Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-6
Registration Statement
Under
SECURITIES ACT OF 1933
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SEPARATE ACCOUNT VL
(Exact Name of Trust)
FIRST VARIABLE LIFE INSURANCE COMPANY
(Name of Depositor)
2122 York Road, Suite 300
Oak Brook, IL 60523-1930
(Complete Address of Depositor's Principal Executive Offices)
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ARNOLD R. BERGMAN Copy To:
Vice President, General Counsel & Secretary THOMAS C. LAUERMAN, Esq.
First Variable Life Insurance Company Freedman, Levy, Kroll & Simonds
2122 York Road, Suite 300 1050 Connecticut Avenue, N.W.
Oak Brook, IL 60523-1930 Washington, D.C. 20036
(630) 684-9270 (202) 457-5106
(Name and Address of Agent for Service)
Title and Amount of Securities being Registered:
An indefinite amount of interests under flexible premium variable life
insurance policies.
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this 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.
CROSS REFERENCE SHEET
Item No. in
Form N-8 B-2 Location
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1, 2 Caption in Prospectus Cover, First Variable
Life Insurance Company, The Separate Account
3 Inapplicable
4 Distribution and Other Agreements
5, 6 The Separate Account
7 Inapplicable
8 Financial Statements
9 Legal Proceedings
10 (a), (b), (c), (d), (e) Highlights, Surrender and Withdrawals,
Withdrawals, Transfers Among Investment
Options, Lapse and Reinstatement,
Determination of Account Value, Other
Provisions of the Policy, The Policies, Your
Investment Options
10 (f) Voting Rights, Other Provisions of the Policy
10 (g), (h) Transfers Among Investment Options
10 (i) Mixed and Shared Funding, Policy Benefits and
Values, Other Provisions of the Policy
11, 12 Separate Account Investment Options: Variable
Investors Series Trust, Federated Insurance
Series
13 Highlights, Other Charges and Deductions (not
currently charged), Elimination, Reduction, or
Refund of Charges and Deductions, Increases in
Bonuses
14, 15 Application and Issuance of a Policy, Free
Look Right, Delayed Investment Allocation Date
16 Premiums, Allocation of Premiums,
Determination of Account Value
17 Surrenders and Partial Withdrawals, Payment of
Proceeds
18 Our Taxation, Determination of Account Value,
The Separate Account, The Available Options,
The Policies, More About Charges and
Deductions
19 Reports and Records, Advertising Practices,
Other Provisions of the Policy
20 See 10 (g) & 10 (h)
21 Regular Loans and Preferred Loans, The
Policies
22, 23, 24 Inapplicable
25 First Variable Life Insurance Company
26 Inapplicable
27 First Variable Life Insurance Company
28 Our Management
29 First Variable Life Insurance Company
30, 31, 32, 33, 34 Inapplicable
35 State Regulation
36 Inapplicable
37 Inapplicable
38, 39, 40, 41 (a) Distribution and Other Agreements, First
Variable Life Insurance Company
41 (b), 41 (c), 42, 43 Inapplicable
44 Determination of Account Value
45 Inapplicable
46 Surrender and Withdrawals
47, 48, 49, 50 Inapplicable
51 Policy Benefits and Values
52 Changes in Death Benefit Options and Face
Amount
53 (a) Federal Tax Matters
53 (b), 54, 55 Inapplicable
56, 57, 58 Inapplicable
59 Financial Statements
Prospectus [Date]
CAPITAL LEGACY VUL
JOINT SURVIVORSHIP FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
Issued by
FIRST VARIABLE LIFE INSURANCE COMPANY
Our Marketing and Executive Office: Our Variable Service Center: Or, for express deliveries;
2122 York Road P.O. Box 1317 1206 Mulberry Street
Oak Brook, IL 60523 Des Moines, IA 50305-1317 Des Moines, IA 50309
Automated Information Line: (800) 845-0689
(800)-59-FUNDS
The Policy described in this prospectus provides life insurance coverage that is
payable upon the death of a Surviving Insured. The Policy also permits you to
accumulate Account Value based on the premiums you pay, the charges and expenses
of the Policy, and the investment results of the underlying investment options.
You have the flexibility to adjust the amount and frequency of premium payments
and the level of life insurance provided under the Policy.
You choose the form of death benefit from one of two options. Generally, the
death benefit amount is either equal to the Face Amount shown in the Policy
(Death Benefit Option A), or an amount equal to the Face Amount plus the Account
Value (Death Benefit Option B).
You may allocate your premiums and your Policy's Account Value among nine
different investment options, or to our Fixed Account. The investment options
are available through our segregated asset account called Separate Account VL
(the "Separate Account"). The Separate Account invests in selected portfolios of
two mutual funds. The portfolios currently available under the Policy are:
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SEPARATE ACCOUNT INVESTMENT OPTIONS
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Federated
Mutual Variable Investors Series Trust ("VIST") Insurance Series
Fund ("FIS")
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Small Cap Growth Growth & Multiple Prime Money
Growth Income Strategies Fund II
Portfolios -----------------------------------------------------------------------------
Matrix World High U.S. Government
Equity Equity Income Bond
Bond
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We guarantee to keep your Policy in force for a minimum period as long as you
pay certain Minimum Monthly Premium amounts. The minimum period depends on the
Joint Age of the insured persons when we issue the Policy, and will usually be
10 years. We will reduce the minimum period, however, if the Joint Age is higher
than ___[to be filed by pre-effective amendment] when we issue the Policy.
Neither the Securities and Exchange Commission nor any state securities
commission approved or disapproved these securities or passed upon the accuracy
or adequacy of the prospectus. Any representation to the contrary is a criminal
offense. This prospectus is accompanied by the current prospectuses of the
Variable Investors Series Trust and Federated Insurance Series. All prospectuses
should be read and retained for future reference.
We have not authorized any person to give any information not contained in this
prospectus (or in any sales literature we have approved.) We do not offer the
policies everywhere, and this prospectus does not constitute an offer anywhere
that it would be unlawful. In certain jurisdictions, various time periods and
other terms and conditions may vary from what is described in this prospectus.
Any such variations that apply to your policy will be included in the policy or
a related rider or endorsement.
TABLE OF CONTENTS
Page
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DEFINITIONS
HIGHLIGHTS
FIRST VARIABLE LIFE INSURANCE COMPANY
THE SEPARATE ACCOUNT
YOUR INVESTMENT OPTIONS
The Available Options
Transfers Among Investment Options
General Requirements
Automatic Transfer Programs
Restrictions on Transfers
Automatic Transfers of Small Accounts
Mixed and Shared Funding
MORE ABOUT CHARGES AND DEDUCTIONS
Monthly Deductions
Daily Deductions
Surrender Charge
Fund Expenses
Other Charges and Deductions (Not Currently Charged)
Elimination, Reduction, or Refund of Charges and Deductions;
Increases in Bonuses
Purposes of Policy Charges
THE POLICIES
Application and Issuance of a Policy
"Free Look" Right
Premiums
Planned Premiums
Monthly Minimum Premium; Death Benefit Guarantee
Additional Premiums
Grace Period
Allocation of Premiums
Telephone Transactions
POLICY BENEFITS AND VALUES
Death Benefit
Death Benefit Options A and B
Table of Minimum Death Benefit Factors
Change in Death Benefit Options and Face Amount
Premium Value Bonuses and Cash Value Bonuses
Optional Additional Benefit Riders
Estate Protection Rider
Joint Accidental Death Benefit Rider
Additional Term Insurance on the Insured(s)
Other Insured Persons Rider
Determination of Account Value
Policy Loans
Regular Loans
Preferred Loans
Immediate Loan Repayment
Surrender and Withdrawals
Surrender
Withdrawals
Maturity Proceeds
Lapse and Reinstatement
Payment of Proceeds
Tax Withholding
Payout Options
Tax Impact
Right to Exchange for a Fixed Benefit Policy
Right to Exchange for Two Insurance Policies
OTHER PROVISIONS OF THE POLICY
Suicide Exclusion
Representations and Contestability
Option to Extend Maturity Date
Misstatement of Age or Sex
Owner and Beneficiary
Assignments
Reports and Records
Voting Rights
Suspension of Payments and Transfers
Nonparticipation in Our Dividends
DISTRIBUTION AND OTHER AGREEMENTS
OUR MANAGEMENT
FEDERAL TAX MATTERS
General
Our Taxation
Income Tax Treatment of Policy Benefits
Life Insurance
Acceleration of Death Benefits
Modified Endowment Contracts
Exchange for Two Policies
Other Tax Effects of Policy Changes
Taxation of Pre-Death Distributions from a Policy that is not a
Modified Endowment Contract
Taxation of Pre-Death Distributions from a Policy that is a
Modified Endowment Contract
Diversification Requirements
ADVERTISING PRACTICES
LEGAL MATTERS
State Regulation
Legal Proceedings
Counsel
EXPERTS
REGISTRATION STATEMENT
YEAR 2000 ISSUES
APPENDICES
APPENDIX A: ANNUAL RATES OF RETURN FOR THE SEPARATE ACCOUNT
APPENDIX B: ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES,
CASH SURRENDER VALUES AND ACCUMULATED VALUE OF
PREMIUMS
APPENDIX C: FINANCIAL STATEMENTS
DEFINITIONS
Business Day - Each day the New York Stock Exchange is open for regular trading,
The New York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day.
Each Business Day ends at the close of regular trading for the day on the
exchange, which usually is 4:00 p.m. Eastern time.
Insureds - The two people whose lives are insured under the Policies. Death
benefits are payable upon the death of the second of the Insureds to die. We
call this person the "Surviving Insured."
Joint Age - The joint equivalent age of the Insureds that is used to calculate
the costs and benefits under the Policies. We determine the Joint Age on the
Policy Date and it increases by 1 on each Policy Anniversary.
Policy Anniversary - An anniversary of the Policy Date.
Policy Date - The date the Policy takes effect, as shown on the Owner's Policy
data page. Policy Months and Policy Years are measured from this date.
Policy Month - Each one-month period beginning on the Policy Date and generally
on the same day of each month after that.
Policy Quarter - One quarter of a Policy Year. The first Policy Quarter begins
on the Policy Date and ends on the last Business Day of the third Policy Month.
Policy Year - Each 12-month period beginning on the Policy Date.
Premium Rate Class - An insurance underwriting risk category that is used to
determine certain benefits and charges under a Policy. For example, Monthly
Minimum Premiums, cost of insurance charges, and Premium Value Bonuses will vary
by the premium rate class assigned the Insureds. On the date of this
prospectus, we use Preferred, Smoker and Non-Smoker premium rate classes that
will differ based on the sex of the Insureds. These classes are further sub-
divided into "standard" and "substandard" insurance classes. Charges are
generally higher for substandard insurance classes.
HIGHLIGHTS
These highlights discuss certain important aspects of the Policy. The rest of
this prospectus explains these and other aspects in greater detail. You should
be sure to read the prospectus and the prospectuses of the Funds for more
complete information.
How do investment results affect a Policy?
You invest the Account Value under your Policy in one or more of the investment
options we offer. Your Account Value increases or decreases by the amount of
any positive or negative return it earns in those options. Your Account Value
also will decrease by the amount of all charges and deductions we make under
your Policy. The Death Benefit we pay under your Policy when the Surviving
Insured dies can also vary as a result of the investment results achieved for
your Account Value.
Account Value invested in our Separate Account investment options is not
guaranteed, and you bear the entire investment risk under those options.
Account Value allocated to our Fixed Account, however, is provided with our
guarantees of principal and a minimum 4% rate of interest on an annual basis.
(Similar guarantees apply to an amount of your Account Value that equals any
Policy loans that you take out.)
How much can I (or must I) invest in a Policy?
Payment of the Monthly Minimum Premium amounts specified in the Policy
guarantees that the Policy will remain in force for a guarantee period ranging
specified in your Policy. The period will usually be 10 years; but will be
reduced if the joint age is higher than when the Policy is issued.
Planned and unplanned additional premiums may be paid, subject to certain
limitations. For example, we will not permit you to pay so much premiums that
your Policy would fail to meet the definitions of a life insurance contract
under the Internal Revenue Code ("Code").
Payment of large amounts of premium (relative to the amount of insurance
coverage) during certain periods of time may cause a Policy to be classified as
a "modified endowment contract" under section 7702A of the Code. Under current
federal income tax law, any pre-death distributions from a modified endowment
contract, or "MEC," including loans, assignments, partial withdrawals and
surrenders, will be included in your taxable income on an income first basis,
and a 10% penalty tax will be imposed on any such income distributed before you
attain age 59-1/2.
Will I have access to my Account Value?
You may borrow up to 90% of your Policy's Cash Surrender Value, subject to
certain limitations. (Cash Surrender Value is your Account Value less any loan,
less any accrued loan interest, and less any applicable Surrender Charges.) You
may surrender (i.e., cancel) your Policy at any time and we will pay you the
Cash Surrender Value. Subject to certain limits, you also may make a partial
withdrawal of your Cash Surrender Value after the first Policy Year.
Do I receive special advantages for holding a Policy over a long term?
Your Policy will be eligible for Premium Value Bonuses and Cash Value bonuses
after 8 Policy Years.
We have developed a Premium Value Bonus to provide special value to Policy
owners who have paid, and continue to pay, Monthly Minimum Premium amounts. We
will pay the Premium Value Bonuses starting in the 9th Policy Year, based on the
amount of premiums you paid that you are not deemed to have withdrawn or
borrowed. The amount of a Premium Value Bonus credited each month is based on
the premium rate class of the insured persons, the total Monthly Minimum Premium
you have paid at that time and the Premium Value Bonus percentages then in
effect. The Premium Value Bonus percentage currently is calculated at an annual
rate of 5% of the Policy's Monthly Minimum Premium for Preferred, Non-Smoker and
Smoker premium rate classes. We may change the Premium Value Bonus percentage
rates at any time, but the annual rate will not be less than 3% for Preferred,
Non-Smoker and Smoker standard premium rate classes.
