As filed with the Securities and Exchange Commission on November 18, 1997
Registration No. 333-32553
SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549
PRE-EFFECTIVE AMENDMENT TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Exact Name of Trust)
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Name of Depositor)
One American Square
Indianapolis, Indiana 46282
(Address of Depositor's Principal Executive Office)
John C. Swhear, Esq.
Counsel
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46282
(Name and Address of Agent for Service of Process)
Copies to:
Jeffrey S. Puretz
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
-----------------------------
Title of securities being registered: Interests in the Separate
Account under Modified Single Premium Variable Life Insurance
Policies.
Approximate date of proposed public offering: As soon as practicable
after the effective date of the Registration Statement. 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
Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
AUL American Individual Variable Life Unit Trust of
American United Life Insurance Company(R)
Modified Single Premium Variable
Life Insurance Policies
RECONCILIATION AND TIE
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
1. (a) Name of trust.............................. Prospectus front cover
(b) Title of securities issued................. Prospectus front cover
2. Name and address of each depositor............ Prospectus front cover
3. Name and address of trustee.................... N/A
4. Name and address of each principal
underwriter.................................. Sale of the Policies
5. State of organization of trust................. Separate Account
6. Execution and termination of trust
agreement.................................... Separate Account
9. Litigation.................................... Other Information
About the Policies
and AUL - Litigation
II. General Description of the Trust
and Securities of the Trust
10. (a) Registered or bearer Summary and Diagram
securities............................ of the Policy
(b) Cumulative or distributive Summary and Diagram
securities............................ of the Policy
i
(c) Withdrawal or Redemption............. Cash Benefits-Policy
Loans; Cash Benefits
- Surrendering the
Policy for Net Cash
Value
(d) Conversion, transfer, etc............ Premium Payments and
Allocations-Transfer
Privilege; Premium
Payments and
Allocations-Dollar
Cost Averaging
Program; Premium
Payments and
Allocations-Portfolio
Rebalancing Program;
Cash Benefits-Policy
Loans; Cash Benefits
-Partial Surrenders;
Other Policy Benefits
and Provisions-
Exchange for Paid-Up
Policy
(e) Lapse or Default...................... Premium Payments and
Allocations-Premium
Payments to Prevent
Lapse; Other Policy
Benefits and
Provisions-
Reinstatement
(f) Voting rights.......................... Other Information
About the Policies
and AUL-Voting
Rights
(g) Notice to security holders.............. Other Policy Benefits
and Provisions-
Changes in the
Policy or Benefits;
Other Policy
Benefits and
Provisions Reports
to Policy Owners;
Other Information
About the Policies
and AUL-Addition,
Deletion or
Substitution of
Investments
(h) Consents required...................... Other Information
About the Policies
and AUL - Voting
Rights; Other
Policy Benefits
and Provisions -
Changes in the
Policy or Benefits;
Other Information
About the Policies
and AUL- Voting
Rights; Other
Information About
the Policies and
AUL - Addition,
Deletion or
Substitution of
Investments
ii
(i) Other provisions...................... Premium Payments and
Allocations; Charges
and Deductions; Death
Benefits; Cash
Benefits;
Summary and Diagram
of the Policy
11. Type of securities comprising units............ Prospectus front
cover; General
Information About
AUL, the Separate
Account and the Funds
12. Certain information regarding
periodic payment plan certificates............ General Information
About AUL, the
Separate Account and
the Funds - The Funds
13. (a) Load, fees, expenses, etc.............. Charges and Deductions
(b) Certain information regarding
periodic payment plan
certificates..........................N/A
(c) Certain percentages.....................Charges and Deductions
(d) Certain other fees, etc................ Charges and Deductions
(e) Certain other profits or benefits..... Premium Payments and
Allocations-Transfer
Privilege;
Illustrations of
Account Values, Cash
Values, Death
Benefits and
Accumulated Premium
Payments
(f) Other benefits.........................General Information
About AUL, the
Separate Account and
the Funds - The Funds
(g) Ratio of annual charges to
income................................N/A
iii
14. Issuance of trust's securities...................Summary and Diagram of
the Policy; Premium
Payments and
Allocations
15. Receipt and handling of payments Premium Payments and
from purchasers................................ Allocations
16. Acquisition and disposition of General Information
underlying securities........................... about AUL, the
Separate Account and
the Funds; Charges
and Deductions - Fund
Expenses
17. Withdrawal or redemption.........................Premium Payments and
Allocations -Transfer
Privilege; Charges
and Deductions -
Surrender Charge;
Cash Benefits -
Surrendering the
Policy for Net Cash
Value; Cash Benefits
-Policy Loans; Cash
Benefits - Partial
Surrenders; Cash
Benefits-Settlement
Options; Other
Information About
the Policies and
AUL - Reinstatement
18. (a) Receipt, custody and General Information
disposition of income ................. About AUL,
the Separate
Account and the
Funds - Separate
Account; Other
Policy Benefits and
Provisions -
Dividends; Tax
Considerations
(b) Reinvestment of
distributions........................ N/A
(c) Reserves or special funds.............. N/A
(d) Schedule of distributions.............. N/A
19. Records, accounts and reports................... Other Policy Benefits
and Provisions
- Reports to Policy
Owners
iv
20. Certain miscellaneous provisions
of trust agreement:
(a) Amendment............................. N/A
(b) Termination........................... N/A
(c) and (d) Trustee, removal and
successor............................ N/A
(e) and (f) Depositors, removal
and successor........................ N/A
21. Loans to security holders....................... Cash Benefits -
Policy Loans
22. Limitations on liability........................ N/A
23. Bonding arrangements............................ N/A
24. Other material provisions of
trust agreement............................... Other Information
About the Policies
and AUL
III. Organizations, Personnel and
Affiliated Persons of Depositor
25. Organization of depositor...................... AUL
26. Fees received by depositor
(a) Under the policies.................... N/A
(b) From the Funds........................ General Information
About AUL, the
Separate Account and
the Funds - The
Funds
27. Business of depositor.......................... General Information
About AUL, the
Separate Account and
the Funds - AUL
28. Certain information as to officials
and affiliated persons of depositor.......... Other Information
About the Policies
and AUL - AUL
Directors and
Executive Officers
v
29. Voting securities of depositor.................. N/A
30. Persons controlling depositor................... N/A
31. Payments by depositor for certain
services rendered to trust.................... N/A
32. Payments by depositor for certain
other services rendered to
trust........................................ N/A
33. Remuneration of employees of
depositor for certain services
rendered to trust............................ N/A
34. Remuneration of other persons
for certain services rendered
to trust..................................... N/A
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities
by states.................................... N/A
37. Revocation of authority to
distribute.................................. N/A
38. (a) Method of distribution.................. Other Information About
the Policies and AUL
-Sale of the Policies
(b) Underwriting agreements.................. Other Information
About the Policies
and AUL - Sale of the
Policies
(c) Selling agreements........................ Other Information
About the Policies
and AUL - Sale of
the Policies
39. (a) Organization of principal
underwriters........................ See Item 25
vi
(b) N.A.S.D. membership of
principal underwriters............. Other Information
About the Policies
and AUL - Sale of the
Policies
40. Certain fees received by principal
underwriters.................................. See Item 26
41. (a) Business of each principal
underwriter.......................... See Item 27
42. Ownership of trust's securities
by certain persons............................ N/A
43. Certain brokerage commissions
received by principal
underwriters................................. N/A
44. (a) Method of valuation................... How Your Account
Values Vary
(b) Schedule as to offering
price............................... Charges and Deductions
(c) Variation in offering price
to certain persons.................. Charges and Deductions
45. Suspension of redemption rights................ N/A
46. (a) Redemption Valuation.................. How Your Account Value
Varies; Cash
Benefits - Surrender
Charge
(b) Schedule as to redemption
price................................. Cash Benefits -
Surrender Charge
47. Maintenance of position in
underlying securities......................... General Information
About AUL, the
Separate Account
and the Funds
Separate Account;
General Information
About AUL, the
Separate Account
and the Funds - The
Funds; Premium
Payments and
Allocations -
Premium Allocations
and Crediting
vii
V. Information Concerning the Trustee or Custodian
48. Organization and regulation of
trustee....................................... N/A
49. Fees and expenses of trustees................... N/A
50. Trustee's lien.................................. N/A
VI. Information Concerning Insurance of
Holders of Securities
51. Insurance of holders of trust's Summary and Diagram
securities.................................... of the Policy;
General Information
About AUL, the
Separate Account and
the Funds; Death
Benefits; Cash
Benefits; Other
Policy Benefits and
Provisions; Other
Information About the
Policies and AUL;
Premium Payments and
Allocations
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities.......................... Other Information
About the Policies
and AUL - Addition,
Deletion or
Substitution of
Investments; General
Information About
AUL, the Separate
Account and the Funds
(b) Transactions involving elimination
of underlying securities.............. N/A
(c) Policy regarding substitution
or elimination of under-
lying securities..................... See Item 52(a)
(d) Fundamental policy not other-
wise covered........................ N/A
53. Tax status of trust............................ Tax Considerations
viii
VIII. Financial and Statistical Information
54. Trust's securities during last
ten years..................................... N/A
55. Trust's securities during last
ten years..................................... N/A
ix
PROSPECTUS
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46282
This Prospectus describes a modified single premium variable life insurance
policy (the "Policy") offered by American United Life Insurance Company(R)
("AUL," "we," "us" or "our"). The Policy is designed to provide insurance
protection on the Insured (or Insureds if you choose the Last Survivor Rider)
named in the Policy.
The Policy gives you the opportunity to allocate premiums and Account Value to
one or more Investment Accounts of the AUL American Individual Variable Life
Unit Trust (the "Separate Account"). The assets of each Investment Account are
invested in a corresponding mutual fund portfolio (each, a "Portfolio") of AUL
American Series Fund, Inc., Alger American Portfolio, American Century Variable
Portfolios, Inc., Fidelity Variable Insurance Products Fund, Fidelity Variable
Insurance Products Fund II, and T. Rowe Price Equity Series, Inc. (each a
"Fund"). Each Fund, and its Portfolio(s), is managed by the investment adviser
shown below:
Fund Investment Adviser
AUL American Series Fund, Inc. AUL
AUL American Equity Portfolio
AUL American Bond Portfolio
AUL American Money Market Portfolio
AUL American Managed Portfolio
Alger American Fund Fred Alger & Company
Alger American Growth Portfolio
American Century Variable Portfolios, Inc. American Century Investment Management,
American Century VP Capital Appreciation Inc.
Portfolio
American Century VP International Portfolio
Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP High Income Portfolio
VIP Money Market Portfolio
VIP Overseas Portfolio
Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
VIP II Asset Manager Portfolio
VIP II Contrafund Portfolio
VIP II Index 500 Portfolio
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc.
T. Rowe Price Equity Income Portfolio
The prospectuses for the Funds describe their respective Portfolios, including
the risks of investing in the Portfolios, and provide other information on the
Funds.
AUL guarantees that the Death Benefit Proceeds will never be less than the
specified Death Benefit in force (less any outstanding loan and loan interest
and plus any benefits provided by rider) so long as sufficient premiums are paid
to keep the Policy in force.
The Policy provides for a Net Cash Value that can be obtained by surrendering
the Policy. Because this value is based on the performance of the Portfolios of
the Funds, there is no guaranteed minimum Net Cash Value.
If the Net Cash Value is insufficient to cover the Monthly Deduction under the
Policy, the Policy will lapse without value. The Policy also permits loans and
Partial Surrenders, within limits.
It may not be advantageous to replace existing insurance with this Policy.
Within certain limits, you may return the Policy, or exchange it for a paid-up
policy for a reduced Death Benefit that provides benefits that do not vary with
the investment results of a separate account.
THIS PROSPECTUS PRESENTS THE INFORMATION YOU SHOULD KNOW BEFORE DECIDING TO
PURCHASE A POLICY. IT SHOULD BE RETAINED FOR FUTURE REFERENCE. PROSPECTUSES FOR
THE FUNDS SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS.
AN INVESTMENT IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
THE POLICY INVOLVES CERTAIN RISKS, INCLUDING THE LOSS OF PREMIUM PAYMENTS
(PRINCIPAL).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is __________,1997.
PROSPECTUS CONTENTS
Page
DEFINITIONS OF TERMS.....................................................5
SUMMARY AND DIAGRAM OF THE POLICY........................................9
GENERAL INFORMATION ABOUT AUL, THE SEPARATE ACCOUNT AND THE FUNDS.......12
AUL............................................................12
Separate Account...............................................13
The Funds......................................................13
PREMIUM PAYMENTS AND ALLOCATIONS........................................17
Applying for a Policy..........................................17
Right to Examine Policy........................................18
Premiums.......................................................18
Premium Payments to Prevent Lapse..............................19
Premium Allocations and Crediting..............................19
Transfer Privilege.............................................20
Dollar Cost Averaging Program..................................21
Portfolio Rebalancing Program..................................22
CHARGES AND DEDUCTIONS..................................................22
Monthly Deduction..............................................22
Annual Contract Charge.........................................24
Surrender Charge...............................................24
Taxes..........................................................25
Special Uses...................................................25
Fund Expenses..................................................26
HOW YOUR ACCOUNT VALUES VARY............................................26
Determining the Account Value..................................26
Cash Value and Net Cash Value..................................27
DEATH BENEFIT...........................................................28
Amount of Death Benefit Proceeds...............................28
Death Benefit..................................................28
Selecting and Changing the Beneficiary.........................29
CASH BENEFITS...........................................................29
Policy Loans...................................................29
Surrendering the Policy for Net Cash Value.....................31
Partial Surrenders.............................................31
Settlement Options.............................................32
Specialized Uses of the Policy.................................33
Life Insurance Retirement Plans................................33
Risks of Life Insurance Retirement Plans.......................34
ILLUSTRATIONS OF ACCOUNT VALUES, CASH VALUES, DEATH BENEFITS
AND ACCUMULATED PREMIUM PAYMENTS...............................35
OTHER POLICY BENEFITS AND PROVISIONS....................................46
Limits on Rights to Contest the Policy.........................46
Changes in the Policy or Benefits..............................46
Exchange for Paid-Up Policy....................................46
When Proceeds Are Paid.........................................47
Dividends......................................................47
Reports to Policy Owners.......................................47
Assignment.....................................................47
Reinstatement..................................................48
Rider Benefits.................................................48
TAX CONSIDERATIONS......................................................49
Tax Status of the Policy.......................................49
Tax Treatment of Policy Benefits...............................51
Estate and Generation Skipping Taxes...........................53
Life Insurance Purchased for Use in Split Dollar Arrangements..54
Non-Individual Ownership of Contracts..........................54
Possible Charge for AUL's Taxes................................54
OTHER INFORMATION ABOUT THE POLICIES AND AUL............................54
Policy Termination.............................................54
Resolving Material Conflicts...................................54
Addition, Deletion or Substitution of Investments..............55
Voting Rights..................................................56
Sale of the Policies...........................................57
AUL Directors and Executive Officers...........................57
State Regulation...............................................62
Additional Information.........................................63
Independent Auditors...........................................63
Litigation.....................................................63
Legal Matters..................................................63
Financial Statements...........................................63
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUSES OF THE FUNDS, OR THE STATEMENTS OF ADDITIONAL
INFORMATION OF THE FUNDS.
DEFINITIONS OF TERMS
ACCOUNT VALUE
The Account Value is the sum of your interest in the Variable Account
and the Loan Account.
AGE
Issue Age means the Insured's age as of the Contract Date. Attained
Age means the Issue Age increased by one for each complete Policy
Year.
CASH VALUE
The Cash Value is the Account Value less the Surrender Charge.
CONTRACT DATE
The date from which Monthiversaries, Policy Years, and Policy
Anniversaries are measured. Suicide and incontestability periods are
measured from the Contract Date.
DEATH BENEFIT AND DEATH BENEFIT PROCEEDS
This Policy has a death benefit that is described herein. The Death
Benefit Proceeds are the Death Benefit less any outstanding loan and
loan interest, plus any benefits provided by rider.
FACE AMOUNT
The Face Amount shown on the Policy Data Page of the Policy, or as
subsequently changed under the Partial Surrender provision.
HOME OFFICE
One American Square, Indianapolis, Indiana 46282.
INITIAL MAXIMUM PREMIUM
An amount set to be less than or equal to the initial premium limit
required to qualify the Policy as life insurance under the Internal
Revenue Code.
INSURED
The insured named on the Policy Data Page of the Policy. The Insured
may or may not be the Owner. An available rider provides for coverage
on the lives of two Insureds.
INVESTMENT ACCOUNTS
One or more of the subdivisions of the Separate Account. Each
Investment Account is invested in a corresponding Portfolio of a
particular mutual fund.
ISSUE DATE
The date the Policy is issued.
LOAN ACCOUNT
A portion of the Account Value which is collateral for loan amounts.
MINIMUM INSURANCE PERCENTAGE
The minimum percentage of insurance required to qualify the Policy as
life insurance under the Internal Revenue Code. A table of these
amounts is on the Policy Data Page of your Policy.
MONTHIVERSARY
The same date of each month as the Contract Date. If a Monthiversary
falls on a day which is not a Valuation Date, the processing of the
Monthiversary will be the next Valuation Date.
NET CASH VALUE
Cash Value less outstanding loans and loan interest.
OWNER
The owner named in the application for a Policy, unless changed.
PARTIAL SURRENDER
A withdrawal of a portion of the Account Value.
POLICY ANNIVERSARY
The same date each year as the Contract Date.
POLICY DATA PAGE
The Policy Data Page in your Policy, or the supplemental Policy Data
Page most recently sent to you by us.
POLICY YEAR
One year from the Contract Date and from each Policy Anniversary.
PORTFOLIO
A separate investment fund in which the Separate Account invests.
PROPER NOTICE
Notice that is received at our Home Office in a form acceptable to us.
RISK AMOUNT
The Death Benefit divided by 1.00246627 less the Account Value.
SEPARATE ACCOUNT
AUL American Individual Variable Life Unit Trust. The Separate Account
is segregated into several Investment Accounts, each of which invests
in a corresponding mutual fund portfolio.
VALUATION DATE
Valuation Dates are the dates on which the Investment Accounts are
valued. A Valuation Date is any date on which the New York Stock
Exchange is open and we are open for business.
VALUATION PERIOD
A Valuation Period begins at the close of one Valuation Date and ends
at the close of the next succeeding Valuation Date.
VARIABLE ACCOUNT
The Account Value of this Policy which is invested in one or more
Investment Accounts.
WE
"We", "us" or "our" means AUL.
YOU
"You" or "your" means the Owner of this Policy.
SUMMARY AND DIAGRAM OF THE POLICY
The following summary of Prospectus information and diagram of the Policy should
be read in conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated, the description of the Policy in this
Prospectus assumes that the Policy is in force, that the Last Survivor Rider is
not in force, and that there are no outstanding loans and loan interests.
The Policy is similar in many ways to fixed-benefit life insurance. As with
fixed-benefit life insurance, typically the Owner of a Policy pays premium
payments for insurance coverage on the Insured. Also, like fixed-benefit life
insurance, the Policy provides for accumulation of premiums and a Net Cash Value
that is payable if the Policy is surrendered during the Insured's lifetime. As
with fixed-benefit life insurance, the Net Cash Value during the early Policy
Years is likely to be lower than the premium payments paid.
However, the Policy differs from fixed-benefit life insurance in several
important respects. Unlike fixed-benefit life insurance, the Death Benefit may
and the Account Value will increase or decrease to reflect the investment
performance of the Investment Accounts to which Account Value is allocated.
Also, there is no guaranteed minimum Net Cash Value. If the Net Cash Value is
insufficient to pay the Monthly Deduction, the Policy will lapse without value
after a grace period. See "Premium Payments to Prevent Lapse." If a Policy
lapses while loans are outstanding, adverse tax consequences may result. See
"Tax Considerations."
The most important features of the Policy, such as charges, cash surrender
benefits, Death Benefit, and calculation of Cash Values, are summarized in the
diagram on the following pages.
Purpose of the Policy. The Policy is designed to provide long-term
insurance benefits, and may also provide long-term accumulation of Cash Value.
The Policy should be evaluated in conjunction with other insurance policies that
you own, as well as the need for insurance and the Policy's long-term potential
for growth. It may not be advantageous to replace existing insurance coverage
with this Policy. In particular, replacement should be carefully considered if
the decision to replace existing coverage is based solely on a comparison of
Policy illustrations. See "Illustrations" below and "Specialized Uses of the
Policy."
Illustrations. Illustrations included in this Prospectus or used in
connection with the purchase of a Policy that illustrate Policy Cash Values and
Death Benefit Proceeds for prototype insureds are based on hypothetical rates of
return.
The illustrations show Policy values based on current charges and,
alternatively, based on guaranteed charges. See "Illustrations of Account
Values, Net Cash Values, Death Benefits and Accumulated Premium Payments."
Policy Tax Compliance. AUL intends for the Policy to satisfy the definition
of a life insurance policy under Section 7702 of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"). It is expected that most
Policies will be treated as modified endowment contracts ("Modified Endowments")
under federal tax law. AUL will monitor the Policies and will attempt to notify
you on a timely basis if your Policy is in jeopardy of violating the federal tax
definition of life insurance. For further discussion of the tax status of a
Policy and the tax consequences of being treated as a life insurance contract or
a Modified Endowment, see "Tax Considerations."
Right to Examine Policy and Policy Exchange. For a limited time, you have
the right to cancel your Policy and receive a refund. See "Right to Examine
Policy." Premiums are generally allocated to the Investment Accounts on the
later of the day the "right to examine" period expires, or the date we receive
the premium at our Home Office. See "Premium Allocations and Crediting."
You may exchange the Policy for a paid-up whole life policy with a level face
amount, not greater than the Policy's Face Amount, that can be purchased by the
Policy's Net Cash Value. See "Exchange for Paid-Up Policy."
Owner Inquiries. If you have any questions, you may write or call our Home
Office at One American Square, P.O. Box 7127, Indianapolis, Indiana 46206-7127,
1-800-863-9354.
Diagram of Contract
Premium Payments
You may elect to pay an initial premium payment that is equivalent to 80%, 90%
or 100% of the Initial Maximum Premium plan but are not required to pay premium
payments according to the plan.
The Policy's maximum initial premium payment depends on the Insured's age, sex
and risk class, initial Face Amount selected, and any supplemental and/or rider
benefits.
Extra premium payments may be necessary to prevent lapse.
Net Premium Payments
You direct the allocation of Net Premium payments among 16 Investment Accounts
of the Separate Account. (See rules and limits on premium payment allocations.)
Each Investment Account invests in a corresponding portfolio of a mutual fund:
Mutual Fund Portfolio
AUL American Series Fund, Inc. Equity Portfolio
Bond Portfolio
Managed Portfolio
Money Market Portfolio
Alger American Fund Alger American Growth Portfolio
American Century Variable Portfolios, Inc. American Century VP Capital Appreciation Portfolio
American Century VP International Portfolio
Fidelity Variable Insurance Products Fund VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP High Income Portfolio
VIP Money Market Portfolio
VIP Overseas Portfolio
Fidelity Variable Insurance Products Fund II VIP II Asset Manager Portfolio
VIP II Contrafund Portfolio
VIP II Index 500 Portfolio
T. Rowe Price Equity Series, Inc. T. Rowe Price Equity Income Portfolio
Deductions
From Account Value
Monthly deduction for cost of insurance, administration fees, state and Federal
taxes and charges for any supplemental and/or rider benefits. Administration
fees are currently 1/12 of 0.40% of Account Value per month. An annual contract
fee of $30 will be deducted on a monthly basis if Account Value is less than
$50,000.
From Investment Accounts
Monthly charge at a guaranteed annual rate of 0.90% from the Investment Accounts
during the first 10 Policy Years and 0.80% thereafter for mortality and expense
risks.
Investment advisory fees and operating expenses are deducted from the assets of
each Portfolio.
Account Value
Contract Value is equal to premiums, as adjusted each Valuation Date to reflect
Investment Account investment experience, charges deducted and other Policy
transactions (such as transfers, loans and surrenders).
Varies from day to day. There is no minimum guaranteed Account Value. The Policy
may lapse if the Net Cash Value is insufficient to cover a Monthly Deduction
due.
Can be transferred among the Investment Accounts. A transfer fee of $25.00 may
apply if more than 12 transfers are made in a Policy Year.
Is the starting point for calculating certain values under a Policy, such as the
Cash Value, Net Cash Value and the Death Benefit used to determine Death Benefit
Proceeds.
Cash Benefits Death Benefits
Loans may be taken for amounts up to 90% of the Income tax free to beneficiary.
Account Value, less loan interest due on the next
Policy Anniversary and any surrender charges. Available as lump sum or under a variety of
settlement options.
Partial Surrenders generally can be made provided For all policies, Face Amount generated by the
there is sufficient remaining Net Cash Value. the selection of the initial premium amount.
Partial Surrenders reduce the Face Amount
proportionately.
The Policy may be surrendered in full at any time Death Benefit equal to the specified amount.
for its Net Cash Value. A surrender charge will
apply during the first ten Policy Years after
issue. Supplemental and/or rider benefits may be available.
Settlement options are available.
Loans, Partial Surrenders, and Full Surrenders
may have adverse tax consequences.
GENERAL INFORMATION ABOUT AUL, THE SEPARATE ACCOUNT AND THE FUNDS
AUL
The Policies are issued by AUL which is a mutual life insurance company
organized under the laws of the State of Indiana. It was originally incorporated
as a fraternal society in 1877 under the laws of the federal government, and
reincorporated under the laws of the State of Indiana in 1933. AUL is currently
licensed to transact life insurance business in 48 states and the District of
Columbia. AUL conducts a conventional life insurance, reinsurance, and annuity
business. At December 31, 1996, AUL had assets of $7,852,292,848 and a policy
owners' surplus of $572,825,650.
AUL is subject to regulation by the Department of Insurance of the State of
Indiana as well as by the insurance departments of all other states and
jurisdictions in which it does business. We submit annual statements on our
operations and finances to insurance officials in such states and jurisdictions.
The forms for the Policy described in this Prospectus are filed with and (where
required) approved by insurance officials in each state and jurisdiction in
which Policies are sold.
Separate Account
The Separate Account was established as a segregated investment account under
Indiana law on July 10, 1997. It is used to support the Policies and may be used
to support other variable life insurance contracts, and for other purposes
permitted by law. The Separate Account is registered with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"). AUL has established other segregated
investment accounts, some of which also are registered with the SEC.
