,000 on
individual life insurance assumed and $200,000 on an individual life insured
under a single group life policy. As of December 31, 2000, the Company had
ceded to other life insurance companies individual life insurance in force of
approximately $32.7 billion.
Benefits and reserves ceded to other insurers amounted to $199,466,000,
$73,536,000 and $54,670,000 during the years ended December 31, 2000, 1999 and
1998, respectively. At December 31, 2000 and 1999, policy reserves ceded to
other insurers were $177,444,000 and $89,362,000, respectively. Claim reserves
ceded amounted to $31,179,000 and $22,153,000 at December 31, 2000 and 1999,
respectively. The Company remains contingently liable on all reinsurance ceded
by it to others. This contingent liability would become an actual liability in
the event an assuming reinsurer should fail to perform its obligations under
its reinsurance agreement with the Company.
Gross assumed premiums from the Company's five largest customers amounted
to $107,945,000, $102,153,000 and $89,915,000 for the years ended December 31,
2000, 1999 and 1998, respectively.
10. Related-Party Transactions
The Company reimburses Generali's U.S. branch for certain expenses incurred
on the Company's behalf. These expenses were not material in 2000, 1999 or
1998. The Company retrocedes a portion of the life insurance it assumes to
Generali. In accordance with this agreement, the Company ceded premiums of
$463,000, $575,000 and $756,000 during 2000, 1999 and 1998, respectively. The
Company ceded claims of $2,000 during 2000, $121,000 during 1999 and $240,000
during 1998.
In 1995, the Company entered into a modified coinsurance agreement with
Generali to cede 50% of certain single-premium deferred annuity contracts
issued. In accordance with this agreement, $6 million, $9 million and $8
million in account balances were ceded to Generali in 2000, 1999 and 1998,
respectively, and Generali loaned such amounts back to the Company. Account
balances ceded and loaned back at December 31, 2000 and 1999 were $158 million
and $184 million, respectively. The recoverable amount from Generali was
offset against the loan. The net expense related to this agreement was
$883,000, $2,034,000 and $1,564,000 for the years ended December 31, 2000,
1999 and 1998, respectively. The Company held payables to Generali of $243,000
and $627,000 at December 31, 2000 and 1999, respectively.
F-25
BUSINESS MEN'S ASSURANCE COMPANY OF AMERICA
(A Member of the Generali Group of Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Stockholder's Equity
The changes in net unrealized gains (losses) that have been included in the
balance sheet caption "accumulated other comprehensive income (loss)" in
stockholder's equity are summarized as follows:
December 31,
------------------
2000 1999
-------- --------
(In Thousands)
Net unrealized gains (losses) on securities:
Fixed maturities................................... $(33,374) $(53,500)
Equity securities.................................. (8,896) (1,898)
Securities held in separate account................ (3,711) (9,315)
Other.............................................. 85 148
-------- --------
Net unrealized gains (losses)........................ (45,896) (64,565)
Adjustment to deferred policy acquisition costs...... 6,219 13,655
Adjustment to unearned revenue reserve............... (383) (885)
Deferred income taxes................................ 11,021 10,128
-------- --------
Net unrealized gains (losses)........................ $(29,039) $(41,667)
======== ========
12. Borrowed Money
The Company has an outstanding liability for borrowed money in the amount
of $30,720,000 as of December 31, 2000, which is included in other
liabilities. This consists of nine items all through the Federal Home Loan
Bank due during the following periods:
Interest
Year Due Amount Range
-------- ----------- -----------
2001.............................................. $11,540,000 6.33%-6.70%
2002.............................................. 5,690,000 6.36%-6.74%
2003.............................................. 8,625,000 6.88%-7.01%
2004.............................................. 4,865,000 7.20%
-----------
$30,720,000
Pledged collateral for this debt consists of GNMA and FNMA securities with
a face amount of $70,669,000 and a market value of $70,322,000 on December 31,
2000. The Company has the ability to borrow up to $80 million from the Federal
Home Loan Bank. The Company's intent is to take advantage of investment
opportunities by matching borrowing maturities to asset maturities that have a
favorable interest rate spread.