In addition to the Premium Value Bonus, a Cash Value Bonus is also scheduled to
be paid monthly starting in the 9th Policy Year, based on your then current
Account Value (net of Policy loans and interest thereon) and the Cash Value
Bonus percentage then in effect. The Cash Value Bonus annual percentage
currently ranges from .30% for a Policy with Account Value (net of Policy loans
and interest thereon) of more than $200,000 at the start of the applicable
Policy Year, to 0.20 % if such value is $100,000 up to $200,000, to 0.10% if
such value is $25,000 or more (but less than $100,000), to 0% if such value is
less than $25,000.
The Cash Value bonus is currently scheduled to increase after the 20th Policy
Year to .50% for Policy's with an Account Value (net of Policy loans and
interest thereon) at the start of the applicable year of more than $200,000, to
.40% if such value is more than $100,000 (up to $200,000), and to .20% if such
value is at least $25,000 (but less than $100,000).
Because we do not guarantee any minimum Cash Value percentage, we could
terminate or reduce Cash Value Bonuses at any time.
The Premium Value and Cash Value Bonuses will not be paid if your state does not
permit them. You should check with your sales representative or call our
Variable Service Center to confirm the availability of the bonuses.
What general income tax consequences will I have from owning a Policy?
Under current federal tax law, you generally do not pay income tax on increases
in your Account Value unless and until there is a total surrender or partial
withdrawal. A complete surrender of the Policy will, and a partial withdrawal
may, be included in your gross income to the extent that the distribution
exceeds your investment in the Policy. Additional amounts may be taxable if a
partial surrender during the first 15 Policy Years results in or is necessitated
by a reduction in benefits.
Under current federal tax, you will generally not pay current income tax on the
proceeds from any Policy loan. Interest you pay on the loan generally will not
be tax deductible, however.
Special rules are applicable to a surrender, withdrawal, loan or transfer of
ownership from a Policy classified as a "modified endowment contract" or "MEC".
Death Benefit Proceeds paid to the Beneficiary under the Policy are generally
not subject to federal income tax.
Please review the FEDERAL TAX MATTERS section of this prospectus for additional
information. We may make any change in a Policy or take any other action in
order to comply with applicable state and federal law, including all tax law
requirements for treatment as life insurance.
How much do we pay the Policy's Beneficiary when the Surviving Insured person
dies?
Upon the death of the Surviving Insured, we will pay the Death Benefit Proceeds
to the Beneficiary. The Death Benefit Proceeds are (1) the amount payable under
Death Benefit Option A or B (whichever is in effect), (2) minus any outstanding
Policy loans and interest thereon, (3) minus any due and unpaid monthly
deductions and charges under your Policy, and (4) plus any amounts we owe under
the terms of any optional additional benefit riders to your Policy. The
Beneficiary may receive the proceeds in a lump sum or in the form of one of our
annuity payout options.
What charges and deductions do you make?
The Policy is subject to the following charges and deductions:
Monthly Deductions - composed of the following:
. administrative charge - currently $10 each Policy Month (which we may
increase to not more than $16 per month);
. policy benefit charge - at an annualized rate of 0.30% of your Policy's
Account Value;
. policy fee - based on the Face Amount of the policy, the sex and premium rate
class of the Insureds and the Joint Age on the Policy Date;
. a cost of insurance charge - based on the sex and premium rate class of the
Insureds, the Joint Age, Policy Year and amount of coverage; and
. any charges for optional additional benefit riders.
Daily Deductions - the charge currently equals an annual rate of 0.90% (which we
may increase to not more than 1.20%) of the daily net assets in each Separate
Account Investment Option.
Surrender Charge - will be assessed upon termination of your Policy during the
first 10 Policy Years. The Surrender Charge varies for each Policy Year during
this period. The maximum Surrender Charge is 125% of 12 Monthly Minimum
Premiums up to a limit, for standard premium rate classes, of $60 per $1,000 of
Face Amount. A new set of Surrender Charges is established for the 10-year
period following an increase in Face Amount.
Fund Expenses - we purchase shares of the Portfolios of Variable Investors
Series Trust ("VIST") and Federated Insurance Series ("FIS") at net asset value,
which reflects investment management fees, other operating expenses and any
expense reimbursement paid by an investment adviser to the applicable Portfolio.
Accordingly, these expenses reduce the return you earn in our related variable
investment options. The total annual expenses of the Portfolios as a percentage
of average net assets for the year ended December 31, 1998 were:
[To be filed by Pre-Effective Amendment]
First Variable Advisory Services Corp., the investment adviser to VIST, has
agreed through April 1, ____ to reimburse VIST for operating expenses (exclusive
of management fees) in excess of .50% of a VIST Portfolio's average daily net
assets (.25% in the case of the VIST U.S. Government Bond Portfolio). Had this
investment adviser not reimbursed expenses of the VIST Portfolios, for the year
ended December 31, 1998, the VIST annual expenses, as a percentage of the
Portfolio's average assets, would have been ___ for the VIST Small Cap Growth
Portfolio; ___% for the VIST World Equity Portfolio; ____% for the VIST Matrix
Equity Portfolio; ___% for the VIST Growth & Income Portfolio; ___% for the VIST
Multiple Strategies Portfolio; ___% for the VIST High Income Bond Portfolio; and
___% for the VIST U.S. Government Bond Portfolio. Federated Advisors, the
investment adviser for FIS has voluntarily agreed to waive any portion of its
fee and/or reimburse certain operating expenses of FIS in excess of ___% of the
FIS Prime Money Fund II Portfolio's average net assets, but can modify or
terminate this voluntary agreement at any time at its sole discretion. Had this
investment adviser not waived expenses and/or reimbursed expenses of the
Federated Prime Money Fund II Portfolio for the year ended December 31, 1998,
the annual expenses, as a percentage of the Portfolio's average assets, would
have been ____%.
Other Expenses - we also have the right to begin making the following additional
charges under the Policies (which we have decided not to impose for now):
Premium Charge and Premium Tax Charge - currently none, guaranteed not to exceed
9.25% of each Premium Payment you make.
Transaction Fees - currently none, guaranteed not to exceed $10 guaranteed for
each transfer among Investment Options that you make in excess of twelve
transfers per Policy Year; and guaranteed not to exceed $10 for any Policy loan.
Additional Transaction Charge - currently none, may be imposed for surrenders
you make for the benefit of a third party assignee of the Policy pursuant to
section 1035 of the Internal Revenue Code. (See "Surrender Charge.")
Tax Charge - currently none, but we reserve the right to impose charges for
other taxes that may be payable and are attributable to the Policies in the
future.
FIRST VARIABLE LIFE INSURANCE COMPANY
We are a stock life insurance company that was organized under Arkansas law in
1968. We engage principally in the business of variable life insurance,
variable annuities, and fixed annuities. We hold licenses to sell insurance in
49 states, the District of Columbia and the U.S. Virgin Islands. Irish Life of
North America, Inc. ("ILoNA") owns all of our outstanding stock, and Irish Life
plc ("Irish Life") in turn, owns all of ILoNA. Irish Life commenced operations
in 1939 through a consolidation of a number of Irish and British life offices
transacting business in Ireland. In terms of assets, Irish Life controls over
50% of the Irish domestic life insurance market. As Ireland's leading
institutional investor, it owns in excess of 10% of the leading Irish publicly
traded stocks. Irish Life, through its international subsidiaries, conducts
business in Ireland, the United Kingdom, the United States, and Europe. As of
the end of 19__, the Irish Life consolidated group had in excess of $__ billion
in assets. ILoNA is a Delaware corporation, incorporated as Carrig
International, Inc. in 1986.
We have an A (Excellent) rating from A.M. Best, an independent firm that
analyzes insurance carriers. Best assigns that rating to companies that have a
strong ability to meet obligations to policyholders over a long period of time.
We also have an AA- rating from Standard and Poor's and an AA- rating from Duff
& Phelps Credit Rating Co. on claims paying ability. Our financial strength
enhances our ability to satisfy our obligations under the Policies.
THE SEPARATE ACCOUNT
We authorized the establishment of Separate Account VL (the "Separate Account)
under Arkansas law on March 6, 1987; and we have registered the Separate Account
with the Securities and Exchange Commission ("SEC") as a unit investment trust-
type investment company.
The Separate Account's assets belong to us. However, our other creditors could
reach only the amount (if any) in the Separate Account that exceeds the current
value of our obligations to policyholders who have chosen a Separate Account
investment option.
The Separate Account has several different investment options within it. We
invest the assets allocated to each investment option in one Portfolio of VIST
or Federated mutual funds.
We may add other investment options to the Policies that, in turn, may be
invested in other Portfolios of VIST or FIS in portfolios of other mutual funds.
We may restrict these other investment options to customers of specified
distributors.
Performance Information
Appendix A to this prospectus sets out the performance record of each portfolio
that you can select as an investment option.
YOUR INVESTMENT OPTIONS
The Available Options
You may allocate your premium payments and existing Account Value to one or more
of our Separate Account investment options and/or to our Fixed Account. The
currently available Portfolios for our Separate Account Investment Options are
listed on the cover page of this prospectus. More information, including a
discussion of potential risks, appears in the current prospectuses for the VIST
and FIS mutual funds, which accompany this prospectus. (The prospectuses for the
funds may also describe other portfolios that are not available under a Policy.)
You should read this prospectus and the prospectuses for the funds carefully
before investing in any Separate Account investment option.
We do not guarantee that continued purchase of Portfolio shares will remain
appropriate in view of the purposes of the Separate Account. If shares of a
Portfolio are no longer available for investment by the Separate Account or if,
in our judgment, further investment in the shares should become inappropriate or
inadvisable in view of the purpose of the Policies, we may substitute shares of
another portfolio or investment vehicle for shares already purchased or to be
purchased in the future. We also may, in our discretion, remove Portfolios for
transfers or new investments. No substitution of securities may take place
without prior approval of the SEC, to the extent required, and in compliance
with requirements the SEC may impose.
We may also combine separate account investment options or operate them in any
form permitted by law, including a form that allows them to make direct
investments.
This prospectus generally describes only the Policy and Separate Account
investment options. Because of certain exemptions, interests in our Fixed
Account are not registered under the securities laws, nor have we registered the
Fixed Account as an investment company. Accordingly, the protections of the
federal securities laws do not apply to our Fixed Account. We will credit your
Account Values in the Fixed Account with at least a minimum effective rate of
interest per year. We may credit additional amounts of "current" interest in
our sole discretion. New premium payments and transfers from the Separate
Account or Loan Account to the Fixed Account may each receive different current
interest rate(s) than the current interest rate(s) credited to Account Value
that has been previously invested in the Fixed Account. We determine current
interest rates in advance, and credit interest daily to your Account Value in
the Fixed Account.
Transfers Among Investment Options
General Requirements. You may transfer Account Value among investment options
by written request or telephone. The minimum amount you may transfer is the
lesser of (a) $100 or (b) your entire interest in the applicable investment
option. You should mail, fax or express written transfer requests to our
Variable Service Center shown on the front cover of this prospectus. You can
also request a transfer by phoning 1-800-228-1035.
Transfer requests must clearly specify the amount to be transferred and the
investment options affected. All transfer requests made at the same time for
Separate Account investment options will be treated as a single request. The
transfer will be effective at the prices we next compute after we receive the
transfer request at our Variable Service Center.
Unless we consent, transfers from the Fixed Account to other investment options
during the first Policy Year cannot total more than 50% of the Fixed Account
Value on the Policy Date.
After the first Policy Year, your transfers from the Fixed Account during a
Policy Year may not exceed the greater of:
. 50% of your Fixed Account Value on the immediately preceding Policy
Anniversary; or
. 100% of your Fixed Account Value transferred to other investment options
during the immediately preceding Policy Year.
We can impose a transaction fee if you make more than 12 "free" transfers in a
Policy Year.
Automatic Transfer Programs - You can participate in automatic transfer
arrangements, including dollar cost averaging and asset rebalancing programs.
You initiate these programs by making a written or telephone request to our
Variable Service Center shown on the front cover of this prospectus. We make
the automatic transfers on the last business day of
whichever of the following intervals you request: quarterly, semi-annually,
annually, monthly (for dollar cost averaging only), or at any other interval
that we approve. You may request us to cease automatic transfers at any time.
Automatic transfers from the Fixed Account are subject to the restrictions
described above in General Requirements (except that, for dollar cost averaging
only, you can transfer up to 100% of your Fixed Account Value within one Policy
Year if you have selected the monthly interval.) Automatic transfers are not
subject to any transaction fee and do not count toward the number of "free"
transfers. We currently do not charge you for an automatic transaction program,
although we reserve the right to do so in the future.
The dollar cost averaging program permits transfers from the Prime Money Fund II
investment option or the Fixed Account to other Separate Account investment
options on a regularly scheduled basis. Such systematic transfers may prevent
investing too much when the price of securities is high or too little when the
price is low. There is no guarantee of this, however. Also, since systematic
transfers, such as dollar cost averaging, involve continuous investment
regardless of fluctuating price levels, you should consider your ability to
continue purchases through periods of low price levels.
The minimum amount, for each dollar cost averaging transfer, is $100. You must
have $1,200 of Account Value in the Prime Money Fund II investment option or
the Fixed Account, as applicable, before a "dollar cost averaging" program may
begin.
The asset rebalancing program enables you to select the percentage levels of
Account Value you wish to maintain in particular investment options. At the
intervals you select, we will automatically rebalance your Account Value to
maintain the indicated percentages by transfers among the investment options.