The Separate Account is divided into Investment Accounts. The Investment
Accounts available under the Policies invest in shares of Portfolios of the
Funds. The Separate Account may include other Investment Accounts that are not
available under the Policies and are not otherwise discussed in this Prospectus.
The assets in the Separate Account are owned by AUL.
Income, gains and losses, realized or unrealized, of an Investment Account are
credited to or charged against the Investment Account without regard to any
other income, gains or losses of AUL. Applicable insurance law provides that
assets equal to the reserves and other contract liabilities of the Separate
Account are not chargeable with liabilities arising out of any other business of
AUL. AUL is obligated to pay all benefits provided under the Policies.
The Funds
Each Fund is registered with the SEC as a diversified, open-end management
investment company under the 1940 Act, although the SEC does not supervise their
management or investment practices and policies. Each of the Funds comprises one
or more of the Portfolios and other series that may not be available under the
Policies. The investment objectives of each of the Portfolios is described
below.
AUL American Series Fund, Inc.
AUL American Equity Portfolio. The primary investment objective of the
AUL American Equity Portfolio is long-term capital appreciation. The Portfolio
seeks current investment income as a secondary objective. The Portfolio attempts
to achieve these objectives by investing primarily in equity securities selected
on the basis of fundamental investment research for their long-term growth
prospects.
AUL American Bond Portfolio. The primary investment objective of the
AUL American Bond Portfolio is to provide a high level of income consistent with
prudent investment risk. As a secondary objective, the Portfolio seeks to
provide capital appreciation to the extent consistent with the primary
objective. The Portfolio attempts to achieve these objectives by investing
primarily in corporate bonds and other debt securities.
AUL American Money Market Portfolio. The investment objective of the
AUL American Money Market Portfolio is to provide a high level of current income
while preserving assets and maintaining liquidity and investment quality. The
Portfolio attempts to achieve this objective by investing in short-term money
market instruments that are of the highest quality.
AUL American Managed Portfolio. The investment objective of the AUL
American Managed Portfolio is to provide a high total return consistent with
prudent investment risk. The Portfolio attempts to achieve this objective
through a fully managed investment policy utilizing publicly traded common
stock, debt securities (including convertible debentures), and money market
securities.
Alger American Fund
Alger American Growth Portfolio. The Alger American Growth Portfolio is
a growth portfolio that seeks to obtain long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase, have a total market capitalization of one billion dollars or greater.
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation Portfolio. The American
Century VP Capital Appreciation Portfolio seeks capital growth by investing
primarily in common stocks (including securities convertible into common stocks
and other equity equivalents) and other securities that meet certain fundamental
and technical standards of selection and have, in the opinion of the Portfolio's
investment manager, better than average potential for appreciation. The
Portfolio tries to stay fully invested in such securities, regardless of the
movement of prices generally.
American Century VP International Portfolio. The American Century VP
International Portfolio seeks to achieve its investment objective of capital
growth by investing primarily in securities of foreign companies that meet
certain fundamental and technical standards of selection and have, in the
opinion of the investment manager, potential for appreciation. The Portfolio
will invest primarily in common stocks (defined to include depository receipts
for common stock and other equity equivalents) of such companies. Investment in
securities of foreign issuers typically involves a greater degree of risk than
investment in domestic securities.
Fidelity Variable Insurance Products Fund
VIP Equity-Income Portfolio. The VIP Equity-Income Portfolio seeks
reasonable income by investing primarily in income-producing equity securities;
the Portfolio will also consider the potential for capital appreciation.
VIP Growth Portfolio. The VIP Growth Portfolio seeks to achieve capital
appreciation. The Portfolio normally purchases common stocks, although the
Portfolio's investments are not restricted to any one type of security. Capital
appreciation may also be found in other types of securities, including bonds and
preferred stocks.
VIP High Income Portfolio. The VIP High Income Portfolio seeks to
obtain a high level of current income by investing primarily in high-yielding,
lower-rated, fixed-income securities, while also considering growth of capital.
These include securities commonly referred to as junk bonds, the risks of which
are described in the prospectus for the Fund.
VIP Money Market Portfolio. The VIP Money Market Portfolio seeks to
maintain a stable $1.00 share price and a high level of current income while
preserving capital and liquidity. The Portfolio invests its assets in
high-quality, U.S. dollar-denominated money market securities of domestic and
foreign issuers.
VIP Overseas Portfolio. The VIP Overseas Portfolio seeks long-term
growth of capital primarily through investments in foreign securities. The
Overseas Portfolio provides a means for investors to diversify their own
portfolios by participating in companies and economies outside of the United
States.
Fidelity Variable Insurance Products Fund II
VIP II Asset Manager Portfolio. The VIP II Asset Manager Portfolio
seeks high total return with reduced risk over the long-term by allocating its
assets among domestic and foreign stocks, bonds and short-term fixed income
instruments.
VIP II Contrafund Portfolio. The Contrafund Portfolio seeks capital
appreciation by investing primarily in companies that the managers of the
Portfolio believe to be undervalued due to an overly pessimistic appraisal by
the public.
VIP II Index 500 Portfolio. The VIP II Index 500 Portfolio seeks to
provide investment results that correspond to the total return (i.e., the
combination of capital changes and income) of common stocks publicly traded in
the United States. In seeking this objective, the Portfolio attempts to
duplicate the composition and total return of the Standard & Poor's Composite
Index of 500 Stocks.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio. The T. Rowe Price Equity Income
Portfolio seeks to provide substantial dividend income as well as long-term
capital appreciation through investments in common stocks of established
companies.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL BE ACHIEVED.
FUND EXPENSE TABLE
The purpose of the following table is to assist investors in
understanding the various costs and expenses that Owners bear indirectly. The
table reflects expenses of the Funds for the fiscal year ended December 1, 1996.
Expenses of the Funds as shown under "Fund Annual Expenses" are not fixed or
specified under the terms of the Policy and may vary from year to year. The fees
in this expense table have been provided by the Funds and have not been
independently verified by AUL. The information contained in the table is not
generally applicable to amounts allocated to payments under Settlement Option.
Fund Annual Expenses (as a percentage of net assets of each Fund)
Management/ Total Fund
Portfolio Advisory Fee Other Expenses Annual Expenses
AUL American Series Fund, In.
American Equity Portfolio 0.50%(1) 0.20% 0.70%
American Bond Portfolio 0.50%(1) 0.21% 0.71%
American Money Market Portfolio 0.50%(1) 0.20% 0.70%
American Managed Portfolio 0.50%(1) 0.20% 0.70%
Alger American Fund
Alger American Growth Portfolio 0.75% 0.04% 0.79%
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation 1.00% 0.00% 1.00%
Portfolio
American Century VP International Portfolio 1.50% 0.00% 1.50%
Fidelity Variable Insurance Products Fund
VIP Equity-Income Portfolio 0.51% 0.07% 0.58%(2)
VIP Growth Portfolio 0.61% 0.08% 0.69%(2)
VIP High Income Portfolio 0.59% 0.12% 0.71%
VIP Money Market Portfolio 0.21% 0.30% 0.51%
VIP Overseas Portfolio 0.76% 0.17% 0.93%(2)
Fidelity Variable Insurance Products Fund II
VIP II Asset Manager Portfolio 0.64% 0.10% 0.74%(2)
VIP II Contrafund Portfolio 0.61% 0.13% 0.74%(2)
VIP II Index 500 Portfolio 0.13% 0.15% 0.28%(3)
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio 0.85%(4) 0.00% 0.85%
(1) AUL has currently agreed to waive its advisory fee if the ordinary expenses
of a Portfolio exceed 1% and, to the extent necessary, assume any expenses
in excess of its advisory fee so that the expenses of each Portfolio,
including the advisory fee but excluding extraordinary expenses, will not
exceed 1% of the Portfolio's average daily net asset value per year. The
Company may terminate the policy of reducing its fee and/or assuming Fund
expenses upon 30 days written notice to the Fund and such policy will be
terminated automatically by the termination of the Investment Advisory
Agreement.
(2) A portion of the brokerage commissions that certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, the total operating
expenses presented in the table would have been 0.56% for the Equity-Income
Portfolio, 0.67% for the Growth Portfolio, 0.92% for Overseas Portfolio,
0.73% for Asset Manager Portfolio, and 0.71% for the Contrafund Portfolio.
(3) Fidelity Management & Research Company agreed to reimburse a portion of
Index 500 portfolio's expenses during the period. Without this
reimbursement, the fund's management fee, other expenses and total expenses
would have been 0.28%, 0.15%, and 0.43% respectively for Index 500
Portfolio on an annualized basis.
(4) T. Rowe Price's management fee includes the ordinary expenses of operating
the Portfolio.
More detailed information concerning the investment objectives, policies, and
restrictions pertaining to the Funds and Portfolios and their expenses,
investment advisory services and charges and the risks involved with investing
in the Portfolios and other aspects of their operations can be found in the
current prospectus for each Fund or Portfolio and the current Statement of
Additional Information for each Fund or Portfolio. The prospectuses for the
Funds or Portfolios should be read carefully before any decision is made
concerning the allocation of Net Premium payments or transfers among the
Investment Accounts.
AUL has entered into agreements with the Distributors/Advisers of American
Century Variable Portfolios, Inc. and Fidelity Investments under which AUL has
agreed to render certain services and to provide information about these Funds
to Owners who invest in these Funds. Under these agreements and for providing
these services, AUL receives compensation from the Distributor/Advisor of these
Funds ranging from zero basis points until a certain level of Fund assets have
been purchased to fifteen basis points on the net average aggregate deposits
made.
AUL cannot guarantee that each Fund or Portfolio will always be available for
the Policies; but, in the unlikely event that a Fund or Portfolio is not
available, AUL will take reasonable steps to secure the availability of a
comparable fund. Shares of each Portfolio are purchased and redeemed at net
asset value, without a sales charge.
PREMIUM PAYMENTS AND ALLOCATIONS
Applying for a Policy
AUL requires satisfactory evidence of the proposed Insured's insurability, which
may include a medical examination of the proposed Insured. The available Issue
Ages are 0 through 85 on a standard basis. Issue Age is determined based on the
Insured's age as of the Contract Date. Acceptance of an application depends on
AUL's underwriting rules, and AUL reserves the right to reject an application.
Coverage under the Policy is effective as of the later of the date the initial
premium is paid or the Issue Date.
As the Owner of the Policy, you may exercise all rights provided under the
Policy while the Insured is living, subject to the interests of any assignee or
irrevocable beneficiary. The Insured is the Owner, unless a different Owner is
named in the application. In accordance with the terms of the Policy, the Owner
may in the application or by Proper Notice name a contingent Owner or a new
Owner while the Insured is living. The Policy may be jointly owned by more than
one Owner. The consent of both joint Owners is required for all transactions
except when proper forms have been executed to allow one Owner to make changes.
Unless a contingent Owner has been named, on the death of the last surviving
Owner, ownership of the Policy passes to the estate of the last surviving Owner,
which then will become the Owner. A change in Owner may have tax consequences.
See "Tax Considerations."
Right to Examine Policy
You may cancel your Policy for a refund during your "right to examine" period.
This period expires 10 days after you receive your Policy. We assume you receive
your Policy 5 days after the Issue Date. If you decide to cancel the Policy, you
must return it by mail or other delivery method to the Home Office or to the
authorized AUL representative who sold it. Immediately after mailing or delivery
of the Policy to AUL, the Policy will be deemed void from the beginning. Within
seven calendar days after AUL receives the returned Policy, AUL will refund the
greater of premiums paid or the Account Value.
Premiums
The Policy permits the Owner to pay a large single premium and, subject to
restrictions, additional premiums. The minimum initial premium payment required
depends on a number of factors, such as the Age, sex and risk class of the
proposed Insured, the initial Face Amount, any supplemental and/or rider
benefits and the premium payments you propose to make. You may elect the initial
premium to be 80%, 90% or 100% of the Initial Maximum Premium. The Initial
Maximum Premium is less than or equal to the maximum premium that can be paid
for a given Face Amount in order for an insurance policy to qualify as a life
insurance contract for tax purposes. Consult your AUL representative for
information about the initial premium required for the coverage you desire.
The initial premium is due on or before delivery of the Policy. There will be no
coverage until this premium is paid or until the Issue Date, whichever is later.
You may make other premium payments at any time and in any amount, subject to
the limits described in this section. The actual amount of premium payments will
affect the Account Value and the period of time the Policy remains in force.
Premium payments after the initial payment must be made to our Home Office. Each
payment must be at least equal to the minimum payment shown on the Policy Data
Page in your Policy. All premiums combined may not be more than $1,000,000,
unless a higher amount is agreed to by us.
If the payment of any premium would cause an increase in Risk Amount because of
the Minimum Insurance Percentage, we may require satisfactory evidence of
insurability before accepting it. If we accept the premium, we will allocate the
premium to your Account Value on the date of our acceptance. If we do not accept
the premium, we will refund it to you.
If the payment of any premium would cause this Policy to fail to meet the
federal tax definition of a life insurance contract in accordance with the
Internal Revenue Code, we reserve the right to refund the amount to you with
interest no later than 60 days after the end of the Policy Year which we receive
the premium, but we assume no obligation to do so.
Each premium after the initial premium must be at least $1,000. AUL may increase
this minimum 90 days after we send you a written notice of such increase.
However AUL reserves the right to limit the amount of a premium payment or the
total premium payments paid.
Premium Payments to Prevent Lapse
The Policy goes into default at the start of the grace period, which is a period
to make a premium payment sufficient to prevent lapse. The grace period starts
if the Net Cash Value on a Monthiversary will not cover the Monthly Deduction. A
premium sufficient to keep the Policy in force must be submitted during the
grace period.
AUL will send notice of the grace period and the amount required to be paid
during the grace period to your last known address. The grace period shall
terminate as of the date indicated in the notice, which shall comply with any
applicable state law. The grace period will begin when the notice is sent. Your
Policy will remain in force during the grace period. If the Insured should die
during the grace period, the Death Benefit Proceeds will still be payable to the
beneficiary, although the amount paid will reflect a reduction for the Monthly
Deductions due on or before the date of the Insured's death (and for any
outstanding loan and loan interest). See "Amount of Death Benefit Proceeds." If
the grace period premium payment has not been paid before the grace period ends,
your Policy will lapse. It will have no value, and no benefits will be payable.
See "Reinstatement." A grace period also may begin if any outstanding loan and
loan interest becomes excessive. See "Policy Loans."
Premium Allocations and Crediting
In the Policy application, you specify the percentage of a premium to be
allocated to each Investment Account. The sum of your allocations must equal
100%, with at least 1% of the premium payment allocated to each Investment
Account selected by you. All premium allocations must be in whole percentages.
AUL reserves the right to limit the number of Investment Accounts to which
premiums may be allocated. You can change the allocation percentages at any
time, subject to these rules, by sending Proper Notice to the Home Office, or by
telephone if written authorization is on file with us. The change will apply to
the premium payments received with or after receipt of your notice.
The initial premium generally is allocated to the Investment Accounts in
accordance with your allocation instructions on the later of the day the "right
to examine" period expires, or the date we receive the premium at our Home
Office. Subsequent premiums are allocated as of the end of the Valuation Period
during which we receive the premium at our Home Office.
We generally allocate all premiums received prior to the Issue Date to our
general account prior to the end of the "right to examine" period. We will
credit interest daily on premiums so allocated. However, we reserve the right to
allocate premiums to the Investment Accounts of the Separate Account in
accordance with your allocation instructions prior to the expiration of the
"right to examine" period. If you exercise your right to examine the Policy and
cancel it by returning it to us, we will refund to you the greater of any
premiums paid or the Account Value. At the end of the "right to examine" period,
we transfer the premium and interest to the Investment Accounts of the Separate
Account based on the percentages you have selected in the application. For
purposes of determining the end of the "right to examine" period, solely as it
applies to this transfer, we assume that receipt of this Policy occurs 5 days
after the Issue Date.
Premium payments requiring satisfactory evidence of insurability will not be
credited to the Policy until underwriting has been completed and the premium
payment has been accepted. If the additional premium payment is rejected, AUL
will return the premium payment immediately, without any adjustment for
investment experience.
Transfer Privilege
You may transfer amounts among Investment Accounts at any time after the "right
to examine" period.
There currently is no minimum transfer amount, although we reserve the right to
require a $100 minimum transfer. You must transfer the minimum amount, or, if
less, the entire amount in the account from which you are transferring each time
a transfer is made. If after the transfer the amount remaining in any account is
less than $25, we have the right to transfer the entire amount. Any applicable
transfer charge will be assessed. The charge will be deducted from the
account(s) from which the transfer is made on a prorata basis.
Transfers are made such that the Account Value on the date of transfer will not
be affected by the transfer, except for the deduction of any transfer charge.
Currently, all transfers are free. On a guaranteed basis, we reserve the right
to limit the number of transfers to 12 per year, or to restrict transfers from
being made on consecutive Valuation Dates.
If we determine that the transfers made by or on behalf of one or more Owners
are to the disadvantage of other Owners, we may restrict the rights of certain
Owners. We also reserve the right to limit the size of transfers and remaining
balances, to limit the number and frequency of transfers, and to discontinue
telephone transfers.
The first 12 transfers during each Policy Year are free. Any unused free
transfers do not carry over to the next Policy Year. We reserve the right to
assess a $25 charge for the thirteenth and each subsequent transfer during a
Policy Year. For the purpose of assessing the charge, each request (or telephone
request described below) is considered to be one transfer, regardless of the
number of Investment Accounts affected by the transfer. The charge will be
deducted from Investment Account(s) from which the transfer are made.
Telephone Transfers. Telephone transfers will be based upon
instructions given by telephone, provided the appropriate election has been made
at the time of application or proper authorization has been provided to us. We
reserve the right to suspend telephone transfer privileges at any time, for any
reason, if we deem such suspension to be in the best interests of Owners.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, and if we follow those procedures, we will not be
liable for any losses due to unauthorized or fraudulent instructions. We may be
liable for such losses if we do not follow those reasonable procedures. The
procedures we will follow for telephone transfers include requiring some form of
personal identification prior to acting on instructions received by telephone,
providing written confirmation of the transaction, and making a tape recording
of the instructions given by telephone.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program, if elected, enables you to transfer
systemically and automatically, on a monthly basis, specified dollar amounts
from The AUL American Money Market Investment Account to other Investment
Accounts. By allocating on a regularly scheduled basis, as opposed to allocating
the total amount at one particular time, you may be less susceptible to the
impact of market fluctuations. However, we make no guarantee that the Dollar
Cost Averaging Program will result in a gain.
You specify the fixed dollar amount to be transferred automatically from the AUL
American Money Market Investment Account. At the time that you elect the Dollar
Cost Averaging Program, the Account Value in the AUL American Money Market
account from which transfers will be made must be at least $2,000.
You may elect this program at the time of application by completing the
authorization on the application or at any time after the Policy is issued by
properly completing and returning the election form. Transfers made under the
Dollar Cost Averaging Program will commence on Monthiversary on or next
following the election.
Once elected, transfers from the AUL American Money Market Investment Account
will be processed until the value of the Investment Account is completely
depleted, or you send us Proper Notice instructing us to cancel the transfers.
Currently, transfers made under the Dollar Cost Averaging Program will not be
subject to any transfer charge and will not count against the number of free
transfers permitted in a Policy Year. We reserve the right to impose a $25
transfer charge for each transfer effected under a Dollar Cost Averaging
Program. We also reserve the right to alter the terms or suspend or eliminate
the availability of the Dollar Cost Averaging Program at any time.
Portfolio Rebalancing Program
You may elect to have the accumulated balance of each Investment Account
redistributed to equal a specified percentage of the Variable Account. This will
be done on an annual basis from the Monthiversary on which the Portfolio
Rebalancing Program commences. If elected, this program automatically adjusts
your Portfolio mix to be consistent with the allocation most recently requested.
The redistribution will not count toward the 12 free transfers permitted each
Policy Year. If the Dollar Cost Averaging Program has been elected, the
Portfolio Rebalancing Program will not commence until the Monthiversary
following the termination of the Dollar Cost Averaging Program.
You may elect this program at the time of application by completing the
authorization on the application or at any time after the Policy is issued by
properly completing the election form and returning it to us. Portfolio
rebalancing will terminate when you request any transfer or the day we receive
Proper Notice instructing us to cancel the Portfolio Rebalancing Program. We do
not currently charge for this program. We reserve the right to alter the terms
or suspend or eliminate the availability of portfolio rebalancing at any time.
CHARGES AND DEDUCTIONS
Monthly Deduction
AUL will deduct Monthly Deductions for the Contract Date and each Monthiversary.
Monthly Deductions due on the Contract Date and any Monthiversaries prior to the
Issue Date are deducted on the Issue Date. Your Contract Date is the date used
to determine your Monthiversary. The Monthly Deduction consists of (1) cost of
insurance charge, (2) monthly administrative charge, (3) mortality and expense
risk charge, (4) tax charges, and (5) any charges for rider benefits, as
described below. The Monthly Deduction is deducted from the Investment Account
prorata on the basis of the portion of Account Value in each account.
Cost of Insurance Charge. This charge compensates AUL for the expense
of providing insurance coverage. The charge depends on a number of variables and
therefore will vary between Policies, and may vary from Monthiversary to
Monthiversary. The Policy contains guaranteed cost of insurance rates that may
not be increased. The guaranteed rates are no greater than the 1980
Commissioners Standard Ordinary Non-Smoker and Smoker Mortality Tables (the
"1980 CSO Tables") (and where unisex cost of insurance rates apply, the 1980
CSO-C Tables). The guaranteed rates for substandard classes are based on
multiples of or additives to the 1980 CSO Tables. These rates are based on the
Attained Age and underwriting class of the Insured. They are also based on the
sex of the Insured, except that unisex rates are used where appropriate under
applicable law, including in the state of Montana, and in Policies purchased by
employers and employee organizations in connection with employment-related
insurance or benefit programs. The cost of insurance rate generally increases
with the Attained Age of the Insured. As of the date of this Prospectus, we
charge "current rates" that are generally lower (i.e., less expensive) than the
guaranteed rates, and we may also charge current rates in the future. The
current rates may also vary with the Attained Age, gender, where permissible,
duration, policy size and underwriting class of the Insured, or, alternatively,
may be a charge against Account Value that does not vary with Attained Age or
gender, and may vary with underwriting class. For any Policy, the current cost
of insurance on a Monthiversary is calculated in one of two ways: (1) if the
Initial Maximum Premium is paid, the cost of insurance equals the lesser of an
amount equal, on an annual basis, to a percentage multiplied by the Account
Value or an amount equal to the Risk Amount multiplied by the guaranteed maximum
cost of insurance rate set forth in the Policy; or (2) if less than the Initial
Maximum Premium is paid, the cost of insurance is calculated by multiplying the
current cost of insurance rate for the Insured by the Risk Amount for that
Monthiversary. We reserve the right to change the current cost of insurance
rates, and, in the case of payment of the Initial Maximum Premium, to assess a
cost of insurance charge calculated solely by multiplying the current cost of
insurance rate for the Insured by the Risk Amount for a Monthiversary, in the
same manner as the cost of insurance charge currently is calculated when less
than the Initial Maximum Premium is paid. The Risk Amount on a Monthiversary is
the difference between the Death Benefit divided by 1.00246627 and the Account
Value.
AUL places the Insured in a risk class when the Policy is given underwriting
approval, based on AUL's underwriting of the application. AUL currently places
Insureds in a standard class based on underwriting. An Insured may be placed in
a substandard risk class, which involves a higher mortality risk than the
standard classes. Standard rates are available for Issue Ages 0-89. The
guaranteed maximum cost of insurance rate is set forth on the Policy Data Page
of your Policy.
Monthly Administrative Charge. The monthly administrative charge is a
level monthly charge that is guaranteed not to exceed, on an annual basis, a
rate of 0.40% of Account Value. We reserve the right to charge a lower current
rate. This charge reimburses AUL for expenses incurred in the administration of
the Policies and the Separate Account. Such expenses include, but are not
limited to: underwriting and issuing the Policy, confirmations, annual reports
and account statements, maintenance of Policy records, maintenance of Separate
Account records, administrative personnel costs, mailing costs, data processing
costs, legal fees, accounting fees, filing fees, the costs of other services
necessary for Owner servicing and all accounting, valuation, regulatory and
updating requirements.
Mortality and Expense Risk Charge. AUL deducts a monthly charge from
the Investment Accounts prorata based on your amounts in each account. The
current charge is at an annual rate of 0.90% of Variable Account value during
the first 10 Policy Years, and 0.80% thereafter, and is guaranteed not to
increase for the duration of a Policy. AUL may realize a profit from this
charge.
The mortality risk assumed is that Insureds, as a group, may live for a shorter
period of time than estimated and, therefore, the cost of insurance charges
specified in the Policy will be insufficient to meet actual claims. The expense
risk AUL assumes is that expenses incurred in issuing and administering the
Policies and the Separate Account will exceed the amounts realized from the
monthly administrative charges assessed against the Policies.
Premium Tax Charge. AUL deducts a monthly charge at an annual rate
equal to .25% of Account Value during the first 10 Policy Years for state and
local premium taxes and related administrative expenses. The state and local
premium tax charge reimburses AUL for premium taxes and related administrative
expenses associated with the Policies. AUL expects to pay an average state and
local premium tax rate (including related administrative expenses) of
approximately 2.5% of premium payments for all states, although such tax rates
from 0% to 4%. This charge may be more or less than the amount actually assessed
by the state in which a particular owner lives.
Federal Tax Charge. AUL also deducts a federal tax charge at an annual
rate equal to 0.15% of Account Value during the first 10 Policy Years.
Cost of Additional Benefits Provided by Riders. The cost of additional
benefits provided by riders is charged to the Account Value on the
Monthiversary.
Annual Contract Charge
AUL deducts an annual contract charge from Account Value equal to $30 on each
Policy Anniversary in which the Account Value is less than $50,000. This charge
is deducted prorata from each Investment Account to which you have allocated
Account Value.
Surrender Charge
During the first 10 Policy Years, a surrender charge based on the percentage of
premium surrendered will be deducted from the Account Value if the Policy is
completely surrendered for cash, or if you make a Partial Surrender in excess of
12% of the first year premium not previously withdrawn. The total surrender
charge will not exceed the maximum surrender charge set forth in your Policy.
The surrender charge on the date of reinstatement of a Policy will be based on
the number of Policy Years from the original Contract Date. For purposes of
determining the surrender charge on any date after reinstatement, the period the
Policy was lapsed will be credited to the total Policy period.