13. Discontinued Operations
In October of 1999, the Company adopted a plan to dispose of its workplace
benefit (group) insurance line of business. Accordingly, the group line of
business was considered a discontinued operation during the year ended 1999
and the consolidated statement of operations for 2000, 1999 and 1998
separately reported the operating results of the discontinued operations, net
of related income taxes. Revenues for this line of business amounted to
$57,662,000 $110,409,000 and $76,682,000 for the years ended December 31,
2000, 1999 and 1998, respectively.
The Company reached an agreement to sell the group line of business in
January 2000 and closed the sale effective June 30, 2000. The Company realized
a gain on the disposal of this line of business, net of income taxes of
$14,871,000. The Company has deferred an additional $2,000,000 of gain that is
attributable to the estimated profit on inforce business that is 100% ceded to
the purchaser.
F-26
APPENDIX A
ILLUSTRATION OF POLICY VALUES
In order to show You how the Policy works, We created some hypothetical
examples. We chose a male and female both age 55, a male and female both age 65
and a male and female both age 75. Our hypothetical insureds are in good health,
do not smoke and qualify for preferred non-tobacco rates. The initial and
Planned Premiums are shown in the upper portion of each illustration. The Death
Proceeds, Accumulation Vales and Cash Surrender Values would be lower if either
Insured was a standard non-tobacco, tobacco or special Rate Class since the cost
of the insurance charges would increase.
There are three illustrations - all of which are based on the above. We also
assumed that the underlying Investment Option had gross rates of return of 0%,
6%, 12%. This means that the underlying Investment Option would earn these rates
of return before the deduction of the operating expenses (including the
management fee). When these costs are taken into account, the net annual
investment return rates (net of an average of approximately .90% for these
charges) are approximately - .90%, 5.10%, and 11.10%.
It is important to be aware that the illustrations assume a level rate of return
for all years. If the actual rate of return moves up and down over the years
instead of remaining level, this may make a big difference in the long-term
investment results of Your Policy. In order to properly show You how the Policy
actually works, We calculated values for the Accumulation Value, Cash Surrender
Value and the Death Proceeds. The Death Proceeds are the Death Benefit minus any
outstanding loans and loan interest accrued.
We used the charges We described in the Expenses Section of the prospectus.
These charges are: (1) Premium Charge; (2) Policy Charge; (3) Per $1,000 of
Specified Amount Charge; and (4) Risk Charge. We also deducted for the cost of
the insurance based on both the current charges and the guaranteed charges. The
values also assume that each Investment Option will incur expenses annually
which are assumed to be approximately .90% of the average net assets of the
Investment Option. This is the average of the fees and expenses of the
Investment Options in 2000. The expenses of .90% reflect the voluntary waiver of
certain advisory fees and/or the reimbursement of operating expenses for certain
Investment Options (as noted under "Expenses - Investment Option Expenses" in
Part I of this prospectus). If the advisory fees had not been waived and/or if
expenses had not been reimbursed, the average expenses would have been
approximately 1.29%. The investment advisers currently anticipate that the
current waiver and/or reimbursement arrangements will continue through at least
May 1, 2002 to the extent necessary to maintain competitive total annual
portfolio expense levels as described under "Expenses - Investment Option
Expenses." However, certain advisers have the right to terminate waivers and/or
reimbursements at any time at their sole discretion. If the waiver and/or
reimbursement arrangements were not in effect, the Death Proceeds, Accumulation
Values and the Cash Surrender Values shown in the illustrations below would be
lower. The illustrations assume no loans were taken.
There is also a column labeled "Premiums Accumulated at 5% Interest Per Year."
This shows how the Premium grows if it was invested at 5% per year.
We will furnish You, upon request, a comparable personalized illustration
reflecting each proposed insured's Age, Rate Class, Specified Amount, the
Planned Premiums, and reflecting both the current cost of insurance and the
guaranteed cost of insurance.