You must include all of your Account Value allocated to the Separate Account
investment options in any asset rebalancing program.
Other investment programs, such as systematic transfers and systematic
withdrawals, or other transfers or withdrawals may not work well in concert with
the asset rebalancing program. Therefore, you should monitor your use of these
programs while the asset rebalancing program is being used.
Restrictions on Transfers. Generally, you may make an unlimited number of
transfers in any Policy Year. Frequent requests to transfer, however, may have
a detrimental effect on the value of Portfolio shares values held in the
Separate Account. We may therefore limit the number of permitted transfers in
any Policy Year, or refuse to honor any transfer request for an owner or a group
of owners, if:
. the purchase or redemption of shares of one or more of the Portfolios is to
be restricted because of excessive trading; or
. a specific transfer or group of transfers is deemed to have a detrimental
effect on Policy Account Value or Portfolio share prices.
We may also at any time suspend or cancel acceptance of third party transfer
requests on behalf of a Policyowner; or restrict the Investment Options that
will be available for such transfers. Notice will be provided to the third
party in advance of the restrictions. We will not impose any restrictions,
however, if we have received satisfactory evidence that:
. you have appointed the third party to act on your behalf for all financial
affairs; or
. a court of competent jurisdiction has appointed the third party to act on
your behalf.
We also reserve the right at any time and without prior notice to otherwise
modify, suspend or terminate the transfer privileges.
Automatic Transfers of Small Accounts. We reserve the right, subject to any
applicable law, to transfer Account Value from any investment option if less
than $100, to the investment option with the greatest Account Value.
Mixed and Shared Funding
We buy shares of VIST and FIS for the Separate Account in connection with the
Policies, and for allocation to separate accounts funding variable annuity
policies and other variable life insurance Policies issued by us. VIST and FIS
offer shares to other insurance companies and to other separate
accounts, either affiliated or unaffiliated with us, for the same purpose. In
the future, it may conceivably become disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
one or more of the VIST or FIS Portfolios simultaneously, if the interests of
variable life insurance and variable annuity policy owners differ. The boards of
trustees of VIST and FIS investing in those Portfolios intend to monitor events
to identify any material irreconcilable conflicts which may arise and to
determine what action, if any, they or the insurance companies should take in
response.
MORE ABOUT CHARGES AND DEDUCTIONS
Monthly Deductions
On the first day of each Policy Month we make a Monthly Deduction from each
Policy's Account Value. We make the deduction from your Investment Options in
proportion to the amount of your Account Value in each (i.e., on a "pro-rata
basis") or by any other method you select and we approve.
For example, we will permit you to have deductions first taken from one or more
preselected investment options. You may also request deductions to first be
taken from the investment option that has the best investment performance over
the prior Policy Month.
The Monthly Deductions include the following charges:
Administrative Charge. This charge is currently $10.00 per Policy Month, we
guarantee this charge not to exceed $16 per Policy Month.
Policy Fee and Policy Benefit Charge. The monthly deduction includes a policy
fee and an additional monthly charge for the benefits we provide under the
Policies. The policy fee is based on the Face Amount of the Policy, the sex and
premium rate class of the Insureds and the Joint Age on the Policy Date. We
compute the policy benefit charge as a percentage of the Policy's Account Value
on each monthly deduction day. We make this charge at an effective annual rate
of 0.30%.
Cost of Insurance. This is a charge for the cost of providing life insurance
coverage for the insured person. First we subtract your then current Account
Value from your then current Death Benefit; under your Policy. This tells us
how many dollars we stand to lose if you were to die at that time. We determine
our cost of insurance charge by (a) dividing that dollar amount of risk by
1.003273739 and (b) multiplying the result by the applicable current cost of
insurance rate. The cost of insurance rate varies based on the length of time a
Policy has been in force and the sex and premium rate class of the Insureds and
the Joint Age. We guarantee this charge will not exceed the charge for the same
amount of risk based on the mortality table guaranteed in the Policy. For
standard risk Insureds, we guarantee the 1980 Commissioner's Standard Ordinary
Mortality Tables, Age Last Birthday ("1980 CSO"). These mortality tables differ
for male and female insured persons and separate mortality tables may be used
for different premium rate classes. The maximum cost of insurance charge for
substandard risk Insureds is based on multiples of or additions to the
guaranteed standard rates established by the 1980 CSO.
We currently charge lower cost of insurance rates for most Joint Ages, although
we can at any time raise them to not more than the above-described guaranteed
maximums.
In general, the guaranteed cost of insurance rates increase with the Joint Age.
Therefore, the longer you own a Policy, the higher your cost of insurance rate
will be. Similarly, non-smokers generally have lower current cost of insurance
rates than smokers do, and persons that have other highly favorable health
characteristics have lower rates than those that do not. On the other hand, if
one or both of the Insureds present particular health, occupational or
avocational risks you may pay higher cost of insurance rates and other
additional charges for the insurance coverage.
The monthly cost of insurance rates for an increase in Face Amount under your
Policy will be based on the set amount of insurance and premium rate class of
the Insureds and the Joint Age at the time of the increase.
Optional Additional Benefit Rider Charges: We intend to offer optional
additional benefit riders that you may add to the Policy. Your Policy will
specify any additional monthly charge for the riders you elect.
Daily Deductions
Each Business Day, we deduct a mortality and expense risk charge that we
calculate as a percentage of your Policy's net assets in each Separate Account
investment options. The charge is currently 0.90% (which we guarantee will not
be increased to more than 1.20 %, on an annual basis.)
Surrender Charge
We may assess a surrender charge if you surrender your Policy during the first
10 Policy Years.
Surrender Charge Percentage. For each Policy Year, we multiply one year's
Monthly Minimum Premium applicable to the initial Face Amount by the surrender
charge percentage shown below. We then deduct that amount if you make a full
surrender at any time during that Policy Year:
- ------------------------------------------------------------------------------
Surrender Surrender Charge %
Policy Year Charge % Policy
Year
- ------------------------------------------------------------------------------
1 62.5% 7 80%
- ------------------------------------------------------------------------------
2 125% 8 60%
- ------------------------------------------------------------------------------
3 125% 9 42%
- ------------------------------------------------------------------------------
4 125% 10 20%
- ------------------------------------------------------------------------------
5 125% 11+ 0%
- ------------------------------------------------------------------------------
6 100%
- ------------------------------------
Maximum Surrender Charge. The surrender charge will not exceed 125% of one
year's Monthly Minimum Premium. Nor will it exceed $60 per $1,000 of Face
Amount for standard premium rate classes. This per $1,000 limit will not apply
if either of the Insureds is in a substandard premium rate class. The Policy
states the dollar amount of the maximum surrender charge on the Policy Date. We
impose no surrender charge upon a partial decrease in Face Amount, but the full
surrender charge will remain in effect for a subsequent surrender.
Surrender Charge for Face Amount Increases: We will establish an additional
surrender charge for the 10 year period following any increase in Face Amount
that you request. The additional surrender charge will be computed as if the
Face Amount increase were being issued in the form of a new Policy, based on the
Joint Age and other risk characteristics of the Insureds at the time of the
increase.
Upon surrender within the 10-year period, the remaining amount of surrender
charges for the Face Amount increase will be deducted, together with any amount
of surrender charge that still remains from the initial policy or from any prior
Face Amount increases.
Fund Expenses
Our Separate Account purchases shares of the Portfolios of VIST and FIS at net
asset value, which reflects investment management fees, other operating expenses
and any expense reimbursement paid by an investment adviser to the applicable
Portfolio. (See "Highlights -- Fund Expenses.")
Other Charges and Deductions (Not Currently Charged)
We do not currently make the charges referred to after the captions "Premium
Charge and Premium Tax Charges" "Transaction Fees", "Additional Transaction
Charges" and "Tax Charge" in the "Highlights" segment of this prospectus. We
reserve the right to do so, however.
Special Service Fees. We do not charge you for special services, such as
additional reports, dollar cost averaging, and asset rebalancing. Although we
do not currently intend to do so, we reserve the right to charge you for these
special services.
Elimination, Reduction or Refund of Charges and Deductions; Increases in Bonuses
We may eliminate, reduce, or refund any charges and deductions on a Policy when
sales of Policies are made to certain individuals or to group and sponsored
arrangements. We will do this when we expect savings of sales, administration or
other expenses, or in a reduction in the level of risks we expect to assume
under the Policies. (This prospectus describes such groups under "Group and
Sponsored Arrangements" below.) We determine any such adjustment to charges and
deductions after examination of relevant factors such as:
. the size and type of group, because large numbers of Policies tend to lower
our per-Policy expenses;
. the total amount of premium payments to be received, because certain expenses
tend to be a smaller percentage of larger premium payments;
. any prior or existing relationship we have with the purchaser, because of the
likelihood of reduced marketing and implementation expenses;
. other circumstances, of which we are not presently aware, which could result
in reduced expenses; and
. after a Policy is issued, if we anticipate expenses for later Policy Years
that are lower than initially projected.
We also may eliminate, reduce or refund charges and deductions when we issue a
Policy to an officer, director, employee or agent of ours or any of our
affiliates. We do not, however, guarantee any adjustment in charges and
deductions, and any adjustment may vary by group. Based on the same
considerations as discussed above, we may also credit higher Policy bonuses than
would be otherwise be payable or accelerate the payment of Policy bonuses to
members of selected groups.
All adjustments will be made under our uniform administrative rules then in
effect. In no event will adjustments to charges, deductions or Policy bonuses
be permitted if the adjustment would be unfairly discriminatory to any person.
Group and Sponsored Arrangements. Group arrangements include those in which a
trustee, employer, association or similar entity purchases individual Policies
covering a group of individuals on a group basis. An example of such an
arrangement is a non-tax qualified deferred compensation plan. Sponsored
arrangements include those in which an employer, an association or similar
entity permits the Company to offer Policies to its employees or members on an
individual basis.
Gender-Neutral Policies. In 1983, the United States Supreme Court decided in
Arizona Governing Committee v. Norris that certain insurance contracts may not
be used to fund certain employee benefit programs where the contracts provided
values and benefits that varied with the
gender of the insured person. We may therefor offer Policies that do not vary by
gender for use in connection with certain employee benefit programs. We
recommend that any employer proposing to offer the Policies to employees under a
group or sponsored arrangement consult its attorney before doing so.
We may also offer the Policy with provisions and charges that are gender neutral
in states where required, and where the "unisex" version of the Policy has been
approved. Currently, the State of Montana prohibits the use of actuarial tables
that distinguish between men and women in determining premiums and policy
benefits.
Purposes of Policy Charges
We have designed the charges under the Policies to cover, on the whole, our
direct and indirect costs of selling, administering and providing benefits under
the Policies. These charges are also designed, on a whole to compensate us for
the risks we assume under the Policies. These include mortality risks (such as
the risk that insured persons will, on average, die before we expect, thereby
increasing the amount of claims we must pay); investment risks (such as the risk
that adverse investment performance will make it more costly for us to provide
the Guaranteed Death Benefit under the Policies or reduce the amount of our
asset-based fee revenues below what we anticipate); sales risks (such as the
risk that we sell fewer Policies and receive lower net revenue than we expect,
thereby depriving us of expected economies of scale); regulatory risks (such as
the risk that tax or other regulations may be changed in ways adverse to issuers
of variable life insurance policies); and expense risks (such as the risk that
the costs of administrative services that we must provide will exceed what we
currently project).
If, as expected, the charges that we collect from the Policies exceed our total
costs in connection with the Policies, we will earn a profit. Otherwise we will
incur a loss. We have set the current and maximum rates of certain of our
charges with reference to estimates of the amount of specific types of expenses
or risks that the Company will incur. In some cases, this prospectus identifies
such expenses or risks in the name of the charge: e.g., the administrative
charge, cost of insurance charge, and mortality and expense risk charge.
However, the fact that any charge bears the name of a particular expense or
risk does not mean that the amount we collect from that charge will never be
more than the amount of such expense or risk, or that we may not also be
compensated for such expense or risk out of any other charges we may deduct
under the terms of the Policies.
THE POLICIES
Application and Issuance of a Policy
If you wish to purchase a Policy, you must submit an application to our Variable
Service Center. You select:
. A Face Amount (minimum of $50,000 on proposed Insureds up to Age 85, and
Death Benefit Option A or B; (see "Death Benefit");
. The amount of planned premium that you intend to pay; and
. The investment options to which we will allocate your premium.
We will review an application under our underwriting rules, and we may request
additional information or reject the application. We generally will not issue
Policies to insure persons older than age 85; nor will we generally issue
Policies to employee benefit plans qualified under Section 401 of the Internal
Revenue Code. If we decline an application, we will refund any premium payment
made.
If we issue the Policy, Monthly Deductions will begin as of the Policy Date. If
you make a premium payment with the application, the Policy Date generally will
be the date we approve the application. If you instead pay the first premium
upon delivery of the Policy, the Policy Date generally will be five days after
we issue the Policy.
Under limited circumstances, we may backdate a Policy, upon request, by
assigning a Policy Date earlier than the date the application is signed. In
that case, even though Monthly Deductions begin earlier, backdating may be
advantageous, for example, to obtain a lower cost of insurance rate, based on a
lower Joint Age of the insured persons.
"Free Look Right." You have the right to review your Policy during an initial
inspection period specified in the Policy and, if dissatisfied, to return it to
us or to the agent through whom you purchased it. We will refund the Account
Value, any Premium Load, and any Monthly Deductions on a Policy returned during
the permitted period, unless a different amount is required by state law. The
"free look" period is typically 10 days, but may be greater depending on state
requirements.