The table below shows the surrender charge deducted if the Policy is completely
surrendered during the first 10 Policy Years.
Table of Surrender Charges
Policy Year Percentage of Premium
1 10%
2 9%
3 8%
4 7%
5 6%
6 5%
7 4%
8 3%
9 2%
10 1%
Taxes
AUL does not currently assess a charge for any taxes other than the state
premium tax charge and federal tax charge. We reserve the right, however, to
assess a charge for such taxes, or taxes resulting from the performance of the
Separate Account, against the Separate Account if we determine that such taxes
will be incurred.
Special Uses
We may agree to reduce or waive the surrender charge or the Monthly Deduction,
or credit additional amounts under the Policies in situations where selling
and/or maintenance costs associated with the Policies are reduced, such as the
sale of several Policies to the same Owner(s), sales of large Policies, sales of
Policies in connection with a group or sponsored arrangement or mass
transactions over multiple Policies.
In addition, we may agree to reduce or waive some or all of these charges and/or
credit additional amounts under the Policies for those Policies sold to persons
who meet criteria established by us, who may include current and retired
officers, directors and employees of us and our affiliates. We may also agree to
waive minimum premium requirements for such persons.
We will only reduce or waive such charges or credit additional amounts on any
Policies where expenses associated with the sale of the Policy and/or costs
associated with administering and maintaining the Policy are reduced. We reserve
the right to terminate waiver/reduced charge and crediting programs at any time,
including those for previously issued Policies.
Fund Expenses
Each Investment Account of the Separate Account purchases shares at the net
asset value of the corresponding Portfolio. The net asset value reflects the
investment advisory fee and other expenses that are deducted from the assets of
the Portfolio. The advisory fees and other expenses are not fixed or specified
under the terms of the Policy and are described in the Funds' prospectuses.
HOW YOUR ACCOUNT VALUES VARY
There is no minimum guaranteed Account Value, Cash Value or Net Cash Value.
These values will vary with the investment experience of the Investment
Accounts, and will depend on the allocation of Account Value. If the Net Cash
Value on a Monthiversary is less than the amount of the Monthly Deduction to be
deducted on that date, the Policy will be in default and a grace period will
begin. See "Premium Payments to Prevent Lapse."
Determining the Account Value
On the Contract Date, the Account Value is equal to the initial premium less the
Monthly Deductions deducted as of the Contract Date. On each Valuation Day
thereafter, the Account Value is the aggregate of the Variable Account value and
the Loan Account value. The Account Value will vary to reflect the performance
of the Investment Accounts to which amounts have been allocated, interest
credited on amounts in the Loan Account, premium payments since the prior
Valuation Date, charges, transfers, Partial Surrenders and surrender charges
since the prior Valuation Date, loans and loan repayments.
Variable Account Value. When you allocate an amount to an Investment
Account, either by premium payment allocation or by transfer, your Policy is
credited with accumulation units in that Investment Account. The number of
accumulation units credited is determined by dividing the amount allocated to
the Investment Account by the Investment Account's accumulation unit value at
the end of the Valuation Period during which the allocation is effected. The
Variable Account value of the Policy equals the sum, for all Investment
Accounts, of the accumulation units credited to an Investment Account multiplied
by that Investment Account's accumulation unit value.
The number of Investment Account accumulation units credited to your Policy will
increase when premium payments are allocated to the Investment Account and when
amounts are transferred to the Investment Account. The number of Investment
Account accumulation units credited to a Policy will decrease when the allocated
portion of the Monthly Deduction is taken from the Investment Account, a loan is
made, an amount is transferred from the Investment Account, or a Partial
Surrender is taken from the Investment Account.
Accumulation Unit Values. An Investment Account's accumulation unit
value is determined on each Valuation Date and varies to reflect the investment
experience of the underlying Portfolio. It may increase, decrease, or remain the
same from Valuation Period to Valuation Period. The accumulation unit value for
the Money Market Investment Account was initially set at $1, and the
accumulation unit value for each of the other Investment Accounts was
arbitrarily set at $5 when each Investment Account was established. For each
Valuation Period after the date of establishment, the accumulation unit value is
determined by multiplying the value of an accumulation unit for an Investment
Account for the prior Valuation Period by the net investment factor for the
Investment Account for the current Valuation Period.
Net Investment Factor. The net investment factor is used to measure the
investment performance of an Investment Account from one Valuation Period to the
next. For any Investment Account, the net investment factor for a Valuation
Period is determined by dividing (a) by (b), where:
(a) is equal to:
1. the net asset value per share of the Portfolio held in the
Investment Account determined at the end of the current Valuation
Period; plus
2. the per share amount of any dividend or capital gain
distribution paid by the Portfolio during the Valuation Period;
plus
3. the per share credit or charge with respect to taxes, if any,
paid or reserved for by AUL during the Valuation Period that are
determined by AUL to be attributable to the operation of the
Investment Account; and
(b) is equal to:
1. the net asset value per share of the Portfolio held in the
Investment Account determined at the end of the preceding Valuation
Period; plus
2. the per share credit or charge for any taxes reserved for the
immediately preceding Valuation Period.
Loan Account Value. On any Valuation Date, if there have been any
Policy loans, the Loan Account value is equal to amounts transferred to the Loan
Account from the Investment Accounts as collateral for Policy loans and for due
and unpaid loan interest, less amounts transferred from the Loan Account to the
Investment Accounts as outstanding loans and loan interest are repaid, and plus
interest credited to the Loan Account.
Cash Value and Net Cash Value
The Cash Value on a Valuation Date is the Account Value less any applicable
surrender charges. The Net Cash Value on a Valuation Date is the Cash Value
reduced by any outstanding loans and loan interest. Net Cash Value is used to
determine whether a grace period starts. See "Premium Payments to Prevent
Lapse." It is also the amount that is available upon full surrender of the
Policy. See "Surrendering the Policy for Net Cash Value."
DEATH BENEFIT
As long as the Policy remains in force, AUL will pay the Death Benefit Proceeds
upon receipt at the Home Office of satisfactory proof of the Insured's death.
AUL may require return of the Policy. The Death Benefit Proceeds may be paid in
a lump sum, generally within seven calendar days of receipt of satisfactory
proof (see "When Proceeds Are Paid"), or in any other way agreeable to you and
us. Before the Insured dies, you may choose how the proceeds are to be paid. If
you have not made a choice before the Insured dies, the beneficiary may choose
how the proceeds are paid. The Death Benefit Proceeds will be paid to the
beneficiary. See "Selecting and Changing the Beneficiary."
Amount of Death Benefit Proceeds
The Death Benefit Proceeds are equal to the sum of the Death Benefit in force as
of the end of the Valuation Period during which death occurs, plus any rider
benefits, minus any outstanding loan and loan interest on that date. If the date
of death occurs during a grace period, the Death Benefit will still be payable
to the beneficiary, although the amount will be equal to the Death Benefit
immediately prior to the start of the grace period, plus any benefits provided
by rider, and less any outstanding loan and loan interest and overdue Monthly
Deductions as of the date of death. Under certain circumstances, the amount of
the Death Benefit may be further adjusted. See "Limits on Rights to Contest the
Policy" and "Changes in the Policy or Benefits."
If part or all of the Death Benefit Proceeds is paid in one sum, AUL will pay
interest on this sum if required by applicable state law from the date of the
Insured's death to the date of payment.
Death Benefit
The Death Benefit is the greater of the Face Amount or the Applicable Percentage
(as described below) of Account Value on the date of the Insured's death. If
investment performance is favorable, the amount of the Death Benefit may
increase. However, the Death Benefit ordinarily will not change for several
years to reflect any favorable investment performance and may not change at all.
To see how and when investment performance may begin to affect the Death
Benefit, see "Illustrations of Account Values, Cash Values, Death Benefits and
Accumulated Premium Payments."
Applicable Percentages of Account Value
Attained Age Percentage Attained Age Percentage Attained Age Percentage Attained Age Percentage
0-40 250% 50 185% 60 130% 70 115%
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94 101
95+ 100
Selecting and Changing the Beneficiary
You select the beneficiary in your application. You may select more than one
beneficiary. You may later change the beneficiary in accordance with the terms
of the Policy. The primary beneficiary, or, if the primary beneficiary is not
living, the contingent beneficiary, is the person entitled to receive the Death
Benefit Proceeds under the Policy. If the Insured dies and there is no surviving
beneficiary, the Owner (or the Owner's estate if the Owner is the Insured) will
be the beneficiary. If a beneficiary is designated as irrevocable, then the
beneficiary's written consent must be obtained to change the beneficiary.
CASH BENEFITS
Policy Loans
Prior to the death of the Insured, you may borrow against your Policy by
submitting Proper Notice to the Home Office at any time after the end of the
"right to examine" period while the Policy is not in the grace period. The
Policy is assigned to us as the sole security for the loan. The minimum amount
of a new loan is $500. The maximum amount of a new loan is:
1. 90% of the Variable Account value; less
2. any loan interest due on the next Policy Anniversary; less
3. any applicable surrender charges; less
4. any existing loans and accrued loan interest.
Outstanding loans reduce the amount available for new loans. Policy loans will
be processed as of the date your written request is received and approved. Loan
proceeds generally will be sent to you within seven calendar days. See "When
Proceeds Are Paid."
Interest. AUL will charge interest on any outstanding loan at an annual
rate of 6.0%. Interest is due and payable on each Policy Anniversary while a
loan is outstanding. If interest is not paid when due, the amount of the
interest is added to the loan and becomes part of the loan.
Loan Collateral. When a Policy loan is made, an amount sufficient to
secure the loan is transferred out of the Investment Accounts into the Policy's
Loan Account. Thus, a loan will have no immediate effect on the Account Value,
but the Net Cash Value will be reduced immediately by the amount transferred to
the Loan Account. The Owner can specify the Investment Accounts from which
collateral will be transferred. If no allocation is specified, collateral will
be transferred from each Investment Account in the same proportion that the
Account Value in each Investment Account bears to the total Account Value in
those accounts on the date that the loan is made. Due and unpaid interest will
be transferred each Policy Anniversary from each Investment Account to the Loan
Account in the same proportion that each Investment Account value bears to the
total unloaned Account Value. The amount we transfer will be the amount by which
the interest due exceeds the interest which has been credited on the Loan
Account.
The Loan Account will be credited with interest at an effective annual rate of
not less than 4.0%. Thus, the maximum net cost of a loan is 2.0% per year (the
net cost of a loan is the difference between the rate of interest charged on
outstanding loans and loan interests and the amount credited to the Loan
Account). On each Monthiversary, the interest earned on the Loan Account since
the previous Monthiversary will be transferred to the Loan Account.
Preferred Loan Provision. A preferred loan may be made available by
AUL. The amount available for a preferred loan is the amount by which the
Account Value exceeds total premiums paid. The maximum amount available for a
preferred loan may not exceed the maximum loan amount. The preferred loan amount
will be credited with an effective annual rate of interest (currently, 6.0%).
Thus, the current net cost of the preferred loan is 0% per year. Any interest
credited in excess of the minimum guaranteed rate is not guaranteed.
Loan Repayment; Effect if Not Repaid. You may repay all or part of your
loan at any time while the Insured is living and the Policy is in force. Loan
repayments must be sent to the Home Office and will be credited as of the date
received. A loan repayment must be clearly marked as "loan repayment" or it will
be credited as a premium unless the premium would cause the Policy to fail to
meet the federal tax definition of a life insurance contract in accordance with
the Internal Revenue Code. When a loan repayment is made, Account Value in the
Loan Account in an amount equivalent to the repayment is transferred from the
Loan Account to the Investment Accounts. Thus, a loan repayment will have no
immediate effect on the Account Value, but the Net Cash Value will be increased
immediately by the amount of the loan repayment. Loan repayment amounts will be
transferred to the Investment Accounts according to the premium allocation
instructions in effect at that time.
If the Death Benefit becomes payable while a loan is outstanding, any
outstanding loans and loan interest will be deducted in calculating the Death
Benefit Proceeds. See "Amount of Death Benefit Proceeds."
If the Monthly Deduction exceeds the Net Cash Value on any Monthiversary, the
Policy will be in default. You will be sent notice of the default. You will have
a grace period within which you may submit a sufficient payment to avoid
termination of coverage under the Policy. The notice will specify the amount
that must be repaid to prevent termination. See "Premium Payments to Prevent
Lapse."
Effect of Policy Loan. A loan, whether or not repaid, will have a
permanent effect on the Death Benefit and Policy values because the investment
results of the Investment Accounts of the Separate Account will apply only to
the non-loaned portion of the Account Value. The longer the loan is outstanding,
the greater the effect is likely to be. Depending on the investment results of
the Investment Accounts while the loan is outstanding, the effect could be
favorable or unfavorable. Policy loans may increase the potential for lapse if
investment results of the Investment Accounts are less than anticipated. Also,
loans could, particularly if not repaid, make it more likely than otherwise for
a Policy to terminate. Loans may be currently taxable and subject to a 10%
penalty tax. See "Tax Considerations," for a discussion of the tax treatment of
Policy loans, and the adverse tax consequences if a Policy lapses with loans
outstanding.
Surrendering the Policy for Net Cash Value
You may surrender your Policy at any time for its Net Cash Value by submitting
Proper Notice to us. AUL may require return of the Policy. A surrender charge
may apply. See "Surrender Charge." A surrender request will be processed as of
the date your written request and all required documents are received. Payment
will generally be made within seven calendar days. See "When Proceeds are Paid."
The Net Cash Value may be taken in one lump sum or it may be applied to a
payment option. See "Settlement Options." The Policy will terminate and cease to
be in force if it is surrendered for one lump sum or applied to a settlement
option. It cannot later be reinstated. Surrenders may have adverse tax
consequences. See "Tax Considerations."
Partial Surrenders
You may make Partial Surrenders under your Policy of at least $500 at any time
after the end of the "right to examine" period by submitting Proper Notice to
us. A Partial Surrender exceeding, in any Policy Year, 12% of the total first
year premium not previously withdrawn may be subject to a surrender charge. See
"Surrender Charge." As of the date AUL receives a written request for a Partial
Surrender, the Account Value and, therefore, the Cash Value will be reduced by
the Partial Surrender.
When you request a Partial Surrender, you can direct how the Partial Surrender
will be deducted from the Investment Accounts. If you provide no directions, the
Partial Surrender will be deducted from your Account Value in the Investment
Accounts on a prorata basis. Partial Surrenders may have adverse tax
consequences. See "Tax Considerations."
AUL will reduce the Face Amount in proportion to the reduction in the Account
Value resulting from the Partial Surrender. AUL will reject a Partial Surrender
request if the Partial Surrender would reduce the Account Value below the
minimum Account Value on the Policy Data Page, or if the Partial Surrender would
cause the Policy to fail to qualify as a life insurance contract under
applicable tax laws, as interpreted by AUL.
Partial Surrender requests will be processed as of the date your written request
is received, and generally will be paid within seven calendar days. See "When
Proceeds Are Paid."
Settlement Options
At the time of surrender or death, the Policy offers various options of
receiving proceeds payable under the Policy. These settlement options are
summarized below. All of these options are forms of fixed-benefit annuities
which do not vary with the investment performance of a separate account. Any
representative authorized to sell this Policy can further explain these options
upon request.
You may apply proceeds of $2,000 or more which are payable under this Policy to
any of the following options:
Option 1 - Income for a Fixed Period. Proceeds are payable in equal
monthly installments for a specified number of years, not to exceed 20.
Option 2 - Life Annuity. Proceeds are paid in equal monthly
installments for as long as the payee lives. A number of payments can be
guaranteed, such as 120, or the number of payments required to refund the
proceeds applied.
Option 3 -Survivorship Annuity. Proceeds are paid in monthly
installments for as long as either the first payee or surviving payee lives. A
number of payments equal to the initial payment can be guaranteed, such as 120.
A different monthly installment payable to the surviving payee can be specified.
Any other method or frequency of payment we agree to may be used to pay the
proceeds of this Policy.
Policy proceeds payable in one sum will accumulate at interest from the date of
death or surrender to the payment date at the rate of interest then paid by us
or at the rate specified by statute, whichever is greater. Based on the
settlement option selected, we will determine the amount payable. The minimum
interest rate used in computing payments under all options will be 3% per year.
You may select or change an option by giving Proper Notice prior to the
settlement date. If no option is in effect on the settlement date, the payee may
select an option. If this Policy is assigned or if the payee is a corporation,
association, partnership, trustee or estate, a settlement option will be
available only with our consent.
If a payee dies while a settlement option is in effect, and there is no
surviving payee, we will pay a single sum to such payee's estate. The final
payment will be the commuted value of any remaining guaranteed payments.
Settlement option payments will be exempt from the claims of creditors to the
maximum extent permitted by law.
Minimum Amounts. AUL reserves the right to pay the total amount of the
Policy in one lump sum, if less than $2,000. If monthly payments are less than
$100, payments may be made less frequently at AUL's option.
The proceeds of this Policy may be paid in any other method or frequency of
payment acceptable to us.
Specialized Uses of the Policy
Because the Policy provides for an accumulation of Cash Value as well as a Death
Benefit, the Policy can be used for various individual and business financial
planning purposes. Purchasing the Policy in part for such purposes entails
certain risks. For example, if the investment performance of Investment Accounts
to which Variable Account value is allocated is poorer than expected or if
sufficient premiums are not paid, the Policy may lapse or may not accumulate
sufficient Variable Account value to fund the purpose for which the Policy was
purchased. Partial Surrenders and Policy loans may significantly affect current
and future Account Value, Net Cash Value, or Death Benefit Proceeds. Depending
upon Investment Account investment performance and the amount of a Policy loan,
the loan may cause a Policy to lapse. Because the Policy is designed to provide
benefits on a long-term basis, before purchasing a Policy for a specialized
purpose a purchaser should consider whether the long-term nature of the Policy
is consistent with the purpose for which it is being considered. Using a Policy
for a specialized purpose may have tax consequences. See "Tax Considerations."
Life Insurance Retirement Plans
Any Owners or applicants who wish to consider using the Policy as a funding
vehicle for (non-qualified) retirement purposes may obtain additional
information from us. An Owner could pay premiums under a Policy for a number of
years, and upon retirement, could utilize a Policy's loan and partial withdrawal
features to access Account Value as a source of retirement income for a period
of time. This use of a Policy does not alter an Owner's rights or our
obligations under a Policy; the Policy would remain a life insurance contract
that, so long as it remains in force, provides for a Death Benefit payable when
the Insured dies.
Illustrations are available upon request that portray how the Policy can be used
as a funding mechanism for (non-qualified) retirement plans, referred to herein
as "life insurance retirement plans," for individuals. Illustrations provided
upon request show the effect on Account Value, Cash Value, and the net Death
Benefit of premiums paid under a Policy and partial withdrawals and loans taken
for retirement income; or reflecting allocation of premiums to specified
Investment Accounts. This information will be portrayed at hypothetical rates of
return that are requested. Charts and graphs presenting the results of the
illustrations or a comparison of retirement strategies will also be furnished
upon request. Any graphic presentations and retirement strategy charts must be
accompanied by a corresponding illustration; illustrations must always include
or be accompanied by comparable information that is based on guaranteed cost of
insurance rates and that presents a hypothetical gross rate of return of 0%.
Retirement illustrations will not be furnished with a hypothetical gross rate of
return in excess of 12%.
The hypothetical rates of return in illustrations are illustrative only and
should not be interpreted as a representation of past or future investment
results. Policy values and benefits shown in the illustrations would be
different if the gross annual investment rates of return were different from the
hypothetical rates portrayed, if premiums were not paid when due, and whether
loan interest was paid when due. Withdrawals or loans may have an adverse effect
on Policy benefits.
Risks of Life Insurance Retirement Plans
Using your Policy as a funding vehicle for retirement income purposes presents
several risks, including the risk that if your Policy is insufficiently funded
in relation to the income stream expected from your Policy, your Policy can
lapse prematurely and result in significant income tax liability to you in the
year in which the lapse occurs. Other risks associated with borrowing from your
Policy also apply. Loans will be automatically repaid from the gross Death
Benefit at the death of the Insured, resulting in the estimated payment to the
beneficiary of the net Death Benefit, which will be less than the gross Death
Benefit and may be less than the Face Amount. Upon surrender, the loan will be
automatically repaid, resulting in the payment to you of the Net Cash Value.
Similarly, upon lapse, the loan will be automatically repaid. The automatic
repayment of the loan upon lapse or surrender will cause the recognition of
taxable income to the extent that Net Cash Value plus the amount of the repaid
loan exceeds your basis in the Policy. Thus, under certain circumstances,
surrender or lapse of your Policy could result in tax liability to you. In
addition, to reinstate a lapsed Policy, you would be required to make certain
payments. Thus, you should be careful to fashion a life insurance retirement
plan so that your Policy will not lapse prematurely under various market
scenarios as a result of withdrawals and loans taken from your Policy.
To avoid lapse of your Policy, it is important to fashion a payment stream that
does not leave your Policy with insufficient Net Cash Value. Determinations as
to the amount to withdraw or borrow each year warrant careful consideration.
Careful consideration should also be given to any assumptions respecting the
hypothetical rate of return, to the duration of withdrawals and loans, and to
the amount of Account Value that should remain in your Policy upon its maturity.
Poor investment performance can contribute to the risk that your Policy may
lapse. In addition, the cost of insurance generally increases with the age of
the Insured, which can further erode existing Net Cash Value and contribute to
the risk of lapse.
Further, interest on a Policy loan is due to us for any Policy Year on the
Policy Anniversary. If this interest is not paid when due, it is added to the
amount of the outstanding loans and loan interest, and interest will begin
accruing thereon from that date. This can have a compounding effect, and to the
extent that the outstanding loan balance exceeds your basis in the Policy, the
amounts attributable to interest due on the loans can add to your federal (and
possibly state) income tax liability.
You should consult with your financial and tax advisers in designing a life
insurance retirement plan that is suitable. Further, you should continue to
monitor the Net Cash Value remaining in a Policy to assure that the Policy is
sufficiently funded to continue to support the desired income stream and so that
it will not lapse. In this regard, you should consult your periodic statements
to determine the amount of their remaining Net Cash Value. Illustrations showing
the effect of charges under the Policy upon existing Account Value or the effect
of future withdrawals or loans upon the Policy's Account Value and Death Benefit
are available from your representative. Consideration should be given
periodically to whether the Policy is sufficiently funded so that it will not
lapse prematurely.
Because of the potential risks associated with borrowing from a Policy, use of
the Policy in connection with a life insurance retirement plan may not be
suitable for all Owners. These risks should be carefully considered before
borrowing from the Policy to provide an income stream.
ILLUSTRATIONS OF ACCOUNT VALUES, CASH VALUES, DEATH BENEFITS
AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate hypothetically how certain
values under a Policy change with investment performance over an extended period
of time. The tables illustrate how Account Values, Cash Values and Death
Benefits under a Policy covering an Insured of a given age on the Policy Date
would vary over time if the return on the assets in each of the Funds were an
assumed uniform gross annual rate of 0%, 6% and 12%. The values would be
different from those shown if the returns averaged 0%, 6% or 12% but fluctuated
over and under those averages throughout the years shown. The hypothetical
investment rates of return are illustrative only and should not be deemed a
representation of past or future investment rates of return. The tables may be
deemed to be "forward looking statements," and are based on certain assumptions.
Actual performance under the Policy may differ materially from performance
described in the tables. Actual rates of return for a particular Policy may be
more or less than the hypothetical investment rates of return and will depend on
a number of factors, including the investment allocations made by an Owner.
These illustrations assume that premiums are allocated equally among the 16
Investment Accounts available under the Policy. These illustrations also assume
that no Policy loans have been made.
The illustrations reflect the fact that the net investment return on the assets
held in the Investment Accounts is lower than the gross return of the selected
Portfolios. The tables assume an average annual expense ratio of approximately
0.76% of the average daily net assets of the Portfolios available under the
Policies. This average annual expense ratio is based on the expense ratios of
each of the Portfolios for the last fiscal year, adjusted, as appropriate, for
any material changes in expenses effective for the current fiscal year of a
Portfolio. For information on the Portfolios' expenses, see the prospectuses for
the Funds and Portfolios.
The illustrations also reflect the deduction of the Monthly Deduction. AUL has
the contractual right to charge the guaranteed maximum charges. The current
charges and, alternatively, the guaranteed charges are reflected in separate
illustrations that follow. All the illustrations reflect the fact that no tax
charges other than the premium tax charge and federal tax charge are currently
made against the Separate Account and assume no outstanding loans and loan
interest or charges for rider benefits.