BMA
Clarity Survivorship Variable Universal Life
Male Age 55 Preferred Non-Tobacco
Female Age 55 Preferred Non-Tobacco
Initial Specified Amount: $500,000
Planned Premium: $4,339.92
Assuming Guaranteed Charges
Death Benefit Option: Level
Death Proceeds Accumulation Value Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of Annual Investment Return of
End of at 5%
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net)
1 4,557 500,000 500,000 500,000 3,006 3,214 3,422 0 0 0
2 9,342 500,000 500,000 500,000 6,674 7,300 7,952 2,334 2,960 3,612
3 14,366 500,000 500,000 500,000 10,207 11,486 12,868 5,868 7,146 8,528
4 19,641 500,000 500,000 500,000 13,595 15,762 18,195 9,689 11,856 14,289
5 25,180 500,000 500,000 500,000 16,822 20,114 23,957 13,350 16,642 20,485
6 30,996 500,000 500,000 500,000 19,871 24,525 30,179 16,833 21,487 27,141
7 37,102 500,000 500,000 500,000 22,716 28,970 36,883 20,112 26,366 34,279
8 43,514 500,000 500,000 500,000 25,326 33,416 44,082 23,156 31,246 41,912
9 50,247 500,000 500,000 500,000 27,658 37,816 51,785 25,922 36,080 50,049
10 57,316 500,000 500,000 500,000 29,663 42,120 59,999 28,361 40,818 58,697
11 64,739 500,000 500,000 500,000 31,461 46,448 68,920 30,376 45,363 67,835
12 72,533 500,000 500,000 500,000 32,820 50,564 78,383 31,952 49,696 77,515
13 80,717 500,000 500,000 500,000 33,683 54,398 88,400 33,032 53,747 87,749
14 89,309 500,000 500,000 500,000 33,979 57,869 98,981 33,545 57,435 98,547
15 98,332 500,000 500,000 500,000 33,616 60,872 110,124 33,399 60,655 109,907
16 107,805 500,000 500,000 500,000 32,639 63,583 122,414 32,639 63,583 122,414
17 117,752 500,000 500,000 500,000 30,700 65,525 135,340 30,700 65,525 135,340
18 128,197 500,000 500,000 500,000 27,567 66,446 148,854 27,567 66,446 148,854
19 139,164 500,000 500,000 500,000 22,955 66,035 162,898 22,955 66,035 162,898
20 150,679 500,000 500,000 500,000 16,537 63,930 177,417 16,537 63,930 177,417
BMA
Clarity Survivorship Variable Universal Life
Male Age 55 Preferred Non-Tobacco
Female Age 55 Preferred Non-Tobacco
Initial Specified Amount: $500,000
Planned Premium: $4,339.92
Assuming Current Charges
Death Benefit Option: Level
Death Proceeds Accumulation Value Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of Annual Investment Return of
End of at 5%
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net)
1 4,557 500,000 500,000 500,000 3,019 3,228 3,436 0 0 0
2 9,342 500,000 500,000 500,000 6,763 7,394 8,049 2,424 3,054 3,709
3 14,366 500,000 500,000 500,000 10,410 11,702 13,097 6,071 7,362 8,757
4 19,641 500,000 500,000 500,000 13,955 16,152 18,617 10,049 12,247 14,711
5 25,180 500,000 500,000 500,000 17,392 20,743 24,650 13,920 17,271 21,178
6 30,996 500,000 500,000 500,000 20,714 25,470 31,239 17,676 22,432 28,201
7 37,102 500,000 500,000 500,000 23,912 30,330 38,431 21,308 27,726 35,827
8 43,514 500,000 500,000 500,000 26,976 35,317 46,278 24,806 33,147 44,108
9 50,247 500,000 500,000 500,000 29,898 40,425 54,835 28,162 38,689 53,099
10 57,316 500,000 500,000 500,000 32,665 45,647 64,166 31,363 44,345 62,864
11 64,739 500,000 500,000 500,000 35,435 51,153 74,527 34,350 50,068 73,442
12 72,533 500,000 500,000 500,000 38,025 56,764 85,828 37,157 55,896 84,960
13 80,717 500,000 500,000 500,000 40,423 62,473 98,157 39,772 61,822 97,506
14 89,309 500,000 500,000 500,000 42,616 68,271 111,614 42,182 67,837 111,180
15 98,332 500,000 500,000 500,000 44,590 74,147 126,310 44,373 73,930 126,093
16 107,805 500,000 500,000 500,000 46,555 80,480 143,060 46,555 80,480 143,060
17 117,752 500,000 500,000 500,000 48,269 86,912 161,473 48,269 86,912 161,473
18 128,197 500,000 500,000 500,000 49,701 93,424 181,730 49,701 93,424 181,730
19 139,164 500,000 500,000 500,000 50,831 100,006 204,043 50,831 100,006 204,043
20 150,679 500,000 500,000 500,000 51,631 106,640 228,655 51,631 106,640 228,655
BMA
Clarity Survivorship Variable Universal Life
Male Age 65 Preferred Non-Tobacco