Premiums
Planned Premiums. You may chose, within limits, to pay premiums on a pre-
determined schedule. We will provide periodic reminder notices. Failure to
make such a payment will not result in termination of your Policy, so long as
your Policy has enough Cash Surrender Value to cover the Monthly Deductions as
they fall due. Although making planned premium payments will not necessarily
assure that your Policy will remain in force, the amounts paid will generally
result in greater benefits than if you pay a lower amount of premium.
You may arrange to pay planned premiums by pre-authorized automatic deductions
from accounts you maintain at other financial institutions. You may also
request to change the amount of your planned premiums by submitting a written
request to our Variable Service Center.
Monthly Minimum Premium; Death Benefit Guarantee. Your Policy shows the Monthly
Minimum Premium, which varies by Joint Age on the Policy Date, Death Benefit
amount (including optional additional benefit riders), and the sex and premium
rate classes of the insured persons. The Monthly Minimum Premium increases if
the Face Amount increases, or if you add other benefits, during the Death
Benefit Guarantee Period.
Your Policy will stay in force during the Death Benefit Guarantee period if, as
of the first Business Day of each Policy Month, the cumulative amount of
premiums paid over the life of your Policy at least equals your Policy's Monthly
Minimum Premium times the number of elapsed Policy Months. For this purpose,
the amount of premium paid is reduced by the sum of any outstanding Policy loans
(including accrued interest) and cumulative withdrawals.
The length of the Death Benefit guarantee period currently ranges 10 years to
_________ years [to be filed by pre-effective amendment], depending on the
Joint Age and premium rate class on the Policy Date (the "issue age"):
- -----------------------------------------------------------------------
Issue Age Guaranteed Death Benefit Period
--------- -------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
We will accrue for later deduction any charges that were due but not taken
during the Guaranteed Death Benefit Period because of insufficient Account
Value. Any due and unpaid Monthly Deductions will be deducted from any Death
Benefit proceeds or from any Account Value that becomes available to pay the
deduction.
Additional Premiums. You may pay additional premiums at any time during the
lifetime of either of the insured persons, subject to three exceptions. First,
we will refuse any premium payment that may cause your Policy no longer to be
treated as life insurance for tax purposes. Second, we
reserve the right to require satisfactory evidence that both of the insured
persons are still insurable before we accept any premium payment that would
increase the then current Death Benefit under your Policy. Third, we may require
that you pay off any Policy loans you have taken (and unpaid interest) prior to
accepting any premium payments from you.
If you pay premiums in excess of certain amounts your Policy may be classified
as a "modified endowment contract," or "MEC," for federal income tax purposes
and this could have adverse tax consequences for you. (See "Federal Tax Matters
Income Tax Treatment at Policy Benefits.")
Grace Period. After the end of your Policy's Death Benefit Guarantee Period,
your Policy will enter a grace period on the first Business Day of any Policy
Month on which your Policy Cash Surrender Value will not cover the current
Monthly Deduction and accrued interest on any Policy loans you have taken. This
also will happen during the Death Benefit Guarantee Period, if you have not paid
enough premiums to keep the guarantee in force.
The grace period runs for 61 days from the applicable Business Day. We will
send you a notice at your last known address which will show the amount
necessary to cover the Monthly Deduction(s) due plus an amount equal to three
times the current Monthly Deduction. If you do not pay at least this amount by
the end of the grace period, your Policy will end without value.
Allocation of Premiums
General. We allocate the premium payments you make (after any deductions) to
the investment options you select. We use "Accumulation Units" to keep track of
your interest in any Separate Account investment option you select. We
determine the number of Accumulation Units credited to a Policy by dividing the
amount allocated a Separate Account investment option by the value of the
applicable Accumulation Unit next determined after receipt of your premium
payment. We calculate Accumulation Unit Values as of the end of each Business
Day. Premium payments allocated to the Fixed Account are credited in dollars.
Premium payments are generally allocated to the Separate Accounts or the Fixed
Account as of the later of the Policy Date or the date we receive your premium.
Delayed Investment Allocation Date. We reserve the right to allocate premium
payments to the Prime Money Fund II investment option for an investment delay
period before they will be invested (together with any investment gain) in any
other investment option(s) you designate. In that case, we would reallocate
your Account Value to the investment options you have selected at the end of
your Policy's "free look" period. We would measure the investment delay period
from the date your Policy is issued from our Variable Service Center and would
include up to 5 extra days in addition to the applicable "free look" inspection
period to provide time for mail or other delivery of the Policy to you.
If we elect to delay your investment allocation date, your Policy will contain a
provision to that effect.
Telephone Transactions
You may initiate various transactions by calling 1-800-845-0689. These are:
transfers of Account Value, notification of a change in your address, change of
premium allocations among Investment Options, partial withdrawal requests,
Policy loans and systematic withdrawals. You may authorize your representative
to make these calls on your behalf.
You may also call 1-800-59-FUNDS for current Accumulation Unit values, current
Account Value, and for telephone transfers of Account Value.
If you own a Policy jointly with another owner, unless both owners have advised
us to the contrary, we will accept instructions from either one of the joint
owners.
We will use reasonable procedures (such as requiring identifying information
from the caller, tape recording the telephone instructions, and providing
written confirmation of the transaction) in order to authenticate instructions
communicated by telephone. You will be responsible for any telephone
instructions we reasonably believe to be genuine. Therefore, you will bear any
losses arising from any errors in the communication of instructions. If we do
not employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, we may be liable to you for any losses due to dishonored
or fraudulent instructions. We may modify or terminate our procedures for
telephone transactions at any time.
POLICY BENEFITS AND VALUES
Death Benefit
If we receive proof that both of the Insureds have died while the Policy was in
force, we would pay the Death Benefit Proceeds to the Beneficiary. You may
elect for the Death Benefit Proceeds to be paid in a single sum or under one of
our other Payout Options before the death of the Surviving Insured. If no such
election is in effect at the death of the Surviving Insured, the Beneficiary may
make the election during a 60-day period following the Company's receipt of
proof of death. We will hold up payment of the Death Benefit Proceeds in the
meantime.
Death Benefit Options A and B
The amount of the Death Benefit depends on whether you have chosen Death Benefit
Option A or Death Benefit Option B.
Option A. Under this option, the Death Benefit is the greater of:
- --------
. the Face Amount or
. the Account Value times the applicable percentage shown in the Table of
Minimum Death Benefit Percentages.
Option B. Under this option, the Death Benefit is the greater of:
- --------
. the Face Amount plus the Account Value or
. the Account Value times the applicable percentage shown in the Table of
Minimum Death Benefit Percentages.
Table of Minimum Death Benefit Percentages
Percentage of Percentage of Percentage of Percentage of
Joint Account Value Joint Account Value Joint Account Value Joint Account Value
Age Age Age Age
35 or less 250
36 250 51 178 66 119 81 105
37 250 52 171 67 118 82 105
38 250 53 164 68 117 83 105
39 250 54 157 69 116 84 105
40 250 55 150 70 115 85 105
41 243 56 146 71 113 86 105
42 236 57 142 72 111 87 105
43 229 58 138 73 109 88 105
44 222 59 134 74 107 89 105
45 215 60 130 75 105 90 105
46 209 61 128 76 105 91 104
47 203 62 126 77 105 92 103
48 197 63 124 78 105 93 102
49 191 64 122 79 105 94 101
50 185 65 120 80 105 95+ 100
In computing the Death Benefit, we use the Joint Age as of the date of death of
the Surviving Insured and the Face Amount, the Account Value, and the death
benefit option that are in effect under the Policy as of that same date.
Change in Death Benefit Options and Face Amount. Beginning in the second Policy
Year, you may make a written request to our Variable Service Center not more
than once each Policy Year to change your Death Benefit option. If we approve
a change from Death Benefit Option B to Death Benefit Option A, we will
automatically increase the Face Amount of your Policy by an amount equal to the
Policy's Account Value. Upon a change from Death Benefit Option A to Death
Benefit Option B, we will automatically decrease the Face Amount of your Policy
by an amount equal to the Policy's Account Value.
After the first Policy Year, you may also make a written request to our Variable
Service Center to increase or decrease your Policy's Face Amount.
We may require evidence of the and the continued insurability of either or both
of the Insureds for a change from Death Benefit Option B to Death Benefit Option
A, or for any other change that would increase the Face Amount. We also may
restrict any requested increases in the Face Amount to minimums and maximums
that vary with the Joint Age and the premium rate class of the Insureds, and may
adjust the Joint Age for any increases in Face Amount. If the Face Amount
increases during any Death Benefit Guarantee period, the Monthly Minimum
Premium also will usually increase for the remainder of the applicable Death
Benefit Guarantee Period. The increase in Monthly Minimum Premium would be
based on the Joint Age, sex, additional Face Amount, and premium rate class of
the Insureds. The surrender charge and applicable surrender charge period will
also increase as a result of an increase in Face Amount, other than an increase
due solely to a change in Death Benefit Option. (See "Surrender Charge.")
Any reduction in Face Amount will take effect in the following order:
. against the most recent increase in Face Amount; then
. against the next most recent increases; then
. against the initial Face Amount.
We may deny any request to reduce the Face Amount (including reductions
resulting from a change of Death Benefit Option A to Death Benefit Option B):
. if the Death Benefit would be reduced below that required to qualify the
Policy as life insurance; or
. if the Death Benefit would be reduced below the minimum Face Amount shown in
the Policy.
A change in Death Benefit Option or Face Amount will take effect on the first
Business Day of the Policy Month coinciding with or next following the date we
approve the request. For a discussion of possible tax consequences of changing
insurance coverage under a Policy, see "Federal Tax Status."
Premium Value Bonuses and Cash Value Bonuses
Subject to approval by your local insurance regulatory authority, a Policy
continuously in force for 8 Policy Years will be eligible for monthly Premium
Value and Cash Value Bonuses. The bonuses will be allocated monthly to the same
investment options as then in effect for your premium payments.
The amounts of these bonuses are discussed above under "Highlights.
Our life insurance policies funded through the Separate Account have only been
available since January 1998, and we have not yet credited any bonuses.
Optional Additional Benefit Riders
We intend to offer optional additional benefit riders subject to regulatory
approval in your local area and to our underwriting and issuance standards. The
following descriptions are not complete. For more complete information about
the riders and their availability, you should consult your sales representative
or request a copy of the form of the rider in which you
are interested. Coverage under these riders may increase the Monthly Deduction
under the Policy.
Acceleration of Death Benefit Rider - permits you to receive an advance of the
Death Benefit when the Surviving Insured person has a terminal illness with a
life expectancy of less than 12 months (all as defined in the rider).
We compute the maximum amount of advance under a formula set forth in the rider.
In no event will we advance more that $500,000, however. Amounts advanced under
the rider generally will be considered Death Benefits for federal income tax
purposes. (See "Federal Tax Matters - Income Tax Treatment of Policy Benefits.")
We do not charge for this rider.
Estate Protection Rider - provides additional fixed benefit term life insurance
during the first four policy years to protect against automatic inclusion of
Policy value in taxable gross estates where the Policy is owned by a trust.
Additional Term Insurance on a Single Insured - provides additional term life
insurance coverage on the life of the insured person, and for a designated
period, that you select. The term coverage cannot continue after that insured
person reaches his or her age 95. You may convert this term insurance to a
permanent plan of life insurance, subject to the conditions listed in the rider,
if the insured person has not yet reached his or her age 70. The charges
applicable to a single insured person rider will vary, depending on the amount
of coverage, age, sex and premium risk class of the insured person.
Additional Joint Term Insurance on the Insureds - provides additional term life
insurance for a preselected period, based on the Joint Age of the Insureds. One
form is payable upon the death of the second of the Insureds to die. The other
form is payable upon the death of the first of the Insureds to die.
Coverage under the second to die term rider may lower the Monthly Minimum
Premium requirement from what we would require if you purchased the same amount
of coverage under the base Policy. Coverage under the rider, as compared to
coverage under the base Policy, may also result in a lower Surrender Charge, a
smaller amount of premiums required initially to maintain your Policy's
Guaranteed Death Benefit, and lower amounts of those Policy charges that are
based on Minimum Premiums and Account Value. However, the amount of any Premium
Value Bonus also will be reduced if coverage on the insured persons is taken
under the rider instead of the base Policy, and the potential for Cash Value
Bonuses may also be reduced unless you pay more than the Monthly Minimum
Premiums.
Other Insured Persons Rider - provides fixed benefit term life insurance
coverage on the lives of other individuals that you select. The term insurance
maybe converted to a permanent plan of life insurance, subject to the conditions
listed in the rider. If the insured person under this rider is not a member of
your family, certain special tax rules will apply, which this prospectus briefly
describes in "Federal Tax Matters - Income Tax Treatment of Policy Benefits.
Disability Waiver Benefit Riders. You may elect to purchase either or both of
our disability benefit riders. The riders provide benefits if the insured person
you select becomes totally disabled, as defined under the terms of the
applicable rider, before reaching his or her age 60. Our "Waiver of Monthly
Deduction" rider waives the Monthly Deductions incurred in connection with the
Policy. (The waiver does not, however, include daily deductions against
Separate Account assets for the mortality and expense risk charge, which will
continue to apply.) Our "Cash Deposit Benefit" rider provides that we will pay
a pre-selected monthly benefit amount into your Policy's Account Value. We
also will credit these payments toward the Monthly Minimum Premium requirements
for the Guaranteed Death Benefit. These riders are only available for a single
insured person, and will not provide coverage for both of the Insureds under a
Policy.
You may request that we cancel any rider benefits at any time. The cancelled
rider, and any charges therefor, will terminate at the end of the Policy Month
during which we receive your written request at our Variable Service Center.