The illustrations are based on AUL's sex distinct rates. Upon request, an Owner
will be furnished with a comparable illustration based upon the proposed
Insured's individual circumstances. Such illustrations may assume different
hypothetical rates of return than those illustrated in the following tables, and
also may reflect allocation of premiums to specified Investment Accounts. Such
illustrations will reflect the expenses of the Portfolios in which such
Investment Accounts invest. We may make a reasonable charge to provide such
illustrations.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$100,000 INITIAL PREMIUM
ISSUE AGE 50 MALE
INITIAL FACE AMOUNT $316,466
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0%
(APPROXIMATE NET OF -1.65% DURING FIRST 10 POLICY YEARS, -1.55% THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ------------- ---------- --------- ---------- ------ ---------
1 105,000 96,933 86,933 316,466 96,063 86,063 316,466
2 110,250 93,960 84,960 316,466 92,057 83,057 316,466
3 115,762 91,079 83,079 316,466 87,962 79,962 316,466
4 121,551 88,286 81,286 316,466 83,751 76,751 316,466
5 127,628 85,578 79,578 316,466 79,402 73,402 316,466
6 134,010 82,953 77,953 316,466 74,891 69,891 316,466
7 140,710 80,409 76,409 316,466 70,198 66,198 316,466
8 147,746 77,943 74,943 316,466 65,301 62,301 316,466
9 155,133 75,553 73,553 316,466 60,174 58,174 316,466
10 162,889 73,236 72,236 316,466 54,784 53,784 316,466
11 171,034 71,346 71,346 316,466 49,310 49,310 316,466
12 179,586 69,505 69,505 316,466 43,433 43,433 316,466
13 188,565 67,712 67,712 316,466 37,081 37,081 316,466
14 197,993 65,965 65,965 316,466 30,174 30,174 316,466
15 207,893 64,262 64,262 316,466 22,620 22,620 316,466
16 218,287 62,604 62,604 316,466 14,335 14,335 316,466
17 229,202 60,989 60,989 316,466 5,225 5,225 316,466
18 240,662 59,415 59,415 316,466 0 0 0
19 252,695 57,882 57,882 316,466 0 0 0
20 265,330 56,389 56,389 316,466 0 0 0
21 278,596 54,934 54,934 316,466 0 0 0
22 292,526 53,516 53,516 316,466 0 0 0
23 307,152 52,135 52,135 316,466 0 0 0
24 322,510 50,790 50,790 316,466 0 0 0
25 338,635 49,449 49,449 316,466 0 0 0
26 355,567 48,143 48,143 316,466 0 0 0
27 373,346 46,870 46,870 316,466 0 0 0
28 392,013 45,630 45,630 316,466 0 0 0
29 411,614 44,422 44,422 316,466 0 0 0
30 432,194 43,244 43,244 316,466 0 0 0
- -------------- ---------------- ------------- --------------- --------- ---------------- -------- ----------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$100,000 INITIAL PREMIUM
ISSUE AGE 50 MALE
INITIAL FACE AMOUNT $316,466
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6%
(APPROXIMATE NET OF 4.30% DURING FIRST 10 POLICY YEARS, 4.40% THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ----------- -------- -------- ---------- ------- --------
1 105,000 102,798 92,798 316,466 101,937 91,937 316,466
2 110,250 105,675 96,675 316,466 103,818 94,818 316,466
3 115,762 108,632 100,632 316,466 105,629 97,628 316,466
4 121,551 111,672 104,672 316,466 107,346 100,346 316,466
5 127,628 114,796 108,796 316,466 108,953 102,953 316,466
6 134,010 118,009 113,009 316,466 110,431 105,431 316,466
7 140,710 121,311 117,311 316,466 111,766 107,766 316,466
8 147,746 124,705 121,705 316,466 112,941 109,941 316,466
9 155,133 128,195 126,195 316,466 113,937 111,937 316,466
10 162,889 131,782 130,782 316,466 114,725 113,725 316,466
11 171,034 136,149 136,149 316,466 115,860 115,860 316,466
12 179,586 140,660 140,660 316,466 116,740 116,740 316,466
13 188,565 145,321 145,321 316,466 117,312 117,312 316,466
14 197,993 150,137 150,137 316,466 117,516 117,516 316,466
15 207,893 155,112 155,112 316,466 117,286 117,286 316,466
16 218,287 160,252 160,252 316,466 116,559 116,559 316,466
17 229,202 165,562 165,562 316,466 115,265 115,265 316,466
18 240,662 171,048 171,048 316,466 113,324 113,324 316,466
19 252,695 176,716 176,716 316,466 110,638 110,638 316,466
20 265,330 182,572 182,572 316,466 107,069 107,069 316,466
21 278,596 188,622 188,622 316,466 102,435 102,435 316,466
22 292,526 194,872 194,872 316,466 96,500 96,500 316,466
23 307,152 201,329 201,329 316,466 88,963 88,963 316,466
24 322,510 208,001 208,001 316,466 79,453 79,453 316,466
25 338,635 214,893 214,893 316,466 67,546 67,546 316,466
26 355,567 222,014 222,014 316,466 52,739 52,739 316,466
27 373,346 229,371 229,371 316,466 34,402 34,402 316,466
28 392,013 236,971 236,971 316,466 11,830 11,830 316,466
29 411,614 244,824 244,824 316,466 0 0 0
30 432,194 252,937 252,937 316,466 0 0 0
- -------------- ---------------- ------------- --------------- --------- ---------------- -------- ----------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$100,000 INITIAL PREMIUM
ISSUE AGE 50 MALE
INITIAL FACE AMOUNT $316,466
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12%
(APPROXIMATE NET OF 10.25% DURING FIRST 10 POLICY YEARS, 10.36% THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ---------- --------- --------- ---------- ------- ----------
1 105,000 108,664 98,664 316,466 107,812 97,812 316,466
2 110,250 118,078 109,078 316,466 116,281 107,281 316,466
3 115,762 128,307 120,307 316,466 125,471 117,471 316,466
4 121,551 139,423 132,423 316,466 135,449 128,449 316,466
5 127,628 151,502 145,502 316,466 146,300 140,300 316,466
6 134,010 164,627 159,627 316,466 158,122 153,122 316,466
7 140,710 178,890 174,890 316,466 171,034 167,034 316,466
8 147,746 194,388 191,388 316,466 185,168 182,168 316,466
9 155,133 211,229 209,229 316,466 200,681 198,681 316,466
10 162,889 229,551 228,551 316,466 217,750 216,750 316,466
11 171,034 250,928 250,928 326,206 237,775 237,775 316,466
12 179,586 274,391 274,391 351,221 259,966 259,966 332,757
13 188,565 300,020 300,020 378,026 284,264 284,264 358,173
14 197,993 328,018 328,018 406,742 310,811 310,811 385,406
15 207,893 358,612 358,612 437,506 339,825 339,825 414,586
16 218,287 392,063 392,063 470,475 371,552 371,552 445,863
17 229,202 428,539 428,539 509,961 406,156 406,156 483,326
18 240,662 468,315 468,315 552,612 443,900 443,900 523,802
19 252,695 511,691 511,691 598,678 485,069 485,069 567,531
20 265,330 558,987 558,987 648,425 529,972 529,972 614,768
21 278,596 610,550 610,550 702,133 578,942 578,942 665,783
22 292,526 667,065 667,065 753,784 632,626 632,626 714,868
23 307,152 729,098 729,098 809,298 691,563 691,563 767,635
24 322,510 797,319 797,319 869,078 756,390 756,390 824,465
25 338,635 872,545 872,545 933,623 827,877 827,877 885,828
26 355,567 955,760 955,760 1,003,548 906,949 906,949 952,296
27 373,346 1,046,547 1,046,547 1,098,874 993,252 993,252 1,042,915
28 392,013 1,145,540 1,145,540 1,202,817 1,087,406 1,087,406 1,141,776
29 411,614 1,253,417 1,253,417 1,316,088 1,190,071 1,190,071 1,249,574
30 432,194 1,370,888 1,370,888 1,439,433 1,301,944 1,301,944 1,367,041
- -------------- ---------------- ------------- --------------- --------- ---------------- -------- ----------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR BELOW THAT AVERAGE
FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$100,000 INITIAL PREMIUM
ISSUE AGE 60 MALE
INITIAL FACE AMOUNT $220,770
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0%
(APPROXIMATE NET OF -1.65% DURING FIRST 10 POLICY YEARS, -1.55% THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ------------ ---------- --------- -------- -------- ----------
1 105,000 96,933 86,933 220,770 95,538 85,538 220,770
2 110,250 93,960 84,960 220,770 90,915 81,915 220,770
3 115,762 91,079 83,079 220,770 86,090 78,090 220,770
4 121,551 88,285 81,285 220,770 81,019 74,019 220,770
5 127,628 85,578 79,578 220,770 75,654 69,654 220,770
6 134,010 82,953 77,953 220,770 69,945 64,945 220,770
7 140,710 80,409 76,409 220,770 63,842 59,842 220,770
8 147,746 77,943 74,943 220,770 57,288 54,288 220,770
9 155,133 75,553 73,553 220,770 50,211 48,211 220,770
10 162,889 73,236 72,236 220,770 42,669 41,669 220,770
11 171,034 71,346 71,346 220,770 34,387 34,387 220,770
12 179,586 69,505 69,505 220,770 25,148 25,148 220,770
13 188,565 67,712 67,712 220,770 14,732 14,732 220,770
14 197,993 65,964 65,964 220,770 2,873 2,873 220,770
15 207,893 64,262 64,262 220,770 0 0 0
16 218,287 62,604 62,604 220,770 0 0 0
17 229,202 60,989 60,989 220,770 0 0 0
18 240,662 59,415 59,415 220,770 0 0 0
19 252,695 57,882 57,882 220,770 0 0 0
20 265,330 56,389 56,388 220,770 0 0 0
21 278,596 54,934 54,933 220,770 0 0 0
22 292,526 53,516 53,516 220,770 0 0 0
23 307,152 52,135 52,135 220,770 0 0 0
24 322,510 50,790 50,790 220,770 0 0 0
25 338,635 49,449 49,449 220,770 0 0 0
26 355,567 48,143 48,143 220,770 0 0 0
27 373,346 46,870 46,870 220,770 0 0 0
28 392,013 45,630 45,630 220,770 0 0 0
29 411,614 44,422 44,422 220,770 0 0 0
30 432,194 43,244 43,244 220,770 0 0 0
- -------------- ---------------- ------------- --------- ---------- ---------- --------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$100,0000 INITIAL PREMIUM
ISSUE AGE 60 MALE
INITIAL FACE AMOUNT $220,770
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6%
(APPROXIMATE NET OF 4.30% DURING FIRST 10 POLICY YEARS, 4.40% THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ---------- ------- -------- ---------------- -------- ----------
1 105,000 102,798 92,798 220,770 101,422 91,422 220,770
2 110,250 105,675 96,675 220,770 102,729 93,729 220,770
3 115,762 108,632 100,632 220,770 103,895 95,895 220,770
4 121,551 111,671 104,671 220,770 104,891 97,891 220,770
5 127,628 114,796 108,796 220,770 105,687 99,687 220,770
6 134,010 118,008 113,008 220,770 106,254 101,254 220,770
7 140,710 121,311 117,311 220,770 106,562 102,562 220,770
8 147,746 124,705 121,705 220,770 106,577 103,577 220,770
9 155,133 128,195 126,195 220,770 106,258 104,258 220,770
10 162,889 131,782 130,782 220,770 105,541 104,541 220,770
11 171,034 136,149 136,149 220,770 104,891 104,891 220,770
12 179,586 140,660 140,660 220,770 103,697 103,697 220,770
13 188,565 145,321 145,321 220,770 101,828 101,828 220,770
14 197,993 150,137 150,137 220,770 99,127 99,127 220,770
15 207,893 155,112 155,112 220,770 95,419 95,418 220,770
16 218,287 160,251 160,251 220,770 90,499 90,499 220,770
17 229,202 165,562 165,562 220,770 84,128 84,128 220,770
18 240,662 171,048 171,048 220,770 76,013 76,013 220,770
19 252,695 176,716 176,716 220,770 65,774 65,774 220,770
20 265,330 182,572 182,572 220,770 52,893 52,893 220,770
21 278,596 188,621 188,621 220,770 36,620 36,620 220,770
22 292,526 194,872 194,872 220,770 15,986 15,986 220,770
23 307,152 201,329 201,329 220,770 0 0 0
24 322,510 208,001 208,000 220,770 0 0 0
25 338,635 214,893 214,893 225,638 0 0 0
26 355,567 222,014 222,014 233,114 0 0 0
27 373,346 229,371 229,371 240,839 0 0 0
28 392,013 236,971 236,971 248,820 0 0 0
29 411,614 244,824 244,824 257,065 0 0 0
30 432,194 252,936 252,936 265,583 0 0 0
- -------------- ---------------- ------------- --------------- --------- ---------------- ------ ------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
SINGLE LIFE OPTION
$100,000 INITIAL PREMIUM
ISSUE AGE 60 MALE
INITIAL FACE AMOUNT $220,770
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12%
(APPROXIMATE NET OF 10.25% DURING FIRST 10 POLICY YEARS, 10.36% THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ------------- --------- --------- -------- ------- --------
1 105,000 108,663 98,663 220,770 107,308 97,308 220,770
2 110,250 118,078 109,078 220,770 115,256 106,256 220,770
3 115,762 128,307 120,307 220,770 123,922 115,922 220,770
4 121,551 139,423 132,423 220,770 133,399 126,399 220,770
5 127,628 151,502 145,502 220,770 143,806 137,806 220,770
6 134,010 164,627 159,627 220,770 155,289 150,289 220,770
7 140,710 178,890 174,890 220,770 168,029 164,029 220,770
8 147,746 194,461 191,461 229,464 182,244 179,244 220,770
9 155,133 211,413 209,413 247,354 198,091 196,091 231,766
10 162,889 229,803 228,803 266,572 215,349 214,349 249,805
11 171,034 251,001 251,001 288,651 235,248 235,248 270,535
12 179,586 274,235 274,235 309,885 257,062 257,062 290,480
13 188,565 299,737 299,737 332,708 281,010 281,010 311,921
14 197,993 327,783 327,783 357,284 307,352 307,352 335,014
15 207,893 358,709 358,709 383,819 336,400 336,400 359,948
16 218,287 392,919 392,919 412,565 368,530 368,530 386,957
17 229,202 430,242 430,242 451,754 403,599 403,599 423,779
18 240,662 470,939 470,939 494,486 441,857 441,857 463,950
19 252,695 515,288 515,288 541,052 483,574 483,574 507,753
20 265,330 563,581 563,581 591,760 529,033 529,033 555,484
21 278,596 616,118 616,118 646,924 578,528 578,528 607,454
22 292,526 673,204 673,204 706,864 632,364 632,364 663,983
23 307,152 735,191 735,191 771,951 690,854 690,854 725,397
24 322,510 802,887 802,887 843,031 754,322 754,322 792,038
25 338,635 876,815 876,815 920,656 823,115 823,115 864,270
26 355,567 957,551 957,551 1,005,429 897,604 897,604 942,484
27 373,346 1,045,721 1,045,721 1,098,007 978,186 978,186 1,027,095
28 392,013 1,142,010 1,142,010 1,199,110 1,065,281 1,065,281 1,118,545
29 411,614 1,247,164 1,247,164 1,309,522 1,159,331 1,159,331 1,217,297
30 432,194 1,362,001 1,362,001 1,430,101 1,260,790 1,260,790 1,323,829
- -------------- ---------------- ------------- --------------- --------- -------------- -------- ---------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR BELOW THAT AVERAGE
FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
LAST SURVIVOR
$100,000 INITIAL PREMIUM
ISSUE AGE: 60 MALE \ 60 FEMALE
INITIAL FACE AMOUNT $333,256
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0%
(APPROXIMATE NET OF -1.65% DURING FIRST 10 POLICY YEARS, -1.55% THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ------------- --------- -------- ------- -------- ---------
1 105,000 97,528 87,528 333,256 97,528 87,528 333,256
2 110,250 95,027 86,027 333,256 95,027 86,027 333,256
3 115,762 92,477 84,477 333,256 92,477 84,477 333,256
4 121,551 89,955 82,955 333,256 89,850 82,850 333,256
5 127,628 87,502 81,502 333,256 87,112 81,112 333,256
6 134,010 85,116 80,116 333,256 84,226 79,226 333,256
7 140,710 82,795 78,795 333,256 81,154 77,154 333,256
8 147,746 80,538 77,538 333,256 77,853 74,853 333,256
9 155,133 78,342 76,342 333,256 74,278 72,278 333,256
10 162,889 76,205 75,205 333,256 70,366 69,366 333,256
11 171,034 74,499 74,499 333,256 66,377 66,377 333,256
12 179,586 72,832 72,832 333,256 61,836 61,836 333,256
13 188,565 71,201 71,201 333,256 56,596 56,596 333,256
14 197,993 69,607 69,607 333,256 50,476 50,476 333,256
15 207,893 68,049 68,049 333,256 43,235 43,235 333,256
16 218,287 66,526 66,526 333,256 34,666 34,666 333,256
17 229,202 65,036 65,036 333,256 24,505 24,505 333,256
18 240,662 63,581 63,581 333,256 12,451 12,451 333,256
19 252,695 62,157 62,157 333,256 0 0 0
20 265,330 60,766 60,766 333,256 0 0 0
21 278,596 59,405 59,405 333,256 0 0 0
22 292,526 58,076 58,076 333,256 0 0 0
23 307,152 56,775 56,775 333,256 0 0 0
24 322,510 55,504 55,504 333,256 0 0 0
25 338,635 54,262 54,262 333,256 0 0 0
26 355,567 53,047 53,047 333,256 0 0 0
27 373,346 51,860 51,860 333,256 0 0 0
28 392,013 50,699 50,699 333,256 0 0 0
29 411,614 49,534 49,534 333,256 0 0 0
30 432,194 48,394 48,394 333,256 0 0 0
- -------------- ---------------- ------------- --------------- --------- ---------------- -------- ----------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
LAST SURVIVOR
$100,000 INITIAL PREMIUM
ISSUE AGE: 60 MALE \ 60 FEMALE
INITIAL FACE AMOUNT $333,256
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6%
(APPROXIMATE NET OF 4.30% DURING FIRST 10 POLICY YEARS, 4.40% THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ---------- --------- --------- ---------- -------- ----------
1 105,000 103,430 93,430 333,256 103,430 93,430 333,256
2 110,250 106,893 97,893 333,256 106,893 97,893 333,256
3 115,762 110,371 102,371 333,256 110,371 102,371 333,256
4 121,551 113,857 106,857 333,256 113,845 106,845 333,256
5 127,628 117,454 111,454 333,256 117,288 111,288 333,256
6 134,010 121,164 116,164 333,256 120,673 115,673 333,256
7 140,710 124,991 120,991 333,256 123,970 119,970 333,256
8 147,746 128,940 125,940 333,256 127,150 124,150 333,256
9 155,133 133,012 131,012 333,256 130,180 128,180 333,256
10 162,889 137,214 136,214 333,256 133,017 132,017 333,256
11 171,034 142,258 142,258 333,256 136,292 136,292 333,256
12 179,586 147,488 147,488 333,256 139,290 139,289 333,256
13 188,565 152,909 152,909 333,256 141,913 141,913 333,256
14 197,993 158,530 158,530 333,256 144,047 144,047 333,256
15 207,893 164,358 164,358 333,256 145,559 145,559 333,256
16 218,287 170,400 170,400 333,256 146,306 146,306 333,256
17 229,202 176,664 176,664 333,256 146,127 146,127 333,256
18 240,662 183,158 183,158 333,256 144,844 144,844 333,256
19 252,695 189,891 189,891 333,256 142,236 142,236 333,256
20 265,330 196,871 196,871 333,256 138,004 138,004 333,256
21 278,596 204,109 204,109 333,256 131,741 131,741 333,256
22 292,526 211,612 211,612 333,256 122,889 122,889 333,256
23 307,152 219,391 219,391 333,256 110,680 110,680 333,256
24 322,510 227,456 227,456 333,256 94,099 94,099 333,256
25 338,635 235,817 235,817 333,256 71,809 71,809 333,256
26 355,567 244,486 244,486 333,256 41,984 41,984 333,256
27 373,346 253,473 253,473 333,256 2,201 2,201 333,256
28 392,013 262,791 262,791 333,256 0 0 0
29 411,614 272,451 272,451 333,256 0 0 0
30 432,194 282,467 282,467 333,256 0 0 0
- -------------- --------------- ------- --------- ------------- --------- ---------- ---------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR
THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
American United Life Insurance Company(R)
Modified Single Premium Variable Life Insurance
LAST SURVIVOR OPTION
$100,000 INITIAL PREMIUM
ISSUE AGE: 60 MALE \ 60 FEMALE
INITIAL FACE AMOUNT $333,256
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12%
(APPROXIMATE NET OF 10.25% DURING FIRST 10 POLICY YEARS, 10.36 THEREAFTER)
End of Premiums CURRENT CHARGES* GUARANTEED CHARGES**
Contract Year Accumulated at
5% Interest Per Account Cash Death Account Cash Death
Year Value Value Benefit Value Value Benefits
- -------------- ---------------- ------------- --------- --------- -------------- -------- ----------
1 105,000 109,333 99,333 333,256 109,333 99,333 333,256
2 110,250 119,456 110,456 333,256 119,456 110,456 333,256
3 115,762 130,432 122,432 333,256 130,432 122,432 333,256
4 121,551 142,330 135,330 333,256 142,330 135,330 333,256
5 127,628 155,227 149,227 333,256 155,227 149,227 333,256
6 134,010 169,266 164,266 333,256 169,211 164,211 333,256
7 140,710 184,576 180,576 333,256 184,388 180,388 333,256
8 147,746 201,270 198,270 333,256 200,885 197,885 333,256
9 155,133 219,474 217,474 333,256 218,850 216,850 333,256
10 162,889 239,325 238,325 333,256 238,458 237,458 333,256
11 171,034 262,285 262,285 333,256 261,226 261,226 333,256
12 179,586 287,551 287,551 333,256 286,365 286,365 333,256
13 188,565 315,496 315,496 350,201 314,188 314,188 348,749
14 197,993 346,221 346,221 377,381 344,791 344,791 375,822
15 207,893 379,972 379,972 406,570 378,410 378,410 404,899
16 218,287 417,104 417,104 437,959 415,397 415,397 436,167
17 229,202 457,745 457,745 480,632 455,885 455,885 478,679
18 240,662 502,198 502,198 527,308 500,177 500,177 525,186
19 252,695 550,789 550,789 578,329 548,601 548,601 576,031
20 265,330 603,860 603,860 634,053 601,504 601,504 631,579
21 278,596 661,775 661,775 694,864 659,246 659,246 692,209
22 292,526 725,246 725,246 761,508 722,204 722,204 758,314
23 307,152 794,803 794,803 834,543 790,761 790,761 830,299
24 322,510 871,032 871,032 914,584 865,316 865,316 908,582
25 338,635 954,572 954,572 1,002,301 946,284 946,284 993,598
26 355,567 1,046,124 1,046,124 1,098,430 1,034,101 1,034,101 1,085,806
27 373,346 1,146,457 1,146,457 1,203,780 1,129,223 1,129,223 1,185,684
28 392,013 1,256,413 1,256,413 1,319,233 1,232,127 1,232,127 1,293,734
29 411,614 1,376,914 1,376,914 1,445,760 1,343,306 1,343,306 1,410,471
30 432,194 1,508,973 1,508,973 1,584,421 1,463,258 1,463,258 1,536,421
- -------------- ---------------- ------------- --------------- --------- ---------------- -------- ----------
*These values reflect investment results using current cost of insurance rates,
administrative fees, and mortality and expense risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and mortality and expense risk rates.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN
THOSE SHOWN. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN APPLICABLE TO THE
POLICY AVERAGED 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW
THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT, ACCOUNT VALUE AND
CASH VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON
THE INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT ACCOUNTS AND THE RATES OF
RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR BELOW THAT AVERAGE
FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL
RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF
TIME.
OTHER POLICY BENEFITS AND PROVISIONS
Limits on Rights to Contest the Policy
Incontestability. In the absence of fraud, after the Policy has been in
force during the Insured's lifetime for two years from the Contract Date, AUL
may not contest the Policy.
If a Policy lapses and it is reinstated, we can contest the reinstated Policy
during the first two years after the effective date of the reinstatement, but
only for statements made in the application for reinstatement.
Suicide Exclusion. If the Insured dies by suicide, while sane or
insane, within two years of the Contract Date or the effective date of any
reinstatement (or less if required by state law), the amount payable by AUL will
be equal to the premiums paid less any loan, loan interest, and any partial
surrender.
Changes in the Policy or Benefits
Misstatement of Age or Sex. If it is determined the age or sex of the
Insured as stated in the Policy is not correct, the Death Benefit will be the
greater of: (1) the amount which would have been purchased at the Insured's
correct age and sex by the most recent cost of insurance charge assessed prior
to the date we receive proof of death; or (2) the Account Value as of the date
we receive proof of death, multiplied by the Minimum Insurance Percentage for
the correct age.
Other Changes. Upon notice, AUL may modify the Policy, but only if such
modification is necessary to: (1) make the Policy or the Separate Account comply
with any applicable law or regulation issued by a governmental agency to which
AUL is subject; (2) assure continued qualification of the Policy under the
Internal Revenue Code or other federal or state laws relating to variable life
contracts; (3) reflect a change in the operation of the Separate Account; or (4)
provide different Separate Account or fixed account accumulation options. AUL
reserves the right to modify the Policy as necessary to attempt to prevent the
Owner from being considered the owner of the assets of the Separate Account. In
the event of any such modification, AUL will issue an appropriate endorsement to
the Policy, if required. AUL will exercise these rights in accordance with
applicable law, including approval of Owners, if required.
Any change of the Policy must be approved by AUL's President, Vice President or
Secretary. No representative is authorized to change or waive any provision of
the Policy.
Exchange for Paid-Up Policy
You may exchange the Policy for a paid-up whole life policy by Proper Notice and
upon returning the Policy to the Home Office. The new policy will be for the
level face amount, not greater than the Policy's Face Amount, which can be
purchased by the Policy's Net Cash Value. The new policy will be purchased using
the continuous net single premium for the Insured's age upon the Insured's
nearest birthday at the time of the exchange. We will pay you any remaining Net
Cash Value that was not used to purchase the new policy.
At any time after this option is elected, the cash value of the new policy will
be its net single premium at the Insured's then attained age. All net single
premiums will be based on 3% interest and the guaranteed cost of insurance rates
of the Policy. No riders may be attached to the new policy.
When Proceeds Are Paid
AUL will ordinarily pay any Death Benefit Proceeds, loan proceeds, Partial
Surrender proceeds, or Full Surrender proceeds within seven calendar days after
receipt at the Home Office of all the documents required for such a payment.
Other than the Death Benefit, which is determined as of the date of death, the
amount will be determined as of the date of receipt of required documents.
However, AUL may delay making a payment or processing a transfer request if (1)
the New York Stock Exchange is closed for other than a regular holiday or
weekend, trading is restricted by the SEC, or the SEC declares that an emergency
exists as a result of which the disposal or valuation of Separate Account assets
is not reasonably practicable; or (2) the SEC by order permits postponement of
payment to protect Owners.
Dividends
You will receive any dividends declared by us as long as the Policy is in force.
Dividend payments will be applied to increase the Account Value in the
Investment Accounts on a prorata basis unless you request cash payment. We do
not anticipate declaring any dividends.
Reports to Policy Owners
At least once a year, you will be sent a report at your last known address
showing, as of the end of the current report period: Account Value, Cash Value,
Death Benefit, change in value of amounts in the Separate Account, premiums
paid, loans, Partial Surrenders, expenses charges, and cost of insurance charges
since the prior report. You will also be sent an annual and a semiannual report
for each Fund or Portfolio underlying an Investment Account to which you have
allocated Account Value, including a list of the securities held in each Fund,
as required by the 1940 Act. In addition, when you pay premiums, or if you take
out a loan, transfer amounts among the Investment Accounts or take surrenders,
you will receive a written confirmation of these transactions.