Female Age 65 Preferred Non-Tobacco
Initial Specified Amount: $500,000
Planned Premium: $7,737.12
Assuming Guaranteed Charges
Death Benefit Option: Level
Death Proceeds Accumulation Value Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of Annual Investment Return of
End of at 5%
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net)
1 8,124 500,000 500,000 500,000 5,948 6,338 6,728 0 0 0
2 16,654 500,000 500,000 500,000 12,211 13,375 14,586 4,474 5,638 6,849
3 25,611 500,000 500,000 500,000 17,937 20,269 22,793 10,200 12,532 15,056
4 35,015 500,000 500,000 500,000 23,056 26,936 31,308 16,093 19,973 24,344
5 44,890 500,000 500,000 500,000 27,484 33,275 40,074 21,295 27,085 33,884
6 55,259 500,000 500,000 500,000 31,112 39,154 49,009 25,696 33,738 43,593
7 66,145 500,000 500,000 500,000 33,792 44,402 57,991 29,150 39,759 53,348
8 77,577 500,000 500,000 500,000 35,328 48,788 66,845 31,459 44,920 62,976
9 89,580 500,000 500,000 500,000 35,472 52,029 75,345 32,377 48,934 72,250
10 102,182 500,000 500,000 500,000 33,938 53,788 83,222 31,617 51,467 80,901
11 115,416 500,000 500,000 500,000 30,715 54,014 90,519 28,781 52,079 88,584
12 129,310 500,000 500,000 500,000 25,139 51,967 96,588 23,591 50,419 95,040
13 143,900 500,000 500,000 500,000 16,805 47,150 101,042 15,645 45,989 99,882
14 159,219 500,000 500,000 500,000 5,220 38,949 103,405 4,447 38,176 102,631
15 175,304 * 500,000 500,000 * 26,551 103,033 * 26,164 102,646
16 192,193 * 500,000 500,000 * 8,950 99,588 * 8,950 99,588
17 209,927 * * 500,000 * * 91,345 * * 91,345
18 228,547 * * 500,000 * * 76,556 * * 76,556
19 248,098 * * 500,000 * * 52,810 * * 52,810
20 268,627 * * 500,000 * * 16,754 * * 16,754
* Additional premium is necessary to keep the policy from lapsing.
BMA
Clarity Survivorship Variable Universal Life
Male Age 65 Preferred Non-Tobacco
Female Age 65 Preferred Non-Tobacco
Initial Specified Amount: $500,000
Planned Premium: $7,737.12
Assuming Current Charges
Death Benefit Option: Level
Death Proceeds Accumulation Value Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of Annual Investment Return of
End of at 5%
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net)
1 8,124 500,000 500,000 500,000 6,048 6,441 6,834 0 0 0
2 16,654 500,000 500,000 500,000 12,675 13,859 15,091 4,937 6,122 7,354
3 25,611 500,000 500,000 500,000 19,050 21,451 24,045 11,313 13,714 16,308
4 35,015 500,000 500,000 500,000 25,163 29,207 33,751 18,200 22,244 26,787
5 44,890 500,000 500,000 500,000 31,000 37,119 44,271 24,810 30,929 38,082
6 55,259 500,000 500,000 500,000 36,547 45,176 55,676 31,131 39,760 50,260
7 66,145 500,000 500,000 500,000 41,786 53,364 68,038 37,144 48,722 63,395
8 77,577 500,000 500,000 500,000 46,695 61,665 81,438 42,826 57,797 77,570
9 89,580 500,000 500,000 500,000 51,255 70,065 95,974 48,160 66,970 92,880
10 102,182 500,000 500,000 500,000 55,444 78,548 111,755 53,123 76,227 109,434
11 115,416 500,000 500,000 500,000 59,548 87,424 129,249 57,614 85,490 127,315
12 129,310 500,000 500,000 500,000 63,206 96,341 148,272 61,659 94,794 146,725
13 143,900 500,000 500,000 500,000 66,376 105,267 168,981 65,216 104,106 167,820
14 159,219 500,000 500,000 500,000 69,019 114,174 191,566 68,246 113,400 190,793
15 175,304 500,000 500,000 500,000 71,098 123,038 216,255 70,712 122,651 215,868
16 192,193 500,000 500,000 500,000 72,947 132,495 244,510 72,947 132,495 244,510
17 209,927 500,000 500,000 500,000 74,188 141,976 275,765 74,188 141,976 275,765
18 228,547 500,000 500,000 500,000 74,790 151,478 310,459 74,790 151,478 310,459
19 248,098 500,000 500,000 500,000 74,717 161,004 349,109 74,717 161,004 349,109
20 268,627 500,000 500,000 500,000 73,939 170,563 392,327 73,939 170,563 392,327
BMA
Clarity Survivorship Variable Universal Life
Male Age 75 Preferred Non-Tobacco
Female Age 75 Preferred Non-Tobacco
Initial Specified Amount: $500,000
Planned Premium: $14,239.08
Assuming Guaranteed Charges
Death Benefit Option: Level