Determination of Account Value
Your Account Value under a Policy includes its value in the Separate Account, in
the Fixed Account and, in the Loan Account. Your Account Value in a Separate
Account investment option at any time equals the number of Accumulation Units
you hold in that option multiplied the then-current value of one such
Accumulation Unit. We compute this value in such a way that the investment
return on your Account Value in any Separate Account investment option will
differ from the total return achieved by the underlying Fund Portfolio only by
the amount of the charges and deductions we make under your Policy from that
investment option.
Your Account Value in the Fixed Account investment option or in the Loan Account
earns fixed rates of interest as described elsewhere in this prospectus. Your
Account Value in the Fixed Account will increase by the amount of such interest,
but will decrease by the amount of any charges or deductions that we take from
that account for your Policy.
Your Account Value in any investment option, or in the Loan Account will also
vary by the amount of transfers we make among those components of Account Value
in response to requests that you make, or that we make automatically in
connection with any Policy loans that you take and the payment of principal and
interest due thereon. Your Account Value in each investment option also will
increase by the amount that you direct to that option from your premium payments
and will decrease by the amount of any withdrawals that you take from that
option.
Policy Loans
We will lend you up to 90% of your Policy's Cash Surrender Value at any time
after the initial free-look period. You may request a Policy loan by submitting
a request in writing or by telephone to our Variable Service Center shown on the
front cover of this prospectus. (See "Telephone Transactions.")
Each loan must be at least $100. We will automatically transfer Account Value
equal to the amounts you borrow to your Policy's Loan Account from the other
investment options you are then using. We credit amounts in your Loan Account
with interest at a minimum annual rate of 4%.
The interest you must pay us on a Policy loan accrues daily and is payable in
arrears at the end of each Policy Month. If not paid when due, we will add it
as an additional Policy loan on the first Business Day of the next Policy Month.
A loan repayment increases your Account Value in your Policy's other investment
options on a dollar-for-dollar basis.
Unless you request otherwise, loans and loan repayments are attributed to the
Separate Account Investment Options and the Fixed Account in proportion to the
Account Value in each. We may disapprove any such request, however.
Regular Loan Interest. For a Regular Loan, we charge interest at a 6% effective
annual rate.
Preferred Loan Interest. We charge interest on a Preferred Loan at a 4%
effective annual rate. You may qualify for Preferred Loans if your Account
Value, less any then outstanding loans and related interest, on any Policy
Anniversary is at least $25,000. If so, the maximum you can take as Preferred
Loan that year is 15% of your Account Value, less any then outstanding Policy
loans and related interest. If your Policy qualifies for a Preferred Loan on
any Policy Anniversary, we will automatically convert at least part of any
Regular Loan outstanding to a Preferred Loan. This automatic conversion,
however, will be subject to the above-mentioned 15% limit for that Policy year
and, therefore, will also reduce the amount of Preferred Loans that otherwise
would be available to you for that year. A Preferred Loan will also reduce the
amount available as a Regular Loan.
Immediate Loan Repayment. If, the loans and related interest under your Policy
on the first Business Day of a Policy Month exceed the Account Value less the
Surrender Charge, you must make a loan repayment within 61 days after such
Business Day. We will send a notice to you or your assignee, if any. The Policy
will terminate without value after 61 days, unless you make a sufficient
repayment to reduce the Policy loans and interest accrued thereon to not more
than the Policy's Account Value less (a) the Surrender Charge and (b) an amount
sufficient to continue the Policy in force for 3 months.
You must designate any loan repayment as such. Otherwise, we will treat the
payment as a premium payment.
Surrender and Withdrawals
Surrender. You may surrender your Policy for its Cash Surrender Value at any
time while either of the Insureds is living, by a signed written request
conforming to our administrative procedures. We calculate the Cash Surrender
Value as of the close of the Business Day when your surrender request is
received at our Variable Service Center. The Cash Surrender Value equals your
Account Value reduced by any unpaid Policy loans and accrued interest and by any
applicable Surrender Charges. You may elect to have all or part of the Cash
Surrender Value applied to a payout option. (See "Payout Options.") The
election must be in writing, except that we will accept telephone requests that
apply to only part of the Cash Surrender Value. Our liability to pay the Death
Benefit proceeds ends when you surrender your Policy.
Withdrawals. After the first Policy Year, you may withdraw a portion of the
Policy's Cash Surrender Value (minimum $100). This will reduce the Account
Value and Death Benefit, generally by the amount withdrawn. If Death Benefit
Option A is in effect, a withdrawal also may reduce your Policy's Face Amount by
the amount of the withdrawal. A requested withdrawal requires our consent,
however:
. if the Death Benefit would be reduced below that required to qualify the
Policy as life insurance or below the minimum Face Amount specified in the
Policy; or
. if the remaining Cash Surrender Value would not be at least (a) $1,000 or (b)
3 times the most recent Monthly Deduction, whichever is greater.
We will take any withdrawals from your Policy's investment options on a pro-rata
basis, unless you make a request in writing in advance for a different method.
We reserve the right to approve or disapprove any such request.
Maturity Proceeds
If either of the Insureds is living on the Policy's "Maturity Date" (the Policy
anniversary of the Policy Date on which the Joint Age is 100), we will pay the
Cash Surrender Value. In such case, the Policy will terminate and we will have
no further obligations under it. We will calculate the Cash Surrender Value for
this purpose as of the Maturity Date, although we may defer paying such amount
to you until you return your Policy to us.
Lapse and Reinstatement
If your Policy lapses following a 61-day grace period, you may still, within 3
years thereafter, request that we reinstate the Policy. You would need to
provide us with satisfactory evidence, however, that both of the Insureds are
still insurable and pay certain amounts specified in the Policy.
Any reinstatement will be effective on the first Business Day of the first
Policy Month that begins on or after we approve reinstatement. The values and
terms and conditions of the reinstated Policy will be in accordance with our
administrative procedures.
Payment of Proceeds
We ordinarily will pay any Cash Surrender Value, Death Benefit Proceeds, or loan
proceeds from the Separate Account Investment Options within seven days after
receipt by our Variable Service Center of a request, or proof of death of the
insured persons, and all other required elections and documentation in a form
satisfactory to us. However, we may delay payment or transfers from a Separate
Account investment option in certain circumstances. (See "Suspension of
Payments and Transfers.") The Company may also delay payment if we contest the
Policy. We will pay interest on Death Benefit Proceeds from the date they
become payable to the date they are paid in one sum or, if an optional payment
option is selected, to the effective date of the option.
Tax Withholding
All distributions from your Policy, or portions thereof, which are included in
your gross income are subject to federal income tax withholding. We will
withhold federal taxes at the rate of 10% from each distribution. However, you
may elect not to have taxes withheld or to have taxes withheld at a different
rate.
Payout Options
While either of the Insureds is living, you may elect a single sum payment or a
Payout Option for all or part of the Cash Surrender Value or the Death Benefit
Proceeds. You may elect to change a previously elected Payout Option for Death
Benefit Proceeds. Any such election or change relating to Death Benefit
Proceeds must be by written request to our Variable Service Center.
You may select the following Payout Options or any other Payout Option
acceptable to us:
Option A - Life Annuity. Equal monthly payments during the life of the payee.
Option B - Life Annuity with Period Certain Of 120 Months. Equal monthly
payments during the lifetime of the payee, but for no less than 120 months.
Option C - Fixed Payments for A Period Certain. Equal monthly payments for any
specified period (at least five years but not exceeding thirty years), as
selected by you.
Option D - Death Benefit Proceeds Remaining With Us. The Death Benefit Proceeds
will remain in our Fixed Account and be credited with interest at an effective
annual rate of not less than 4%. The Payee may make full and partial
withdrawals at any time with no Surrender Charge.
Each payment under Payment Options A, B, or C will be at least equal the amounts
calculated based on the annuity tables contained in your Policy. If the payee
dies during a period certain (Payout Options B or C), any remaining payments
will be made to the estate of the Payee. The estate may elect to have the
commuted value of the remaining payments
paid in a single sum instead. We will determine the commuted value by
discounting the remaining payments at its then current interest rate used for
commutation.
Tax Impact. Whether a Payout Option is chosen may have tax consequences for you
or your Beneficiary. Therefore, you should consult a qualified tax adviser
before deciding whether to elect one or more Payout Options.
Right to Exchange for a Fixed Benefit Policy
During the first 24 Policy Months, if your Policy has not lapsed, you have an
unconditional right to transfer all of your Account Value in the Separate
Account investment option to the Fixed Account without any transaction charge.
Right to Exchange for Two Insurance Policies
If your Policy is issued as a standard or preferred premium rate class, you will
be allowed to split your Policy and exchange it for two policies of individual
life insurance. The Policy's benefits and values will generally be split
between the two new policies, except that additional optional benefit riders
(other than certain extended death benefit guarantee riders) will be deleted.
You may elect to split your Policy only within 180 days after any of the
following events:
. Divorce - starting at the end of a sixty-day waiting period after a divorce
between the Insureds is effective.
. Tax Law Change - the effective date of an amendment to the Code that
eliminates a marital deduction used for purposes of computing federal estate
and gift taxes.
. Dissolution or Bankruptcy of Partnership - a partnership in which the
Insureds are general partners is dissolved or ordered and adjudged to be
bankrupt.
. Dissolution or Bankruptcy of Closely Held Corporation - a closely held
corporation in which the Insureds are officers, directors or shareholders, is
dissolved or ordered and adjudged to be bankrupt. (A Corporation is not
considered "closely held" if it is publicly traded or listed on a regional or
national exchange.
Your right to exchange is not available, however, if:
. Either of the Insureds is not alive on the date of the exchange, however, no
other evidence of insurability is required, or
. Either of the Insureds is older than the maximum issue age permitted by the
Company (or its affiliate) for the new policies; or
. The Policy is in a Grace Period or receiving benefits from any disability
rider on the date of the exchange; or
. You fail to make the election in writing to our Variable Service Center
within the required 180-day period.
Each of the new policies to be issued will be on the life of one of the
Insureds. Unless otherwise permitted by us, the new policies will:
. Be for an initial death benefit amount that does not exceed 50% of the Death
Benefit of your Policy on the date of exchange, reduced by 50% of any
Indebtedness and by any optional rider benefits then in effect under this
Policy;
. Be a variable life insurance policy form then available for such exchange,
and have an account value that does not exceed 50% of the Cash Surrender
Value under your Policy on the date of the exchange, less any amounts used to
repay any Indebtedness under your Policy on the date of exchange;
. Have provisions for suicide exclusion and incontestability that reflect the
Policy Date of your Policy;
. Have provisions for withdrawal and surrender charges that do not reflect the
Policy Date of your Policy; and
. Be without any transaction charges being imposed under this Policy for the
exchange.
Unfavorable tax consequences, including recognition of taxable income, may
result from exchanging your Policy for two life insurance policies on individual
insureds. Therefore, you should consult with a qualified tax adviser before
doing so
OTHER PROVISIONS OF THE POLICY
Suicide Exclusion
If suicide of both the Insureds, or of the Surviving Insured, occurs within two
years from the Policy Date (or less if required by state law), we will limit the
Death Benefit to your Policy's Cash Surrender Value.
Representations and Contestability
Generally, we can challenge the validity of your Policy (or any rider that was
in force on the Policy Date) for two years from the Policy Date, based on any
misrepresentations made in your application to us. We can challenge an increase
in benefits requiring evidence of insurability for two years from the date of
the increase. We can challenge a reinstatement of the Policy until
reinstatement has been in force for two years from its effective date. However,
the two-year time limits on our right to challenge all or part of the Policy do
not apply if either of the insureds dies within the two-year period.
Misstatement of Age or Sex
If any application for benefits under your Policy misstates the age or sex of
either of the Insureds, the Death Benefit will be the amount provided by the
correct age and sex.
Owner and Beneficiary
The Policy application names the Policyowner, who in turn may name a new owner.
At the death of the owner, his or her estate will become the owner, unless he or
she has named a successor owner. Because the owner has the authority to
exercise most rights under a Policy, this prospectus generally refers to the
owner when it refers to "you" or "your". The owner's rights as such terminate
when the Surviving Insured dies. If two or more people are named as owners, we
will generally assume that one owner has the authority to act for all owners.
However, we may require the consent of all owners for certain transactions under
the Policy, such as an election to exchange the Policy for two policies.
Beneficiary. The Policy application also names the Beneficiary under the Policy
and any contingent Beneficiary. You may change the Beneficiary of the Policy
(other than an irrevocably named Beneficiary) at any time before the death of
the Surviving Insured. The Beneficiary has no rights under the Policy until the
death of the Surviving Insured and must survive that insured person in order to
receive the Death Benefit Proceeds. If no named Beneficiary is alive when the
Surviving Insured dies, we will pay the proceeds to the owner.
Changes and Assignments. A change of owner or Beneficiary requires a written
request satisfactory to us that is dated and signed by all of the owners. The
change will take effect on the date it is signed, but is subject to all payments
made and actions taken by us under the Policy before we receive the request at
our Variable Service Center.
Assignments
The owner may assign (transfer) the owner's rights in a Policy to someone else.
An absolute assignment of the Policy designates the assignee as owner and
Beneficiary. A collateral assignment of the Policy does not change the owner or
Beneficiary, but their rights will be subject to the terms of the assignment.
All collateral assignees of record must consent to any full surrender or partial
withdrawals. An assignment requires a written request signed by all of the
Policy's owners. An assignment will take effect only when we record it at our
Variable Service Center. We have no responsibility for any assignment not
submitted for recording; nor for the sufficiency or validity of any assignment.
Unfavorable tax consequences, including recognition of taxable income and the
loss of income tax-free treatment for any death benefit payable to the
Beneficiary may result from transferring ownership or making an assignment.