Assignment
The Policy may be assigned in accordance with its terms. In order for any
assignment to be binding upon AUL, it must be in writing and filed at the Home
Office. Once AUL has received a signed copy of the assignment, the Owner's
rights and the interest of any beneficiary (or any other person) will be subject
to the assignment. If there are any irrevocable beneficiaries, you must obtain
their consent before assigning the Policy. AUL assumes no responsibility for the
validity or sufficiency of any assignment. An assignment is subject to any loan
on the Policy.
Reinstatement
The Policy may be reinstated within five years (or such longer period if
required by state law) after lapse, subject to compliance with certain
conditions, including the payment of a necessary premium and submission of
satisfactory evidence of insurability. See your Policy for further information.
Rider Benefits
The following rider benefits are available and may be added to your Policy. If
applicable, monthly charges for these riders will be deducted from your Account
Value as part of the Monthly Deduction. All of these riders may not be available
in all states.
Waiver of Monthly Deduction Disability (WMDD)
Issue Ages: 20-55
This rider waives the Monthly Deduction, excluding the mortality and expense
risk charge, during a period of total disability. WMDD cannot be attached to
Policies with Face Amounts in excess of $3,000,000 or rated higher than
Table H.
Monthly Deductions are waived for total disability following a six month
waiting period. Monthly Deductions made during this waiting period are
re-credited to the Account Value upon the actual waiver of the Monthly
Deductions. If disability occurs before age 60, Monthly Deductions are
waived as long as total disability continues. If disability occurs between
ages 60-65, Monthly Deductions are waived as long as the Insured remains
totally disabled but not beyond age 65.
Last Survivor Rider (LS)
Issue Ages: 20-85
This rider modifies the terms of the Policy to provide insurance on the
lives of two Insureds rather than one. When the LS Rider is attached, the
Death Benefit Proceeds are paid to the beneficiary upon the death of the
last surviving Insured. The cost of insurance charges reflect the
anticipated mortality of the two Insureds and the fact that the Death
Benefit is not paid until the death of the surviving Insured. For a Policy
containing the LS Rider to be reinstated, either both Insureds must be alive
on the date of the reinstatement; or the surviving Insured must be alive and
the lapse occurred after the death of the first Insured. The
Incontestability, Suicide, and Misstatement of Age or Sex provisions of the
Policy apply to either Insured.
LS Rider also provides a Policy Split Option, allowing the Policy on two
Insureds to be split into two separate Policies, one on the life of each
Insured. The LS Rider also includes an Estate Preservation Benefit which
increases the Face Amount of the Policy under certain conditions. The Estate
Preservation Benefit is only available to standard risks.
Accelerated Death Benefit Rider (ABR)
This rider allows for a prepayment of a portion of the Policy's Death
Benefit while the Insured is still alive, if the Insured has been diagnosed
as terminally ill, and has 12 months or less to live. The minimum amount
available is $5,000. The maximum benefit payable (in most states) is the
lesser of $500,000 or 50% of the Face Amount. ABR may be added to the Policy
at any time while it is still in force. There is no charge for ABR.
Your determination as to how to purchase a desired level of insurance coverage
should be based on specific insurance needs. Consult your sales representative
for further information.
Additional rules and limits apply to these rider benefits. Not all such benefits
may be available at any time, and rider benefits in addition to those listed
above may be made available. Please ask your AUL representative for further
information, or contract the Home Office.
TAX CONSIDERATIONS
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon AUL's understanding of the present
federal tax laws as they currently are interpreted by the Internal Revenue
Service (the "IRS").
Tax Status of the Policy
In order to attain the tax benefits normally associated with life insurance, the
Policy must be classified for federal income tax purposes as a life insurance
contract. Section 7702 of the Internal Revenue Code sets forth a definition of a
life insurance contract for federal income tax purposes. The U.S. Treasury
Department (the "Treasury") is authorized to prescribe regulations implementing
Section 7702. While proposed regulations and other interim guidance has been
issued, final regulations have not been adopted. In short, guidance as to how
Section 7702 is to be applied is limited. If a Policy were determined not to be
a life insurance contract for purposes of Section 7702, such Policy would not
provide the tax advantages normally provided by a life insurance contract.
With respect to a Policy issued on a standard basis, AUL believes that such a
Policy should meet the Section 7702 definition of a life insurance contract.
With respect to a Policy that is issued on a substandard basis (i.e., a premium
class with extra rating involving higher than standard mortality risk), there is
less guidance, in particular as to how the mortality and other expense
requirements of Section 7702 are to be applied, in determining whether such a
Policy meets the Section 7702 definition of a life insurance contract. If the
requirements of Section 7702 were deemed not to have been met, the Policy would
not provide the tax benefits normally associated with life insurance and the tax
status of all contracts invested in the Investment Account to which premiums
were allocated under the non-qualifying contract might be affected.
If it is subsequently determined that a Policy does not satisfy Section 7702,
AUL may take whatever steps are appropriate and reasonable to attempt to cause
such a Policy to comply with Section 7702. For these reasons, AUL reserves the
right to modify the Policy it deems in its sole discretion as necessary to
attempt to qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Internal Revenue Code requires that the investments of
each of the Investment Accounts must be "adequately diversified" in accordance
with Treasury regulations in order for the Policy to qualify as a life insurance
contract under Section 7702 of the Internal Revenue Code. The Investment
Accounts, through the Portfolios, intend to comply with the diversification
requirements prescribed in Treas. Reg. Section 1.817-5, which affect how the
Portfolio's assets are to be invested. AUL believes that the Investment Accounts
will meet the diversification requirements, and AUL will monitor continued
compliance with this requirement.
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
investment accounts used to support their contracts. In those circumstances,
income and gains from the investment account assets would be includable in the
variable contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of investment
account assets if the contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. The
Treasury has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Owner), rather than
the insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which contract holders may direct their
investments to particular investment accounts without being treated as owners of
the underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of investment account assets. For example,
an Owner has additional flexibility in allocating premium payments and Account
Value. These differences could result in an Owner being treated as the owner of
a prorata portion of the assets of the Investment Accounts. In addition, AUL
does not know what standards will be set forth, if any, in the regulations or
rulings which the Treasury has stated it expects to issue. AUL therefore
reserves the right to modify the Policy as necessary to attempt to prevent an
Owner from being considered the Owner of a prorata share of the assets of the
Investment Accounts.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
Tax Treatment of Policy Benefits
In General. AUL believes that the proceeds and Account Value increases
of a Policy should be treated in a manner consistent with a fixed-benefit life
insurance contract for federal income tax purposes. Thus, the Death Benefit
under the Policy should be excludable from the gross income of the beneficiary
under Section 101(a)(1) of the Internal Revenue Code. However, if you elect a
settlement option for a Death Benefit other than in a lump sum, a portion of the
payment made to you may be taxable.
Depending on the circumstances, the exchange of a Policy, a Policy loan, a
Partial Surrender, a surrender, a change in ownership, or an assignment of the
Policy may have federal income tax consequences. In addition, federal, state and
local transfer, and other tax consequences of ownership or receipt of Policy
proceeds depends on the circumstances of each Owner or beneficiary.
The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should consult a qualified tax adviser
regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Account Value, including increments thereof, until there is a distribution. The
tax consequences of distributions from, and loans taken from or secured by, a
Policy depend on whether the Policy is classified as a Modified Endowment. Upon
a complete surrender or lapse of a Policy, whether or not a Modified Endowment,
the excess of the amount received plus the amount any of outstanding loans and
loan interests over the total investment in the Policy will generally be treated
as ordinary income subject to tax.
Modified Endowments. Section 7702A establishes a class of life
insurance Policies designated as "Modified Endowment Contracts." The rules
relating to whether a Policy will be treated as a Modified Endowment are
extremely complex and cannot be adequately described in the limited confines of
this summary. In general, a Policy will be a Modified Endowment if the
accumulated premiums paid at any time during the first seven Policy Years exceed
the sum of the net level premiums which would have been paid on or before such
time if the Policy provided for paid-up future benefits after the payment of
seven level annual premiums. A Policy may also become a Modified Endowment after
a material change. The determination of whether a Policy will be a Modified
Endowment after a material change generally depends upon the relationship of the
Death Benefit and Account Value at the time of such change and the additional
premiums paid in the seven years following the material change.
It is expected that most Policies will be Modified Endowments. Due to the
Policy's flexibility, classification as a Modified Endowment will depend on the
individual circumstances of each Policy. In view of the foregoing, a current or
prospective Owner should consult with a tax adviser to determine whether a
Policy transaction will cause the Policy to be treated as a Modified Endowment.
Policies classified as Modified Endowments will be subject to the following:
First, all distributions, including distributions upon surrender and Partial
Surrender, from such a Policy are treated as ordinary income subject to tax up
to the amount equal to the excess (if any) of the Account Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, loans taken from or secured by such a Policy, are treated as
distributions from the Policy and taxed accordingly. Past due loan interest that
is added to the loan amount will be treated as a loan. Third, a 10 percent
additional income tax is imposed on the portion of any distribution from, or
loan taken from or secured by, such a Policy that is included in income except
where the distribution or loan is made on or after the Owner attains age 59 1/2,
is attributable to the Owner's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
Owner or the joint lives (or joint life expectancies) of the Owner and the
Owner's beneficiary.
If a Policy becomes a Modified Endowment after it is issued, distributions made
during the Policy Year in which it becomes a Modified Endowment, distributions
in any subsequent Policy Year and distributions within two years before the
Policy becomes a Modified Endowment will be subject to the tax treatment
described above. This means that a distribution from a Policy that is not a
Modified Endowment could later become taxable as a distribution from a Modified
Endowment.
All Modified Endowments that are issued by AUL (or its affiliates) to the same
Owner during any calendar year are treated as one Modified Endowment for
purposes of determining the amount includable in an Owner's gross income under
Section 72(e) of the Internal Revenue Code.
Distributions from a Policy that is not a Modified Endowment are generally
treated as first recovering the investment in the Policy (described below) and
then, only after the return of all such investment in the Policy, as
distributing taxable income. An exception to this general rule occurs in the
case of a decrease in the Policy's Death Benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in a cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment are not
treated as distributions. Instead, such loans are treated as indebtedness of the
Owner.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment are subject
to the 10 percent additional income tax.
Policy Loan Interest. Generally, consumer interest paid on any loan
under a Policy which is owned by an individual is not deductible for federal or
state income tax purposes. The deduction of other forms of interest paid on
Policy loans may also be subject to other restrictions under the Internal
Revenue Code. A qualified tax adviser should be consulted before deducting any
Policy loan interest.
Investment in the Policy. Investment in the Policy means: (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any loan from, or secured by, a
Policy that is a Modified Endowment, to the extent such amount is excluded from
gross income, will be disregarded), plus (iii) the amount of any loan from, or
secured by, a Policy that is a Modified Endowment to the extent that such amount
is included in the gross income of the Owner.
Estate and Generation Skipping Taxes
When the Insured dies, the Death Benefits will generally be includable in the
Owner's estate for purposes of federal estate tax if the Insured owned the
Policy. If the Owner was not the Insured, the fair market value of the Policy
would be included in the Owner's estate upon the Owner's death. Nothing would be
includable in the Insured's estate if he or she neither retained incidents of
ownership at death nor had given up ownership within three years before death.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. An unlimited marital deduction may be available for federal estate and
gift tax purposes. The unlimited marital deduction permits the deferral of taxes
until the death of the surviving spouse (when the Death Benefits would be
available to pay taxes due and other expenses incurred).
If the Owner (whether or not he or she is the Insured) transfers ownership of
the Policy to someone two or more generations younger, the transfer may be
subject to the generation-skipping transfer tax with the taxable amount being
the value of the Policy. The generation-skipping transfer tax provisions
generally apply to transfers which would be subject to the gift and estate tax
rules. Because these rules are complex, the Owner should consult with a
qualified tax adviser for specific information if ownership is passing to
younger generations.
Life Insurance Purchased for Use in Split Dollar Arrangements
On January 26, 1996, the IRS released a technical advice memorandum ("TAM") on
the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
Non-Individual Ownership of Contracts
If the Owner of a Policy is an entity rather than an individual, the tax
treatment may differ from that described above. Accordingly, prospective Owners
that are entities should consult a qualified tax advisor.
Possible Charge for AUL's Taxes
At the present time, AUL makes no charge for any federal, state or local taxes
(other than the premium tax charge and federal tax charge) that it incurs that
may be attributable to the Investment Accounts or to the Policies. However, AUL
reserves the right to make additional charges for any such tax or other economic
burden resulting from the application of the tax laws that it determines to be
properly attributable to the Investment Accounts or to the Policies.
OTHER INFORMATION ABOUT THE POLICIES AND AUL
Policy Termination
The Policy will terminate, and insurance coverage will cease, as of: (1) the end
of the Valuation Period during which we receive Proper Notice to surrender the
Policy; (2) the expiration of a grace period; or (3) the death of the Insured.
See "Surrendering the Policy for Net Cash Value." "Premium Payments to Prevent
Lapse," and "Death Benefit."
Resolving Material Conflicts
The Funds presently serve as the investment medium for the Separate Account and,
therefore, indirectly for the Policies. In addition, the Funds have advised us
that they are available to registered separate accounts of insurance companies,
other than AUL, offering variable annuity and variable life insurance policies.
We do not currently foresee any disadvantages to you resulting from the Funds
selling shares as an investment medium for products other than the Policies.
However, there is a theoretical possibility that a material conflict of interest
may arise between Owners whose Cash Values are allocated to the Separate Account
and the owners of variable life insurance policies and variable annuity
contracts issued by other companies whose values are allocated to one or more
other separate accounts investing in any one of the Funds. Shares of some of the
Funds may also be sold to certain qualified pension and retirement plans
qualifying under Section 401 of the Internal Revenue Code. As a result, there is
a possibility that a material conflict may arise between the interests of Owners
or owners of other contracts (including contracts issued by other companies),
and such retirement plans or participants in such retirement plans. In the event
of a material conflict, we will take any necessary steps, including removing the
Separate Account from that Fund, to resolve the matter. The Board of
Directors/Trustees of each Fund will monitor events in order to identify any
material conflicts that may arise and determine what action, if any, should be
taken in response to those events or conflicts.
Addition, Deletion or Substitution of Investments
We reserve the right, subject to applicable law, to make additions to, deletions
from, or substitutions for the shares that are held in the Separate Account or
that the Separate Account may purchase. If the shares of a Portfolio are no
longer available for investment or if, in our judgment, further investment in
any Portfolio should become inappropriate in view of the purposes of the
Separate Account, we may redeem the shares, if any, of that Portfolio and
substitute shares of another registered open-end management investment company.
We will not substitute any shares attributable to a Policy's interest in an
Investment Account of the Separate Account without notice to you and prior
approval of the SEC and state insurance authorities, to the extent required by
the 1940 Act or other applicable law.
We also reserve the right to establish additional Investment Accounts of the
Separate Account, each of which would invest in shares corresponding to a
Portfolio of a Fund or in shares of another investment company having a
specified investment objective. Any new Investment Accounts may be made
available to existing Owners on a basis to be determined by AUL. Subject to
applicable law and any required SEC approval, we may, in our sole discretion,
eliminate one or more Investment Accounts if marketing needs, tax considerations
or investment conditions warrant.
If any of these substitutions or changes are made, we may, by appropriate
endorsement, change the Policy to reflect the substitution or change.
If we deem it to be in the best interests of persons having voting rights under
the Policies (subject to any approvals that may be required under applicable
law), the Separate Account may be operated as a management investment company
under the 1940 Act, it may be deregistered under that Act if registration is no
longer required, or it may be combined with other AUL separate accounts.
Voting Rights
AUL is the legal owner of the shares of the Portfolios held by the Investment
Accounts of the Separate Account. In accordance with its view of present
applicable law, AUL will exercise voting rights attributable to the shares of
each Portfolio held in the Investment Accounts at any regular and special
meetings of the shareholders of the Funds or Portfolios on matters requiring
shareholder voting under the 1940 Act. AUL will exercise these voting rights
based on instructions received from persons having the voting interest in
corresponding Investment Accounts of the Separate Account and consistent with
any requirements imposed on AUL under contracts with any of the Funds, or under
applicable law. However, if the 1940 Act or any regulations thereunder should be
amended, or if the present interpretation thereof should change, and as a result
AUL determines that it is permitted to vote the shares of the Portfolios in its
own right, it may elect to do so.
The person having the voting interest under a Policy is the Owner. AUL or the
pertinent Fund shall send to each Owner a Fund's proxy materials and forms of
instruction by means of which instructions may be given to AUL on how to
exercise voting rights attributable to the Portfolio's shares.
Unless otherwise required by applicable law or under a contract with any of the
Funds, with respect to each of the Portfolios, the number of Portfolio shares as
to which voting instructions may be given to AUL is determined by dividing the
value of all of the Accumulation Units of the corresponding Investment Account
attributable to a Policy on a particular date by the net asset value per share
of that Portfolio as of the same date. Fractional votes will be counted. The
number of votes as to which voting instructions may be given will be determined
as of the date coincident with the date established by a Fund for determining
shareholders eligible to vote at the meeting of the Fund or Portfolio. If
required by the SEC or under a contract with any of the Funds, AUL reserves the
right to determine in a different fashion the voting rights attributable to the
shares of the Portfolio. Voting instructions may be cast in person or by proxy.
Voting rights attributable to the Policies for which no timely voting
instructions are received will be voted by AUL in the same proportion as the
voting instructions which are received in a timely manner for all Policies
participating in that Investment Account. AUL will vote shares of any Investment
Account, if any, that it owns beneficially in its own discretion, except that if
a Fund offers its shares to any insurance company separate account that funds
variable annuity contracts or if otherwise required by applicable law or
contract, AUL will vote its own shares in the same proportion as the voting
instructions that are received in timely manner for Policies participating in
the Investment Account.
Neither the Separate Account nor AUL is under any duty to inquire as to the
instructions received or the authority of Owners or others to instruct the
voting of shares of any of the Portfolios.
If required by state insurance officials, AUL may disregard Owner voting
instructions if such instructions would require shares to be voted so as to
cause a change in sub-classification or investment objectives of one or more of
the Portfolios, or to approve or disapprove an investment advisory agreement. In
addition, AUL may under certain circumstances disregard voting instructions that
would require changes in the investment advisory contract or investment adviser
of one or more of the Portfolios, provided that AUL reasonably disapproves of
such changes in accordance with applicable federal regulations. If AUL ever
disregards voting instructions, Owners will be advised of that action and of the
reasons for such action in the next semiannual report. Finally, AUL reserves the
right to modify the manner in which the weight to be given to pass-through
voting instructions is calculated when such a change is necessary to comply with
current federal regulations or the current interpretation thereof.
Sale of the Policies
The Policies will be offered to the public on a continuous basis, and we do not
anticipate discontinuing the offering of the Policies. However, we reserve the
right to discontinue the offering. Applications for Policies are solicited by
representatives who are licensed by applicable state insurance authorities to
sell our variable life contracts and who are also registered representatives of
AUL. AUL is registered with the SEC under the Securities Exchange Act of 1934 as
a broker-dealer and is a member of the National Association of Securities
Dealers, Inc.
AUL acts as the "principal underwriter," as defined in the 1940 Act, of the
Policies for the Separate Account. We are not obligated to sell any specific
number of Policies.
Registered representatives may be paid commissions on Policies they sell.
Representatives will generally be paid 4% of the initial premium.
Representatives will generally be paid 4% of the initial premium. Additional
commissions may be paid in certain circumstances. Other allowances and overrides
also may be paid.
AUL Directors and Executive Officers
The following table sets forth the name and principal occupations during the
past five years of each of AUL's directors and executive officers. Unless
otherwise indicated, the address of each of the following individuals is One
American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368, and the
indicated position is with AUL.
Name Principal Occupation During Past Five Years
Jerry D. Semler President and Chief Operating Officer, 1980-1989;
President & Chief Exec. Officer, 1989-8/91; Chairman of
the Board, Pres. & CEO, 9/91-present; Mental Health
Board, State of Indiana, 10/87-10/91; Dir. Jenn
Foundation Board, 5/92-present; IWC Resources Corp.,
4/96-present
John H. Barbre Sr. Vice Pres., Individual Div., 5/80-present
William R. Brown General Counsel & Secretary, 1/85-present; Dir., Health &
Hospital Corp. of Marion County Board, 1/84-1/92; Member,
Metro Development Com. of Indpls., 1/92-10/93; Dir.,
NOLHGA Board, 1/95-present
Charles D. Lineback Sr. Vice Pres., Reinsurance Div., 12/87-present
James W. Murphy Sr. Vice Pres., Corporate Finance, 8/69-present
Jerry L. Plummer Sr. Vice Pres., Human Resources, 1/93-present; V.P. Human
Res., 1/81-1/93
R. Stephen Radcliffe Executive Vice Pres., 8/94-present; Sr. V.P., Chief
Actuary, 5/83-8/94; Director, 2/91-present
G. David Sapp Sr. Vice Pres., Investments, 1/92-present; V.P.,
Securities, 8/75-1/92
William T. Tindall Sr. Vice Pres., Pension Div., 8/97-present; Sr. Vice
Pres., Massachusetts Mutual Life Insurance Co.,
1993-1997; Vice Pres., Pension Marketing, Massachusetts
Mutual Life Insurance Co., 1987-1993.
Gerald T. Walker Sr. Vice Pres., Group Life & Health Div., 10/89-present
Kent R. Adams Vice Pres., Fixed Income Securities, 1/92-present; Asst.
V.P., Securities, 1/77-1/92
Catherine B. Husman V.P. and Chief Actuary, 7/97-present; V.P. and Corporate
Actuary, 1/84-7/97
Scott A. Kincaid V.P. & Chief Information Officer, 1/95-present; V.P. Data
Center, 9/91-1/95; Asst. V.P. Data Center, 8/83-9/91
Steven C. Berring, M.D. Director, 2/90-present; Director, NIPSCO Industries, Inc.
575 McCormick Rd. 2/86-present; Director, Arvin Industries, Inc.,
West Lafayette, IN 47906 11/83-present; Director, Eli Lilly, 4/83-present;
President, Purdue University, 2/83-present; Director,
Guidant Corp., 12/94-8/95; Dir., State Life Ins. Co.,
11/94-present
Arthur L. Bryant Director, 11/94-present; President, The State Life
11817 Sand Dollar Ct. Insurance Company, 9/83-present; Chairman of Board, The
Indianapolis, IN 46256 State Life Ins., 2/85-11/94
James M. Cornelius Director, 2/96-present; V.P. & CEO, Eli Lilly & Co.,
1055 Park Place 1/83-1995; Chairman, Guidant Corp., 10/95-present; Dir.
Zionsville, IN 46077 State Life Ins. Co., 11/94-present, Dir., National Bank
of Indpls., 11/93-present; Dir. Lilly Industries, Inc.,
4/96-present
James A. Dora Director, 2/89-present; Chairman/CEO and Owner, General
5121 Green Braes, E. Dr. Hotels Corp., 1/90-present; President and Owner, General
Indianapolis, IN 46234 Hotels Corp., 1967-1989; Dir., Indiana National Bank,
4/83-10/93; Dir., NBD Bank, N.A. (formerly Indiana
National Bank), 10/93-present; Dir., State Life,
11/94-present
Otto N. Frenzel Director, 2/71-present (Chairman of Audit Comm.);
11330 Templin Rd. Chairman, Executive Comm., National City Bank Indiana,
Zionsville, IN 46077 1/96-present; Chrmn. National City Bank Indiana,
10/92-1/96; Dir., National City Corp., 10/92-present;
Chairman, Merchants National Corp., 4/79-1/93; Vice
Chrmn, Merchants National Bank & Trust Co. of Indpls.,
4/86-10/92; Director, Indpls. Water Co., 4/63-present;
Dir., Indiana Gas Co., Inc. 1/67-present; Dir. Indpls.