Death Proceeds Accumulation Value Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of Annual Investment Return of
End of at 5%
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net)
1 14,951 500,000 500,000 500,000 10,798 11,511 12,225 0 0 0
2 30,650 500,000 500,000 500,000 19,602 21,653 23,792 5,363 7,414 9,553
3 47,133 500,000 500,000 500,000 25,333 29,239 33,495 11,094 15,000 19,256
4 64,441 500,000 500,000 500,000 27,662 33,802 40,819 14,846 20,987 28,004
5 82,614 500,000 500,000 500,000 26,159 34,760 45,117 14,768 23,369 33,725
6 101,696 500,000 500,000 500,000 20,222 31,325 45,516 10,255 21,358 35,548
7 121,731 500,000 500,000 500,000 8,990 22,408 40,805 447 13,865 32,261
8 142,769 * * 500,000 * * 29,278 * * 22,158
9 164,859 * * 500,000 * * 8,579 * * 2,884
10 188,052 * * * * * * * * *
11 212,406 * * * * * * * * *
12 237,977 * * * * * * * * *
13 264,827 * * * * * * * * *
14 293,020 * * * * * * * * *
15 322,622 * * * * * * * * *
16 353,704 * * * * * * * * *
17 386,340 * * * * * * * * *
18 420,608 * * * * * * * * *
19 456,590 * * * * * * * * *
20 494,370 * * * * * * * * *
* Additional premium is necessary to keep the policy from lapsing.
BMA
Clarity Survivorship Variable Universal Life
Male Age 75 Preferred Non-Tobacco
Female Age 75 Preferred Non-Tobacco
Initial Specified Amount: $500,000
Planned Premium: $14,239.08
Assuming Current Charges
Death Benefit Option: Level
Death Proceeds Accumulation Value Cash Surrender Value
Premiums Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Accumulated Annual Investment Return of Annual Investment Return of Annual Investment Return of
End of at 5%
Policy Interest 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
Year Per Year (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net) (-0.98% Net) (5.02% Net) (11.02% Net)
1 14,951 500,000 500,000 500,000 11,793 12,537 13,282 0 0 0
2 30,650 500,000 500,000 500,000 23,784 26,021 28,347 9,545 11,782 14,108
3 47,133 500,000 500,000 500,000 35,126 39,623 44,487 20,887 25,384 30,248
4 64,441 500,000 500,000 500,000 45,789 53,313 61,781 32,973 40,498 48,966
5 82,614 500,000 500,000 500,000 55,744 67,065 80,331 44,353 55,674 68,940
6 101,696 500,000 500,000 500,000 64,972 80,864 100,268 55,005 70,896 90,300
7 121,731 500,000 500,000 500,000 73,464 94,707 121,758 64,920 86,164 113,214
8 142,769 500,000 500,000 500,000 81,208 108,599 145,000 74,088 101,479 137,881
9 164,859 500,000 500,000 500,000 88,193 122,547 170,235 82,498 116,852 164,539
10 188,052 500,000 500,000 500,000 94,416 136,573 197,751 90,144 132,301 193,479
11 212,406 500,000 500,000 500,000 100,460 151,326 228,547 96,901 147,766 224,987
12 237,977 500,000 500,000 500,000 105,440 165,999 262,260 102,592 163,151 259,412
13 264,827 500,000 500,000 500,000 109,251 180,557 299,360 107,115 178,421 297,224
14 293,020 500,000 500,000 500,000 111,769 194,965 340,435 110,345 193,541 339,011
15 322,622 500,000 500,000 500,000 112,853 209,195 386,240 112,141 208,483 385,528
16 353,704 500,000 500,000 500,000 112,918 224,344 439,887 112,918 224,344 439,887
17 386,340 500,000 500,000 520,979 111,196 239,454 500,941 111,196 239,454 500,941
18 420,608 500,000 500,000 586,021 107,464 254,559 568,952 107,464 254,559 568,952
19 456,590 500,000 500,000 657,253 101,461 269,720 644,365 101,461 269,720 644,365
20 494,370 500,000 500,000 735,376 92,888 285,033 728,095 92,888 285,033 728,095
APPENDIX B - RATES OF RETURN
From time to time, We may report different types of historical performance for
the Investment Options available under the Policy. We may report the average
annual total returns of the funds over various time periods. Such returns will
reflect the operating expenses (including management fees) of the funds, but not
deductions at the Separate Account or Policy level for Risk Charges and Policy
expenses, which, if included, would reduce performance. See Section 4- Expenses
for a discussion of the charges and deductions from a Policy.