Therefore, you should consult with a qualified tax adviser before doing so.
Reports and Records
We will mail to your last known address of record an annual statement showing
your Policy's current Account Values, transactions since the last statement,
Policy loan information, and any other information required by federal or state
laws or regulations.
We will also send you annual and semi-annual reports containing the financial
statements of the Portfolios you are using.
In addition, you will receive statements of significant transactions, such as
changes in the Death Benefit, transfers among investment options, premium
payments, Policy loans, Policy loan principal, Policy loan repayments, and
Policy reinstatement or termination.
Voting Rights
We will vote the shares of the Portfolios held by the Separate Account at
regular or special meetings of the Portfolio's shareholders in accordance with
instructions received from you and other owners having the voting interest in
the affected Portfolio(s). We compute the number of votes that an owner has
the right to instruct for a particular Portfolio by dividing the owner's Account
Value in that Portfolio by that Portfolio's net asset value per share. We will
vote a Portfolio's shares held in our Separate Account for which we do not
receive instructions, as well as shares held in our Separate Account that are
not attributable to owners in the same proportion as we vote that Portfolio's
shares held in the Separate Account for which we have received instructions.
We may disregard voting instructions under limited circumstances prescribed by
SEC rule. We will include a summary of any such action and the reasons for it
in the next semiannual report to owners.
Suspension of Payments and Transfers
Under certain circumstances, we may suspend or postpone transactions that
pertain to a Separate Account investment option under your Policy. These
include payment of Death Benefit Proceeds or Maturity Value, payment for
surrenders, withdrawals and Policy loans, or transfers for any period when:
. the New York Stock Exchange is closed for regular trading;
. regular trading on the New York Stock Exchange is restricted by the SEC;
. an emergency exists as a result of which disposition of securities held in
the applicable Separate Account investment options is not reasonably
practicable or it is not reasonably practicable to determine the value of
such option's net assets; or
. the SEC, by order, permits such suspension during any other period.
We also may defer payment for a surrender, withdrawal or Policy loan, or
transfer from the Fixed Account, for the period permitted by law but not for
more than six months after we receive your written request. We will pay interest
to the extent provided under state insurance law on payments that are delayed.
Also, we may defer payment of any amount attributable to a check you have given
us in order to allow a reasonable time (not to exceed 15 days) for the check to
clear the banking system.
Nonparticipation in Our Dividends
The Policies are "nonparticipating". This means that they do not participate in
(or receive) any dividend we pay or distribution of our surplus.
DISTRIBUTION AND OTHER AGREEMENTS
First Variable Capital Services, Inc. ("FVCS"), 2122 York Road, Oak Brook,
Illinois 60523, acts as distributor of the Policies. FVCS, our wholly owned
subsidiary, is registered with the SEC as a broker/dealer under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. FVCS offers the Policies on a continuous basis.
FVCS and we have agreements with various broker/dealers under which their
registered representatives, who are also licensed insurance agents, will sell
the Policies. The commissions payable to a broker/dealer for sales of a Policy
may vary with the sales agreement. However, we do not expect that, on an
aggregate basis they will exceed 100% of the amount of paid in the first Policy
Year up to 12 Monthly Minimum Premiums, plus ___% of additional first year
premium payments, plus _____% of all premiums received in Policy Years 2 through
6. Broker/Dealers may receive annual "trail commission" equivalent to 0.30% of
a Policy's Account Value beginning in Policy Year 7, as well as expense
allowances, wholesaler fees, bonuses and training fees.
FVCS and we may permit specific broker/dealers to sell versions of the Policies
which contain specific investment options that are not available through other
broker/dealers. FVCS and we may pay a different level of compensation for sales
of different versions of the Policies.
Under a Services Agreement with FVCS, we perform insurance underwriting,
issuance and other administrative services for our variable life insurance
policies, including the Policies.
The Company serves as the custodian of the assets of the Separate Account.
OUR MANAGEMENT
Here is a list of our directors and executive officers and their principal
business experience during the past five years. Unless otherwise noted, our
directors are located at 2211 York Road, Suite 202, Oak Brook, Illinois 60523
and all our executive officers are located at 2122 York Road, Suite 300, Oak
Brook, Illinois 60523.
Directors
Ronald M. Butkiewicz, Chairman. He is also the President and Chief Executive
Officer, Irish Life of North America, Inc., and Chairman and Chief Executive
Officer, Interstate Assurance Company.
Michael J. Corey - 401 East Host Drive. Lake Geneva, WI 53147. He is a
Managing Director, Insurance/Professional Services Practice Group and President,
CSG International Inc.
Norman A. Fair - He is also Vice President, Treasurer, & Asst. Sec., Irish Life
of North America, Inc. and prior to 1994, he was the Senior Vice President and
Chief Financial Officer of Interstate Assurance Company.
Michael R. Ferrari, 25th & University Ave., Des Moines, IA 50311 - Chancellor,
Texas Christian University; and prior to July 1998. He was the President of
Drake University.
Shane W. Gleeson - He is the Executive Vice President, Irish Life of North
America, Inc.; and prior to December 1997, he was the President, Interstate
Assurance Company. Prior to November 1994, he was the Senior Vice President and
Chief Operating Officer of Interstate Assurance Company.
Jeff S. Liebmann, Esq., 1301 Avenue of the Americas New York, NY 10019 - He is
a partner of Dewey, Ballantine.
Kenneth R. Meyer, 200 South Wacker Dr., Suite 2100, Chicago, IL 60606 - He is a
Managing Director, Lincoln Capital Management Co.
Philip R. O'Connor, 111 West Washington, Suite 1247 Chicago, IL 60602 He is the
President of NEV Midwest, LLC and prior to April 1998, he was a Principal of
Coopers & Lybrand LLP/Palmer Bellevue Corp.
Clark Ramsey - He is also Vice President and Corporate Actuary, Irish Life of
North America, Inc. Prior to March, 1998, he was the Vice President and
Actuarial Director, Allstate International, Inc.
Executive Officer & Director
John M. Soukup, President - Prior to July, 1997, he was the Market Development
Officer, Fortis Financial Group.
Other Executive Officers
Steve Horn, Senior Vice President and Chief Operations Officer - Prior to
January 1999, he was the Assistant Vice President of Irish Life of North
America, and prior to July 1998, he was the Sr. Vice President and General
Manager of United Casualty Insurance Company of America.
Arnold R. Bergman, Vice President, General Counsel and Secretary - Prior to
February 1995, he served as Counsel, Aetna Life Insurance and Annuity Company.
Thomas Gualdoni, Vice President, Sales - Prior to December 1997, he was the Vice
President, Sales, Fortis Benefits Insurance Company.
Christopher S. Harden, Vice President & Treasurer - Prior to April, 1998 he was
the First Vice President and Chief Accounting Officer, COVA Financial Services
Life Insurance Company.
Martin Sheerin, Vice President & Chief Actuary - Prior to October, 1994, he was
a Vice President, Irish Life of North America, Inc.
FEDERAL TAX MATTERS
General
BECAUSE OF THE COMPLEXITY OF THE LAW AND BECAUSE TAX RESULTS WILL VARY ACCORDING
TO YOUR IDENTITY AND STATUS, YOU SHOULD SEEK INDIVIDUALIZED LEGAL AND TAX ADVICE
BEFORE PURCHASING OR TAKING ANY ACTION UNDER A POLICY.
We cannot provide a comprehensive description of the federal income tax
consequences regarding the Policies in this prospectus, and special tax rules
may apply that we have not discussed herein. Nor does this discussion address
any applicable state, local, gift, inheritance, estate, and foreign or other tax
laws. This discussion assumes that you, the Policy's owner, are a natural
person and a U.S. citizen and resident. Finally, we would caution that the law
and the related regulations and interpretations on which we base our tax
analysis can change, and such changes can be retroactive.
Our Taxation
Under current federal income tax law, the operations of the Separate Account and
the Fixed Account do not require us to pay any tax. Thus, we currently impose
no charge for our federal income taxes. However, we may decide to charge the
Separate Account or Fixed Account for our federal income taxes, if there are
changes in federal tax law.
We may incur state and local taxes (in addition to premium taxes) in several
states. At present, these taxes are not significant and, accordingly, we do not
currently impose a charge for them. If they increase, however, we may impose a
charge for such taxes attributable to the Separate Account and/or Fixed Account.
Income Tax Treatment of Policy Benefits
Life Insurance. Section 7702 of the Internal Revenue Code provides that if
certain tests are met, your Policy will qualify as a life insurance contract for
federal tax purposes. The death benefit under a life insurance contract is
generally excluded from the gross income of the Beneficiary. Also, the owner of
a life insurance contract is generally not taxed on increases in the account
value until withdrawn or surrendered.
Section 7702 limits the amount of premiums that may be invested in a life
insurance contract and requires certain minimum amounts of life insurance
coverage, relative to the account value. We will monitor compliance with these
tests. Although we believe that the Policies are in compliance with the tests,
the manner in which the tests should be applied to certain features of a joint
survivorship life insurance contract is not directly addressed by section 7702.
In the absence of final regulations or other guidance issued under section 7702,
there is necessarily some uncertainty whether the Policies will meet the Code's
definition of a life insurance contract.
Acceleration of Death Benefits Rider. Similarly, we believe that accelerated
death benefit payments, if permitted under your Policies because of the terminal
illness of either of the Insureds, in most cases will not constitute taxable
income for you. Such payments may be taxable income to you, however, if:
. you are not an insured person; or
. you have an insurable interest in either of the insured persons' lives
because that insured person is a director, officer or employee of yours or is
otherwise financially interested in any trade or business carried on by you.
Modified Endowment Contracts. The Code contains provisions affecting certain
life insurance policies that the Code refers to as "modified endowment
contracts."
Modified endowment contracts result when cumulative premiums paid under a Policy
at any time during the first seven Policy Years exceed the sum of the premiums
that would have been paid by then if the Policy provided for paid up future
benefits after the payment of seven level annual premiums ("seven-pay test").
The amount of premiums payable under the seven-pay test is calculated based upon
certain assumptions regarding the policy's earnings and the use of a reasonable
mortality charge. Riders to a Policy are considered part of the Policy for
purposes of applying the seven-pay test.
Whenever there is a "material change" under a Policy, the Policy generally will
be:
. treated as a new Policy for purposes of determining whether it is a modified
endowment; and
. subjected to a new seven-pay test.
The Policy would become a modified endowment contract if, at time of the
material change or at any time during the next seven years, it failed to satisfy
such new seven-pay test. A material change for these purposes could result from
a change in death benefit option, election of additional rider benefits, an
increase in a Policy's Face Amount, and certain other changes.
If a Policy's benefits are reduced during the first seven Policy years (or
within seven years after a material change), the seven-pay premium limit will be
redetermined based on the reduced level of benefits and applied retroactively
for purposes of the seven-pay test. (Such a reduction in benefits could
include, for example, any decrease in Face Amount that you request or, in some
cases, a partial withdrawal or termination or reduction of benefits under a
rider.) If you have already paid (or subsequently pay) more premiums than
permitted by the recalculated seven-pay limit, your Policy will become a
modified endowment contract.
Any Policy that you acquire in exchange for another life insurance policy that
is a modified endowment contract will also be a modified endowment contract.
However, an exchange under Section 1035 of the Code of a life insurance policy
entered into before June 21, 1988 will not make the new policy a modified
endowment contract if you pay no additional premiums and there is no benefit
increase as a result of the exchange.
Exchanges for Two Policies. An exchange of a Policy for two new policies
("Policy split") may have adverse tax consequences. It is not clear whether a
Policy split will be treated as a nontaxable exchange or transfer under the
Code. Unless a Policy split is so treated, among other things, the split or
transfer will result in the recognition of taxable income on the gain in the
Policy. In addition, it is not clear whether, in all circumstances, the
individual policies that result from a Policy split would be treated as life
insurance policies under section 7702 of the Code or would be classified as
modified endowment contracts. The Policy Owner should consult a qualified tax
adviser regarding the possible adverse tax consequences of a Policy split.
Other Tax Effects of Policy Changes. Changes made to your Policy (for example,
a decrease in benefits under or a lapse or reinstatement of a Policy) may have
other tax effects. These include impacting the maximum amount of premiums you
can pay under the Policy, as well as the maximum amount of Account Value you can
maintain under the Policy.
Taxation of Pre-Death Distributions from a Policy that is not a Modified
Endowment Contract ("MEC"). As long as a Policy remains in force as a non-
modified endowment, you will not pay current income tax on the proceeds from any
Policy loan. Interest you pay on the loan generally will not be tax deductible,
however.
After the first 15 Policy Years, you will not pay current federal income tax on
any partial withdrawals you make, except to the extent such withdrawals exceed
your "investment" in the Policy. (The "investment" generally will equal the
premiums you have paid, less the amount of any previous distributions from your
Policy that were not taxable.) During the first 15 Policy Years, you could have
to pay federal income tax on certain withdrawals that reduce the Death Benefit,
to the extent that your Policy's Account Value exceeds your investment in the
Policy.
On the Maturity Date or upon full surrender, any excess of proceeds (including
amounts we use to discharge any Policy loan and accrued loan interest) over your
investment in the Policy, will constitute taxable income to you for federal
income tax purposes. In addition, if your Policy terminates after a grace
period while you have a Policy loan outstanding, the cancellation of such loan
and accrued loan interest will be treated as a distribution and could be subject
to tax under the above rules. Finally, if you assign or transfer rights or
benefits under your Policy, you may be deemed to have received a distribution
from the Policy, all or part of which may be taxable.