Power & Lights Corp. 4/77-present; Dir. Baldwin & Lyons,
Inc., 5/79-present; Dir. IPALCO Enterprises, Inc.,
9/83-present; Dir., IWC Resources Corp., 3/86-present;
Dir. Indiana Energy, Inc., 10/85-present; Dir., State
Life Ins. Co., 11/94-present
David W. Goodrich Director, 2/95-present; Exec. Vice Pres., F.C. Tucker
6060 Sunset Ln. Co., 1/86-present; Chrmn., Methodist Hosp. of Indiana
Indianapolis, IN 46228 1/93-6/96; Director, The State Life Ins. Co.,
7/90-present; Director, Irwin Financial Corp.,
1/88-present; Director, Citizens Gas & Coke Utility,
9/94-present; Vice Chairman, Clarian Health Partners,
6/96-present
William P. Johnson Director, 7/78-present; Chairman of the Board & CEO,
19448 Rio Verde Dr. Goshen Rubber Co., 7/91-present, Pres. & Treas., Goshen
Goshen, IN 46526 Rubber Co., 9/76-7/91; Pres. & Dir., GNC Corp.,
9/76-7/91; Pres. & Dir., GSH Corp., 7/91-present; Pres. &
Dir. GRN Corp., 9/76-7/91; Chrmn., GRN Corp.,
7/91-present; Pres. & Dir., Goshen Rubber of Canada,
Ltd., 9/76-7/91; Chrmn., Goshen Rubber of Canada, Ltd.,
7/91-present; Dir., Society Bank Ind. (formerly Trustcorp
Inc.) Co. Bend, IN, 2/88-12/95; Member of Advisory Comm.,
Society Bank Ind. Goshen, IN, 2/88-12/95; Dir., Coachman
Industries, 1978-present; Chrmn. & CEO, Syracuse Rubber
Co., 1981-present; Chrmn. & CEO, Bond-Flex Rubber Co.,
4/86-present; Dir., Peetro Go, Inc., 4/86-5/96; Dir.,
Flair Inc., 3/86-present; Dir., Lightfoot Enterprises,
4/86-present; Chrmn., Palmer Plastics, 10/87-present;
Chrmn., Dayton Polymrics, 10/89-present; Chrmn. GR
Plastics, 10/89-present; Chrmn. & CEO, ETI Inc.,
9/92-present; Chrmn. & CEO, GKI Inc., 7/91-present;
Chrmn. & CEO, Prolon, Inc., 10/92-present; Chrmn. & CEO,
Yeasel, Inc., 1/90-present; Chrmn. & CEO, Bower Mfg.,
7/91-present; Dir., State Life Ins. Co., 11/94-present
James T. Morris Director, 2/87-present; Chairman & CEO, Indianapolis
8191 N. Pennsylvania Water Co., 1/92-present; Pres., Indianapolis Water Co.,
Indianapolis, IN 46240 1/89-1/92; Pres., Chrmn. & CEO, IWC Resources Corp.,
1/89-present; Director, MSA Realty Corp., 11/84-9/94;
Dir., National City Bank Corp., 7/89-present; Advisor,
Logo 7, Inc., 9/90-12/91; Dir., Paul Harris,
12/96-present; Dir., State Life Ins. Co., 11/94-present
Thomas E. Reilly, Jr. Director, 2/90-present; Chairman, Reilly Industries,
8877 Pickwick Dr. Inc., 1/90-present; President, Reilly Indus., 1963-1/90;
Indianapolis, IN 46260 Director, Lilly Indus. Inc., 4/81-present; Director, INB
National Bank, 4/84-10/93; Dir. NBD Indiana, subsid. of
NBD Bancorp, 4/84-1994; Dir., NBD Bancorp, 3/94-2/95;
Dir., First Chicago NBD Corp., 2/95-present; Dir., Herif
Jones Corp., 10/95-present; Dir., State Life Ins. Co.,
11/94-present
William R. Riggs Director, 2/92-present; Attorney (Partner), Ice Miller
7614 Silver Pine Ct. Donadio & Ryan, 6/63-present; Dir., State Life Ins. Co.,
Indianapolis, IN 46250 11/94-present
Yvonne H. Shaheen Director, 8/93-present; Utility Pres., & CEO, Bright
11808 Rolling Springs Dr. Sheet Metal, 2/87-1/95; Pres. & CEO, Long Elec. Co.,
Indianapolis, IN 46032 2/87-present; Dir., Corporate Community Council,
1/93-1/95; Director, Community Hospital Foundation,
1/92-2/96; Dir., Junior Achievement, 4/90-present; Dir.,
National Elec. Contractors Assoc., 1/91-present; Dir.,
Indianapolis Chamber of Commerce, 1/90-present; Dir.,
Greater Indianapolis Progress Committee, 12/88-present;
Dir., Boy Scouts of America, 10/91-present, Director,
State Life Ins. Co., 11/94-present
Frank D. Walker Director, 11/94-present; Chairman of the Board & CEO,
3613 Bay Rd. N. Dr. Walker Information, Inc., 6/60-present; Managing Partner,
Indianapolis, IN 46240 W.R. Properties, 6/84-present; Dir., Citizens Gas & Coke
Utility, 10/87-present; Dir., NBD Bank N.A. Indiana,
4/88-present; Advisor, Wild Birds Unlimited, Inc.,
8/95-present
State Regulation
AUL is subject to regulation by the Department of Insurance of the State of
Indiana, which periodically examines the financial condition and operations of
AUL. AUL is also subject to the insurance laws and regulations of all
jurisdictions where it does business. The Policy described in this Prospectus
has been filed with and, where required, approved by, insurance officials in
those jurisdictions where it is sold.
AUL is required to submit annual statements of operations, including financial
statements, to the insurance departments of the various jurisdictions where it
does business to determine solvency and compliance with applicable insurance
laws and regulations.
Additional Information
A registration statement under the Securities Act of 1933 has been filed with
the SEC relating to the offering described in this Prospectus. This Prospectus
does not include all the information set forth in the registration statement.
The omitted information may be obtained at the SEC's principal office in
Washington, D.C. by paying the SEC's prescribed fees.
Independent Auditors
The consolidated balance sheets for AUL at December 31, 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year ended December 31, 1996, appearing herein have been audited by Coopers &
Lybrand LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Stephen J.
Pearson, FSA, MAAA, Assistant Vice President and Individual Product Actuary, of
AUL.
Litigation
The Separate Account is not a party to any litigation. Its depositor, AUL, as an
insurance company, ordinarily is involved in litigation. AUL is of the opinion
that, at present, such litigation is not material to the Owners of the Policies.
Legal Matters
Dechert Price & Rhoads of Washington, D.C. has provided advice on certain
matters relating to the federal securities laws. Matters of Indiana law
pertaining to the Policies, including AUL's right to issue the Policies and its
qualification to do so under applicable laws and regulations issued thereunder,
have been passed upon by Richard A. Wacker, Associate General Counsel, of AUL.
Financial Statements
AUL's financial statements as of December 31, 1996 for the year ended December
31, 1996 and as of June 30, 1997 for the six month period ended June 30, 1997
are included in this Prospectus. The financial statements of AUL should be
distinguished from financial statements of the Separate Account and should be
considered only as bearing upon AUL's ability to meet its obligations under the
Policies. They should not be considered as bearing on the investment performance
of the assets held in the Separate Account. Because the Separate Account had not
commenced operations before the date of this Prospectus, no financial statements
of the Separate Account are included in this Prospectus.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American United Life Insurance Company
Indianapolis, Indiana
We have audited the accompanying combined balance sheet of American United Life
Insurance Company(R) and affiliates as of December 31, 1996 and 1995, and the
related combined statements of operations, policyowners' surplus and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of American United Life
Insurance Company(R) and affiliates as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note I to the combined financial statements, the Company adopted
Statement of Financial Accounting Standards No. 120 (SFAS 120) and Financial
Accounting Standards Board Interpretation No. 40 (FIN 40) which required
implementation of several accounting pronouncements not previously adopted. The
effects of adopting SFAS 120 and FIN 40 were retroactively applied to the
Company's previously issued financial statements, consistent with the
implementation guidance of those standards.
The Company previously issued financial statements for 1995 which were presented
in accordance with accounting principles prescribed or permitted by the
Insurance Department of the State of Indiana and which were considered generally
accepted accounting principles for mutual life insurance companies. We
previously issued our report dated February 19, 1996, on such financial
statements.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 19, 1997
COMBINED BALANCE SHEET
December 31,1996, and l995 1996 (in millions) 1995
- -----------------------------------------------------------------------------
Assets
Investments:
Fixed Maturities:
Available for sale at fair value $1,593.4 $1,628.8
Held to maturity at amortized cost 3,013.6 2,982.4
Equity securities at fair value 15.2 19.0
Mortgage loans 1,114.6 1,124.7
Real estate 52.3 54.5
Policy loans 143.5 141.6
Short term and other invested assets 43.8 69.0
Cash and cash equivalents 20.2 10.9
- -----------------------------------------------------------------------------
Total investments 5,996.6 6,030.9
- -----------------------------------------------------------------------------
Accrued investment income 82.1 86.0
Reinsurance receivables 209.5 191.2
Deferred acquisition costs 348.2 310.2
Property and equipment 54.0 47.3
Insurance premiums in course of collection 47.5 31.2
Other assets 35.7 26.9
Assets held in separate accounts 1,078.7 603.9
- -----------------------------------------------------------------------------
Total assets $7,852.3 $7,327.6
- -----------------------------------------------------------------------------
Liabilities and policyowners' surplus
Liabilities
Policy reserves $5,688.6 $5,755.8
Other policyowner funds 176.2 171.7
Pending policyowner claims 137.6 130.4
Surplus notes 75.0 ---
Other liabilities and accrued expenses 123.4 116.9
Liabilities related to separate accounts 1,078.7 603.9
- -----------------------------------------------------------------------------
Total liabilities 7,279.5 6,778.7
- -----------------------------------------------------------------------------
Unrealized appreciation of securities,
net of deferred income tax 19.0 47.2
Policyowners' surplus 553.8 501.7
- -----------------------------------------------------------------------------
Total policyowners' surplus 572.8 548.9
- -----------------------------------------------------------------------------
Total liabilities and policyowners' surplus$7,852.3 $7,327.6
- -----------------------------------------------------------------------------
COMBINED STATEMENT OF OPERATIONS
for years ended December 31,1996, and l995 1996 (in millions) 1995
- -----------------------------------------------------------------------------
Revenues:
Insurance premiums and other considerations $ 401.1 $ 390.0
Policy and contract charges 46.5 39.8
Net investment income 471.8 478.9
Realized investment gains 6.6 8.2
Other income 3.8 .1
- -----------------------------------------------------------------------------
Total revenues 929.8 917.0
- -----------------------------------------------------------------------------
Benefits and expenses:
Policy benefits $ 381.4 $ 346.7
Interest expense on annuities
and financial products 261.6 283.1
Underwriting, acquisition and insurance
expenses 110.2 100.3
Amortization 49.8 41.2
Dividends to policyowners 26.3 24.7
Interest expense on surplus notes 5.1 ----
Other operating expenses 8.9 42.7
- -----------------------------------------------------------------------------
Total benefits and expenses 843.3 838.7
- -----------------------------------------------------------------------------
Income before income tax expense 86.5 78.3
Income tax expense 34.4 32.7
- -----------------------------------------------------------------------------
Net income $ 52.1 $ 45.6
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
COMBINED STATEMENT OF POLICYOWNERS' SURPLUS
Policyowners' surplus at beginning of year $548.9 $430.7
Net income 52.1 45.6
Unrealized appreciation
(depreciation) of securities, net (28.2) 72.6
- -----------------------------------------------------------------------------
Policyowners' surplus at end of year $572.8 $548.9
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
COMBINED STATEMENT OF CASH FLOWS
for years ended December 31,1996, and l995 1996 (in millions) 1995
- -----------------------------------------------------------------------------
Cash flows from operating activities:
- ------------------------------------------------------------------------------
Net Income $ 52.1 $ 45.6
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization 49.8 41.2
Depreciation 9.2 8.6
Deferred taxes 1.8 7.0
Realized investment gains (6.6) (8.2)
Policy acquisition costs (69.3) (61.2)
Interest credited to deposit liabilities 254.7 274.2
Fees charged to deposit liabilities (19.8) (19.5)
Amortization of investment income (6.2) (10.9)
Increase in insurance liabilities 93.9 110.5
Increase in assets (44.4) (72.1)
Increase in liabilities 19.6 14.7
- ------------------------------------------------------------------------------
Net cash provided by operating activities 334.8 329.9
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases:
Fixed maturities, Held to Maturity (194.4) (390.1)
Fixed maturities, Available for Sale (477.7) (234.9)
Equity securities (24.7) (1.1)
Mortgage loans (169.1) (159.9)
Real estate (3.9) (2.2)
Short term and other invested assets (2.6) (.4)
Proceeds from sales, calls or maturities:
Fixed maturities, Held to Maturity 158.8 290.1
Fixed maturities, Available for Sale 466.4 145.7
Equity securities 28.7 14.7
Mortgage loans 175.0 115.7
Real estate 3.1 3.4
Short term and other invested assets 27.6 4.6
- -----------------------------------------------------------------------------
Net cash used by investing activities (12.8) (214.4)
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of surplus notes 75.0 ---
Deposits to insurance liabilities 595.2 471.7
Withdrawals from insurance liabilities (984.6) (587.8)
Policyowner dividends 3.6 .7
Increase in policy loans (1.9) (3.6)
- ------------------------------------------------------------------------------
Net cash used by financing activities (312.7) (119.0)
- ------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 9.3 (3.5)
- ------------------------------------------------------------------------------
Cash and cash equivalents beginning of year 10.9 14.4
- ------------------------------------------------------------------------------
Cash and cash equivalents end of year $ 20.2 $ 10.9
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Presentation
American United Life Insurance Company(R) (AUL) is an Indiana-domiciled mutual
life insurance company with headquarters in Indianapolis. AUL is licensed to do
business in 47 states and the District of Columbia. AUL offers individual life
insurance and annuities, group life and disability insurance and pension
products through career agents working in a distribution network of general
agency offices. AUL also offers reinsurance services. The combined financial
statements include the accounts of the Company and its affiliate, The State Life
Insurance Company (State Life). Significant intercompany transactions have been
excluded.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP). As of January 1, 1996, AUL
adopted Financial Accounting Standards Board (FASB) Statement No. 120,
Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts, and Financial
Accounting Standards Board Interpretation No. 40 (FIN40), 'Applicability of
Generally Accepted Accounting Principles for Mutual Life Insurance and Other
Enterprises.' SFAS120 requires financial statements prepared in accordance with
generally accepted accounting principles to apply all applicable authoritative
GAAP pronouncements. The cumulative effect of applying SFAS No. 120 primarily
consists of the initial deferral of acquisition costs, the establishment of
deferred taxes, the change in methodology for insurance reserves, the
elimination of the statutory asset valuation reserve and the effect of
classifying certain fixed maturity investments as available for sale. The effect
of the changes has been reported retroactively through restatement of the
financial information as of January 1, 1994. As a result of restating the 1995
financial statements, combined net income was increased by $1.4 million, and
combined policyowners' surplus increased $239.8 million.
AUL also files financial statements with insurance regulatory authorities which
are prepared on the basis of statutory accounting practices which are
significantly different from financial statements prepared in accordance with
GAAP. These differences are described in detail in Note 9 - Statutory
Information.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
INVESTMENTS
Fixed maturity securities which may be sold to meet liquidity and other needs of
the Company are categorized as available for sale and are stated at fair value.
Fixed maturity securities which the Company has the positive intent and ability
to hold to maturity are categorized as held-to-maturity and are stated at
amortized cost. Equity securities are stated at fair value. Mortgage loans on
real estate are carried at amortized cost less an impairment allowance for
estimated uncollectible amounts. Real estate is reported at cost less allowances
for depreciation. Depreciation is provided (straight line) over the estimated
useful lives of the related assets. Investment real estate is net of accumulated
depreciation of $28.8 million and $28.3 million at December 31, 1996 and 1995,
respectively. Depreciation expense for investment real estate amounted to $2.4
million and $2.6 million for 1996 and 1995, respectively. Policy loans are
carried at their unpaid balance. Other invested assets are reported at cost plus
the Company's equity in undistributed net equity since acquisition. Short term
investments include investments with maturities of one-year or less and are
carried at cost which approximates market. Short term certificates of deposit
and savings certificates are considered to be cash equivalents. The carrying
amount for cash and cash equivalents approximates market.
Realized gains and losses on sale or maturity of investments are based upon
specific identification of the investments sold and do not include amounts
allocable to separate accounts. At the time a decline in value of an investment
is determined to be other than temporary, a provision for loss is recorded which
is included in realized investment gains and losses. Unrealized gains and
losses, resulting from carrying available-for-sale securities at fair value, are
reported in policyowners' surplus, net of deferred income taxes.
DEFERRED POLICY ACQUISITION COSTS
Those costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable. Such costs include commissions, certain costs of
policy underwriting and issue and certain variable agency expenses. These costs
are amortized with interest as follows:
For participating whole life insurance products, over the lesser of 30 years or
the lifetime of the policy in relation to the present value of estimated gross
margins from expenses, investments and mortality, discounted using the expected
investment yield.
For universal life-type policies and investment contracts, over the lesser of
the lifetime of the policy or 30 years for life policies or 20 years for other
policies in relation to the present value of estimated gross profits from
surrender charges and investment, mortality and expense margins, discounted
using the interest rate credited to the policy.
For term life insurance products and life reinsurance policies, over the lesser
of the benefit period or 30 years for term life or 20 years for life reinsurance
policies in relation to the ratio of anticipated annual premium revenue to the
anticipated total premium revenue, using the same assumptions used in
calculating policy benefits.
NOTES TO FINANCIAL STATEMENTS (continued)
For miscellaneous group life and individual and group health policies, straight
line over the expected life of the policy.
For credit insurance policies, the deferred acquisition cost balance is
primarily equal to the unearned premium reserve multiplied by the ratio of
deferrable commissions to premiums written.
Recoverability of the unamortized balance of deferred policy acquisition costs
is evaluated regularly. For universal life-type contracts, investment contracts
and participating whole life policies, the accumulated amortization is adjusted
(increased or decreased) whenever there is a material change in the estimated
gross profits or gross margins expected over the life of a block of business in
order to maintain a constant relationship between cumulative amortization and
the present value of gross profits or gross margins. For most other contracts,
the unamortized asset balance is reduced by a charge to income only when the
present value of future cash flows, net of the policy liabilities, is not
sufficient to cover such asset balance.
ASSETS HELD IN SEPARATE ACCOUNTS
Separate accounts are funds on which investment income and gains or losses
accrue directly to certain policyholders, primarily variable annuity contracts
and equity-based pension and profit sharing plans. The assets of these accounts
are legally segregated, and are valued at fair value. The related liabilities
are recorded at amounts equal to the underlying assets; the fair value of these
liabilities is equal to their carrying amount.
PROPERTY AND EQUIPMENT
Property and equipment includes real estate owned and occupied by the Company.
Property and equipment is carried at cost, net of accumulated depreciation of
$35.9 million and $30.1 million as of December 31, 1996 and 1995, respectively.
The Company provides for depreciation of property and equipment using the
straight-line method over its estimated useful life. Depreciation expense for
1996 and 1995 was $6.8 million and $6.0 million, respectively.
PREMIUM REVENUE AND BENEFITS TO POLICYHOLDERS
The premiums and benefits for whole life and term insurance products and certain
annuities with life contingencies (immediate annuities) are fixed and
guaranteed. Such premiums are recognized as premium revenue when due. Group
insurance premiums are recognized as premium revenue over the time period to
which the premiums relate. Benefits and expenses are associated with earned
premiums so as to result in recognition of profits over the life of the
contracts. This association is accomplished by means of the provision for
liabilities for future policy benefits and the amortization of deferred policy
acquisition costs.
Universal life policies and investment contracts are policies with terms that
are not fixed and guaranteed. The terms that may be changed could include one or
more of the amounts assessed the policyholder, premiums paid by the policyholder
or interest accrued to policyholder balances. The amounts collected from
policyholders for these policies are considered deposits, and only the
deductions during the period for cost of insurance, policy administration and
surrenders are included in revenue. Policy benefits and claims that are charged
to expense include interest credited to contracts and benefit claims incurred in
the period in excess of related policy account balances.
RESERVES FOR FUTURE POLICY AND CONTRACT BENEFITS
Liabilities for future policy benefits for participating whole life policies are
calculated using the net level premium method and assumptions as to interest and
mortality. The interest rate is the dividend fund interest rate and the
mortality rates are those guaranteed in the calculation of cash surrender values
described in the contract. Liabilities for future policy benefits for term life
insurance and life reinsurance policies are calculated using the net level
premium method and assumptions as to investment yields, mortality and
withdrawals. The assumptions are based on projections of past experience and
include provisions for possible unfavorable deviation. These assumptions are
made at the time the contract is issued. Liabilities for future policy benefits
on universal life and investment contracts consist principally of policy account
values plus certain deferred policy fees which are amortized using the same
assumptions and factors used to amortize the cost of policies produced. If the
future benefits on investment contracts are guaranteed (immediate annuities with
benefits paid for a period certain) the liability for future benefits is the
present value of such guaranteed benefits. Claim liabilities include provisions
for reported claims and estimates based on historical experience, for claims
incurred but not reported.
INCOME TAXES
The provision for income taxes includes amounts currently payable and deferred
income taxes resulting from the temporary differences in the assets and
liabilities determined on a tax and financial reporting basis.
NOTES TO FINANCIAL STATEMENTS (continued)
2. Investments:
The amortized cost and fair value of investments in fixed maturity securities by
type of investment were as follows:
December 31, 1996
- ------------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------
Available for sale: (in millions)
Obligations of U.S. government, states,
political subdivisions and foreign governments $ 85.2 $ 1.9 $ 1.3 $ 85.8
Corporate securities 1,000.0 33.9 7.0 1,026.9
Mortgage-backed securities 463.0 19.1 1.4 480.7
- -----------------------------------------------------------------------------------------------------------------
$1,548.2 $ 54.9 $ 9.7 $ 1,593.4
- -----------------------------------------------------------------------------------------------------------------
Held to maturity:
Obligations of U.S. government, states,
political subdivisions and foreign governments $ 132.0 $ 5.5 $ 1.1 $ 136.4
Corporate securities 1,891.1 100.1 14.0 1,977.2
Mortgaged-backed securities 990.5 44.9 4.4 1,031.0
- -----------------------------------------------------------------------------------------------------------------
$3,013.6 $ 150.5 $ 19.5 $ 3,144.6
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------
Available for sale: (in millions)
Obligations of U.S. government, states,
political subdivisions and foreign governments $ 50.7 $ 3.7 $ .1 $ 54.3
Corporate securities 925.3 63.5 2.0 986.8
Mortgage-backed securities 543.2 44.7 .2 587.7
- -----------------------------------------------------------------------------------------------------------------
$1,519.2 $ 111.9 $ 2.3 $ 1,628.8
- -----------------------------------------------------------------------------------------------------------------
Held to maturity:
Obligations of U.S. government, states,
political subdivisions and foreign governments $ 135.0 $ 10.7 $ .3 $ 145.4
Corporate securities 1,817.7 174.8 1.5 1,991.0
Mortgaged-backed securities 1,029.7 89.7 .2 1,119.2
- -----------------------------------------------------------------------------------------------------------------
$2,982.4 $ 275.2 $ 2.0 $ 3,255.6
NOTES TO FINANCIAL STATEMENTS (continued)
The amortized costs and fair value of fixed maturity securities at December 31,
1996, by contractual average maturity, are shown below. 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.
Available for Sale Held to Maturity
Total
Amortized Fair Amortized Fair
Amortized Fair
(in millions) Cost Value Cost Value
Costs Value
- -----------------------------------------------------------------------------------------------------------------------------
Due in one year or less $ 85.1 $ 85.7 $ 62.7 $ 63.4 $ 147.8
$ 149.1
Due after one year through five years 369.2 370.8 704.0 727.6
1,073.2 1,098.4
Due after five years through ten years 363.0 376.7 800.8 841.8
1,163.8 1,218.5
Due after ten years 267.9 279.5 455.6 480.8
723.5 760.3
- -----------------------------------------------------------------------------------------------------------------------------
1,085.2 1,112.7 2,023.1 2,113.6
3,108.3 3,226.3
Mortgage-backed securities 463.0 480.7 990.5 1,031.0
1,453.5 1,511.7
- -----------------------------------------------------------------------------------------------------------------------------
$1,548.2 $ 1,593.4 $3,013.6 $3,144.6 $ 4,561.8
$ 4,738.0
=============================================================================================================================
Net investment income consistent of the following:
December 31,1996,and l995 1996 (in millions) 1995
- -----------------------------------------------------------------------------
Fixed maturity securities $ 364.0 $ 369.4
Equity securities 2.0 2.9
Mortgage loans 104.4 104.4
Real estate 10.8 10.7
Policy loans 9.0 9.2
Other 6.1 4.5
- -----------------------------------------------------------------------------
Gross investment income 496.3 501.1
Investment expenses 24.5 22.2
- -----------------------------------------------------------------------------
Net investment income $ 471.8 $ 478.9
- -----------------------------------------------------------------------------
Net realized investment gains and losses include write downs and changes in the
reserve for losses on mortgage loans and foreclosed real estate of $.5 million
and $1.5 million for 1996 and 1995, respectively. Proceeds from the sales,
maturities or calls of investments in fixed maturities during 1996 and 1995 were
approximately $609.0 million and $435.8 million, respectively. Gross gains of
$12.0 million and $9.1 million, and gross losses of $6.9 million and $2.9
million were realized in 1996 and 1995, respectively. The changes in unrealized
appreciation (depreciation) of fixed maturities amounted to approximately
$(64.3) million and $156.5 million in 1996 and 1995, respectively.
At December 31, 1996, the unrealized appreciation on equity securities of
approximately $1.4 million is comprised of $3.0 million in unrealized gains and
$1.6 million of unrealized losses and has been reflected directly in
policyowners' surplus. The change in the unrealized appreciation (depreciation)
of equity securities amounted to approximately $(1.1) million and $1.2 million
in 1996 and 1995, respectively.
The Company maintains a diversified mortgage loan portfolio and exercises
internal limits on concentrations of loans by geographic area, industry, use and
individual mortgagor. Mortgage loans on various properties in nine states
(California, Florida, North Carolina, Indiana, Texas, Illinois, Georgia,
Kentucky and Ohio) account for approximately 62% of the fair value of the
mortgage loan portfolio. Approximately $163.9 million of mortgage loans have
been issued on 67 geographically diversified properties of 8 large retailers.
NOTES TO FINANCIAL STATEMENTS (continued)
The Company has outstanding mortgage loan commitments at December 31, 1996, of
approximately $67.9 million.
As of December 31, 1996, the carrying value of investments that produced no
income for the previous twelve month period was $9.7 million.
3. Insurance Liabilities:
At December 31, 1996 and 1995, insurance liabilities consisted of the following:
(in
millions)
- -------------------------------------------------------------------------------------------------------------------------------
Mortality
Interest
Withdrawal or morbidity
rate
assumption assumption assumption
1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
Future policy benefits:
Participating whole life contracts Company experience Company experience 2.5% to 6.0% $ 554.9
$ 520.0
Universal life-type contracts N/A N/A N/A
352.0 334.9
Other individual life contracts Company experience Company experience 6.8% to 10.0%
183.6 160.3
Accident and health N/A N/A N/A
43.7 43.3
Annuity products N/A N/A N/A
4,397.1 4,546.8
Group life and health N/A N/A N/A
157.3 150.5
Other policyowner funds N/A N/A N/A
176.2 171.7
Pending policy owner claims N/A N/A N/A
137.6 130.4
- -------------------------------------------------------------------------------------------------------------------------------
Total insurance liabilities $ 6,002.4
$ 6,057.9
===============================================================================================================================
Participating life insurance policies under generally accepted accounting
principles represent approximately 11% and 12% of the total individual life
insurance in force at December 31, 1996 and 1995, respectively. Participating
policies represented approximately 40% of life premium income for both 1996 and
1995. The amount of dividends to be paid is determined annually by the Board of
Directors.
4. Employees' and Agents' Benefit Plans:
The Company has a noncontributory defined benefit pension plan covering
substantially all employees. Company contributions to the employee plan are made
annually in an amount between the minimum ERISA required contribution and the
maximum tax-deductible contribution. Contributions made to the Plan were $2.4
million in 1996 and $2.2 million in 1995. The net periodic pension cost was $.6
million and $1.6 million for the year ended December 31, 1996 and 1995,
respectively. This includes service cost of $3.5 million and $.8 million,
interest cost of $1.4 million and $1.3 million, and return on plan assets of
$4.3 million and $.5 million for the year ended December 31, 1996 and 1995,
respectively.
The following benefit information for the employees' defined benefit plan was
determined by outside actuaries as of January 1, 1996 and 1995, respectively,
the most recent actuarial valuation dates.