At the request of a purchaser, BMA will accompany the returns of the funds with
at least one of the following: (i) returns, for the same periods as shown for
the funds, which include deductions under the Separate Account for the Risk
Charge in addition to the deductions of fund expenses, but does not include
other charges under the Policy; or (ii) an illustration of Accumulation Values
and Cash Surrender Values as of the performance reporting date for a
hypothetical Insureds of given Age, gender, risk classification, Premium level
and Initial Specified Amount. The illustration will based either on actual
historic fund performance or on a hypothetical investment return between 0% and
12% as requested by the purchaser. The Cash Surrender Value figures will assume
all fund charges, the Risk Charge, and all other Policy charges are deducted.
The Accumulation Value figures will assume all charges except the surrender
Charges are deducted.
We may also distribute sales literature comparing the percentage change in the
net asset values of the funds or in the Accumulation Unit Values for any of the
Investment Options to established market indices, such as the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average. We also
may make comparisons to the percentage change in values of other mutual funds
with investment objectives similar to those of the Investment Options being
compared.
The chart below shows the Effective Annual Rates of Return of the funds based on
the actual investment performance (after deduction of investment management fees
and direct operating expenses of the funds). These rates do not reflect the Risk
Charge assessed. The rates do not reflect deductions from Premiums or Monthly
Deductions assessed against the Accumulation Value of the Policy, nor do they
reflect the Policy's Surrender Charges. (For a discussion of these charges,
please see Section 4. Expenses.) Therefore, these rates are not illustrative of
how actual investment performance will affect the benefits under the Policy
(see, however, Appendix A - Illustration of Policy Values).
THE RATES OF RETURN SHOWN ARE NOT INDICATIVE OF FUTURE PERFORMANCE. These rates
of return may be considered, however, in assessing the competence and
performance of the investment advisers.
============================================================================================================================
Portfolio
Inception 10 Years/
Investment Option Date 1 Year 5 Years Since Inception
============================================================================================================================
============================================================================================================================
INVESTORS MARK SERIES FUND, INC.
============================================================================================================================
============================================================================================================================
Intermediate Fixed Income......................................... 11/13/97 10.77% N/A 5.35%
============================================================================================================================
============================================================================================================================
Mid Cap Equity.................................................... 11/13/97 26.92% N/A 12.82%
============================================================================================================================
============================================================================================================================
Money Market...................................................... 11/13/97 5.83% N/A 5.17%
============================================================================================================================
============================================================================================================================
Global Fixed Income............................................... 11/13/97 9.46% N/A 5.72%
============================================================================================================================
============================================================================================================================
Small Cap Equity.................................................. 11/13/97 -2.69% N/A 8.33%
============================================================================================================================
============================================================================================================================
Large Cap Growth.................................................. 11/13/97 -12.03% N/A 15.88%
============================================================================================================================
============================================================================================================================
Large Cap Value................................................... 12/2/97 8.79% N/A 3.65%
============================================================================================================================
============================================================================================================================
Growth & Income................................................... 11/12/97 15.79% N/A 15.64%
============================================================================================================================
============================================================================================================================
Balanced.......................................................... 11/17/97 8.42% N/A 3.23%
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BERGER INSTITUTIONAL PRODUCTS TRUST
============================================================================================================================
============================================================================================================================
Berger IPT-International.......................................... 8/1/97 -10.18% N/A 8.31%
============================================================================================================================
=================================================================================================================================
THE ALGER AMERICAN FUND
=================================================================================================================================
=================================================================================================================================
Alger American Growth...................................................... 1/9/89 14.77% 19.19% 20.45%
=================================================================================================================================
=================================================================================================================================
Alger American Leveraged AllCap............................................ 1/25/95 -24.83% 23.15% 30.86%
=================================================================================================================================
=================================================================================================================================
Alger American MidCap Growth............................................... 5/3/93 9.18% 19.27% 22.57%