Taxation of Pre-Death Distributions from a Policy that is a Modified Endowment
Contract. If your Policy falls within the definition of a modified endowment
contract, the following rules will apply to pre-death distributions:
. You must include distributions, such as withdrawals, in your gross income
subject to federal tax, to the extent the Account Value of the Policy exceeds
your investment in the Policy. Any additional amounts you receive, other than
Policy loans, will not constitute currently taxable income, but will reduce
your investment in the Policy.
. Policy Loans, including any increase in the amount of the loan to pay
interest, also constitute distributions to you for these purposes. Your
investment in the Policy, however, will increase by the amount of any loan
included in your gross income.
. If your Policy terminates after a grace period while there is a Policy loan,
the cancellation of such loan and accrued loan interest will also constitute
a distribution to you for these purposes to the extent not previously treated
as such.
. On the Maturity Date or upon a full surrender, any excess of the proceeds
(including any amounts we use to discharge any loan and accrued loan
interest) over your investment in the Policy, will also constitute a
distribution to you for these purposes.
. A change of ownership or Policy assignment also can constitute a distribution
for these purposes. For example, a collateral assignment will subject any
gain in the Policy to taxation.
For purposes of determining the amount of any distribution that is included in
gross income, you must treat all modified endowment contracts that we or our
affiliates issue to you during any calendar as a single modified endowment
contract.
The taxable amount of any distribution from a Policy that is a modified
endowment also will incur an additional penalty tax equal to 10% of such taxable
amount unless the distribution:
. is made on or after you attain age 59 1/2;
. results from your becoming disabled (as defined in the Code); or
. forms part of a series of substantially equal periodic payments made no less
frequently than annually for your life (or life expectancy) or for the joint
lives (or life expectancies) of the owner or the Beneficiary.
The Monthly Deductions under a modified endowment contract attributable to any
Other Insured Person Rider for a person who is not a member of your family may
constitute distributions from your policy for tax purposes.
However, the Beneficiary of this rider should not have to pay federal income tax
on any benefit received.
Distributions that occur during a Policy Year in which a Policy becomes a
modified endowment contract and during any subsequent Policy Years, will be
taxed as described in the preceding paragraphs. In addition, any distributions
from a Policy within two years before it becomes a modified endowment contract
also will be subject to tax in this manner. This means that a distribution made
from a Policy that is not a modified endowment contract could later become
taxable as a distribution from a modified endowment.
Diversification Requirements
The Internal Revenue Code provides that a variable life insurance policy will
not be treated as a life insurance contract under the Code for any period (and
any subsequent period) for which the related investments are not adequately
diversified. We intend that all Portfolios of the Funds in which your Policy
may invest will comply with the diversification requirements. If your Policy
did not qualify as life insurance, you would be subject to immediate taxation on
the increases in your Policy's Account Value, plus the cost of insurance
protection under your Policy. This treatment would apply for the period of non-
compliance and subsequently, unless and until we are able to settle the matter
with the Internal Revenue Service. We have no legal obligation to seek or
agree to any such settlement, however.
The amount of investment control which you may exercise under a Policy differs
in some respects from the situation addressed in published rulings issued by the
Internal Revenue Service in which it held that variable life insurance policy
owners were not deemed, for federal income tax purposes, to own the related
assets held in a separate account by the issuing insurance company. It is
possible that these differences, such as your ability to transfer among
investment choices or the number and type of investment choices available, would
cause you to be taxed as if you were the owner of the Portfolio shares that are
attributable to your Policy. In that case, you would be liable for income tax
on an allocable portion of any current income and gains realized by the Separate
Account, even though you have received no distribution of those amounts.
In the event any forthcoming guidance or ruling by federal income tax
authorities sets forth a new position, such guidance or ruling will generally be
applied only prospectively. However, if such ruling or guidance was not
considered to set forth a new position, it may, result in your being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, we reserve the right to modify your Policy
in an attempt to maintain its intended tax treatment.
ADVERTISING PRACTICES
We may from time to time receive endorsements of the Policies from professional
organizations. We may use these in advertisements or sales material for the
Policies. We may also pay the professional organization for the use of its
customer or mailing lists in order to distribute promotional materials regarding
the Policies. An endorsement does not necessarily indicate the performance or
results that you may obtain.
From time to time, articles discussing the Separate Account's investment
experience, performance rankings and other characteristics may appear in
national publications. Some or all of these publishers or ranking services
(including, but not limited to, Lipper Analytical Services Inc. and Morningstar,
Inc.) may publish their own rankings or performance reviews of variable contract
separate accounts, including the Separate Account. We may use references to,
reprints, or portions of reprints of such articles or rankings as sales
literature or advertising material. We may also use rankings that indicate the
names of other variable policy separate accounts and their investment
experience.
We, the Funds, or other parties may develop articles and releases about the
following matters in relation to the Separate Account, the Funds or individual
Portfolios: asset levels, and sales volumes, statistics and analyses of industry
sales volume and asset levels, or other characteristics. Our promotional
material for the Policies and Separate Accounts can refer to, or be a reprint
of, such articles and releases. Such literature may refer to personnel of an
adviser or sub-advisers who have investment management responsibility, and their
investment style. The reference may allude to or include excerpts from articles
appearing in the media.
The advertising and sales literature for the Policies and the Separate Account
may refer to historical, current and prospective economic trends. In addition,
we may publish advertising and sales literature concerning topics of general
investor interest for the benefit of registered representatives and prospective
purchasers of Policies. These materials may include, but are not limited to,
discussions of college planning, retirement planning, and reasons for investing
and historical examples of the investment performance of various classes of
securities, securities markets and indices.
LEGAL MATTERS
State Regulation
We are subject to the insurance laws of Arkansas and to regulation by the
Arkansas Insurance Department. The National Association of Insurance
Commissioners periodically examines our operations. Such regulation does not,
however, involve any supervision of management or investment practices or
policies. In addition, we are subject to regulation under the insurance laws of
other jurisdictions in which we may operate. As a result, various time periods
and other terms and conditions described in this prospectus may vary depending
on where you reside. We will reflect any applicable variations in your Policy
and riders, or related endorsements.
Legal Proceedings
There are no material pending legal proceedings to which the Separate Account,
FVCS or we are a party.
Counsel
Our Legal Department has reviewed legal matters in connection with the Policies.
Freedman, Levy, Kroll & Simonds, of Washington, DC, has advised us on certain
matters relating to the federal securities and tax laws.
EXPERTS
The consolidated financial statements of First Variable Life Insurance Company
at _________________and _________ and for each of the three years in the period
ended ____________________ and the financial statements of First Variable Life
Insurance Company--Separate Account VL at ________________________________and
for the period then ended appearing in this prospectus and Registration
Statement have been audited by ________________________independent auditors, as
set forth in their report appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC under the Securities Act of
1933. This prospectus omits certain information contained in the Registration
Statement. You can obtain copies of such additional information from the SEC
upon payment of the prescribed fee.
YEAR 2000 ISSUES
Like other financial and business organizations around the world, we could be
adversely affected if our computer systems and those of our service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. We have completed an assessment of the Year 2000 impact
on our systems, procedures, customers and business processes. At December 31,
1997, our management is satisfied that our main operating systems are Year 2000
compliant. We are currently reviewing our general office systems and contacting
our service providers.
We believe that we will complete our Year 2000 project prior to any anticipated
impact on our operating systems. The date on which we believe we will complete
the Year 2000 project is based on our management's best estimates. Although
there can be no guarantee that these estimates will be achieved, our management
does not at this time believe that actual results will differ materially from
those anticipated. Specific factors that might cause such material differences
would most likely result from our service providers.
APPENDIX: A
ANNUAL RATES OF RETURN FOR THE SEPARATE ACCOUNT INVESTMENT OPTIONS
The following tables show performance information for the Separate Account
investment options for periods ending _________________________. Table A-1
assumes that each option had been in operation for the same period as its
corresponding Portfolio. Table A-2 is derived from historic performance results
of the Separate Account investment options from the date they actually commenced
operations (March 31, 1997) to fund variable life insurance policies. Both
tables reflect the total of the income generated by the Portfolio shown, less
total Portfolio operating expenses, plus or minus realized or unrealized capital
gains and losses, and less the deductions for the Policies' current mortality
and expense risk charge (.90% per annum) and the policy benefit charge (0.30%
per annum).
The tables do not reflect three significant charges that will apply to your
Policy: cost of insurance charges, an administrative charge (currently $10 per
month), and the surrender charge. If these charges were reflected, the total
return figures shown would be lower. For an example of the effect of the
deduction of the surrender charge, compare the "Cash Surrender Value" to the
corresponding "Account Value" in the hypothetical illustrations on pages ___ to
___.
Table A-1 Average Annual Total Return from Portfolio Inception Date
- --------------------------------------------------------------------------------------------------
From Portfolio
Portfolio and Portfolio Inception Date
Inception Date 1 Yr. 3 Yr. 5 Yr. 10 Yr.
- --------------------------------------------------------------------------------------------------
VIST Small Cap Growth - 5/95
(1)(4)
- --------------------------------------------------------------------------------------------------
VIST World Equity - 6/88 (2)(4)
- --------------------------------------------------------------------------------------------------
VIST Growth - 6/88 (1)(2)(4)
- --------------------------------------------------------------------------------------------------
VIST Matrix Equity - 6/88
(2)(3)(4)
- --------------------------------------------------------------------------------------------------
VIST Growth & Income 5/95 (4)
- --------------------------------------------------------------------------------------------------
VIST Multiple Strategies - [To be filed by Pre-Effective amendment.]
5/87 (2)(4)
- --------------------------------------------------------------------------------------------------
VIST High Income Bond - 6/87
(2)(4)
- --------------------------------------------------------------------------------------------------
VIST US Gov. Bond - 5/87 (2)(4)
- --------------------------------------------------------------------------------------------------
Federated Prime Money Fund II -
11/94 (4)
- --------------------------------------------------------------------------------------------------
Table A-2 Annualized Total Return from the Separate Account Investment Options'
Inception Date (March 31, 1997)
Separate Account From Separate Account From
Investment Options Inception Investment Options Inception
Date Date
------------------------------------------------------------ ---------------------------------------------------
Small Cap Growth - (1)(4) Multiple Strategies - (4)
------------------------------------------------------------ ---------------------------------------------------
World Equity - (4) High Income Bond - (4)
------------------------------------------------------------ ---------------------------------------------------
Growth - (1)(4) US Gov. Bond - (4)
------------------------------------------------------------ ---------------------------------------------------
Matrix Equity - (3)(4) Prime Money Fund II - (4)
------------------------------------------------------------ ---------------------------------------------------
Growth & Income - (4)
------------------------------------------------------------
(1) Prior to May 1, 1997, the VIST Small Cap Growth Portfolio was named the
VIST "Small Cap Portfolio," and the VIST Growth Portfolio was named the
VIST "Common Stock Portfolio." The names of the corresponding Separate
Account investment options were, respectively, "Small Cap Sub-Account" and
"Common Stock Sub-Account".
(2) On April 1, 1994, First Variable Advisory Services Corp., an affiliate of
the Company, became the investment advisor. Prior to that date, results
were achieved by former investment advisers.
(3) Prior to May 1, 1997, the VIST Matrix Equity Portfolio was named the VIST
"Tilt Utility Portfolio" and had different investment policies. The name
and objective of the corresponding Separate Account investment option also
differed.
(4) Performance information reflects any fee waivers and expense reimbursements
with respect to the Portfolios. Absent such waivers or reimbursements, the
performance shown would have been lower.
Performance information shown above for any Separate Account investment option
reflects only the performance of an assumed investment in the Separate Account
Investment Option for the Policies during the particular time period shown. You
should consider this performance information in light of the investment
objectives and policies, characteristics and quality of the Portfolio in which
the Separate Account investment option invests and the market conditions during
the given time period. You should not consider it representative of what the
Separate Account investment option will achieve in the future. Actual returns
will differ from those shown and will depend on a number of factors, including
the investment allocations you make and the different investment rates of return
for the Portfolios.
APPENDIX: B
ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES,
CASH SURRENDER VALUES AND ACCUMULATED VALUE OF PREMIUMS
The tables in this Appendix B show how a Policy's Death Benefit, Cash Surrender
Value and Account Value could change over an extended period of time, assuming
constant gross annual rates of return for the Separate Account of 0%, 6% and
12%. ("Gross return" for this purpose means the assumed rate of return the
underlying Portfolio has earned before deducting any of its expenses or any
Policy Charges and deductions). The payment of an annual premium of $______ for
a male insured person and a female insured person, who are both age 45 on the
Policy Date and $______ for a male insured person and a female insured person
who are both age 55 on the Policy Date; and a Face Amount of $100,000. The
insured persons are assumed to be in the Preferred - standard premium rate
class. The first version of each of the tables assumes our current (i.e., non-
guaranteed) rates for the premium charge, premium tax charge, administrative
expense charge, cost of insurance charge, mortality and expense risk charge,
Policy benefit charge, and expected Premium Value Bonuses and Cash Value Bonuses
beginning in the 9th Policy Year. The next table is based on our contractually
guaranteed rates for those items.
The Death Benefits, Cash Surrender Values and Account Values shown in the tables
also reflect an unweighted average of the investment advisory fees and other
operating expenses incurred by the Portfolios, at an annual rate of _____% of
the average daily net assets of the Portfolios. This average reflects a
voluntary "caps" on the investment advisory fees. If the investment adviser
discontinued these caps, the values illustrated on the following pages could be
less. (See "Highlights")
Taking account of any daily charges for mortality and expense risks in the
Separate Account and the average investment advisory fee and operating expenses
of the Portfolios, the gross current annual rates of return of 0%, 6% and 12%
correspond to net investment experience at constant annual rates of ___%, ____%
and _____%, respectively, for the "current" tables, and ___%, ____% and ____%
respectively, for the "guaranteed" tables. The tables do not reflect any tax
charges attributable to the Separate Account since we currently make no such
charges. If we impose any such charges in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the Death Benefits, Cash Surrender Values and
Account Values illustrated.