1996 (in millions) 1995
- -----------------------------------------------------------------------------
Actuarial present value of accumulated benefits for the employees' defined
benefit plan:
Vested $ 20.1 $ 18.2
Nonvested .2 .2
- -----------------------------------------------------------------------------
$ 20.3 $ 18.4
- -----------------------------------------------------------------------------
Related net assets available for plan
benefits $ 28.8 $ 25.1
- ------------------------------------------------------------------------------
The Company has a defined contribution plan covering employees who have
completed one full calendar year of service. Annual contributions are made by
the Company in amounts based upon the Company's financial results. Company
contributions to the plan during 1996 and 1995 were $1.7 million and $1.2
million, respectively.
NOTES TO FINANCIAL STATEMENTS (continued)
The Company has a defined contribution pension plan and a 401(k) plan covering
substantially all of the agents, except general agents. Contributions of 3%
defined commissions (plus 3% for commissions over the Social Security wage base)
are made to the pension plan. An additional contribution of 3% of defined
commissions are made to a 401(k) plan. Company contributions expended for these
plans for 1996 and 1995 were $612,000 and $606,000, respectively.
The funds for all plans are held by the Company under deposit administration and
group annuity contracts.
The Company also provides certain health care and life insurance benefits
(postretirement benefits) for retired employees and certain agents (retirees).
Substantially all employees and agents may become eligible for such benefits if
they reach retirement age while working for the Company.
The net periodic postretirement benefit cost was $956,000 and $986,000 for the
year ended December 31, 1996 and 1995, respectfully. This includes service cost
of $255,000 and $253,000, interest cost of $645,000 and $688,000, amortization
of unrecognized loss of $56,000 and $45,000 for the year ended December 31, 1996
and 1995, respectively.
Accrued postretirement benefits as of December 31 were as follows:
1996 (in millions) 1995
- -----------------------------------------------------------------------------
Accumulated postretirement benefit obligation (APBO):
Retirees and their dependents $ 4.6 $ 5.6
Active employees fully eligible to retire
and receive benefits 2.6 2.4
Active employees not fully eligible 2.7 1.3
Unrecognized loss (1.0) (1.5)
- -----------------------------------------------------------------------------
Total APBO $ 8.9 $ 7.8
- -----------------------------------------------------------------------------
The assumed discount rate used in determining the accumulated postretire- ment
benefit was 7.25% and the assumed health care cost trend rate was 10% graded to
6% over 50 years. Compensation rates were assumed to increase 6% at each year
end. The health coverage for retirees and 65 and over is capped in the year
2000. The health care cost trend rate assumption has an effect on the amounts
reported. An increase in the assumed health care cost trend rates by one
percentage point would increase the accumulated postretirement benefit
obligation as of December 31, 1996 by $178,000 and increase the accumulated
postretirement benefit cost for 1996 by $77,000.
5. Federal Income Taxes:
A reconciliation of the income tax attributable to continuing operations
computed at U.S. federal statutory tax rates to the income tax expense included
in the statement of operations follows:
for years ended December 31, 1996 and 1995 1996 (in millions) 1995
- -----------------------------------------------------------------------------
Income tax computed at statutory tax rate $ 30.3 $ 27.4
Bond discount accrual and investment (4.0) (4.0)
Mutual company differential earnings amount 7.5 3.4
Other .6 5.9
- -----------------------------------------------------------------------------
Federal income tax $ 34.4 $ 32.7
- -----------------------------------------------------------------------------
The components of the provision for income taxes on earnings included current
tax provisions of $32.6 million and $25.7 million for the year ended December
31, 1996 and 1995, respectively, and deferred tax expense of $1.8 million and
$7.0 million for the year ended December 31, 1996 and 1995, respectively.
NOTES TO FINANCIAL STATEMENTS (continued)
Deferred income tax assets (liabilities):
1996 (in millions) 1995
- -----------------------------------------------------------------------------
Deferred policy acquisition costs $(110.9) $ (104.5)
Investments (8.1) (16.6)
Insurance liabilities 139.0 132.5
Unrealized appreciation of securities (11.2) (28.6)
Other (4.9) 5.5
- -----------------------------------------------------------------------------
Deferred income tax assets (liabilities) $ 3.9 $ (11.7)
- -----------------------------------------------------------------------------
Federal income taxes paid were $39.0 million and $18.2 million for 1996 and
1995, respectively.
6. Reinsurance:
The Company is a party to various reinsurance contracts under which it receives
premiums as a reinsurer and reimburses the ceding companies for portions of the
claims incurred. At December 31, 1996 and 1995, life reinsurance assumed was
approximately 67% and 65%, respectively, of life insurance in force.
The Company cedes that portion of the total risk on an individual life in excess
of $1,000,000. For accident and health and disability policies, the Company has
established various limits of coverage it will retain on any one policy owner
and cedes the remainder of such coverage.
Certain statistical data with respect to reinsurance follows:
for years ended December 31, 1996 and 1995 1996 (in millions) 1995
- -----------------------------------------------------------------------------
Direct statutory premiums $ 353.1 $ 352.3
Reinsurance assumed 214.8 209.7
Reinsurance ceded 109.8 103.8
- -----------------------------------------------------------------------------
Net premiums 458.1 458.2
- -----------------------------------------------------------------------------
Reinsurance recoveries $ 73.5 $ 77.3
- -----------------------------------------------------------------------------
The Company accounts for all reinsurance agreements as transfers of risk. If
companies to which reinsurance has been ceded are unable to meet obligations
under the reinsurance agreements, the Company would remain liable. Five
reinsurers account for approximately 64% of the Company's December 31, 1996
ceded reserves for life and accident and health insurance. The remainder of such
ceded reserves is spread among numerous reinsurers.
7. Surplus Notes and Lines of Credit:
On February 16, 1996, the Company issued $75 million of Surplus Notes, due March
30, 2026. Interest is payable semi-annually on March 30, and September 30 at a
7.75% annual rate. Any payment of interest on or principal of the Notes may be
made only with the prior approval of the Commissioner of the Indiana Department
of Insurance. The Surplus Notes may not be redeemed at the option of AUL or any
holder of the Surplus Notes. Interest paid during 1996 was $3.6 million. The
Company has available a $125 million committed credit facility. No amounts have
been drawn as of December 31, 1996.
8. Commitments and Contingencies:
Various lawsuits have arisen in the ordinary course of the Company's business.
In each of the matters, the Company believes the ultimate resolution of such
litigation will not result in any material adverse impact to operations or
financial condition of the Company.
NOTES TO FINANCIAL STATEMENTS (continued)
9. Statutory Information:
The Company and its affiliate, State Life, prepare statutory financial
statements in accordance with accounting principles and practices prescribed or
permitted by the Indiana Department of Insurance. Prescribed statutory
accounting practices (SAP) currently include state laws, regulations and general
administrative rules applicable to all insurance enterprises domiciled in a
particular state, as well as practices described in National Association of
Insurance Commissioners'(NAIC) publications.
A reconciliation of SAP surplus to GAAP surplus at December 31 follows:
for years ended December 31, 1996 and 1995 1996 (in millions) 1995
- -----------------------------------------------------------------------------
SAP Surplus $ 407.9 $ 309.1
Deferred policy acquisition costs 362.7 343.2
Adjustments to policy reserves (278.3) (285.0)
Asset valuation and interest maintenance
reserves 106.4 105.2
Unrealized gain on invested assets 17.4 49.9
Surplus notes (75.0) ----
Deferred income taxes 16.8 15.6
Other, net 14.9 10.9
- -----------------------------------------------------------------------------
GAAP surplus $ 572.8 $ 548.9
- -----------------------------------------------------------------------------
A reconciliation of SAP net income to GAAP net income for the years ended
December 31 follows:
for years ended December 31, 1996 and 1995 1996 (in millions) 1995
- -----------------------------------------------------------------------------
SAP Income $ 51.4 $ 44.2
Deferred policy acquisition costs 19.5 20.1
Adjustments to policy reserves (15.0) (10.7)
Deferred income taxes (1.5) (6.7)
Other, net (2.3) (1.3)
- -----------------------------------------------------------------------------
GAAP net income $ 52.1 $ 45.6
- -----------------------------------------------------------------------------
Life insurance companies are required to maintain certain amounts of assets on
deposit with state regulatory authorities. Such assets had an aggregate carrying
value of $4.5 million at December 31, 1996.
10. Fair Value of Financial Instruments:
The disclosure of fair value information about certain financial instruments
based primarily on quoted market prices. The fair values of short-term
investments and accrued investment income approximate the carrying amounts
reported in the balance sheets. Fair values for fixed maturity set and equity
securities, and surplus notes 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, are estimated 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 of the aggregate mortgage loan portfolio was estimated by
discounting the future cash flows using current rates at which similar loans
would be made to borrowers with similar credit ratings for similar maturities.
The estimated fair values of the liabilities for policyholder funds approximate
the statement values because interest rates credited to account balances
approximate current rates paid on similar funds are not generally guaranteed
beyond one year. Fair values for other insurance reserves are not required to be
disclosed. However, the estimated fair values for all insurance liabilities 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. The fair
values of certain financial instruments along with their corresponding carrying
values at December 31, 1996 and 1995 follows.
- ---------------------------------------------------------------------------------------------------
1996 (in millions) 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------
Fixed maturity securities:
Available for sale $1,593.4 $1,593.4 $ 1,628.8 $ 1,628.8
Held to Maturity 3,013.6 3,144.6 2,982.4 3,255.6
Equity securities 15.2 15.2 19.0 19.0
Mortgage loans 1,114.6 1,186.3 1,124.7 1,229.1
Policy loans 143.5 143.5 141.6 141.6
Surplus notes 75.0 73.0 --- ----
- -------------------------------------------------------------------------------------------------
LIFE AND ACCIDENT AND HEALTH COMPANIES-ASSOCIATION EDITION
QUARTERLY STATEMENT
as of June 30, 1997
OF THE CONDITION AND AFFAIRS OF THE
AMERICAN UNITED LIFE INSURANCE COMPANY
NAIC Group Code: 0619 NAIC Company Code: 60895 Employer's ID Number: 35-0145825
Organized under SPECIAL ACT OF UNITED STATES CONGRESS, made to the
INSURANCE DEPARTMENT OF THE STATE OF INDIANA
Pursuant to the Laws Thereof
Incorporated..................................................................................November 7, 1877
Commenced Business............................................................................November 7, 1877
Reincorporated........................................November 29, 1933 under the Laws of the State of Indiana
Statutory Home Office.........................................One American Square, Indianapolis, Indiana 46204
Main Administrative Office.......................One American Square Indianapolis, Indiana 46204 (317)263-1877
Mail Address.....................................................P.O. Box 368 Indianapolis, Indiana 46206-0368
Primary Location of Books and Records. ....... . One American Square Indianapolis, Indiana 46204 (317)263-1877
Annual Statement Contact.......................................Catherine B. Husman, FSA (317)263-1877 ext 1685
OFFICERS
Jerry Doran Semler, Chairman of the Board, President and Chief Executive Officer
Ray Stephen Radcliffe, FSA Jerry Lee Plummer William Russell Brown
Executive Vice President Senior Vice President General Counsel and Secretary
John Hardin Barbre George David Sapp Jack E Hufford
Senior Vice President Senior Vice President Treasurer
Charles David Lineback James Patrick Shanahan Catherine Bigot Husman, FSA
Senior Vice President Senior Vice President Vice President and Chief Actuary
James William Murphy Gerald Thomas Walker Scott Alex Kincaid
Senior Vice President Senior Vice President VP and Chief Information Officer
Larry Sweany
Controller
DIRECTORS OR TRUSTEES
Jerry Doran Semler, Chairman Otto Nicholas Frenzel III Thomas Edward Reilly, Jr.
Steven Claus Beering, M.D. David William Goodrich William Ray Riggs
Arthur Lee Bryant, FSA William Patrick Johnson Yvonne Hawrany Shaheen
James Milton Cornelius James Thomas Morris Frank Dilling Walker
James Earl Dora Ray Stephen Radcliffe, FSA
State of Indiana
County of Marion
Jerry D. Semler, Chairman of the Board, President and Chief Executive Officer,
and Larry Sweany, Controller, of the American United Life Insurance Company,
being duly sworn each for himself deposes and says that they are the above
described officers of the said insurer and that on the thirtieth day of June
1997, all of the herein described assets were the absolute property of the said
insurer free and clear from any liens or claims thereon, except as herein
stated, and that this statement is a full and true statement of all the assets
and liabilities and of the condition and affairs of the said insurer as of the
thirtieth day of June 1997, and of its income and deductions therefrom for the 6
months ended on that date, according to the best of their information, knowledge
and belief, respectively.
This statement is to be subscribed and sworn to by two of the Company's
Executive Officers and a statement of actuarial opinion as prescribed by the
instructions of the annual statement is to be subscribed and sworn to by an
actuary. Show titles of officers.
\s\ Jerry D. Semler \s\ Catherine B. Husman \s\Larry Sweany
Chairman of the Board Vice President & Controller
President and Chief Executive Officer Chief Actuary
Subscribed and sworn to before me this 5th day of August 1997 (A) Is this an original filing Yes (X) No( )
\s\ Rita M. Gentry (B) If no: (i) state the amendment no. _____
Rita M. Gentry, County of Residence: Marion (ii) Date filed _____
Notary public Commission expires May 25, 2001 (iii) number of paper attached ____
STATEMENT AS OF JUNE 30,1997
OF THE
American United Life Insurance Company
ASSETS
Current Statement Date
1 2 3 4 5
December 31
Net Admitted Assets Prior Year Net
Ledger Assets Non-Ledger Assets Assets not Admitted (Cols. l+2-3) Admitted Assets
1. Bonds (Less $..liability for
asset transfers with put
options)...................4,287,885,441..................................................4,287,885,441......4,303,935,308
2. Stocks:
2.1 Preferred stocks. ..........3,318,780.......................................... ...........3,318,780..........3,329,440
2.2 Common stocks..............37,410,141.....................................................37,410,141 .........7,671,445
3. Mortgage loans on real estate:
3.1 First liens.............1,073,416,360..................................................1,073,416,360......1,076,204,168
3.2 Other than first liens................................................................................................
4. Real estate:
4.1 Properties occupied by the company (less
$............encumbrances)....32,419,697............................................... .....32,419,697.........32,519,338
4.2 Properties acquired in satisfaction of debt (less
$............encumbrances).....6,895,972......................................................6,895,972..........3,010,724
4.3. Investment real estate (less
$............encumbrances)....42,753,863.....................................................42,753,863.........43,385,989
5. Policy loans..................120,611,367....................................................120,611,367........121,679,425
6. Premium notes, including $ ..................
for first year premiums...................................................................................................
7. Collateral loans.........................................................................................................
8. Cash ($.....(8,303,709) )and short-term
investments ($.15,080,000)......6,776,291......................................................6,776,291.........56,818,050
9. Other invested assets..........39,136,246.....................................................39,136,246.........37,564,840
10. Aggregate write-ins for invested
assets.........................14,740,925.....................................................14,740,925.........15,928,607
11. Subtotals, cash and invested assets
(Lines 1 to 10................5,665,365,084...........................................(a)..5,665,365,084......5,702,047,334
12. Reinsurance ceded:
12.1 Amounts recoverable from reinsures........4,093,437.......................................4,093,437..............(299)
12.2 Commissions and expense allowances due....1,217,674.......................................1,217,674............929,302
12.3 Experience rating and other refunds due...............................................................................
13. Electronic data processing
equipment......................11,829,757............................3,822,569.................8,007,187..........8,644,813
14. Federal income tax recoverable.............................................................................................
15. Life insurance premiums and annuity
considerations deferred and uncollected on in
force (Less premiums on reinsurance ceded
and less $.....1,879,042 loading).............56,737,736......................................56,737,736.........48,593,271
16. Accident and health premiums due and
unpaid........................................15,031,248......................................15,031,248.........15,489,951
17. Investment income due and
accrued.......................................80,478,086......................................80,478,086.........77,148,500
18. Net adjustment in assets and liabilities due to
foreign exchange rates.....................................................................................................
19. Receivable from parent, subsidiaries and
affiliates.................................................................................................................
20. Amounts receivable relating to uninsured accident
and health plans...........................................................................................................
21. Other assets nonadmitted.......12,430,830...........................12,430,830.............................................
22. Aggregate write-ins for other than invested
assets.........................41,063,209.......1,003,136............3,877,447................38,188,898.........47,267,781
23. Total assets excluding Separate Accounts
Business (Lines 11 to 23)...5,730,688,879.....158,561,316...........20,130,846.............5,869,119,350......5,900,120,653
24. From Separate Accounts
Statement...................1,368,071,563..................................................1,368,071,563......1,078,742,955
25. Total (Lines 23 and 24).....7,098,760,442.....158,561,316............20,130,846............7,237,190,913......6,978,863,608
DETAILS OF WRITE-INS
1001. Securities receivable.......14,740,925......................................................14,740,925.........15,928,607
1002...........................................................................................................................
1003...........................................................................................................................
1098. Summary of remaining write-ins for Line 10 from
overflow page............................................................................................................
1099. Totals (Lines 1001 thru 1003 plus 1098)
(Line 10 above).............14,740,925......................................................14,740,925.........15,928,607
2201. Reinsurance accounts
receivable..................30,792,093........806,662.......................................31,598,755.........40,666,127
2202. State ins guarantee fund assess
rec..........................6,393,669.......................................................6,393,669..........6,586,289
2203. Miscellaneous Group Income
accrued.......................................196,474..........................................196,474.............15,365
2298. Summary of remaining write-ins for Line 22 from
overflow page................3,877,447...............................3,877,447...........................................
2299. Totals (Lines 2201 thru 2203 plus 2298)
(Line 22 above).............41,063,209.......1,003,136...............3,877,447..............38,188,898.........47,267,781
(a) Includes $.................388,386 investments in parent, subsidiaries and affiliates.
STATEMENT AS OF JUNE 30,1997 OF THE American United Life Insurance Company
LIABILITIES, SURPLUS AND OTHER FUNDS
1 2
Current December 31
Statement Date Prior Year
- ---------------------------------------------------------------------------------------------------------------------------------
1. Aggregate reserve for life policies and contracts $..4,963,661,052 less $_____________
included in Line 7.3 (including $........................ Modco Reserve)........4,963,661,052..........5,038,731,624
2. Aggregate reserve for accident and health policies
(including $ ...Modco Reserve)......................................................116,726,026.............84,047,607
3. Supplementary contracts without life contingencies (including $..Modco
Reserve).............................................................................1,694,554...............1,830,721
4. Policy and contract claims:
4.1 Life...........................................................................36,421,111..............39,129,522
4.2 Accident and health............................................................56,094,408..............53,456,864
5. Policyholders' dividend and coupon accumulations....................................59,724,999..............59,756,505
6. Policyholders' dividends $1,974,971 and coupons$...due and unpaid....................1,974,971................2,310,276
7. Provision for policyholders' dividends and coupons payable in following calendar year - estimated
amounts:
7.1 Dividends apportioned for payment to December 31, 1997........................18,275,271..............17,996,904
7.2 Dividends not yet apportioned..................................................2,299,015...............2,417,404
7.3 Coupons and similar benefits....................................................................................
8. Amount provisionally held for deferred dividend policies not incldued in Line 7.......................................
9. Premiums and annuity considerations received in advance less $ ....discount; including
$............................... 1,775 accident and health premiums...................376,302................ 271,251
10. Liability for premium and other deposit funds:
10.1 Policyholder premiums, including $...deferred annuity liability...............2,517,603...............2,544,378
10.2 Guaranteed interest contracts including $.....deferred annuity liability.......................................
10.3 Other contract deposit funds, including $.....29,040,306 deferred annuity
liability....................................................................37,991,701..............36,326,162
11. Policy and contract liabilities not included elsewhere:
11.1 Surrender values on canceled policies..........................................618,959.................779,703
11.2 Provision for experience rating refunds,
including $.accident and health experience rating refunds.....................................................
11.3 Other amounts payable on reinsurance assumed...............................(3,415,628)........................
11.4 Interest maintenance reserve................................................26,215,362..............25,778,475
12. Commissions to agents due or accrued-life and annuity
$2,225,139 accident and health $....................790,566..................3,015,705...............2,153,464
12A. Commissions and expense allowances payable on reinsurance
assumed......................................................................2,079,814...............1,142,197
13. General expenses due or accrued.....................................................1,371,905...............1,371,905
13A. Transfers to Separate Accounts due or accrued (net) (including $............
(51,054,828) accrued for expense allowances recognized in reserves).........(51,292,476)............(40,141,291)
14. Taxes, licenses and fees due or accrued, excluding federal income taxes.............10,867,879.............11,005,820
14A Federal income taxes due or accrued, including $.on capital gains
(excluding deferred taxes)...........................................................5,189,556..............9,438,705
15. "Cost of collection"' on premiums and annuity considerations deferred and
uncollected in excess of total loading thereon......................................2,839,925..............2,004,056
16. Unearned investment income...........................................................2,852,838..............2,853,678
17. Amounts withheld or retained by company as agent or trustee.........................18,206,063.............15,289,169
18. Amounts held for agents' account including $..2,312,195 agents' credit balances......2,312,195..............2,267,239
19. Remittances and items not allocated.................................................35,352,395.............31,265,448
20. Net adjustment in assets and liabilities due to foreign exchange rates...............................................
21. Liability for benefits for employees and agents if not included above................................................
22. Borrowed money $....... and interest thereon $............................unpaid.....................................
24. Miscellaneous liabilities:
24.1 Asset valuation reserve......................................................73,020,834.............73,352,970
24.2 Reinsurance in unauthorized companies....................... ...................200,843................400,674
24.3 Funds held under reinsurance treaties with unauthorized einsurer..............1,460,792..............1,308,829
24.4 Payable to parent, subsidiaries and affiliates................................................................
24.5 Drafts outstanding...............................................................13,153...............(276,634)
24.6 Liability for amounts held under uninsured accident and health plans..........................................
24.7 Funds held under coinsurance..................................................................................
25. Aggregate write-ins for liabilities .................................................33,594,712.............33,494,208
26. Total Liabilities excluding Separate Accounts business (Lines 1 to 25)............5,462,261,840..........5,512,307,833
27. From Separate Accounts Statement..................................................1,368,071,563..........1,078,742,955
28. Total Liabilities (Lines 26 and 27)...............................................6,830,333,403..........6,591,050,788
29. Common capital stock..................................................................................................
30. Preferred capital stock...............................................................................................
31. Aggregate write-ins for other than special surplus funds..............................................................
32. Surplus notes........................................................................75,000,000.............75,000,000
34. Aggregate write-ins for special surplus funds.........................................................................
35. Unassigned funds (surplus)..........................................................331,857,510............312,812,820
36. Less treasury stock, at cost:
(1) ................shares common (value included in Line 29 $........................)..............................
(2) ................shares preferred (value included in Line 30 $.......................)............................
37. Surplus (total Lines 31 + 32 + 33 + 34 + 35- 36) (including $...
in Separate Accounts Statement).....................................................406,857,510............387,812,820
38. Totals of Lines 29, 30 and 37.......................................................406,857,510............387,812,820
39. Totals of Lines 28 and 38.........................................................7,237,190,913..........6,978,863,608
DETAILS OF WRITE-INS
2501. Accounts payable....................................................................7,611,474..............9,207,266
2502. Amounts due reinsures..............................................................16,176,925.............14,454,817
2503. Reserve for unclaimed funds...........................................................200,139................217,738
2598. Summary of remaining write-ins for Line 25 from overflow page.......................9,606,175..............9,614,387
2599. Totals (Lines 2501 thru 2503 plus 2598)(Line 25 above).............................33,594,712.............33,494,208
3101.......................................................................................................................
3102.......................................................................................................................
3103.......................................................................................................................
3198. Summary of remaining write-ins for Line 31 from overflow page.......................................................
3199. Totals (Lines 3101 thru 3103 plus 3198)(Line 31 above)..............................................................
3401.......................................................................................................................
3402.......................................................................................................................
3403.......................................................................................................................
3498. Summary of remaining write-ins for Line 34 from overflow page.........................................................
3499. Totals (Lines 3401 thru 3403 plus 3498)(Line 34 above)................................................................
STATEMENT AS OF JUNE 30,1997 OF THE American United Life Insurance Company
SUMMARY OF OPERATIONS
(Excluding Unrealized Capital Gains and Losses)
1 2 3
Current Year Prior Year Prior Year Ended
To Date Year to Date December 31
1. Premiums and annuity consideration...............................220,109,053.............215,109,735........425,488,077
1A. Deposit-type funds...............................................293,230,324.............258,409,176........537,242,735
2. Considerations for supplementary contracts with life
contingencies...................... ..................................38,347..................85,071............160,426
3. Considerations for supplementary contracts without life
contingencies and dividend accumulations..............................47,219..................37,997.............39,426
3A. Coupons left to accumulate at interest..................................................................................
4. Net investment income (includes $ ... equity in undistributed
income or loss of subsidiaries)..................................220,291,924.............223,441,998.........448,627,558
4A. Amortization of interest maintenance reserve (IMR).................2,031,083...............1,483,280...........3,367,820
4B. Net gain from operations from Separate Accounts Statement................................................................
5. Commissions and expenses ceded.....................................6,577,797...............6,654,240..........12,586,492
5A. Reserve adjustments on reinsurance ceded...........................1,489,326...............1,227,551...........2,566,330
6. Aggregate write-ins for miscellaneous income.......................2,010,769...............1,043,587............2,649,798
7. Totals (Lines 1 to 6)............................................745,825,841.............707,492,635........1,432,728,663
8. Death benefits....................................................64,144,842..............64,899,005..........122,653,076
9. Matured endowments (excluding guaranteed annual pure
endowments)..........................................................370,613.................345,895..............860,327
10. Annuity benefits..................................................48,652,698..............47,714,721...........96,514,839
11. Disability benefits and benefits under accident and health
policies..........................................................38,163,104..............33,174,904...........71,435,992
11A. Coupons, guaranteed annual pure endowments and similar
benefits.................................................................................................................
12. Surrender benefits and other fund withdrawals....................325,438,669.............295,672,482..........608,245,645
13. Group conversions......................................................7,847...................5,806...............11,489
14. Interest on policy or contract funds...............................2,142,870...............3,107,321............6,289,171
15. Payments on supplementary contracts with life
contingencies........................................................219,489.................165,581..............361,424
16. Payments on supplementary contracts without life contingencies and of dividend
accumulations........................................................238,352.................287,755..............493,379
16A. Accumulated coupon payments..............................................................................................