=================================================================================================================================
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AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
=================================================================================================================================
=================================================================================================================================
VP Income & Growth......................................................... 10/30/97 -10.62% N/A 12.28%
=================================================================================================================================
=================================================================================================================================
VP Value................................................................... 5/1/96 18.14% N/A 12.59%
=================================================================================================================================
=================================================================================================================================
DREYFUS STOCK INDEX FUND........................................................ 9/29/89 -9.28% 17.98% 16.97%
=================================================================================================================================
=================================================================================================================================
DREYFUS VARIABLE INVESTMENT FUND
=================================================================================================================================
=================================================================================================================================
Dreyfus VIF Disciplined Stock.............................................. 5/1/96 -9.14% N/A 17.60%
=================================================================================================================================
=======================================================================================================================
VARIABLE INSURANCE PRODUCTS FUND and VARIABLE INSURANCE PRODUCTS FUND II
=======================================================================================================================
=======================================================================================================================
Fidelity VIP Overseas Portfolio*...................................... 1/28/87 -19.34% 10.32% 9.22%
=======================================================================================================================
=======================================================================================================================
Fidelity VIP Growth Portfolio * ...................................... 10/09/86 -11.21% 19.19% 19.98%
=======================================================================================================================
=======================================================================================================================
Fidelity VIP II Contrafund Portfolio * ............................... 1/03/95 -6.83% 17.72% 21.14%
=======================================================================================================================
=======================================================================================================================
INVESCO VARIABLE INVESTMENT FUNDS, INC.
=======================================================================================================================
=======================================================================================================================
INVESCO VIF-High Yield............................................... 5/27/94 -11.68% 6.00% 7.50%
=======================================================================================================================
=======================================================================================================================
INVESCO VIF-Equity Income............................................ 8/10/94 4.87% 16.83% 17.78%
=======================================================================================================================
=======================================================================================================================
LAZARD RETIREMENT SERIES, INC.
=======================================================================================================================
=======================================================================================================================
Lazard Retirement Small Cap.......................................... 11/4/97 21.05% N/A 6.33%
=======================================================================================================================
THE FIGURES SHOWN IN THIS CHART DO NOT REFLECT ANY CHARGES AT THE SEPARATE
ACCOUNT OR THE POLICY LEVEL.
PART II
UNDERTAKING TO FILE REPORTS
a. Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority confined in that section.
b. Pursuant to Investment Company Act Section 26(e), Business Men's Assurance
Company of America ("Company") hereby represents that the fees and charges
deducted under the Policy described in the Prospectus, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company.
INDEMNIFICATION
The Bylaws of the Company (Article IV) provide that:
Section 1: Indemnification. Each person who is or was a Director, officer or
employee of the Corporation or is or was serving at the request of the
Corporation as a Director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person) shall be indemnified by the
Corporation as a right to the full extent permitted or authorized by the laws of
the State of Missouri, as now in effect and as hereafter amended, against any
liability, judgment, fine, amount paid in settlement, cost and expense
(including attorneys' fees) asserted or threatened against and incurred by such
person in his capacity as or arising out of his status as a Director, officer or
employee of the Corporation, or if serving at the request of the Corporation, as
a Director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise. The indemnification provided by this Bylaw
provision shall not be exclusive of any other rights to which those indemnified
may be entitled under any other bylaw or under any agreement, vote of
shareholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnifications with respect to the same or different persons or classes of
persons.
Without limiting the foregoing, the Corporation is authorized to enter into an
agreement with any Director, officer or employee of the Corporation providing
indemnification for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including any action by or in the right of the
Corporation, that arises by reason of the fact that such person is or was a
Director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent allowed by law, whether or not such indemnification would otherwise be
provided for in this Bylaw, except that no such agreement shall indemnify any
person from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful misconduct.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company 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, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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
Company 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.