The second column of each table shows the amount that would accumulate if you
instead invested your assumed premiums to earn interest, after taxes of 5% per
year, compounded annually.
JOINT AGE 45: $100,000 INITIAL FACE AMOUNT - DEATH BENEFIT
OPTION A
MALE, AGE 45 PREFERRED STANDARD PREMIUM RATE CLASS $______ ANNUAL PREMIUM
FEMALE, AGE 45 PREFERRED STANDARD PREMIUM RATE CLASS
CURRENT POLICY CHARGE AND BONUS RATES
Values Based on Assumed Hypothetical Gross Investment Returns of:
Premiums 0% (1)(2)(3) 6% (1)(2)(3) 12% (1)(2)(3)
End of at 5% Cash Cash Cash
Policy Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year (1) Value Value Benefit Value Value Benefit Value Value Benefit
---- --- ----- ----- ------- ----- ----- ------- ----- ----- -------
1
2
3
4
5
6 [TO BE FILED BY Pre-Effective Amendment]
7
8
9
10
15
20
25
30
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varied.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited at the
following rates for Policy Years 9 and after:
Premium Value Bonus Percentage: 11% Cash Value Bonus Percentage: (% of Account Value less loans and interest:
Cash Surrender Value less than $25,000: 0%
Cash Surrender Value $25,000 to $99,999: .10% (.20% after Policy Year 20)
Cash Surrender Value $100,000 to $200,000: .20% (.40% after Policy Year 20)
Cash Surrender Value more than $200,000: .30% (.50% after Policy Year 20)
YOU SHOULD CONSIDER THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AS
ILLUSTRATIVE ONLY AND NOT NECESSARILY A REPRESENTATIVE OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN WILL DIFFER FROM THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING YOUR INVESTMENT ALLOCATIONS,
PREVAILING ECONOMIC CONDITIONS, PREVAILING RATES AND RATES OF INFLATION. THE
DEATH BENEFIT AND ACCOUNT VALUE WOULD DIFFER FROM THOSE SHOWN IF THE ACTUAL
RATES AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS WE MAKE. NO REPRESENTATION
THAT THESE ASSUMED RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
JOINT AGE 45:
MALE, AGE 45 PREFERRED STANDARD PREMIUM RATE CLASS
FEMALE, AGE 45 PREFERRED STANDARD PREMIUM RATE CLASS
$100,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
$______ ANNUAL PREMIUM
GUARANTEED POLICY CHARGE AND BONUS RATES
Values Based on Assumed Hypothetical Gross Investment Returns of:
Premiums 0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
---- ----------- ----- ----- ------- ----- ----- ------- ----- ----- -------
1
2
3
4
5
6 [TO BE FILED BY Pre-Effective Amendment]
7
8
9
10
15
20
25
30
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following guaranteed factors for Policy Years 9 and after:
Premium Value Bonus Percentage: 6% Cash Value Bonus Percentage: .00%
YOU SHOULD CONSIDER THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AS
ILLUSTRATIVE ONLY AND NOT NECESSARILY A REPRESENTATIVE OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN WILL DIFFER FROM THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING YOUR INVESTMENT ALLOCATIONS,
PREVAILING ECONOMIC CONDITIONS, PREVAILING RATES AND RATES OF INFLATION. THE
DEATH BENEFIT AND ACCOUNT VALUE WOULD DIFFER FROM THOSE SHOWN IF THE ACTUAL
RATES AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS WE MAKE. NO REPRESENTATION
THAT THESE ASSUMED RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
JOINT AGE 55:
MALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS
FEMALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS
$100,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
$______ ANNUAL PREMIUM
CURRENT POLICY CHARGE AND BONUS RATES
Values Based on Assumed Hypothetical Gross Investment Returns of:
Premiums 0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
---- ----------- ----- ----- ------- ----- ----- ------- ----- ----- -------
1
2
3
4
5
6 [TO BE FILED BY Pre-Effective Amendment]
7
8
9
10
15
20
25
30
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following guaranteed factors for Policy Years 9 and after:
Premium Value Bonus Percentage: 11%
Cash Value Bonus Percentage: (% of Account Value less loans and interest):
Cash Surrender Value less than $25,000: 0%
Cash Surrender Value $25,000 to $99,999: .10% (.20% after Policy Year 20)
Cash Surrender Value $100,000 to $200,000: .20% (.40% after Policy Year 20)
Cash Surrender Value more than $200,000: .30% (.50% after Policy Year 20)
YOU SHOULD CONSIDER THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AS
ILLUSTRATIVE ONLY AND NOT NECESSARILY A REPRESENTATIVE OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN WILL DIFFER FROM THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING YOUR INVESTMENT ALLOCATIONS,
PREVAILING ECONOMIC CONDITIONS, PREVAILING RATES AND RATES OF INFLATION. THE
DEATH BENEFIT AND ACCOUNT VALUE WOULD DIFFER FROM THOSE SHOWN IF THE ACTUAL
RATES AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS WE MAKE. NO REPRESENTATION
THAT THESE ASSUMED RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
JOINT AGE 55:
MALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS
FEMALE, AGE 55 PREFERRED STANDARD PREMIUM RATE CLASS
$100,000 INITIAL FACE AMOUNT - DEATH BENEFIT OPTION A
$______ ANNUAL PREMIUM
CURRENT POLICY CHARGE AND BONUS RATES
Values Based on Assumed Hypothetical Gross Investment Returns of:
Premiums 0%(1)(2)(3) 6%(1)(2)(3) 12%(1)(2)(3)
End of Accumulated Cash Cash Cash
Policy at 5% Account Surrender Death Account Surrender Death Account Surrender Death
Year Interest(1) Value Value Benefit Value Value Benefit Value Value Benefit
---- ----------- ----- ----- ------- ----- ----- ------- ----- ----- -------
1
2
3
4
5
6 [TO BE FILED BY Pre-Effective Amendment]
7
8
9
10
15
20
25
30
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Assumes annual premium payments are paid in full at the beginning of each
Policy Year. Values would differ if the amount or frequency of payment
varies.
(2) Zero values in the Death Benefit column indicate Policy lapse in the
absence of sufficient additional premium payments.
(3) Reflects Premium Value Bonuses and Cash Value Bonuses credited under the
following guaranteed factors for Policy Years 9 and after:
Premium Value Bonus Percentage: 6% Cash Value Bonus Percentage: .00%
YOU SHOULD CONSIDER THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AS
ILLUSTRATIVE ONLY AND NOT NECESSARILY A REPRESENTATIVE OF PAST OR FUTURE
INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN WILL DIFFER FROM THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING YOUR INVESTMENT ALLOCATIONS,
PREVAILING ECONOMIC CONDITIONS, PREVAILING RATES AND RATES OF INFLATION. THE
DEATH BENEFIT AND ACCOUNT VALUE WOULD DIFFER FROM THOSE SHOWN IF THE ACTUAL
RATES AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE
AND BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS WE MAKE. NO REPRESENTATION
THAT THESE ASSUMED RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
APPENDIX C: FINANCIAL STATEMENTS
The financial statements of First Variable Life Insurance Company contained in
this prospectus should be considered to bear only upon our ability to meet our
obligations under the Policies. They should not be considered as bearing upon
the investment experience of the Separate Account.
The following financial statements are included in this Appendix:
First Variable Life Insurance Company Separate Account VL
First Variable Life Insurance Company
[To be filed by Pre-Effective Amendment]
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 rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING REGARDING INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act of
1933 ("Act") may be permitted to directors and officers and controlling persons
of the Registrant and the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of 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.
REPRESENTATION PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940
In accordance with section 26(e) of the Investment Company Act of 1940, First
Variable Life Insurance Company represents that the fees and charges deducted
under the Policies described in this Registration Statement on Form S-6, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by First Variable Life Insurance
Company. First Variable Life Insurance Company bases its representation on its
assessment of all the facts and circumstances, including such relevant factors
as: the nature and extent of such services, expenses and risks, the need for
First Variable Life Insurance Company to earn a profit, the degree to which the
Policies include innovative features, and regulatory standards for the grant of
exemptive relief under the Investment Company Act of 1940 used prior to October
1996, including the range of industry practice. This representation applies to
all Policies sold pursuant to this Registration Statement, including those sold
on the terms specifically described in the prospectus contained herein, or in
any variations thereof based on supplements, endorsements, or riders to any
Policies or prospectus, or otherwise.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-Reference Sheet.
The prospectus consisting of _________________ pages.
The undertaking to file reports.
The undertaking regarding indemnification.
The representation pursuant to section 26(e) under the Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Arnold R. Bergman (See Exhibit 2)
Martin Sheerin (See Exhibit 6 (a))
The following exhibits:
1.A (1) Resolution of the Board of Directors of the Company authorizing the
establishment of the Separate Account.*
(2) Not Applicable.
(3) (a) Underwriting Agreement.**
(b) Form of Sales Agreement.**
(c) Commission Schedule for the Policies ###
(4) Not Applicable.
(5) Specimen Variable Life Insurance Policy.****
(6) (a) Articles of Incorporation of First Variable Life Insurance
Company.##
(b) By-Laws of First Variable Life Insurance Company.**
(7) Not Applicable.
(8) Form of Participation Agreement.***
(9) Not Applicable.
(10) Specimen Flexible Premium Variable Life Insurance Application.###
2. Opinion and consent of Arnold R. Bergman, Vice President, General
Counsel & Secretary, as to securities being registered.###
3. Not Applicable.
4. Not Applicable
5. Not Applicable
6. Opinion and consent of Actuary.###
7. Consent of Ernst & Young LLP, Independent Auditors.###
8. Powers of Attorney. #### - of the following individuals appointing
John M. Soukup or Arnold R. Bergman their attorney-in-fact to act for
them in their capacities as Directors of the Company or otherwise, to
do all things necessary to comply with the provisions and intent of
the Securities Act of 1933 and the Investment Company Act of 1940 with
respect to variable life insurance policies and variable annuity
contracts:
Ronald M. Butkiewicz Shane W. Gleeson Kenneth R. Meyer
Michael J. Corey Jeff S. Liebmann Philip R. O'Connor
Michael R. Ferrari
- -------------
* Incorporated herein by reference to the Form S-6 Registration
Statement of First Variable Life Insurance Company and Separate
Account VL, filed electronically with the Securities and Exchange
Commission on June 3, 1996 (File No. 333-05053).
** Incorporated herein by reference to Pre-Effective Amendment No. 1 to
the Form S-6 Registration Statement of First Variable Life Insurance
Company and Separate Account VL, filed electronically with the
Securities and Exchange Commission on November 15, 1996 (File
No. 333-05053).
*** Incorporated herein by reference to Post-Effective Amendment No. 22 to
the Form N-4 Registration Statement of First Variable Life Insurance
Company and First Variable Annuity Fund E, filed electronically with
the Securities and Exchange Commission on September 18, 1996 (File
Nos. 333-12197, 811-04092).
**** Filed herewith.
# Incorporated herein by reference to the Pre-Effective Amendment No. 1
to the Form S-6 Registration Statement of First Variable Life
Insurance Company and Separate Account VL, filed electronically with
the Securities and Exchange Commission on January 3, 1997 (File No.
333-19193).
## Incorporated herein by reference to Post-Effective Amendment No. 21 to
the Form N-4 Registration Statement of First Variable Life Insurance
Company and First Variable Annuity Fund E, filed electronically with
the Securities and Exchange Commission on April 29, 1996 (File
Nos. 33-86738, 811-04092).
### To be filed by amendment.
#### Incorporated by reference to Post-Effective Amendment No. 1 to the
Form S-6 Registration Statement of First Variable Life Insurance
Company Separate Account VL, filed electronically with the Securities
and Exchange Commission on or about April 27, 1998 (File
No. 333-19193).
EXHIBIT INDEX
Filed herewith, as indicated on the Exhibit list.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the First Variable
Life Insurance Company has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, on the __ day of
________________________.
First Variable Life Insurance Company
By: /s/John M. Soukup
-----------------
John M. Soukup
President
ATTEST:
/s/Arnold R. Bergman
- --------------------
Arnold R. Bergman
Secretary
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Separate Account VL of First Variable Life Insurance Company, has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, on the ____ day of __________.
Separate Account VL of
First Variable Life Insurance Company
(Registrant)
By: First Variable Life Insurance Company
(Depositor)
By: /s/ John M. Soukup
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John M. Soukup
President
ATTEST:
/s/ Arnold R. Bergman
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Arnold R. Bergman
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated with First Variable Life Insurance Company, on the ____ day of
_________________.
PRINCIPAL EXECUTIVE OFFICER:
/s/ John M. Soukup
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John M. Soukup
President
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Christopher S. Harden
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Christopher S. Harden
Vice President & Treasurer
DIRECTORS:
/s/Ronald M. Butkiewicz* /s/Jeff S. Liebmann*
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Ronald M. Butkiewicz Jeff S. Liebmann
/s/ John M. Soukup /s/Kenneth R. Meyer*
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John M. Soukup Kenneth R. Meyer
/s/Michael J. Corey* /s/Philip R. O'Connor*
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Michael J. Corey Philip R. O'Connor
/s/Michael R. Ferrari* /s/Norman A. Fair*
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Michael R. Ferrari Norman A. Fair
/s/Shane W. Gleeson*
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Shane W. Gleeson
/s/Clark Ramsey
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Clark Ramsey
* By: /s/Arnold R. Bergman
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Arnold R. Bergman
Attorney-in-Fact