17. Increase in aggregate reserves for life and accident and health
policies and contracts...........................................(42,392,154)............(44,984,518).........(76,383,555)
17A. Increase in liability for premium and other deposit funds. .........(921,635)..............1,001,596.............2,488,128
18. Increase in reserve for supplementary contracts without life contingencies and for dividend
and coupon accumulation............................................(136,167)..............(193,221).............(360,916)
19. Totals (Lines 8 to 18)............................................435,928,528...........401,197,327............832,608,999
20. Commissions on premiums and annuity considerations (direct business
only)..............................................................27,458,447............25,400,388.............51,010,048
21. Commissions and expense allowances on reinsurance assumed..........19,879,088............17,308,662.............35,242,773
22. General insurance expenses.........................................53,551,050............44,056,850.............95,822,094
23. Insurance taxes, licenses and fees, excluding federal income
taxes..............................................................5,218,566.............4,627,213..............8,092,695
24. Increase in loading on and cost of collection in excess of loading
on deferred and uncollected premiums..................................(75,120)...............58,616................466,801
24A. Net transfers to or (from) Separate Accounts.......................181,410,734..........176,444,161............309,402,914
25. Aggregate write-ins for deductions................................(27,175,186).........(12,540,332)............(2,904,278)
26. Totals (Lines 19 to 25)...........................................696,196,108...........656,552,885..........1,329,742,045
27. Net gain from operations before dividends to policyholders
and before federal income taxes (Line 7 minus Line 26).............49,629,734............50,939,750............102,986,618
28. Dividends to policyholders.........................................12,154,929............12,123,550.............22,230,819
29. Net gain from operations after dividends to policyholders
and before federal income taxes (Line 27 minus Line 28)...........37,474,805............38,816,200.............80,755,799
30. Federal income taxes incurred (excluding tax on capital
gains).............................................................14,784,369............12,538,633.............28,219,209
31. Net gain from operations after dividends to policyholders and
federal income taxes and before realized capital gains or (losses)
(Line 29 minus Line 30)............................................22,690,436............26,277,567.............52,536,590
32. Net realized capital gains or (losses) less capital gains tax
and transferred to the IMR.........................................(2,323,015)..........(1,123,662).............(3,262,974)
33. Net income (Line 31 plus Line 32)...................................20,367,421..........25,153,905..............49,273,616
CAPITAL AND SURPLUS ACCOUNT
34. Capital and surplus, December 31, prior year.......................387,812,820.........289,363,821.............289,363,821
35. Net income (Line 33)...............................................20,367,421..........25,153,905..............49,273,616
36. Change in net unrealized capital gains or (losses).....................178,588...........1,742,834...............1,673,030
37. Change in non-admitted assets and related items....................(2,033,287)..........(2,418,881).............(4,471,464)
38. Change in liability for reinsurance in unauthorized companies..........199,831............(152,628)................(46,919)
39. Change in reserve on account of change in valuation basis,
(increase) or decrease..........................................................................................(19,014,847)
40. Change in asset valuation reserve......................................332,136..........(3,374,358).............(1,592,868)
41. Change in treasury stock..................................................................................................
42. Other changes in surplus in Separate Accounts Statement...................................................................
43. Capital changes:
a. Paid in..............................................................................................................
b. Transferred from surplus (Stock Dividend).............................................................................
c. Transferred to surplus................................................................................................
44. Surplus adjustment
a. Paid in..............................................................................................................
b. Transferred to capital (Stock Dividend)...............................................................................
c. Transferred from capital..............................................................................................
d. Change in surplus as a result of reinsurance..........................................................................
45. Dividends to stockholders................................................................................................
46. Aggregate write-ins for gains and losses in surplus.....................................75,000,000..............72,628,452
47. Net change in capital and surplus for the year (Lines 35 thru 46)....19,044,689.........95,950,872..............98,448,999
48. Capital and surplus, as of statement date (Lines 34+ 47)............406,857,509........385,314,693.............387,812,820
DETAILS OF WRITE-INS
0601. Miscellaneous income.................................................2,010,769..........1,043,587...............2,649,798
0602...........................................................................................................................
0603...........................................................................................................................
0698. Summary of remaining write-ins for Line 6 from overflow page...........................................................
0699. Totals (Lines 0601 thru 0603 plus 0698),(Line 6 above)...............2,010,769..........1,043,587...............2,649,798
2501. Liability gains (losses)subject to IMR amortization...................................(2,612,422).............(2,612,422)
2502. Reserve adjustments on reinsurance assumed........................(26,575,714)...........(6,485)...............(204,510)
2503. Transfer of health reserves...........................................(599,972).........(520,697).............(1,082,363)
2598. Summary of remaining write-ins for Line 25 from overflow page...... ...... 500........(9,400,728)................995,017
2599. Totals (Lines 2501 thru 2503 plus 2598)(Line 25 above).............(27,175,186)......(12,540,332).............(2,904,278)
4601. Issuance of surplus notes.............................................................75,000,000..............75,000,000
4602. Transfer to separate account for reserve revaluation.........................................................(1,361,473)
4603. APBO calculation error.......................................................................................(1,010,074)
4698. Summary of remaining write-ins for Line 46 from overflow page...........................................................
4699. Totals (Lines 4601 thru 4603 plus 4698)(Line 46 above)................................75,000.000..............72,628,453
STATEMENT AS OF JUNE 30,1997 OF THE AmericanUnited Life Insurance Company
CASH FLOW
1 2
Current Year Prior Year Ended
Cash for Operations to Date December 31
1. Premiums and annuity considerations.........................................219,694,530............419,170,789
2. Deposit-type funds..........................................................286,994,509............526,298,866
3. Considerations for supplementary contracts with life
contingencies....................................................................38,347................160,426
4. Considerations for supplementary contracts without life contingencies and
dividend accumulations..........................................................47,219.................39,425
5. Coupons left to accumulate at interest........................................................................
6. Net investment income.......................................................219,564,247............455,471,134
7. Commissions and expense allowances on reinsurance ceded.......................8,069,263.............13,906,271
8. Aggregate write-ins for miscellaneous
income......................................................................25,576,296...............3,556,563
9. Total (Lines 1 to 8)............................................ ..........759,984,411...........1,418,603,474
10. Death benefits..............................................................69,145,866.............122,253,453
11. Matured endowments.............................................................370,613.................860,327
12. Annuity benefits............................................................48,699,137..............96,620,686
13. Disability benefits and benefits under accident and health
policies....................................................................37,277,957..............63,819,047
14. Coupons, guaranteed annual pure endowments and similar
benefits......................................................................................................
15. Surrender benefits and other fund withdrawals..............................325,553,014.............608,898,269
16. Group conversions................................................................7,847..................11,489
17. Interest on policy or contract funds.........................................2,163,120...............6,177,620
18. Payments on supplementary contracts with life contingencies....................221,158.................359,756
19. Payments on supplementary contracts without life contingencies and
dividend accumulations........................................................238,972.................494,626
20. Accumulated coupon payments...................................................................................
21. Total (Lines 10 to 20).....................................................483,677,684.............899,495,273
22. Commissions on premiums and annuity considerations..........................26,596,206..............51,254,194
23. Commissions and expense allowances on reinsurance assumed...................18,941,472..............34,836,980
24. General insurance expenses..................................................53,551,050..............95,573,946
25. Insurance taxes, licenses and fees, excluding federal income taxes...........6,017,700...............9,396,880
26. Net transfers to or (from) Separate Accounts...............................192,561,919..............328,677,755
27. Aggregate write-ins for deductions............................................2,907,441...............4,625,125
28. Total (Lines 21 to 27)......................................................784,253,471...........1,423,860,153
29. Dividends paid to policyholders..............................................12,330,256..............20,963,866
30. Federal income taxes (excluding tax on capital gains)........................19,033,518..............34,103,028
31. Total (Lines 28 to 30)......................................................815,617,245...........1,478,927,047
32. Net cash from operations (Line 9 minus Line 31).............................(55,632,834)...........(60,323,573)
Cash from Investments
33. Proceeds from investments sold, matured or repaid:
33.1 Bonds...................................................................236,374,132............589,808,355
33.2 Stocks...................................................................29,663,112..............28,610,205
33.3 Mortgage loans...........................................................45,929,528............171,820,125
33.4 Real estate.................................................................482,627..............3,065,091
33.5 Collateral loans..........................................................................................
33.6 Other invested assets...........................................................................15,305,387
33.7 Net gains or (losses) on cash and short -term investments.....................(123)...................(77)
33.8 Miscellaneous proceeds....................................................1,187,682.......................
33.9 Total investment proceeds (Lines 33.1 to 33.8)...........................13,636,958.............808,609,087
34. Net tax on capital gains (losses)..............................................(885,919)...............3,670,335
35. Total (Line 33.9 minus Line 34)..............................................314,522,877.............804,938,752
36. Cost of investments acquired (Long-term only):
36.1 Bonds...................................................................213,651,217.............619,035,335
36.2 Stocks...................................................................58,559,000..............19,053,279
36.3 Mortgage loan............................................................52,456,149.............158,974,250
36.4 Real estate...............................................................1,401,447...............4,640,692
36.5 Collateral loans...........................................................................................
36.6 Other invested assets....................................................1,578,840...............28,920,874
36.7 Miscellaneous applications........................................................................2,649,278
36.8 Total investments acquired (Lines 36.1 to 36.7)........................327,646,653..............833,273,708
37. Net increase (or decrease) in policy loans and premium notes................(1,068,058)................1,396,227
38. Net cash from investments (Line 35 minus Line 36.8 minus (plus) Line 37)...(12,055,717)..............(29,731,183)
Cash from Financing and Miscellaneous Sources
39. Cash provided:
39.1 Surplus notes, capital and surplus paid in........................................................75,000,000
39.2 Borrowed money $.................. less amounts repaid $..................................................
39.3 Other cash provided.....................................................20,681,259................26.642,878
39.4 Total other cash provided (Lines 39.1 to 39.3)..........................20,681,259...............101,642,878
40. Cash applied:
40.1 Dividends to stockholderspaid................................................................................
40.2 Interest on indebtedness.....................................................................................
40.3 Other applications (net).................................................3,034,467.................26,979,594
40.4 Total (Lines 40.1 and 40.3)..............................................3,034,467.................26,979,594
41. Net cash from financing and miscellaneous sources (Line 39.4 minus Line 41).17,646,792.................74,663,284
RECONCILIATION OF CASH AND SHORT-TERM INVESTMENTS
42. Net change in cash and short term investments (Line 32, plus Line 38, plus Line
40.4)......................................................................(50,041,759)...............(15,391,472)
43. Cash and short-term investments:
43.1 Beginning of year.......................................................56,818,050................72,209,522
43.2 End of period (Line 42 plus Line 43.1)...................................6,776,291................56,818,050
DETAILS OF WRITE-INS
0801. Miscellaneous income........................................................1,829,660.................2,634,433
0802. Transfers of health reserves..................................................599,972...................884,687
0803. Reserve adjustment on reinsurance assumed..................................23,146,664....................37,443
0898. Summary of remaining write-ins for Line 08 from overflow page..................................................
0899. Totals (Lines 0801 thru 0803 plus 0898) ( Line 08 above)...................25,576,296.................3,556,563
2701. Miscellaneous interests.....................................................2,906,941.................3,630,108
2702. Fines and penalties...............................................................500.......................289
2703. Group marketing service fee.............................................................................994,728
2798. Summary of remaining write-ins for Line 27 from overflow page..................................................
2799. Totals (Lines 2701 thru 2703 Plus 2798) (Line 27 above).....................2,907,441..................4,625,125
STATEMENT AS OF JUNE 30,1997 OF THE American United Life Insurance Company
RECONCILIATION OF LEDGER ASSETS
1 2
Current Prior Year Ended
Year to Date December 31
INCREASES IN LEDGER ASSETS
1. Premiums on life policies and annuity considerations............................168,594,277................320,802,367
1A Deposit-type funds..............................................................286,994,509................526,298,866
2. Accident and health cash premiums, including $...policy, membership and other
fees.............................................................................51,100,252.................98,368,422
3. Considerations for supplementary contracts with life contingencies...................38,347....................160,426
4. Considerations for supplementary contracts without life contingencies, including
$..........disability................................................................47,219.....................39,426
5. Dividends left with the company to accumulate at interest.............................................................
5A. Coupons left with the company to accumlate at interest................................................................
6. Gross investment income.........................................................231,690,014................479,728,581
7. Increase in capital and paid in or contributed surplus................................................................
8. Borrowed money gross $ .... less amount repaid $......................................................................
9. Commissions and expense allowances on reinsurance ceded...........................6,289,424.................12,384,884
9A. Reserve adjustments on reinsurance ceded..........................................1,779,838..................1,521,387
10. From sale or maturity of ledger assets............................................6,064,208.................15,982,297
11. By adjustment in book value of ledger assets........................................207,319..................2,010,188
12. Aggregate write-ins for increases in ledger assets...............................32,840,180................183,536,415
13. Total increases in Ledger Assets (Lines 1 through 12)...........................785,645,590..............1,640,833,259
DECREASES IN LEDGER ASSETS
14. Policy and contract claims:
14.1 Life........................................................................69,516,479................123,113,779
14.2 Accident and health.........................................................37,277,957.................63,819,049
15. For annuities with life contingencies, excluding payments
on supplementary contacts (including cash refundpayments)........................48,699,137.................96,620,686
16. Premium notes and liens voided by lapse, less $...............restorations............................................
17. Surrender benefits and other fund withdrawals...................................245,402,121................689,049,162
17A. Group conversions....................................................................7,847.....................11,489
17B. Interest on policy or contract funds.............................................2,163,120..................6,177,620
18. Dividends to policyholders:
18.1 Life insurance and annuities................................................11,221,142.................20,614,747
18.2 Accident and health..........................................................1,109,114....................349,119
18A. Coupons, guaranteed annual pure endowments and similar benefits......................................................
19. Total Paid Policyholders........................................................415,396,918................999,755,651
20. Paid for claim on supplementary contracts:
20.1 With life contingencies........................................................221,158....................359,756
20.2 Without life contingencies.....................................................238,972....................494,626
20.3 Total paid for claims an supplementary contracts (Lines 20.1 plus
20.2).........................................................................460,129....................854,382
21. Dividends and interest thereon held on deposit disbursed..............................................................
21A. Coupons and interest thereon held on deposit disbursed...............................................................
22. Commissions to agents (direct business only):
22.1 Life insurance and annuities, including $.......... 71,868 commuted
commissions..................................................................19,394,211.................38,029,253
22.2 Accident and health, including $...............14,857 commuted
commissions...................................................................7,201,995.................13,224,940
22.3 Policy, membership and other fees retained by agents..............................................................
22.4 Total commissions to agents (Lines 22.1 through 22.3)........................26,596,206.................51,254,193
22A Commissions and expense allowances on reinsurance assumed.........................18,941,472.................34,836,980
23. General expenses..................................................................60,656,369................109,722,786
23.1 Taxes, licenses and fees, excluding federal income taxes......................8,218,883.................13,995,404
23.2 Federal income taxes, including $................ (885,919) on capital gains
.................................................................................18,147,599.................37,773,363
24. Decrease in capital and paid in or contributed surplus.................................................................
25. Paid stockholders for dividends (cash $.......... stock $.............)................................................
26. Borrowed money repaid gross $.................. less amount borrowed $.................................................
27. Interest on borrowed money.............................................................................................
27A Net transfers to or (from) Separate Accounts......................................192,561,919...............328,677,755
28. From sale or maturity of Ledger assets..............................................6,805,172................10,036,637
29. By adjustment in book value of ledger assets........................................1,839,017.................3,974,340
30. Aggregate write-ins for decreases in ledger assets.................................80,243,704.................5,149,211
31. Total Decrease in Ledger Assets (Sum of Lines 19, 20.3, 21, 21A,
and 22.4 through 30)..............................................................829,867,388.............1,596,030,702
RECONCILIATION
32. Amount of ledger assets December 31st of prior year.............................5,774,910,678.............5,730,108,121
33. Increase or (decrease) in ledger assets (Line 13 minus Line 31)..................(44,221,798)................44,802,557
34. Total = LedgerAssets as of statement date......................................5,730,688,879..............5,774,910,678
DETAILS OF WRITE-INS
1201. Miscellaneous income...........................................................1,829,660....................2,634,433
1202. Increase in amounts withheld/retained as agent or trustee......................2,916,894.............................
1203. Increase in accounts payable................................................................................3,274,239
1298. Summary of remaining write-ins for Line 12 from overflow page.................28,093,625...................77,627,743
1299. Totals (Lines 1201 thru 1203 plus 1298)(Line 12 above)..................... .32,840,180..................183,536,415
3001. Decreasein amounts due reinsurers....................................................................................
3002. Miscellaneous interest.........................................................2,906.941....................3,630,108
3003. Decrease in suspense..........................................................75,791,759.............................
3098. Summary of remaining write-ins for Line 30 from overflow page..................1,545,004....................1,519,103
3099. Totals (Lines 3001 thru 3003 plus 3098)(Line 30 above)........................80,243,704....................5,149,211
STATEMENT AS OF JUNE 30,1997 OF THE American United Life Insurance Company
OVERFLOW PAGE FOR WRITE-INS
LQ002 Additional Aggregate Lines for Page 02 Line 22.
*ASSETS
2204 Prepaid expenses................................................2,990,178.......2,990,178
2005 Autos less depreciation...........................................887,269.........887,269
2297 Summary of remaining write-ins from Line 21 from Page 02........3,877,447.......3,877,447
LQ003 Additional Aggregate Lines for Page 03 Line 25.
*LIAB
2504. Interest on contract funds....................................................................343,779...............449,099
2505. Miscellaneous interest........................................................................231,530...............216,669
2506. Accumulated post retirement benefits liability.............................................9,030,866.............8,948,619
2507.............................................................................................................................
2508.............................................................................................................................
2597. Summary of remaining write-ins for Line 25 from Page 03......................................9,606,175............9,614,387
LQ004 Additional Aggregate Lines for Page 04 Line 25.
*SUMOPS
2405. Separate account transfer credits..........................................................(9,901,016)......................
2505. Marketing services fees.......................................................................499,999................994,728
2506. Fines and penalties..................................................................500..........289...................289
2507.............................................................................................................................
2597. Summary of remaining write-ins for Line 25 from Page 04..............................500...(9,400,728)...............995,017
LQ006 Additonal Aggregate Lines for Page 06 Line 12.
*RECON
1204. Reserve adjustments on reinsurance assumed............................................................................37,442
1205. Increase in suspense..............................................................................................86,571,638
1206. Increase in ledger liabilities.............................................................2,443,823........................
1207. Increase in amounts due reinsurers.........................................................1,903,166..............15,133,976
1208. Transfer of health reserves..................................................................599,972.................884,687
1209. Increase in surplus notes balance.................................................................................75,000,000
1210. Other adjustments on reinsurance assumed.................................................23,146,664.........................
1297. Summary of remaining write-ins for Line 12 from Page 06..................................28,093,625..............177,627,743
LQ006 Additional Aggregate Lines for Page 06 Line 30.
*RECON
3004. Reserve adjustments on reinsurance assumed.................................................................................
3005. Fines and penalties............................................................................500......................289
3006. Transfer of health reserves................................................................................................
3007. Marketing services fees.............................................................................................994,728
3008. Decrease in amounts withheld/retained as agent or trustee...........................................................458,962
3009. Decrease in ledger liabilities.......................................................................................65,124
3010. Decrease in accounts payable.............................................................1,544,504.........................
3097. Summary of remaining write-ins for Line 30 from Page 06..................................1,545,504................1,519,103
LQ009 Additional Aggregate Lines for Page 09 Line 18.
*SCBPT1SN1
1804. Sold to another investor..........................................................................................2,878,748
1805. Loss on foreclosed mortgages....................................5,643,508..................................................
1897. Summary of remaining write-ins for line 18 from page 09.........5,643,508.........................................2,878,748
PART II
Undertaking to File Reports
Subject to the terms and conditions of Section 15(d) of the Securities
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 regulation of
the Commission heretofore or hereafter duly adopted pursuant to authority
conferred in that section.
Rule 484 Undertaking
Article IX, Section 1 of the by-laws of American United Life Insurance
Company(R) ("AUL") provides as follows:
The corporation shall indemnify any director or officer or former
director or officer of the corporation against expenses actually and
reasonably incurred by him (and for which he is not covered by
insurance) in connection with the defense of any action, suit or
proceeding (unless such action, suit or proceeding is settled) in which
he is made a party by reason of being or having been such director or
officer, except in relation to matters as to which he shall be adjudged
in such action, suit or proceeding, to be liable for negligence or
misconduct in the performance of his duties. The corporation may also
reimburse any director or officer or former director or officer of the
corporation for the reasonable costs of settlement of any such action,
suit or proceeding, if it shall be found by a majority of the directors
not involved in the matter in controversy (whether or not a quorum)
that it was to the interest of the corporation that such settlement be
made and that such director or officer was not guilty of negligence or
misconduct. Such rights of indemnification and reimbursement shall not
be exclusive of any other rights to which such director or officer may
be entitled under any By-law, agreement, vote of members or otherwise.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor 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 Depositor 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.
Section 26(e)(2) Representation
AUL, the sponsoring insurance company of the AUL American Individual
Variable Life Unit Trust, hereby represents that the fees and charges deducted
under the Policies are reasonable in relation to the services rendered, the
expenses expected to be incurred and the risks assumed by AUL.
Rule 6e-3(T) Representation
This filing is made pursuant to Rule 6e-3(T) and Rule 6e-3 under the
Investment Company Act of 1940.
Contents of Registration Statement
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet.
Reconciliation and tie.
The Prospectus consisting of 92 pages (including
illustrations).
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The representation pursuant to Section 26(e)(2).
The Rule 6e-3(T) representation.
The signatures.
Written consent of the following persons (included
in the exhibits shown below):
Independent Public Accountants
Dechert Price & Rhoads
Actuary
The following exhibits:
1. (1) Resolution of the Board of Directors of the Depositor
dated July 10, 1997 concerning AUL American Individual
Variable Life Unit Trust (1)
(2) Inapplicable
(3) (a) Inapplicable
(b) Inapplicable
(c) Schedule of Sales Commissions
(4) Inapplicable
(5) (a) Form of Modified Single Premium Variable Life
Insurance Policy(4)
(b) Form of Last Survivor Rider (1)
(c) Form of Waiver of Monthly Deduction Disability (1)
(d) Form of Accelerated Death Benefit Rider (1)
2
(6) (a) Articles of Incorporation of American United Life
Insurance Company(R)(2)
(b) Bylaws of American United Life Insurance Company(R)
(2)
(7) Inapplicable
(8) (a) Form of Participation Agreement between American
United Life Insurance Company(R) and Alger American
Fund (3)
(b) Form of Participation Agreement between American
United Life Insurance Company(R) and American
Century Variable Portfolios, Inc.(3)
(c) Form of Participation Agreement between American
United Life Insurance Company(R) and Fidelity
Variable Insurance Products Fund(2)
(d) Form of Participation Agreement between American
United Life Insurance Company(R) and Fidelity
Variable Insurance Products Fund II(2)
(e) Form of Participation Agreement between American
United Life Insurance Company(R) and T. Rowe Price
Equity Series, Inc.(3)
(9) Inapplicable
(10) Form of Application for Modified Single Premium
Variable Life Insurance Policy(1)
2. Opinion and consent of legal officer of American United Life
Insurance Company(R) as to legality of Policies being
registered(1)
3. Inapplicable
4. Inapplicable
5. Inapplicable
6. Consent of Independent Accountants
7. Consent of Dechert Price & Rhoads
8. Opinion of Actuary(1)
3
9. Memorandum Describing Issuance, Transfer, and Redemption
Procedures (4)
10. Powers of Attorney(1)
- ---------------
(1) Incorporated herein by reference to the Registration Statement for the
Flexible Premium Adjustable Variable Life Insurance Policy funded by AUL
American Individual Variable Life Unit Trust (File No. 333-32531) on Form
S-6.
(2) Incorporated herein by reference to the Registration Statement of AUL
Unit Trust (File No. 33-31375) on Form N-4.
(3) Incorporated herein by reference to the registration statement of AUL
American Individual Unit Trust (File No. 33-79562) on Form N-4.
(4) Filed with the Registrant's initial registration statement on Form S-6
(File No. 333-32553) on July 31, 1997.
4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
AUL American Individual Variable Life Unit Trust, has duly caused this
pre-effective amendment no. 1 to the registration statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the city of
Indianapolis, and the state of Indiana, on the 18th day of November, 1997.
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
(Registrant)
By: American United Life Insurance Company
By: Jerry D. Semler*
Name: Jerry D. Semler
Title: Chairman of the Board, President,
and Chief Executive Officer
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Depositor)
By: Jerry D. Semler*
Name: Jerry D. Semler
Title: Chairman of the Board, President,
and Chief Executive Officer
* By: /s/ Richard A. Wacker
______________________
Richard A. Wacker as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
pre-effective amendment no. 1 to the registration statement has been signed
below by the following persons in the capacities and on the date indicated.
Name Capacity Date
Jerry D. Semler* Director, President, and Chief Executive Officer November 18, 1997
James W. Murphy* Principal Financial and Accounting Officer November 18, 1997
Steven C. Beering, M.D. Director November 18, 1997
Arthur L. Bryant* Director November 18, 1997
James E. Cornelius* Director November 18, 1997
James E. Dora* Director November 18, 1997
Otto N. Frenzel III* Director November 18, 1997
David W. Goodrich Director November 18, 1997
William P. Johnson* Director November 18, 1997
James T. Morris Director November 18, 1997
R. Stephen Radcliffe* Director November 18, 1997
Thomas E. Reilly, Jr. Director November 18, 1997
William R. Riggs Director November 18, 1997
Yvonne H. Shaheen* Director November 18, 1997
Frank D. Walker* Director November 18, 1997
* By: /s/ Richard A. Wacker
_______________________________
Richard A. Wacker as attorney-in-fact
* Powers of Attorney incorporated by reference herein.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS FILED WITH
FORM S-6
For Registration Under the Securities Act of 1933
of Securities of Unit Investment Trust
Registered on Form N-8B-2
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
OF AMERICAN UNITED LIFE INSURANCE COMPANY
Exhibit Number Name of Exhibit
1.(3)(c) Schedule of Sales Commissions
6 Consent of Independent Accountants
7 Consent of Dechert Price & Rhoads