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement comprises the papers and documents:
The facing sheet
The Prospectus consisting of 58 pages.
Undertakings to file reports.
The signatures.
The following exhibits.
A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2.
1. Resolution of the Board of Directors of the Company*
2. Not Applicable
3.a. Form of Principal Underwriter Agreement#
3.b. Form of Selling Agreements**
3.c. Schedule of Commissions**
4. Not Applicable
5.a. Last Survivor Flexible Premium Adjustable Variable Life
Insurance Policy#
5.b. Extension of Maturity Date Rider#
5.c. Guaranteed Minimum Death Benefit Rider#
5.d. Exchange Option Rider I#
5.e. Exchange Option Rider II#
5.f. Survivorship Term Rider#
6.a. Articles of Incorporation of the Company*
6.b. Bylaws of the Company*
7. Not Applicable
8.a. Form of Fund Participation Agreements**
8.b. Form of Fund Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation and the Company***
8.c. Form of Fund Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors Corporation and
the Company***
9. Form of Reinsurance Agreement**
10. Application Form#
11. Powers of Attorney*
B. Opinion and of Counsel
C. Consent of Actuary
D. Consents of Independent Accountants
*Incorporated by reference to Form S-6 (File No. 333-52689) electronically
filed on May 14, 1998.
**Incorporated by reference to Pre-Effective Amendment No. 1 (File No. 333-
52689) electronically filed on August 28, 1998.
***Incorporated by reference to Post-Effective Amendment No. 3 (File No. 333-
52689) electronically filed on May 1, 2000.
#Incorporated by reference to Form S-6 (File No. 333-46538) electronically filed
on September 25, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Kansas City and State of
Missouri on this 6th day of April, 2001.
BMA VARIABLE LIFE ACCOUNT A
Registrant
By: BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
By: /s/ DAVID A. GATES
------------------------------
BUSINESS MEN'S ASSURANCE
COMPANY OF AMERICA
By: /S/ EDWARD S. RITTER
----------------------------
Attest:
/S/ PEGGY M. HEIDKAMP
- - ----------------------------
(Name)
VICE PRESIDENT, SALES OPERATIONS
- - ----------------------------
Title
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
Giorgio Balzer* Director, Chairman of the Board 4/6/01
- ------------------------- -------
Giorgio Balzer and Chief Executive Officer Date
Thomas Morton Bloch* Director 4/6/01
- ------------------------- -------
Thomas Morton Bloch Date
Mel G. Carvill* Director 4/6/01
- ------------------------- -------
Mel G. Carvill Date
William Thomas Grant II * Director 4/6/01
- ------------------------- -------
William Thomas Grant II Date
Donald Joyce Hall, Jr.* Director 4/6/01
- ------------------------- -------
Donald Joyce Hall, Jr. Date
Renzo Isler* Director 4/6/01
- ------------------------- -------
Renzo Isler Date
Allan Drue Jennings* Director 4/6/01
- ------------------------- -------
Allan Drue Jennings Date
David Woods Kemper* Director 4/6/01
- ------------------------- -------
David Woods Kemper Date
John Kessander Lundberg* Director 4/6/01
- ------------------------- -------
John Kessander Lundberg Date
John Pierre Mascotte* Director 4/6/01
- ------------------------- -------
John Pierre Mascotte Date
Andrea Rabusin* Director 4/6/01
- ------------------------- -------
Andrea Rabusin Date
/S/ ROBERT T. RAKICH Director, President and Chief 4/6/01
- ------------------------- -------
Robert Thomas Rakich Operating Officer Date
/S/DAVID A. GATES 4/6/01
- ------------------------- Vice President, General Counsel -------
David A. Gates and Secretary Date
/S/ DAVID L. HIGLEY Senior Vice President & Chief 4/6/01
- ------------------------- -------
David L. Higley Financial Officer Date
/S/ SUSAN A. SWEENEY Vice President - Treasurer & 4/6/01
- ------------------------- -------
Susan Annette Sweeney Controller Date
*By: /S/ DAVID A. GATES
--------------------
Attorney-in-Fact
*By: /S/ ROBERT T. RAKICH
--------------------
Attorney-in-Fact
INDEX TO EXHIBITS
EX-99.B Opinion and Consent of Counsel
EX-99.C Consent of Actuary
EX-99.D Independent Accountants' Consents